CONTENTS
1Hankyu Hanshin Holdings Group at a Glance

6

Financial Highlights (Consolidated)

89

Message from the Management
Interview with the President

16

Medium-Term Management Plan Progress

18

Special Feature
Hankyu Hanshin Holdings Group Growth Drivers

Major Development Projects in and around Umeda
22

Overview of Core Businesses

24■ Urban Transportation

29■ Real Estate

34■ Entertainment and Communications

37■ Travel and International Transportation

41■ Hotels

44■ Retailing

47

Management Organisation

47

Corporate Governance50

Promotion of Compliance-Focused Management

51

Directors and Corporate Auditors

52

Corporate Social Responsibility

52

Social Contribution Activities

54

Environmental Protection Activities

55

Financial Section

84

Group at a Glance

85

Investor Information

Search Index●

Group Overview

2–5, 22–23, 84–85

Forward-looking Statements●

Major Indicators

6–7, 11, 16–17, 56●

Integration Synergies●

Medium-Term Management Planand Growth Strategies

11–12, 16–17, 18–21

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

●

Message from Heads of Businesses

28, 33, 36, 40, 43, 46●

Shareholder Returns

13, 176, 15

Figures are rounded unless otherwise specified in the notes.

Who We Are
Hankyu Hanshin Holdings Group at a Glance

Hankyu Hanshin Holdings1Who We Are

Hankyu Hanshin Holdings Group at a Glance

The Hankyu Hanshin Holdings Group is a corporate group with some 20,000 employees, created by the October 2006 management integration of two major private
railway operators based in the Kansai region, Hankyu Holdings and Hanshin Electric
Railway.
The Group operates a wide range of businesses such as its core railway operations, the real estate business, including rental of commercial facilities and officebuildings and the sale of condominiums, and the entertainment business, centeringon the Hanshin Tigers professional baseball team and the Takarazuka Revue. For overKansai region

100 years the member companies of the Group have provided innovative services,helping create more successful communities served by our railway lines.

Tokyo
Kobe Kyoto
Osaka
Hankyu Railway

Hanshin Electric Railway

Fiscal 2009 (Consolidated Basis)

As managing company, Hankyu Hanshin Holdings operates four core companies,

Revenues fromOperations

Hankyu Corporation, Hanshin Electric Railway, Hankyu Hanshin Express Holdings and683.7

Hankyu Hanshin Hotels. It is active in six core business domains, Urban Transportation,

billion

Real Estate, Enter tainment and Communications, Travel and International
Transportation, Hotels and Retailing.

■ Urban Transportation■ Real Estate■ Entertainment andCommunications■ Travel and International
Transportation■ Hotels■ Retailing■ Other

Of our six core businesses, the main drivers are the Urban Transportation andReal Estate segments, accounting for about half of all revenues from operations and
80% of operating income. In the Urban Transportation segment, railways accountOperating Income

for most earnings, while rental businesses generate most earnings in the Real Estate

77.8

business, ensuring a stable cash flow.

billionHankyu Hanshin Holdings
Urban
Transportation

Real EstateEntertainment andCommunications

Hankyu Corporation
Hanshin Electric Railway

Retailing

Travel andInternational
Transportation
HankyuHanshin
Express
Holdings

HotelsHankyuHanshinHotels(As of 31st March 2009)

Annual Report 2009

* Revenues from operations referto such revenues generated
from external customers, while
operating income represents
amounts prior to consolidation
adjustments.

(Kansai Region)(Location)

Ashiya(Ashiya, Hyogo)

district of downtown Osaka, with its high concentration of office and commercial

2

Syukugawa(Nishinomiya, Hyogo)

3

Nishinomiya(Nishinomiya, Hyogo)

facilities. The two companies also have as their major catchment areas districts of high4

Okamoto(Kobe, Hyogo)

population density across the Kansai area, comprising the Osaka-Kobe belt and Kyoto.

5

Kobe

(Kobe, Hyogo)

6

Mikage(Kobe, Hyogo)

7

Umeda

(Osaka, Osaka)

areas in the Kansai area, and network transportation efficiency is high. By leveraging

8

Senri-chuo(Toyonaka, Osaka)

this advantage, and our real estate developments in these areas, primarily in the

8

Rokko

(Kobe, Hyogo)

10Sannomiya(Kobe, Hyogo)

Umeda distinct of downtown Osaka, we are increasing value along Group railway

11

Kyoto

(Kyoto, Kyoto)lines and maintaining or sharpening our competitive edge in our various businesses.

12

Kurakuen(Nishinomiya, Hyogo)

13

Sumiyoshi(Osaka, Osaka)

14

Namba

(Osaka, Osaka)

15

Takatsuki(Takatsuki, Osaka)

16

Takarazuka(Takarazuka, Hyogo)

16

Ibaraki(Ibaraki, Osaka)

The areas served by the lines operated by the Group are popular residential

Message

Place

1

Financial Highlights

Rank

Hankyu Corporation and Hanshin Electric Railway have their terminals in the Umeda

At a Glance

Survey of Preferred Residential Areas

represents areas served by Hankyu and Hanshin Lines
Source: Survey released 8th September 2008 by
Sumitomo Real Estate and 7 other major real estate firms

Special Feature

The Group delivers inspiration and dreams through the Hanshin Tigers professional baseball team/Hanshin Koshien
throughout Japan, giving them unique brand recognition. These two powerful attractions are strengths that none of
our rivals have, and they contribute strongly to brand value.

©Hanshin Tigers

Performances by the Takarazuka Revue take placeat the Takarazuka Grand Theatre (Hyogo) and Tokyo
Takarazuka Theatre, supplemented by troupe tours
throughout the country. With its all-female cast, playing
both male and female roles, the Takarazuka Revue with
its scintillating, romantic repertoire and large fan baseare a household name in entertainment in Japan.

Financial Section

The Hanshin Tigers have long been one of the mostpopular professional baseball teams in Japan. In recent
years, they have drawn an annual total of 3 million
spectators to home games each season.
Renovation of the main section of Hanshin
Koshien Stadium was completed in March 2009. The
stadium is much-loved throughout Japan as the homeground of the Hanshin Tigers, as well as the venue for
the National High School Baseball Championship in
spring and summer.

■ Takarazuka Revue

Management Organisation■ The Hanshin Tigers professional baseballteam and Hanshin Koshien Stadium

Overview of Core Businesses

Stadium and the Takarazuka Revue, both of which are popular and enthusiastically supported not only in Kansai but©Takarazuka Revue Company

Hankyu Hanshin Holdings3

Who We Are

Hankyu Hanshin Holdings Group at a Glance

Major Group Facilities in the Kansai Area
Hankyu Railway

Hanshin Electric Railway

Kobe Line

Lines
Kobe Line
Imazu Line
Itami Line
Koyo LineCompany-operated Section
Umeda to Sannomiya
Imazu to Takarazuka
Tsukaguchi to Itami
Syukugawa to Koyoen

Takarazuka
Line

Subtotal
Umeda to Takarazuka
Ishibashi to Mino-oTakarazuka Line
Mino-o Line
Subtotal

Umeda to Kawaramachi
Kita-senri to Tenjimbashisuji-rokuchome
Katsura to Arashiyama
Subtotal
Total
Kobe Rapid Transit Railway Line
Sannomiya to Nishidai
Grand Total

Kyoto Line

Kyoto Line
Senri Line
Arashiyama Line

Length32.3km
9.3
3.1
2.2
46.9
24.5
4.0
28.5
47.7
13.6
4.1
65.4
140.8
5.7
146.5

Lines
Main Line
Hanshin Namba Line
Mukogawa Line

Total
Kobe Rapid Transit Railway Line
Grand Total

Lines
Section
Kawanishi-noseguchi to Nissei-chuo
Nosé Electric Railway Line
Tenjimbashisuji-rokuchome to Tengachaya
Subway Sakaisuji Line
Nishidai to Sanyo-Himeji
Sanyo Electric Railway Line
Hanshin
Osaka-Namba to Kintetsu-Nara
Kintetsu Line

Kyot

Length32.1km
10.1
1.7
43.9
5.0
48.9

Motomachi to Nishidai

Myokenguchi
Nissei-chuo

Osaka P

Hyogo Pref.

Trackage Right Lines
HankyuCompany-operated Section
Umeda to Motomachi
Osaka-Namba to Amagasaki
Mukogawa to Mukogawadanchi-mae

Length10.8km
8.1
54.7
32.8

Nosé Electric
Railway Line

Mino-o Linemino-oKawanishi-noseguchi

Senri Line
Osaka
International
AirportTakarazuka

6

Imazu Line

Ishibashi

Kita-Osaka Kyuko
Railway Line

Itami

Itami Line

Koyo Line

Tanigamiuko
hin KyHokus way LineRail

KoyoenKobe Line
SyukugawaNishinomiyakitaguchi

Sannomiya

2

Esaka
Tsukaguchi
Shin-Osaka

Imazu

5 Mukogawa

Daimotsu
Amagasaki

Mukogawadanchi-mae

Awaji

Juso

Tenjimbashis

Umeda
a

Main Line
Mukogawa Line

Motomachi

Nishidaii

To Himej

Sany

ine
ay L
Railw
c
i
r
t
c
e
o El

■ Hankyu Railway Network
One of the 16 largest private railway
operators in Japan, the Hankyu network comprises the Kobe Line, theTakarazuka Line, the Kyoto Line andmultiple branch lines. Usage levels are very high as it serves thethree major urban areas of Osaka, Kobe and Kyoto.

4

Hanshin Namba Line

Osaka Bay■ Hanshin Electric Railway Network
The Hanshin network is one of the 16
largest private railways in Japan. The network
comprises the Hanshin Main Line, the Hanshin
Namba Line, and the Mukogawa Line. The
Hanshin Namba Line, which extends the former Nishi-Osaka Line as
far as Kintetsu Osaka-Namba Station, was opened in March 2009. Theline links the Namba district, which constitutes the core of the “Minami”
district, with Kobe, and thus forms part of a wider railway network
linking Kobe with Nara via Osaka.

Total length of lines operated:
140.8km
Number of stations:85
Annual number of passengers carried: 601,244 thousands (fiscal 2009)

Total length of lines operated:
43.9kmNumber of stations:45
Annual number of passengers carried: 165,655 thousands (fiscal 2009)*Excluding a section under the management of Kobe Rapid Transit Railway*Includes Nishikujo-Osaka Namba segment of Hanshin Namba Line, andexcludes a section under the management of Kobe Rapid Transit Railway

Annual Report 2009

Osaka-Nambas

Subway Sakaisuji Line

Minatogawa
Shinkaichi

Takarazuka Line

Imazu

Kobe Rapid Transit Railway Line
Shin-Kobe

Kita-senri

Senri-chuo

Kawaramachi

to Pref.

At a Glance

Arashiyama

1 Umeda Hankyu Building⇒Please see page 19

KatsuraArashiyama Line

2 Hankyu Nishinomiya
Gardens

Kyoto

HERBIS ENT

3 HERBIS OSAKA/ 4 HERBIS ENT(Osaka-West Umeda area development)

Kyoto Line

Pref.

Message

Hanshin Electric Railway is engaged in a major developmentof the West Umeda area of Osaka. The key tenant of phase I,
the HERBIS OSAKA development which opened for businessin 1997, is The Ritz-Carlton, Osaka hotel. At phase II, HERBIS
ENT, opened in 2004, the key tenant is the Osaka Shiki Theatre,
which is dedicated to performances by Shiki Theatre Company.
A high-rise multipurpose building comprising retail outlets
and offices, it serves as an ideal gateway to the international
city of Osaka.

Financial Highlights⇒Please see page 31

Sh

in

ka

ns

5 Hanshin Koshien Stadium

Nara Pref.

suji-rokuchome

Hotel Hankyu International

Hankyu Corporation
Head Office

Owned solely by the Group

Chayamachi
Applause

Joint ownership

Total area:
Total of seats:

Master lease
Master lease (underground)

Kitano Hankyu
Bldg.

C

Owned by Hankyu REIT Inc.

Block
Kita Hankyu Bldg.

B

Nishi Hankyu Bldg.

Hankyu Umeda Station
Hankyu Sanbangai

Hotel New Hankyu
Osaka Station
North District(about 24ha)

Hankyu Terminal Bldg.

A

Block
Phase 1Development Area(about 7ha)

JR

in
nsh
Hatation
S

4

1

ion

tat

aS

ak
Os

Eastern Chayamachi
District
NU_
chayamachi
Umeda Centre Bldg.

Um

eda

HEP
Higashi Hankyu
FIVE
Bldg.
HankyuGrand
Bldg. HEP NAVIO
Umeda Hankyu Bldg.
(Hankyu Department Store)(Under construction)

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

Diamor Osaka
HERBIS ENT

3
ima

ush

tion

Sta

HERBISOSAKAThe Ritz-Carlton, Osaka

Hotel Hanshin

6 Takarazuka
Grand Theatre
The Takarazuka Grand Theatre wasfounded as a theatre for the troupes
in 1924. In the run-up to the 80th
anniversary of the founding of thetroupes, a refurbishment was carried out with reopening in
1993, creating a split-level zigzag alignment enabling comfortable viewing of the stage from anywhere within the Theatre.
Then, in 2005, in order to make the performers on the “Silver
Bridge” apron stage easier to see from the second story, the “Silver
Bridge” was reshaped into a gentle curve. This has enabled theinstallation of an extra 23 seats in the front row of the centralarea, bringing the total seating up to 2,550.
In addition, we have introduced a computerized lighting
system capable of memorising 1,000 scenes, and introduced alive orchestra to create a more dramatic performance space.

Financial Section

Block38,500m2 (ground: 13,000m2）
47,808

Management Organisation

Umeda Area in Detail

Eighty-five years have passed since
Hanshin Koshien Stadium was built
in 1924. With its colourful history, it
is known throughout the country
as the spiritual home of baseball inJapan. In March 2009, renovation
work on the main stadium was completed. In this project,while respecting the history and traditions of Koshien, we
aimed to raise safety standards by strengthening earthquakeresistance, and enhance spectator comfort by improving andexpanding seating to cater for all comers and by upgrading
restaurants and shops.

Overview of Core Businesses

N

FukSpecial Feature

en⇒Please see page 32 for structural details of HERBIS OSAKA
and HERBIS ENT.

(As of the end of March 2009)* HEP FIVE is jointly owned with Hankyu REIT Inc.
* Hankyu Grand Building is scheduled to be repurchased from a special purpose company* Hotel Hanshin is operated by Hankyu Hanshin Hotels
Hankyu Hanshin Holdings5Financial Highlights (Consolidated)(Millions of yen)(Thousands of
U.S. dollars)*1

FY2007*2

FY2008FY2009FY2009Result of Operations:
Revenues from operations
Operating income
EBITDA*3
Net income¥ 743,377
87,003
146,500
36,619¥ 752,301
90,725145,200
628¥ 683,715
77,824
135,300
20,551$ 6,976,686
794,122
1,380,612
209,704

Operating Expense:
Costs of revenues from operations
Depreciation and amortization¥ 656,374
43,889¥ 661,576
51,578¥ 605,891
54,799$ 6,182,564
559,169

Capital Expenditure:
Capital expenditure¥

53,795¥ 134,307¥ 109,688$ 1,119,265¥

78,982(199,579)
132,290

74,902(100,058)
36,718¥ 108,598(115,048)
7,015$ 1,108,142(1,173,956)
71,577¥ 2,348,476
476,639
1,271,100¥ 2,307,332
473,879
1,275,621$ 23,544,205
4,835,498
13,016,540

Cash Flows:
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Financial Position:
Total assets
Total net assets
Interest-bearing debt

¥ 2,366,694
522,286
1,209,382

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

31.84−
405.355.00

Ratios:Interest-bearing debt/EBITDA (times)
Shareholders’ equity (%)
ROE (%)*4
Debt/equity (D/E) ratio (times)*5

8.3
21.7
8.4
2.4

¥

¥

0.50
0.41
369.25
5.00

8.8
19.9
0.1
2.7

¥

16.28
16.18
366.96
5.00

9.4
20.1
4.4
2.8

$

0.17
0.17
3.74
0.05

−
−
−
−

*1 The U.S. dollar amounts have been translated, for convenience only, at ¥98=$1, the prevailing exchange rate on the Tokyo Foreign Exchange Market as of 31st March 2009.
*2 In fiscal 2007, consolidated results of Hanshin Electric Railway are included as a result of management integration, in the scope of consolidation of the Group from thesecond quarter.
Assuming the integration of Hankyu and Hanshin from the beginning of the term, revenues from operations would have been ¥813,613 million, operating income ¥94,800
million and net income ¥40,507 million.
*3 EBITDA = operating income + depreciation expenses + amortisation of goodwill attendant on the management integration of Hankyu and Hanshin
EBITDA figures are rounded to the nearest ¥100 million.
*4 ROE = net income/equity (i.e. average net assets attributable to shareholders for the year)*5 D/E ratio = interest-bearing debt/equity

6

Annual Report 2009

Financial Position

At a Glance

Result of Operations

Interest-Bearing Debt andInterest-Bearing Debt/EBITDA

Revenues from Operations■ Interest-Bearing Debt ■ Interest-Bearing Debt/EBITDA(¥ billion)

1,000

1,500

800

743.4

(Times)11

1,209.4

1,200

752.3

1,271.1

1,275.6
10

683.7

9.4

600

Financial Highlights(¥ billion)

9

900

8.8
600

200

300

0

2007

(FY)

2008

8.3

7

0

2009

2007

(FY)

2008

2009

6

Equity and Equity Ratio

Operating Income ■ EBITDA■ Equity ■ Equity Ratio(¥ billion)(¥ billion)

200

200

(%)

(¥ billion)

600

Special Feature

Operating Income and EBITDA

8
Message

400

25

513.5
145.2

500

135.3

466.6
21.7

400
100

87.0

100

90.7

463.0

150

20.1

300

19.9

77.8

20

Overview of Core Businesses

146.5

150

200
100
0

2007

(FY)

2008

2009

0

0
(FY)

Net Income

2007

2008

2009

Debt/Equity Ratio
3.0

36.6
2.8
2.7

30

20.6

20

Financial Section(Times)(¥ billion)

40

15

Management Organisation

50

50

2.5

2.4
10

0.6
0
(FY)

2007

2008

2009

(FY)

2007

2008

2009

2.0

Hankyu Hanshin Holdings

7

Message from the Management

Tomokazu Yamazawa

Shinya Sakai

Kazuo Sumi

Director

Representative Director

President

Director(President of Hankyu Hanshin Hotels Co., Ltd.)(President of Hanshin Electric Railway Co., Ltd.)(President of Hankyu Corporation)(President of Hankyu Hanshin Express Holdings Corporation)

Hiroshi Ojima

First, let us thank our shareholders who have supported andprojects were completed on schedule — Hankyu Nishinomiya

encouraged us over the years.

Gardens (with commercial launch in November 2008),

The Hankyu Hanshin Holdings Group did not escape

Hanshin Namba Line (operations launched in March 2009)

the serious deterioration in the world economy following theand Hanshin Koshien Stadium renovation (main work

collapse of Lehman Brothers in September 2008. Many ofcompleted in March 2009). All three have performed robustly

our businesses were significantly affected. Operating income

since completion. Reconstruction work is also proceeding

on a consolidated basis for the period ended 31st March 2009smoothly at Umeda Hankyu Building, the lynchpin project infell 14.2% year-on-year to ¥77,824 million due in particular

the current Medium-Term Management Plan, and we are on

to recognition of losses on valuation at cost or market

schedule for the grand opening in spring 2012.

(whichever is lower) of land and buildings for subdivisions,

While taking measures against adverse business condi-

following the slump in the real estate market. However, as ations, we regard continued investment in creation of attractive

result of measures to strengthen the competitiveness of ourcommunities as the key to improvement in value along ourcore businesses, operating income margin on a consolidatedlines and higher enterprise value over the long-term. Looking

basis stood at 11.4%, the highest level among the major pri-ahead, we will further deepen the trust and good reputationvate railway operators in Japan, and net income also reachedthat the Group enjoys, with all employees of the Group fromthe highest level of all our private-sector peers, at ¥20,551

executives downward uniting to achieve the goals of themillion.

Medium-Term Management Plan and meet our stakeholders’

Although there are some bright signs now in the

expectations.

economy, we expect a full recovery to take several years, inWe would like to thank our shareholders and investors

light of the severe dampening of consumer sentiment among

for their continued understanding and support for thisour customers. However, the multiple major development

endeavour.

projects which will serve as the driver of the future earnings
June 2009

growth for the Group are proceeding smoothly. Three major

Kazuo Sumi
President8

Annual Report 2009

Shinya Sakai

Representative Director

Interview with the President

At a Glance

Q.

Business
Environment andAssessment of
Financial Results

A. Despite a dramatic decline in the business environment, resulting in a reducedof 11%. This was the best results among all the major private railway operators.

Financial Highlights

operating income, we were able to secure an operating income margin in excess

Messageness lines of the Group. In particular, our condominium business struggled as the real estatemarket continued to deteriorate. The global economic deceleration and skyrocketing fuel costs(¥ billion)
Sales

The impact of the global economic downturn during fiscal 2009 extended into the major busi-

contributed to stagnation in our Travel and International Transportation Business, while our150

Special Feature

Fiscal 2009 Performance for
the Major Private Railway
Operators

Hotels Business and Retailing Business — ever susceptible to changes in business conditions —experienced a very challenging business environment. At the same time, our core Urban
Transportation Business and real estate leasing business continued to perform well despite theHankyu Hanshinworsening economy. The Hanshin Tigers baseball games and the Takarazuka Revue (Entertainment
50

and Communications business segment) enjoyed continued popularity among many baseball fans
and theatre-goers.

0Year-on-year revenues from operations decreased significantly in fiscal 2009, mainly due to
5

10

15

the exclusion of the Hanshin Department Store Group* from the scope of consolidation at the
beginning of the last half of the previous fiscal year.
Meanwhile, operating income declined year-on-year, mainly due to valuation losses recorded
as a result of the application of the lower of cost or market method for real estate for sale. Ouroperating income margin amounted to 11.4%. While certainly not a satisfactory figure, this was

Management Organisation（%）
Operating Income Margin

Overview of Core Businesses

100

among the highest of all listed major private railway operators. Net income increased significantly
year-on-year, owing to non-repetition of one-time losses on valuation of land held for sale under
The Company announced a downward revision in earnings forecasts for fiscal 2009 in
February 2009, reflecting a downward trend in the performance of our real estate subdivision busi-

Financial Section

the “Saito” International Culture Park Development project.

ness, Travel and International Transportation Business, and Hotels Business, all of which changed
into a severe business environment. However, the effect of subsequent cost-cutting and othermeasures ultimately resulted in operating income for fiscal 2009 falling only 7% compared withSee Financial
Section on

P.55
for more aboutcompany
performance

our original projections, showing an underlying strength relative to other industries.
* Here and below, the Hanshin Department Store, Ltd. (now Hankyu Hanshin Department Stores, Inc.) and four
subsidiaries.

Hankyu Hanshin Holdings

9Interview with the President

Performance
Outlook for
Fiscal 2010

Q.

A. We anticipate revenues from operations at roughly the same level as the previous
year, but we expect a lower operating income due to increasing depreciation.

We have incorporated the following factors into our calculations for full-year performanceprojections.
With respect to revenues from operations, we expect the Hanshin Namba Line and theHankyu Nishinomiya Gardens (opened during the second half of fiscal 2009) to contribute to fullyear revenue growth. However, the rebuilding of the department store section of the Umeda
Hankyu Building will enter Phase II Work, which will decrease the space available for rent. We also
forecast downward pressure on revenues stemming from our withdrawal from the consumer
credit business during the previous fiscal year, as well as pressures on our Retailing Business andHotels Business associated with the ongoing economic malaise. As a result of these factors, we areforecasting revenues from operations in the same range as fiscal 2009.
Meanwhile, we are forecasting a decrease in operating income due to further depreciation inline with the completion of construction on Hanshin Namba Line, Hankyu Nishinomiya Gardens,
and the second phase of renovation work on Hanshin Koshien Stadium.
We expect the environment surrounding the Group to remain challenging throughout fiscal
2010, but by marshalling our Group capacity to the greatest extent possible, we will be able to getthrough this difficult situation.

Revenues from Operations(¥ billion)(¥ billion)

800

80
683.7

70.0
60

400

40

200

20

0

77.8

684.0

600

(FY)

10 Annual Report 2009

Operating Income

2009

2010

ResultEstimate

0
(FY)

2009

2010

ResultEstimate

Q.

At a Glance

Medium-Term
Management
Plan Progresseffects of a worsening business environment are most significant. While ournumerical plans overall have been unavoidably revised downward, we have not

Financial Highlights

A. We made changes to our profit plan, mainly in those businesses for which themade any changes to our numerical targets for fiscal 2013, and we are taking thenecessary steps to ensure we reach those goals.

Message

The three most significant points related to our revised management plan figures are as follows:business environment in fiscal 2010 and beyond (our condominium, travel, international transpor-

Special FeatureFirst, most of our profit plan changes are based on fiscal 2009 performance, and have to dowith the four businesses that we believe will be most affected by a deeper deterioration of thetation, and hotels businesses). As a result, despite incorporating additional revenue generationand expense reduction measures into our core businesses to the greatest extent possible, overall
The second point is that we have reflected in our plan our initiatives to hold down increases
in interest-bearing debt in response to the softening of the pace of reduction in interest-bearing
debt in conjunction with decreases in EBITDA. By (1) holding down low priority investments;(2) scrutinising investment amounts and timing based on the current state of affairs; andplans, and are committed to reducing the increase in interest-bearing debt between fiscal 2010
and fiscal 2013 as much as possible.
The third point is that we have made a decision for dealing with so-called “securitised
assets” that we have not recorded on our balance sheets. Under the previous plan, we expectedManagement Organisation(3) closely reviewing new investment plans, we have made a disciplined review of our investment

Overview of Core Businesses

Group EBITDA is now projected to be lower than the previous plan.

to include an increase in interest-bearing debt (related to the Hankyu Grand Building and Daiichi Hotel Tokyo in liquidation) on the fiscal 2010 balance sheet, based on the likelihood that SPC
then decided to wait for subsequent developments before determining whether we would buy
back the properties or engage in re-securitisation. The recently revised plan assumes the buyback

Financial Section

would be consolidated as required by changes in financial accounting standards. However, weof these properties, considering that financial institutions may be disinclined to lend money on
properties that are intended for liquidation and solely capitalised by the original owner.
While the newly revised plan shows fiscal 2013 plan figures below targets in most key
See Medium-Term
Management Plan
Progress on

performance indicators, the future business environment is difficult to predict with certainty at

P.16

Plan could indeed change significantly. Accordingly, we have not made any changes to ourfor more regarding
numerical plans andtargets

ing initiatives necessary for reaching our goals, eliminating the discrepancies between our planned

present, and the assumptions and projections incorporated into our Medium-Term Management
numerical targets for fiscal 2013 from the previous plan. We will be investigating and implementand target figures.

Hankyu Hanshin Holdings

11Interview with the President

Contributionof Major
Development
Projects

Q.

A. The majority of major development projects currently underway are located inareas within Umeda (central Osaka) considered to have a high potential for future
growth. Umeda will feature a large volume of new lease properties, including
numerous projects by other companies. We believe that our development properties will be very highly competitive, and will contribute to profits according to plan.

Of the major development projects to be completed during the time encompassed by our MediumTerm Management Plan, the Hanshin Namba Line, Hankyu Nishinomiya Gardens, and the renovationof the main section of Hanshin Koshien Stadium have already been completed. These properties arein heavy use by many customers, and are contributing to Company performance as expected.
Of our current projects, the one expected to make the greatest contribution to profits in the
future is the Rebuilding of Umeda Hankyu Building, which represents the completion of multi-use
buildings (consisting of one of Japan’s largest department stores and a high-rise office building).
In particular, the office building section scheduled to open in April 2010 will provide new floor
space not available before the start of the project, serving as a net increase in our revenue base.
However, our numerical plans do not show the office space operating at full capacity from thestart; occupancy will grow steadily after opening for tenants. Our plan calls for full capacity fromfiscal 2014 (beyond the last year of the Medium-Term Management Plan). Given the lack of clarity
in the market outlook, our rent forecasts reflect a rather conservative approach, and we believe
the likelihood of achieving the planned figures to be high.
We have several other development projects, including Osaka Station North District Phase 1
Development Area Project and Chayamachi Redevelopment (Eastern District). Developments
designed to contribute to the growth and revitalisation of an area must be approached from along-term view. We plan to pursue these projects steadily, without being unduly influenced byshort-term economic developments.
Real Estate Business Performance Forecast
EBITDA
Operating Income(¥ billion)

Revenues from Operations(¥ billion)

80

See Special Feature on

60

40
EBITDA
Operating Income
Revenues from Operations* Prepared according to management
accounting units, which differ from financial
accounting business segments.

56.9

33.7

37.9

180

0

120

60

20

(FY)

12 Annual Report 2009

170.1

240

48.9

P.18
for more aboutmajor development
projects

210.4

2009

2013

ResultEstimate0Q.

At a Glance

Stronger
Competitive
Edge throughManagement
Integration

tion as we originally anticipated. Our revised Medium-Term Management Plan
includes a higher bar for target figures reflecting the synergistic effects of ourintegration.

Financial Highlights

A. Each of our business segments has benefited from the management integra-

Message

Since the integration, we have unified the management resources of each company, taking measbasic strategies (“Build Value along Our Railway Lines” and “Revitalise the Umeda Area”). One of thesignificant developments from our integration is that we have further strengthened our presence

Special Featureures to improve our competitive ability in six major business fields as we work toward the Group’s

in the Umeda area, which demonstrates the greatest potential for growth anywhere in the Kansai
District of Japan, since both Hankyu and Hanshin have established Umeda as the main terminals
increased presence in the Umeda area not only contributes to the revitalisation of the local community, but also has a significant influence on improving the value along the Hankyu and Hanshin
railway lines, bringing synergies to every other business segment that we operate.
We are pursuing the concrete expression of the synergies that integration brings to our firm,
have also made Kobe Rapid Transit Railway Co., Ltd. a consolidated subsidiary and reorganised
our International Transportation Business into the newly revised Medium-Term Management Plan,
introducing higher target figures to reflect the effects of integration.
Looking over a longer-term time frame, we believe that we can make a deeper contribu-

Management Organisation

moving rapidly towards greater efficiencies in our business and administrative operations. We

Overview of Core Businesses

for their railway lines, owning numerous real estate assets in and around the Umeda area. Antion in several socially significant ways, including community building and traffic network
improvement.
Financial Section

Integration Synergies (Total Revenue/Cost Synergies)(¥ billion)

10

See Medium-Term
Management Plan
Progress on

9.3

8

7.1

6
4.6

P.16

4

for more about
integration synergies

2

2.2

0
(FY)

2008

2009

2010

2013

ResultResultEstimate

Estimate

Hankyu Hanshin Holdings

13Interview with the President

Environmental
Initiatives

Q.
A. As a Group, we are working to build a more convenient system of public transportation with reduced levels of CO2 emissions as one way of doing our part toprovide a healthy environment for the next generation.

For over 100 years, the companies under the Hankyu Hanshin Holdings Group have operated theirbusinesses and built up relationships of trust in the areas served by the Hankyu and Hanshin lines,
while enriching their communities. To fulfil our role as a member of the local community for the
next 100 years, each and every employee will strive to create an enjoyable living environment intheir local communities, while working together within the Group to create a healthy environment
for the future.
It is particularly important to emphasise that our Urban Transportation Business (one of ourcore Group businesses) provides an indispensable function in creating sustainable communities.
The CO 2 emission intensity of a train is extremely low — only one-tenth to one-ninth that of aregular passenger car. A bus puts out only three-tenths the CO2 emissions of a regular passenger
car, making the role of railways and buses invaluable in the reduction of global warming. US
President Obama recently announced the framework of a US$13 billion high-speed rail project,showing again the importance of rail transportation as one element in the realisation of a lowcarbon society.
In December 2008, Hankyu Corporation began operating the “Eco-Train: Dreams andCommunities of the Future” to reacquaint the public living near the railway lines with the environmentally friendly features of rail transportation, as well as to create an opportunity to cometogether with local citizens, the government and other corporations to consider ways to create anenvironmentally conscious society. Japan’s Minister of the Environment was among the dignitaries
participating in the opening ceremonies for the project, which were extensively covered by Japan’smass media. The “Eco-Train” is decorated on the inside with environmentally themed posters andstickers provided by cooperating companies and local government agencies, and the entire train
is designed to communicate the importance of preserving the environment.
We are maintaining a Group-wide approach to making the train more convenient among a
See Corporate Social
Responsibility on

P.52
for more about
environmental
initiatives

14 Annual Report 2009

wider range of users, one aspect of which has been the popularly received “rent-a-cycle” program
recently launched.

At a Glance

Q.

Shareholder
Returns

A. At present we are pursuing a basic policy of stable dividends that sets a miniManagement Plan (fiscal 2013), we will take another look at our shareholder
return policies, including our dividends policy.

Financial Highlights

mum annual dividend of ¥5 per share. At the conclusion of our Medium-Term

Message

Under the current Medium-Term Management Plan, we have designated the first three years of
the plan are the “Realisation of the Benefits of Large-Scale Investments.” The first three years of theplan call for capital investment to outpace depreciation during the six-year period. At present, weSpecial Feature

the plan as an “Investment in Development for Further Growth,” while the second three years ofare heavily involved in the investment to Rebuilding of Umeda Hankyu Building, which we view asa pillar supporting profit growth during the plan period. For the time being, we will be investing
holder return policies such as increased dividends or stock buy-backs. Accordingly, our dividends
policy calls for a stable minimum annual ¥5 per share dividend, while we work to reinforce ourmanagement foundation and financial strength. For fiscal 2009, we declared an annual dividend of¥5 per share as in the previous fiscal year, which is the same dividend level that we plan for fiscal
Cash flows from core businesses such as our Urban Transportation Business and Real EstateBusiness will begin to increase in fiscal 2011 (the first of the last three years of our current MediumTerm Management Plan), spurred by returns on these earlier investments. The funds generated
at this time will be put to use in reducing our interest-bearing debt for the improvement of ourManagement Organisation

2010.

Overview of Core Businesses

capital in these types of projects in order to enhance enterprise value, rather than pursuing share-financial soundness.
By fiscal 2013, which is the final year of our current Medium-Term Management Plan, major
Dividends per Share andPayout Ratio(Non-Consolidated)reached full operational status, significantly contributing to Group profits. At that time, we willrevisit our shareholder return policies, including dividend payments. We believe that moving

(¥)

(%)

10

100
84.3

8

75.3

80

5.00

60

Financial Section

projects now under construction, including Rebuilding of Umeda Hankyu Building, will haveforward in our projects according to plan, realising greater profits, and achieving the numericaltargets of our Medium-Term Management Plan will enhance our enterprise value. In this way, we
intend to support our share price and meet the expectations of our valued shareholders.

6
5.00

5.00

4
2
0
(FY)

40

37.6

2007
Dividends

2008

2009

20

Payout Ratio

Hankyu Hanshin Holdings

15Medium-Term Management Plan Progress
At present, we are pursuing our “Hankyu Hanshin Holdings Group 2007 Medium-Term Management Plan”
ending in fiscal 2013. Every fiscal year, we make revisions to this plan according to our progress and changes in
the operating environment. The following is our latest plan, reflecting the most recent revisions.

Interest-Bearing Debt

Interest-Bearing Debt/EBITDA

EBITDA(¥ billion)(¥ billion)

1,700

170

10.2x
We expect a higher peak inratio due to significant
decreases in estimated
EBITDA compared to theprior version of our plan.

1,600

9.4x
1,500

¥146.5*1

1,400¥141.5*2¥145.2¥143.28.8x¥1,360.0¥135.3

8.3x

1,300

160

¥154.0150

EBITDA for the Group is
expected to grow significantly(approximately ¥20 billion
increase over the latter threefiscal years).

140

130

¥133.07.7x¥1,271.1¥1,275.6

1,200

Increases (growth) due todecreases in EBITDA are minimised
as much as possible throughinvestment plan revisions.

¥1,209.4
1,100

Investment in Development
for Further Growth120¥1,180.0
110

Realisation of the Benefitsof Large-Scale Investments

1,000

100
(FY)

2007

2008

2009

2010

2011

2012

2013

ResultResultResultEstimate

Estimate

Estimate

Estimate*1 Fiscal 2007 results were calculated assuming management integration from the start of the period.
*2 Figures for the first half of fiscal 2008 include department store business (Hanshin Department Store Group) results;
results excluding department store business figures are displayed in purple.

Revenues from Operations

Operating Income(¥ billion)(¥ billion)

1,000

100

EBITDA(¥ billion)

92.0

90.7

154.0

160
145.2
135.3 133.0

800

752.3

750.0

77.8

80

70.0

683.7 684.0

600

60

400

40

200

20

120

80

0
(FY)

2008 2009 2010 2013
ResultResult Estimate Estimate

0
(FY)

40

2008 2009 2010 2013
ResultResult Estimate Estimate* The first half of fiscal 2008 includes results of the department store business (Hanshin Department Store Group)

16 Annual Report 2009

0
(FY)

2008 2009 2010 2013
ResultResult Estimate Estimate

At a Glance

FY2009 (results)

FY2010 (estimate) FY2013 (estimate)

Total

2.2

4.6

7.1

9.3

Sales Synergy

0.9

2.9

3.6

5.1

0.1
2.0
2.3
0.1

1.1

0.4
0.4

0.6

0.7

0.6

0.1

0.4

0.5

0.6

2.0

1.8

0.5

0.7

0.7

1.0
1.6

Cost-Saving Synergy

1.4

1.7

3.5

4.2

* Sums given are those which can be calculated at the current time.
* Figures may not total exactly due to rounding.

[Main factors behind changes compared withinitial forecasts]■ Reorganisation in the international transportation business provided cumulative synergies(integration of overseas entities, etc.)■ Purchase cost reductions provided throughconvenience store business integration

Financial Section* See Interview with the President on P.11 for more about how the Group is approaching fiscal 2013 numeric targets.

Management Indicators

Definition

Targets for FY2013

Operating income

Earnings from core businesses¥100 billion

EBITDA

Cash flow generation capability¥160 billion or more

Effects of integration

Quantitative effects of management integration

EBITDA = ¥5 billion or more(per year from FY2010)

Interest-bearing debt/EBITDA

Financial soundness

Around 7 times

Interest-bearing debt

Repayment of all TOB funds¥1,130 billion or lessDebt/equity (D/E) ratio

Financial soundness

Less than two-fold

ROE

Capital efficiency

6.0% or moreManagement Organisation[Cost-saving synergy]■ Effective use of human resources andknow-how■ Strengthen purchasing at each business■ Withdraw from duplicated facilities andrationalise duplicated businesses■ Streamlining and system harmonisation at
support departments■ Improved efficiency of operational system
thanks to reorganisation of PMBM (Property
Management & Building Maintenance)business

Overview of Core Businesses

0.6

Special Feature

Urban Transportation
Real Estate
OthersUrban Transportation
Real Estate
Others[Main factors behind changes compared withinitial forecasts]■ Kobe Rapid Transit Railway converted toconsolidated subsidiary

2.1

Message

2.5[Sales synergy]■ Strengthen alliances within Urban
Transportation, use companies of both groups■ Joint operations in the housing business■ Strengthen collaboration in advertising■ Open retail outlets at facilities of bothcompanies■ Use joint sales promotion of travel products
using stores as well as direct mailing andwebsites■ Collaboration in international transportation
business (active use of co-loading, etc.)

Financial Highlights(¥ billion)

FY2008 (results)(EBITDA basis)

Hankyu Hanshin Holdings

17

Special
FeatureHankyu Hanshin Holdings Group Growth Drivers

Major Development Projects in and around Umeda

At present, the Group is engaged in several major development projects that will serve as profit growth drivers
in the future. These projects are part of the Hankyu Hanshin Holdings Group 2007 Medium-Term Management
Plan, which focuses activities in areas located adjacent to Hankyu and Hanshin railway lines.
In particular, Rebuilding of Umeda Hankyu Building, Osaka Station North District Phase 1 Development
Area Project, and Chayamachi Redevelopment (Eastern District) in Umeda, the heart of Osaka, will serve torevitalise the Umeda area, which is a central part of the Group’s ongoing strategy. At the same time, theseprojects will lead to improved value along the Hankyu and Hanshin railway lines that use Umeda Station as ahub, bringing synergies to Group companies that operate mainly in areas served by these tracks.
This special feature will help readers understand more about the Group’s growth strategy, which is built on
a foundation of greater fundamental competitive strength. We will discuss the features and progress of projects
in the Umeda area that capitalise on our ability to create value in areas served by our railway lines, a competitive advantage we hold as a corporate group.

Schedule
FY2007
Rebuilding of
Umeda Hankyu
Building

FY2008FY2009FY2010FY2011FY2012FY2013

Office Building Section Work
April 2010 Completion
3rd September 2009
OpenedDepartment Store Phase I Work

Osaka Station
North District
Design, construction, and otherwork progressing on schedule
Phase 1 Development
Area Project
Chayamachi
Western District
Negotiations with local authorities, design, andRedevelopment October 2005 Commercial
construction work progressing on schedule(Eastern District) Facilities Opened (NU chayamachi)

Spring 2012
Grand Opening(scheduled)

Department Store Phase II Work

Second Half, Fiscal 2010 (scheduled)Start of Construction

December 2008
Start of Construction

Second Half, Fiscal 2013 (scheduled)Completion of Construction

Spring 2011 (scheduled)Completion of Construction

Umeda: Western Japan’s largest commercial hub goes on growing
Umeda is defined as the area immediately surrounding the Osaka and Umeda train stations. This retail and business district boasts
the highest concentration of department stores, commercial buildings, office buildings, and hotels in western Japan. This area isalso a strategic traffic hub into which JR, Hankyu Railway, Hanshin Electric Railway, and Osaka Municipal Subway all feed. On a typical day, nearly 2.4 million passengers pass through it. The Hankyu Group and the Hanshin Group have developed and operated
numerous commercial facilities and office buildings in prime locations, to the east and west of Osaka Station respectively. The integration of these companies has resulted in an entity with the capacity to develop the entire Umeda area.

Osaka Business Districts (six main districts): Trends in Average Vacancy/Rents(Yen/3.3m2)

(%)

22

17,000

Average Vacancy Rates

Osaka Business Districts

Average Rents

20

Umeda

16,00018

Minami-Morimachi

16

15,000

Yodoyabashi/Hommachi

14,000

Semba

14
12

Shinsaibashi/Namba

10

13,000Shin-Osaka

8
12,000

6
4

11,000

2
0

2004
Dec.

18 Annual Report 2009

2005
Dec.

2006
Dec.

2007
Dec.

2008
Dec.

2009
Jun.

10,000

2004
Dec.

2005
Dec.

2006
Dec.

2007
Dec.

2008
Dec.

2009
Jun.

Source: Miki Shoji, Latest trends inthe office-building market

Grand opening scheduled in spring 2012
At a Glance

An Umeda landmark; Building the pillar of the future rental business

Financial Highlights

The Umeda Hankyu Building is home to the flagship store in the Hankyu Department
Store network. The store opened in 1929, and was the first in the world to be locatedwithin a train terminal. Today this store boasts the greatest revenues of any department store in western Japan. At present, we are rebuilding this building as a major
multi-use commercial building, featuring the latest advances in earthquake resistanceand eco-friendly functions. Having received a variance under the Urban RenaissanceSpecial Measures Law, we are enlarging the department store and constructing new
office space in the high-rise section of the building.
We have divided the construction areas into north and south, pursuing the
project in two phases. We will rebuild the office space portion of the building while
keeping the department store open for business. The Phase I Department Store in
the lower tier of the building in the south construction area will be open for businessin September 2009, while the high-rise office spaces are scheduled to open in April
2010. The Phase II Department Store construction in the north area is planned forcompletion in spring 2012 in time for the grand opening. We project a total investment of ¥57.5 billion for the project.

Message

The Umeda Hankyu Building under Rebuilding(July 2009)

Special Feature

A new landmark contributing to the revitalisation of the Umeda area
Overview of Core Businesses

The “New Umeda Hankyu Building” will be one of the largest major multi-use commercial building in Japan to include both a department store and a high-rise office building
in one facility. We expect this building to play a part in the revitalisation of Umeda as a
new landmark in the heart of Osaka. The Group plans to make the New Umeda Hankyu
Building the pillar of our rental business, capitalising on the location potential for Umeda,
and providing outstanding facilities management.

Yoshihiro IshidaFeatures of the New Umeda Hankyu Building
1. Floor-area ratio variance granted due to the nature of the public contribution (800 percentage point increase compared to pre-rebuilding)■ Rebuilding of Umeda Hankyu Building: Plan Overview
Structure

Before Rebuilding
SRC construction

Number of
FloorsHeight2 floors below ground; 12 floors
above ground
Approx. 45m
Department store: 107,600m2

Floor Space

Concourse: 5,000m2
Total: 12,600m2

After Rebuilding
Steel frame construction(SRC construction underground)
2 floors below ground; 41
floors above ground; 1 Penthouse Floor
Approx. 187m
Department store: 140,000m2
Concourse: 10,000m2
Office space: 102,000m2
Total: 252,000m2

Floor-Area
Ratio*

1,000% 174,600m2

1,800% 314,000m2

Financial Section

The New Umeda Hankyu Building was granted a floor-area ratio variance under the Urban Renaissance Special Measures Law based on thefact that the Group is providing a barrier-free (handicapped-friendly)
integration with neighbouring facilities — a feature viewed as a contribution to the public good. After completion, the new building will
have a floor-area ratio of 1,800%, representing an 800 percentage point
increase compared to the building prior to rebuilding. This variance has
facilitated the construction of a major multi-use commercial building
with floor space twice that of the pre-rebuilding layout.

Management Organisation

Manager, Real Estate Development Dept
Real Estate Business Headquarters
Hankyu Corporation*Including floor space of Hankyu Grand Building on the same site

2. One of the largest department stores in JapanThe department store located in the New Umeda Hankyu Building will celebrate its grand opening in spring 2012, rebuilt as one of the largest
such stores in Japan. The shopping facility will consist of a total of 15 floors (13 above ground; two below ground) and 84,000m2 of total sales
floor space (37% increase compared to pre-rebuilding). Intent on maintaining this location as the pre-eminent shopping destination in Japanin terms of scale and ability to attract customers to the Umeda area (expected to experience major growth as a commercial district in Osaka),
H2O Retailing Corporation (an equity-method affiliate of the Company) is already planning the creation of a superlative department store.

Hankyu Hanshin Holdings

19Special Hankyu Hanshin Holdings Group Growth Drivers
FeatureMajor Development Projects in and around Umeda

3. Improved pedestrian flow
The current construction project also includes the improvement of a barrier-free underground entrance that will serve as a pedestrian walkway linking public transportation (Hankyu Railway, Hanshin Electric Railway, Osaka Municipal Subway, etc.) and other surrounding facilities. Thisfeature will enhance customer attraction to the New Umeda Hankyu Building by facilitating movement.

4. New high-quality, competitive office space
The new office spaces in the New Umeda Hankyu Building will be accessible through a
dedicated entrance on the ground floor that connects directly to the 15th floor sky lobby(equipped with various business support services such as café, convenience stores) via alarge-scale shuttle elevator. The office building consists of three banks (A bank on floors
17-25; B bank on floors 26-33; C bank on floors 34-41), with each bank having its own accesselevator, connecting each floor from the sky lobby.
Underground Entrance Conceptual Diagram

The office section of the building comprises a total floor space of 102,000m2. A wide,
unobstructed space of 2,800m2 (standard floor configuration) on each floor provides theflexibility to meet a wide variety of business office needs. Staircases inside each space can beinstalled when several connected floors are to be used simultaneously, allowing businesses
to maximise the use of a multi-dimensional office layout. Making the most of the prime
Umeda location, advanced security features, the latest in office functions, and eco-friendly
design, the New Umeda Hankyu Building offers a comfortable, quality business space inwhich companies can thrive.

Project — A worthy gateway to Osaka

Sky Lobby Conceptual Diagram

Construction planned for completion
during the second half of fiscal 2013This project is a major undertaking to develop the Phase 1 Development Area (7 hectares)in the Osaka Station North District (“Umeda North Yard”; 24 hectares) on the north side of
the JR Osaka Station. The project is being undertaken by a consortium of which Hankyu
Corporation is a member, and a multi-use complex is being developed, including offices,
commercial facilities, a hotel, residences, and more. The Phase 1 Development Area will be
divided into Blocks A, B, and C.
This project in the Osaka Station North District — considered to be the last prime
location in a major urban hub anywhere in Japan — will include the latest advancementsfrom an eclectic collection of fields, including technology, the arts, and entertainment. This
integration of concepts will culminate in a “Knowledge Capital” zone, creating a base ofknowledge and expertise that can lead to new approaches to business. This will be a project
truly worthy of being the new gateway to Osaka.

A
B
C

Project Conceptual Diagram■ Osaka Station North District Phase 1 Development Area Project: Plan Overview
BlocksNumber of Floors
Site Area

A Block
37 floors above ground;
3 floors below ground
Approx. 10,570m2

B Block
37 floors above ground;
33 floors above ground;
3 floors below ground
3 floors below ground
Approx. 22,679m2

C Block
50 floors above ground;
1 floor below ground
Approx. 4,665m2

Floor-Area Ratio

1,600%

1,150%

1,150%Space Subject to Floor-Area Ratio Calculations

Approx. 169,100m2

Approx. 260,800m2

Approx. 53,700m2

Major Use

Offices Commercial
facilities

South tower: Offices
North tower: Offices, hotels & residences
Lower tier: Commercial facilities; Knowledge Capital

Condominiums

Total Floor
Area

2

Office Space

Approx. 228,800m

Commercial Facilities

Approx. 80,700m2

Knowledge Capital

Approx. 82,300m2

Apartment Units

Approx. 52,300m2

Hotel/Residential Units

Approx. 39,500m2(As of 25th February 2008)

20 Annual Report 2009

Planned completion in spring 2011

Financial Highlights

The Chayamachi District lies adjacent to the Hankyu Umeda Station. This district, which
occupies a corner of Umeda, has an enormous potential for the development of commercial
facilities, hotels and cultural facilities. The “NU– Chayamachi,” a large-scale commercial complex,
was opened in October 2005, and is being operated by the Hankyu Hanshin HoldingsGroup. In December 2008 work was started on a multi-use development project in the
Chayamachi Eastern District, which will consist of commercial facilities, residences, schools,
and businesses. When the project is complete, the Group will be responsible for operating
commercial facilities and for the sale of condominiums.

Message

Developing an attractive new facility in the Chayamachi District will contribute tocreating a lively, bustling community, while at the same time revitalising the entire surrounding area by increasing the traffic in and around the entire Umeda district.

Conceptual Diagram

Site Area

Approx. 5,130m2
Approx. 35,870m2

Building Scale

1 floor below ground; 31 floors above ground

Building overview

Multi-use development including commercial, residential, school, and business facilities

Special Feature■ Chayamachi Redevelopment (Eastern District): Plan Overview
Total Floor Area

At a Glance

Building a new multi-use complex on the east side of Hankyu
Umeda Station

Overview of Core Businesses
Management Organisation

Osaka Station North District
Phase 1 Development Area Project
JR Osaka Station

Financial Section

Hankyu Umeda Station

Chayamachi Redevelopment(Eastern District)Rebuilding of
Umeda Hankyu
Building

Hankyu Hanshin Holdings21

Overview of Core Businesses
Urban Transportation

Real EstateEntertainment andCommunications

Nature of Business

Percentage of Group Total©Hanshin Tigers

Revenues from operations

Operating income

Revenues from operations

Operating income

Revenues from operations

Operating income¥195.2 billion¥32.5 billion¥171.7 billion¥32.8 billion¥100.6 billion¥8.4 billion

27.9%
42.3%

21.9%
42.8%

13.2%
10.9%

Centred on Hankyu Corporation andHanshin Electric Railway, this segment
operates railway, bus and taxi services
forming an extensive transportation network throughout Kansai region. With the
opening in March 2009 of the Hanshin
Namba Line, we have created a railway
network linking Kobe, Osaka and Nara,
while serving Osaka’s two major terminals,
Umeda and Namba. This will further revitalise areas along our lines. With ongoing
grade separation (track elevation) projects
and work to make facilities barrier-free,
this segment is committed to providing
safe, convenient and appealing transit
services.

Consisting of real estate leasing, dealership and management businesses, theReal Estate segment derives its revenue base from property leasing andmanagement (retail and offices) andits condominium business. It boasts avaried and attractive business portfolio
including commercial facilities such as
Hankyu-Sanbangai and HERBIS OSAKA/
ENT, and the highly regarded GEO condominium brand in the Kyoto-OsakaKobe area. Based on its proven trackrecord in creating value along railway
lines, founded on project-development
capabilities developed over many years,
the segment is enjoying steady progressin large-scale projects that are revitalising line-side areas, such as Rebuilding of
Umeda Hankyu Building and Chayamachi
Redevelopment.

This segment offers a wide variety of live
entertainment, centred on the sportsbusiness — the nationally popular
Hanshin Tigers professional baseballteam and their home ground and highschool baseball mecca, Hanshin Koshien
Stadium — and the stage revue business,based on the hugely popular, globallyrenowned and original Takarazuka Revue.
Other businesses include our advertising
agency, which uses advertising spaces
on railways and other public transport;
our cable TV business serving areas along
Hanshin lines; and publishing (magazinesand books). With this rich and broad
media portfolio, the Entertainment andCommunications segment aims to deliverinspiration and dreams to customers allover Japan.

Hankyu Corporation

Hanshin Electric Railway

Hanshin Electric Railway

Hanshin Tigers Baseball Club

Hankyu Realty

Hankyu Corporation

Major Companies

Total length of lines operated:
Hankyu Corporation 146.5km
Hanshin Electric Railway 48.9km(including tier 2 railway operator)

Hankyu Corporation
Hanshin Electric Railway
Nosé Electric Railway
Kita-Osaka Kyuko Railway
Hokushin Kyuko Railway
Kobe Rapid Transit Railway
Hankyu Bus
Hanshin Bus
Hankyu Taxi
Hanshin Taxi

P.24 >>>

22 Annual Report 2009

Osaka Diamond Chikagai

Takarazuka Creative Arts

Hankyu Hanshin Building Management

Umeda Arts Theatre

Hanshin Real Estate

Bay Communications
Itec Hankyu Hanshin

P.29 >>>

P.34 >>>

Hotels

Retailing

At a Glance

Travel and International
Transportation

Financial Highlights

Revenues from operations

Operating income

Revenues from operations

Operating income

Revenues from operations

Operating income¥65.8 billion¥1.5 billion¥66.5 billion¥0.3 billion¥67.6 billion¥0.7 billion

Message

The Hankyu-Hanshin-Daiichi Hotel Group
operates 45 hotels, consisting of 19 thatare directly managed and 26 belonging
to chains operated by franchise. It is one
of Japan’s most eminent hotel chains,with approximately 8,500 guest rooms,
as of 30th April 2009. The segment offers
a wide range of hotel formats, fromgeneral-purpose “city hotels” to hotels
for businessmen (with very limited function facilities), and is particularly strong
as a hotel operator with many directlymanaged hotels in the Tokyo and Kinki
areas, Japan’s two major markets. In addition to chain operations, it also manages
The Ritz-Carlton, Osaka, an international
luxury brand with which it has formed analliance.

This segment comprises the Book 1st.
bookstore chain, the asnas convenience
store chain, the Color Field cosmetics andaccessories chains, the DOUBLEDAY furniture and daily accessories chain and othersale-of-goods outlets, as well as the restaurant and ready-to-eat meal businesses
Hankyu Soba (udon and soba noodles),Natural Kitchen KOJI (izakaya bars) and
Cook Deli Gozen (ready-to-eat meals). In
addition to its extensive presence along
the Hankyu and Hanshin lines, we havealso opened Book 1st. stores in the Tokyo
area, drawing on our long experience indeveloping businesses along our lines tostrengthen our competitive edge.

Hankyu Hanshin Express Holdings

Hankyu Hanshin Hotels

Hankyu Corporation

Hankyu Travel International

Hanshin Hotel Systems

Hankyu Retails

Hanshin Travel Service

Arima View Hotel

Iina Dining

Hankyu Express International

Hotel New Hankyu Kochi

Creative Hankyu* We plan to reorganise the travel and internationaltransportation business from October 2009 to
April 2010. Please see P.39 for more information.

Financial Section

In April 2008, we shifted to a corporate
structure with four core businesses
operating under an intermediary holding company, Hankyu Hanshin Express
Holdings.* In our travel business, Hankyu
Travel International offers an original
product range led by the comprehensive
and varied Trapics brand, while Hanshin
Travel Service offers Friend Tour line of
package tours, with a focus on European
destinations, and customised tours forbusiness travellers. The international transportation business offers high-quality
logistics services through Hankyu Express
International and Hanshin Air Cargo.

Management Organisation

9.7%
0.9%

Overview of Core Businesses

9.7%
0.4%

Special Feature

9.6%
1.9%

Hanshin Air Cargo

P.37 >>>

P.41 >>>

P.44 >>>* Segment results are on a financial accounting basis.
* Figures for segment revenues from operations as a percentage of Group totals are calculated on the basis of sales to external customers; while figures for operating income
as a percentage of Group totals are based on figures prior to consolidation adjustment (in both cases, as of 31st March 2009).
* Revenues from operations in other businesses accounted for 8.0%, and operating income for 0.7%.

Hankyu Hanshin Holdings

23

■ Urban Transportation
Major Businesses

Railway operations : Hankyu Corporation [passenger journeys per year: 601,244 thousands]
Hanshin Electric Railway [passenger journeys per year: 165,655 thousands]* Passenger journeys in year to 31st March 2009;
does not include Kobe Rapid Transit Railway.

Other consolidated subsidiaries:
Nosé Electric Railway, Kita-Osaka Kyuko Railway,
Hokushin Kyuko Railway, Kobe Rapid Transit Railway

Bus operations : Hankyu Bus, Hanshin Bus
Other consolidated subsidiaries:
Hankyu Kanko Bus, Osaka Airport Transport, Hankyu Denen Bus

Taxi operations : Hankyu Taxi, Hanshin Taxi
Core Companies

Hankyu Corporation, Hanshin Electric Railway

Hankyu Railway

Attracting more people to live along Group lines

Ikebukuro and Shibuya. *2This success is due to the Group’s dedication since
its founding to safe and convenient urban transportation
services, coupled with our commitment to creation of
appealing residential and commercial areas along our lines
through development of premium residential areas andretail facilities (such as the world’s first department store ina railway terminal (now Hankyu Department Store Umeda
Main Store)), our proprietary entertainment enterprises,
and other businesses flowing organically out of our railway
operations.

In recent years, the population of the Kansai area has been
in decline, with a low birth-rate and a rising proportion ofelderly people. However, areas along Group lines are popularand populations here have maintained growth momentum
since the trough of 1996, the year after the Great HanshinAwaji earthquake.
Furthermore, Umeda, the main hub of the Hankyu andHanshin network, contains the largest concentration of retailpremises in Kansai. Including lines operated by other companies, approximately 2.4 million people use Umeda (Osaka)
station each day, making it the busiest station in Kansai. It
also has the fourth-largest service catchment area*1 of any
station in Japan, after the three Tokyo terminals of Shinjuku,*1 Service catchment area of stations: Area around stations from which customers
using the stations are drawn, including people residing, working, studying, etc.
in the area. Bus routes bringing people in can also be counted as being in acatchment area.
*2 Source: Urban Transportation Report 2008 Edition (Institution for Transport
Policy Studies). Figures are for 2006.

Population Trends in the Kansai Area
(Thousand)150
150000Hankyu/Hanshin service areas
Osaka (service areas)
Hyogo (service areas)
Kyoto (service areas)
Osaka (non-service areas)
Hyogo (non-service areas)
Kyoto (non-service areas)
Shiga
Nara
Wakayama

Population changes (1991=0)120000100
90000
6000050
30000
00
Hankyu/Hanshin Service Areas: Following areas with stations ofHankyu (Tier 1), Hanshin Electric Railway (Tier 1), Kita-Osaka
Kyuko Railway, Nosé Electric Railway
Osaka: Osaka City (Higashi-Yodogawa, Yodogawa, Nishi-Yodogawa,
Kita, Konohana, Fukushima Wards out of 24 wards), Toyonaka,
Takatsuki, Suita, Ibaraki, Minoh, Ikeda, and Settsu cities, Shimamoto,
Toyono, and Nose towns-30000-50-60000-100-90000

(CY)

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Hyogo: Kobe City (Higashi-Nada, Nada, Chuo Wards out of 9
wards), Amagasaki, Nishinomiya, Takarazuka, Itami, Kawanishi,
and Ashiya cities, Inagawa Town
Kyoto: Kyoto City (Ukyo, Nishikyo, Nakagyo, Shimogyo Wards outof 11 wards), Nagaokakyo and Muko cities, Oyamazaki Town

2005

2006

Source: The Basic Resident Register, end of March each year

24 Annual Report 2009

Revenues from railway operations remain firm

Hank yu Cor poration also has plans to build newcommercial facilities along our lines, revenues from railway

and Nagaokakyo new station (name and date of opening

operations have increased year-on-year since fiscal 2007* in theundecided). Settsu-Shi Station is being built in tandem withcase of Hankyu Corporation, and, in the case of Hanshin Electric

the Minami-Senrioka project in an environment-friendly urban

Railway, since fiscal 2006. Likewise in fiscal 2009, although most

hub development in Settsu City between Shojaku and Minami-

major private railway operators in the Kanto (Tokyo) and Kansai

Ibaraki stations. This station project uses solar paneling andareas recorded a decrease in revenues from railway operations,other energy-saving measures, and will be Japan’s first carbon

the Hankyu and Hanshin networks maintained stable or firm

neutral station. Zero carbon dioxide emissions will be achieved

growth momentum.

by these methods in addition to purchases of carbon credits to* Excluding the boost following the tragic 2005 derailment on JR West’s
Fukuchiyama Line

offset emissions.
To ensure good interconnections at the Nagaokakyo newstation, to be built between Oyamazaki and Nagaoka-Tenjin
stations, plans will be aligned with the Kyoto second outer ring

Message

Building out the network to boost passenger
volumes

Financial Highlights

downtown stations, Settsu-Shi Station (to open in spring 2010)

At a Glance

Thanks to rising populations and the development ofroad project now under construction. The station will form
part of an interchange with park-and-ride and high-speed bus

working to offer better bus, taxi, bicycle parking lot and bicycle

stop facilities. This will give motorists and high-speed bus users

rental services from stations where passengers get off theireasy access to the new station, bringing more people onto thetrains. We are committed to developing urban transportation

railway network. It is also expected to syphon off some of theservices that include a broad range of travel options, not only

private-car traffic flows into Kyoto city centre.
With only one-ninth of their carbon dioxide emission

ment area coverage. Other initiatives to encourage greater use

levels, railways perform far better in terms of environment-of public transport include extension of the network with thefriendliness than cars. By raising public awareness of the eco-

opening of the Hanshin Namba Line, special promotions jointly

advantages of railways, we are deepening understanding ofplanned in alliance with other companies, and an expanded

environmental issues and the encouraging the use of public“points” system using the STACIA PiTaPa smart card (PiTaPa

transport.

means “Postpay IC for Touch and Pay.”)

Overview of Core Businesses

point-to-point along our lines, but also providing total catch-

Special Feature

The Group not only provides railway services, but is also

Management Organisation
Financial Section

Nosé Electric Railway

Kita-Osaka Kyuko Railway

Hankyu Bus

Hanshin Bus
Hankyu Hanshin Holdings

25

Urban Transportation

Steady passenger volumes as more people moveto areas along Group lines and commercial
developments come onstream

by opening a new route for passengers leaving Hanshin Tigers

In the year under review, revenues from railway operations* onnight games linking Hanshin Koshien Stadium with Hankyu

Hankyu lines were virtually unchanged (-0.1% for commuter

Nishinomiya-Kitaguchi station, and by unifying the various

passes, +0.1% for other tickets) to ¥90,425 million, due chiefly

types of bus cards issued by Hankyu Bus and Hanshin Bus fromto the opening of the major commercial development Hankyu

March 2009.

In bus operations, we improved customer convenience

Nishinomiya Gardens abutting Hankyu Nishinomiya-Kitaguchi

As a result of these measures, revenues from operations

Station, which offset a decline in passenger volumes due to thein the year under review increased 0.2% or ¥341 million year-

economic slowdown. At the same time, revenues from opera-

on-year to ¥195,244 million, but operating income declined

tions* on Hanshin Electric Railway lines increased 1.5% year-

2.0% or ¥665 million to ¥32,490 million due to the recording of

on-year (+1.6% for commuter passes, +1.5% for other tickets)business startup expenses in connection with the opening ofto ¥23,688 million, due chiefly to the opening of the Hanshin

the Hanshin Namba Line.

Namba Line in March 2009 and progress in construction of* Excluding revenues from the Kobe Rapid Transit Railway.

new condominium blocks along Hanshin lines (please see P.27,
Topics).

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

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

26 Annual Report 2009

At a Glance

Hanshin Namba Line begins operation on 20th March 2009
Becomes the first private operator to serve the two major terminals in Osaka — Umeda and Namba
Development work on the Nishi-Osaka Line Extension Project was completed after the project launch five-and-a-half years earlier in
October 2003, and the Hanshin Namba Line, the stretch of line resulting from the extension, began operations on 20th March 2009. In
facilities (lines and stations), supported by state and local government subsidies, while Hanshin Electric Railway leases and operates theline, under the top-and-bottom (ownership/operation) separation method.
The opening of the Hanshin Namba Line has added a large terminal and interchange station, Namba — second only to Umeda in

Financial Highlights

this project, the Hanshin Electric Railway-invested third-sector company Nishi-Osaka Railway Co., Ltd. constructed and owns the railway

the Kansai region — to the Hanshin Electric Railway network. At the same time, it has enriched the railway network in the Osaka central
area through connections with other subway and overground lines at each of the three new stations on the Namba line, Kujo, Domemae and Sakuragawa.
broader Kobe-to-Nara belt under a shared-line-use agreement with Kintetsu Corporation enabling a direct connection between Kobe

Message

The Hanshin Namba Line also serves to increase the potential of areas along Group lines by promoting greater mobility within theand Nara. This has made the Hanshin Namba Line a powerful competitive asset.
Target Figures

Special Feature

Passenger usage: 84 thousands people per day (67 thousands per day in the first year)
Revenue increase: ¥3.8 billion per year (¥3.0 billion in the first year)* In the first year of operation (fiscal 2010), we expect to reach only 80% of passenger usage and revenue increasetargets. We have assumed an increase of five percentage points per year going forward.

Overview of Core Businesses
Management Organisation
Financial Section

Hanshin Namba Line (wrapping train)

Hankyu Hanshin Holdings

27

Urban Transportation

Future Plan and Outlook (2007 Medium-Term Management Plan)*Figures below are based on management accounting, and are different from financial accounting.

Our fiscal 2010 EBITDA estimate is ¥61.7 billion, up ¥1.8 billion (3%)
year-on-year, in light of an expected improvement in revenues from(¥ billion)

80

EBITDA

Operating income

190.7

191.0

58.3

59.9

operations from the full-year contribution of the new Hanshin Namba
Line, inclusion in the scope of consolidation of Kobe Rapid Transit

60

Revenues from operations(¥ billion)

200
195.9
61.7

196.0
61.9

180

Railway Co., Ltd. and the divestiture of the bus operations of Hanshin
Electric Railway.

40

The EBITDA estimate for fiscal 2013, the final year of the

31.9

31.8

31.0

34.3

160

Medium-Term Management Plan, is ¥61.9 billion, a ¥200 million (0.3%)
increase over fiscal 2010 estimates. Although we expect a slight

20

140

decline in revenues from operations of lines other than the Hanshin
Namba Line, revenue growth is likely to be driven by increased passenger numbers on the Hanshin Namba Line, higher passenger num-

0
(FY)

2008

2009

2010

2013

ResultResultEstimate

Estimate

120

bers on lines feeding Umeda Hankyu Building, for which the grandopening is scheduled for spring 2012, and the opening of the new
Settsu-Shi Station of Hankyu Railway, scheduled for spring 2010.

■ Message from Heads of Urban Transportation Business
Naturally, ensuring safety is theprimary mission for railway operators such as ourselves. At the sametime, I also regard it as an important task to encourage people to
make their homes and fulfil theirambitions in the areas along ourlines.
Tsuneo Wakabayashi
One element of helping
Managing Director
people fulfil their ambitions is the
Head of Urban Transportation
businessplanned opening of the Hankyu
Hankyu Corporation
Settsu-Shi Station between Shojaku
and Minami-Ibaraki stations in spring 2010, and the opening of Nagaokakyo new station (name as yet undecided)
between Oyamazaki and Nagaoka-Tenjin stations. Locatedin a model zone for global-warming measures, Settsu-Shi
Station will be Japan’s first carbon neutral station. At thesame time, Nagaokakyo new station will be located by the
Kyoto second outer ring road, now under construction, witha park-and-ride enabling visitors to Kyoto city centre to drive
to the station and continue their journey by train. This new
station brings together highway and railway in a new joint
transit concept. We see both Settsu-Shi and Nagaokakyo as
models for the future development of stations.

28 Annual Report 2009

On the 20th M arch 2009, theHanshin Namba Line went into
service. Because it enables directaccess on Hanshin lines to Namba
and Nara, under a line-sharing
arrangement with Kintetsu, andincludes stations offering transfers
to Osaka municipal subway lines
Takaoki Fujiwara
and the Nankai Line, the Hanshin
Managing Director
Namba Line is seen as a boon by
Head of Urban Transportation
business
people not only in west Osak a
Hanshin Electric Railway
but also across the broader Kansai
region, as a component in a comprehensive urban transportation network. The line has got off to a good start, but wewill take measures to publicise as widely as possible the convenience of the Hanshin Namba Line and the attractivenessof the areas it serves, to maximise passenger numbers.
At the same time, we will remain absolutely committed to safety. The Hanshin Namba Line was constructedusing state-of-the-art technology, and rolling stock likewise
includes safety systems that are more advanced than others currently available. However, I constantly remind ourstaff that merely because we use the latest technologies,
this does not mean we can afford to relax our vigilance. Our
employees are trained to never lose sight of safety, even for
one instant.

■ Real Estate
Main
MajorBusinesses
Businesses
major
properties,
pleasesee P.32]please see P.32][For detailsof major
properties,[passenger
journeys per
year: 165,655
thousands]
Hanshin
Major companies:
Electric Railway
HankyuCorporation,
HanshinElectric
Railway

At a Glance

Extensive property-holdings,
property-holdings, mainly
mainly along
along Hankyu
Hankyu andand Hanshin
Hanshin lines
lines [For details of■ Real estate leasing :: Extensive
Passenger journeys
to 31st March
2009;
does
not
Kobe Rapid
Transitand saleinofyear
residential
land lots
andsaleofinclude
condominiums
andReal estate dealership : *Subdivision
Railway.

single-family housing, mainly along Hankyu and Hanshin lines

Hankyu Corporation [passenger journeys per year: 601,244 thousands]■ Railway operations : Major
companies: Hankyu Corporation, Hanshin Electric Railway,

journeysper year:
601,244bythousands]
andCorporation
Tokyo areas,[passenger
includingbuildings
owned
the Group
Hankyu■ Railway operations : Kobe
journeysper year:
165,655 thousands]
Major
companies:
Hankyu[passenger
Hanshin
Building
Management
HanshinElectric Railway

Core Companies* Passenger journeys in year to 31st March 2009; does not include Kobe Rapid Transit
Railway.

Financial Highlights

HanshinRealty
Electric Railway [passenger journeys per year: 165,655 thousands]
Hankyu* Passenger journeys in year to 31st March 2009; does not include Kobe Rapid Transit
Real estate management : Operation
Railway. and management of buildings of various formats in the Kyoto-Osaka-

HankyuCorporation, Hanshin Electric Railway
Core
Companies
Hankyu Corporation, Hanshin Electric Railway
MessageHERBIS OSAKA

business conditions in the real estate market in Japan haveworsened rapidly, due to a dramatic drying up of credit andunder the impact of the global financial crisis triggered by thecooling of consumer sentiment, creating an extremely difficult

subprime crisis originating in the United States in fiscal 2008.

business environment for the dealership (land-lot subdivision)

Since the collapse of Lehman Brothers in September 2008,

and other real estate businesses.

Average Vacancy Rates in the Osakaand Tokyo Business Areas(%)(Thousands)

12

Osaka business district

100

Tokyo area

Tokyo business district

10

Change Ratio of Land Prices (national
averages for all categories of use)

Management Organisation(%)

Condominium Sales (units marketed)

5

Kinki area

80
0

8

Overview of Core Businesses

In fiscal 2009, the real estate market went into sharp decline

Special Feature

Real estate market deteriorates dramatically

60
6
40
-5

4
20

0
(CY)

2004

2005

2006

2007

2008

2009
(June)

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

0
(CY)

2004

2005

2006

2007

2008

Source: Real Estate Economic Institute Co., Ltd., survey
into trends in the condominium market

Group rental properties perform robustly

-10
(CY)

2005

2006

2007

2008

2009

Source: Ministry of Land, Infrastructure, Transport andTourism, “Official Land Prices”

Financial Section

2

in terms of tenant-leasing attractiveness and ability to draw in

Most operating income in the Real Estate segment of the Group is

customers. The average vacancy rate for office buildings in thegenerated by rental operations. Approximately half of the rentable

Umeda area, which briefly sank as low as 3% in 2007, climbed toarea is in properties owned by the Group in the Umeda area.

6.40% in June 2009 as business conditions in the real estate market

The Umeda area has the highest land prices in Osaka, andworsened. But this is still a relatively low level compared with theis also highly competitive compared with other parts of Osaka

current 9.19% rate for all Osaka business areas and 7.25% for Tokyo

Hankyu Hanshin Holdings

29Real Estatebusiness areas. Furthermore, rents remained at the highest level
among Osaka business districts.
Currently, the average vacancy rate at a major office build-

Condominium business feels effects of rapidly
cooling market
In the subdivision business, we market condominiums, single-

ings owned by the Group in Umeda is lower than overall district

family houses and residential land lots. The condominium business,

rates partly because many of Group properties are in highly

centred on the GEO brand, has maintained a strong brand image

attractive and competitive locations.

in areas along Hankyu and Hanshin lines as well as in the Tokyo

We expect tougher competition around the edges of the
Umeda area as new supply — large-scale rental developments

area, on the strength of excellent property locations and valueadded features.

other than the Group’s ongoing Umeda Hankyu Building project —However, due to extreme sluggishness in the Tokyo andcomes onstream. However, we are confident we can maintain andKansai markets, the number of units sold (aggregate of all condo-

extend our competitive lead in the Umeda market.

minium developer) in 2008 fell 7,475 (24.7%) year-on-year in the
Kinki region, and the total rate of contracted sales over the year
declined 5.8 percentage points to 78.0% of all units marketed.*
This means that the price of condominiums has peaked.
* Survey carried out by Real Estate Economic Institute Co., Ltd.

Deteriorating business conditions leave theirmarkdevelopments. Residential land-lot sales centred on the MinohIn the leasing business, footfall and tenants’ sales remained

Yamatedai Residence ( Tak arazuk a, H yogo Prefec ture)robust at Hankyu Nishinomiya Gardens, despite a difficult busi-

developments.

Onohara Residence (Minoh, Osaka Prefecture) and Takarazuka

ness environment amid a slowdown in consumer spending.

We have also made good progress with large-scale

Hankyu Nishinomiya Gardens, the fruit of a Group-wide project

development projects such as the Rebuilding of Umeda Hankyu

and one of the largest shopping centres in western Japan,

Building (for details, please see the feature on P.18)

opened its doors in November 2008. In the Tokyo area, in addi-

However, revenues from operations in this segment felltion to opening the AKIBA TOLIM shopping centre in April 2008,¥8,004 million (4.5%) to ¥171,686 million, due chiefly to a weak

we made a Group-wide effort to keep occupancy rates high at

performance in the subdivision business amid deterioration inGroup-owned office buildings and commercial facilities while

the overall real estate market. Operating income also declined

cutting management and operational costs.

by ¥6,702 million (17.0%) to ¥32,816 million, on recording of

I n t h e s u b d i v i s i o n b u s i n e s s, c o n d o m i n i u m s a l e s

an appraisal loss under the lower of cost or market method on

centred on the GEO Senri Momoyamadai ( Toyonaka, Osaka

subdivided land and structures (¥3,820 million), and a loss on

Prefecture) and GEO Kitasenri Furuedai (Suita, Osaka Prefecture)valuation of the real estate fund business (¥2,283 million).

GEO Senri Momoyamadai

30 Annual Report 2009

Takarazuka Yamatedai ResidenceAt a Glance

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

MessageSpecial Feature

Hankyu Nishinomiya Gardens, one of the largest commercial facilities in western Japan, opens its doors

Financial Highlights(1) By leveraging our expertise in community building, provide safe and convenient basic infrastructure and provide services that support community lifestyles• Step up measures to ensure stable operations at Hankyu Nishinomiya Gardens• Supply housing lots in a joint project with Hankyu Realty and Hanshin Electric Railway, particularly in areas along Hankyu andHanshin lines(2) Enhance enterprise value and optimise cash flow by striking an appropriate balance between investments and returns(3) Raise our profile in the Umeda area, through renovations of our properties• Rebuilding of Umeda Hankyu Building, Chayamachi Redevelopment (Eastern District), and Osaka Station North District Phase 1
Development Area Project

In November 2008, Hankyu Nishinomiya Gardens, one of the largest retail complexes in western Japan, opened its doors. Fruit of aredevelopment project on the site of the Hankyu Nishinomiya Stadium adjacent to the Hankyu Nishinomiya-Kitaguchi station, the mallof the main attractions of the Hankyu Nishinomiya Gardens is the Hankyu Department Store, and they also contain a cinema complex
managed by Toho Cinemas Ltd. and OS Co., Ltd. Combined with the Hyogo Performing Arts Center and the Kitaguchi-Minami Hankyu
Building located south of the station, this development with its ability to draw in customers from a wide area is becoming a new hub in
the Osaka-Kobe belt.

ness conditions with weak personal spending.
Outline of Facilities

Core Facilities

Site area: Approximately 70,000m2
Rentable area: 107,000m2
Number of outlets: 268

Department store (Hankyu Department Stores)
Cinema complex (Toho Cinemas Ltd. and OS Co., Ltd.); 12 screens, 2,200 seats
General merchandise store (Izumiya Co., Ltd.)Management Organisation

In the first fiscal year, we aim to attract approximately 20 million visitors and post sales of approximately ¥60 billion (full-yearbasis). As of 13th July 2009, visitors totalled 12.65 million and sales approximately ¥47 billion, a solid performance despite difficult busi-

Overview of Core Businesses

provides a commercial and entertainment space drawing on the comprehensive resources of the Hankyu Hanshin Toho Group. One(of which 69 will be debut openings in the Kansai area)
Financial Section

Parking spaces: Approximately 3,000“Sky Garden” featuring rooftop greenery

The mall has 268 specialist retail outlets

Hankyu Hanshin Holdings

31Real Estate

Hotel Hankyu International
Corporation
Umeda Area in Detail Hankyu
Head Office

Kyoto Pref.

20
Kitano Hankyu
Bldg.

C

5
B

Nishi Hankyu Bldg.

Hankyu Umeda Station

Block

3

Hotel New Hankyu

A

tio
Sta

aka

Os

Higashi Hankyu
Bldg.

Nosé Electric
Railway Line

Hanshin Department Store

14

Mino-o Line4

mino-oKawanishi-noseguchi

9

Itami Line

Koyo Lineuko
hin KyHokus way LineRail

KoyoenKobe Line

19

Itami

Senri Line

Takarazuka Line
Esaka

Shin-Osaka

Awaji

Imazu
Mukogawa

10

Daimotsu

N

Juso
Umeda

Amagasaki
Mukogawadanchi-mae

18

25
en

Kita-Osaka Kyuko
Railway Line

6

Imazu

Sannomiya

Ishibashi

Tsukaguchi
Nishinomiya-kitaguchi

SyukugawaShinkobe

8

inImazu Line

Kita-senri

Senrichuo

15

Main Line

Tenjimbashisuji-rokuchome

Nara Pref.
16

Mukogawa Line

Motomachi

Property Name

Hankyu Corporation
Umeda Hankyu Bldg.
1
2
Hankyu Terminal Bldg.
3
Hankyu Sanbangai Shopping Arcade
4
Shin Hankyu Bldg.*2
5
Kita Hankyu Bldg.
6
Hankyu Nishinomiya Gardens
7
Kotocross Hankyu Kawaramachi
8
Itami Hankyu Station Bldg. (Itami Reita)
AKIBA TOLIM
9
Senri Asahi Hankyu Bldg.
10 Kobe Hankyu Bldg.
Miyazu Hankyu Bldg. (Mipple)
11 Katsura Higashi Hankyu Bldg.
Hanshin Electric Railway
12 Umeda Hanshin Daiichi Bldg. (HERBIS OSAKA)
13 Umeda Hanshin Daini Bldg. (HERBIS ENT)
14 Dai Hanshin Bldg. (Hanshin Department Store)
15 Noda Hanshin Bldg.
16 Fukushima Hanshin Bldg.
17 Motomachi Hanshin Bldg.
18 Sannomiya Hanshin Bldg.
19 EBISTA Nishinomiya (Commercial facility under an elevated railway tracks)

Completed

Area for Lease (m2)*1

1920
1972
1969
1962
1971
2008
2007
1998
2008
1992
1936
1997
1993

77,90826,44040,01830,613
12,343
108,186
2,965
10,00910,294
12,522
7,901
20,021
2,793

1997
2004
1963
1992
1987
1987
1933
2003

78,70854,602
98,57841,086
21,764
7,865
13,672
10,359No.

Property Name

Hankyu Realty
20 Hankyu Chayamachi Bldg. (Chayamachi Applause)
21 Navio Hankyu (HEP NAVIO)
22 Hankyu Five Bldg. (HEP FIVE)
23 Umeda Center Bldg.
24 Hankyu Kawaramachi Bldg.
25 Hankyu Senri Chuo Bldg.

Completed

Area for Lease (m2)*1

1992
1980
1998
1987
1970
1980

51,865
15,49911,466
9,893
38,237
12,503*1 Area for lease does not include areas for public use.
*2 Land for Shin Hankyu Bldg. is rented from Hanshin Electric Railway.

3 Hankyu Sanbangai

Shopping Arcade

32 Annual Report 2009ns

Takarazuka

Tanigami

No.

Osaka
International
Airportka

HERBIS ENTThe Ritz-Carlton, Osaka

17

Osaka Pref.

Hankyu Department Storeeda

HERBISOSAKA

Shinkaichi

Kyoto Line

21

1

Um
in
nsh
Hatation
S

Myokenguchi

Nissei-chuo

Hankyu
Grand
Bldg.

13

Kobe Rapid Transit
Railway Line

Kyoto

23

2

Block

n

12

24

22

Phase 1Development Area(about 7ha)

JRArashiyama Line

Katsura11

Sh

Osaka Station
North District(about 24ha)

Kawaramachi

Eastern
Chayamachi
District
NU_
chayamachi

Block

7

Arashiyama

14 Dai Hanshin Bldg.

(Hanshin Department
Store)

22 Hankyu Five Bldg.

(HEP FIVE)At a Glance

Future Plan and Outlook (2007 Medium-Term Management Plan)*Figures below are based on management accounting, and are different from financial accounting.

We expect to post a ¥3.5 billion (7.2%) year-on-year decline in EBITDA
to ¥45.4 billion in fiscal 2010. A decline in rental revenues (office(¥ billion)

80

and a reduction in area for lease following completion of Phase I

70

Umeda Hankyu Building are likely to outweigh the projected full-60

year earnings from Hankyu Nishinomiya Gardens, which opened its

50

doors in November 2008. In fiscal 2013, we expect EBITDA to increase40

by ¥11.5 billion (25.3%) to ¥56.9 billion compared with fiscal 2010
building wing of the Umeda Hankyu Building reconstruction project,

179.7
170.1

20

210
190

171.6

170
56.9

55.1
48.9

(¥ billion)

230

210.4

150

45.4

41.5

130
37.9

33.7
28.6

30
(FY)

expected to be the biggest driver of the earnings growth under the

Revenues from operations

110
90

2008

2009

2010

2013

ResultResultEstimate

Estimate

70

Messageestimate. Chief factors will be completion in April 2010 of the office

Operating income

Financial Highlights

buildings and commercial facilities) due to the economic downturn(department store building) and Phase II demolition work at the

EBITDA

90

Medium-Term Management Plan, and the grand opening of the complex following completion of Phase II work at the department store ofSpecial Feature

the New Umeda Hankyu Building in spring 2012.

■ Message from Heads of Real Estate Business

Financial Section

Hankyu Hanshin Holdings

Management Organisation

Some five years have passed since
HERBIS ENT opened its doors. In thattime, we have focused efforts ondevelopment of the areas aroundstations along our lines. In future, weplan to continue developing areas
around major stations and refurbishing commercial facilities. In contrast
to specialist real estate companies Yoshihiro Iwase
Senior Managing Director
that focus on expanding business (Representative Director)of Real Estate operations
scale, the real estate division of a HeadHanshin Electric Railway
railway company is also expected tohelp encourage greater use of the railways. We see our mission as building communities along our lines and providing
the amenities they need.
In this endeavour, the Umeda area is a strategic hub
for both Hankyu and Hanshin. Looking ahead, we must
continue to work to raise the profile of this area. In addition
to the ongoing Rebuilding of the Umeda Hankyu Building,
we are committed to the development of a “greater Umedaarea” including West Umeda, where we at Hanshin Electric
Railway are also involved in various projects. We regard thisas an important future mission for The Hankyu Hanshin
Holdings Group. I believe the combined expertise built up
by our two brands positions us for further exciting businessdevelopment.

Overview of Core Businesses

The job of the Group’s Real Estatebusinesses is to create communities — communities that people
w an t to li ve, wor k and en j o ythemselves in. The basic idea is therailway comes first, then the realestate business builds the community, and Group service businesses then supply the amenities
that make the community viable.
Takashi Shimada
Managing Director
We differ from conventional real
Head of Real Estate operations
estate businesses in that we place
Hankyu Corporation
heavy emphasis on the mediumto-long term. We are committed to
dynamic community creation not only in the area served byour lines but across the whole Kansai area.
Key to this concept is our regeneration of the Umeda
area of Osak a, where we are currently engaged in a
number of projects such as Rebuilding of Umeda Hankyu
Building (the flagship of Hankyu Department Stores, Inc.),
Chayamachi Redevelopment, and Osaka Station North
District Phase 1 Development Area Project. Our focus is not
only upgrading facilities operated by Hankyu and Hanshingroups, but creation of a fully interlinked zone in the Umeda
area with above-ground and below-ground spaces connected by escalators and elevated walkways between buildings, enabling completely untrammelled circulation. I believe
we are helping to create an even more dynamic hub for the
future Kansai area.

33

■ Entertainment and Communications
Major Businesses

Sports business : Professional baseball business (the Hanshin Tigers) and Hanshin
Koshien Stadium, and related businesses

Revue and theatre business : Takarazuka Revue and related businesses;
operation of Umeda Arts Theatre and promotionof stage productions

Advertising agency, publishing/broadcasting, musical entertainment(“Billboard Live” club and restaurant chain), information technology
services, and other businessCore Companies

Hankyu Corporation, Hanshin Electric Railway©Takarazuka Revue Company

Strong fan base keeps the crowds coming

the Kansai area but also throughout Japan, and retain excellent

According to recent household spending surveys carried out

brand images. Other railway groups have nothing to compareby the Statistics Bureau of the Ministry of Internal Affairs andwith these two powerful attractions, which have become

Communications, overall household consumption in 2008

significant assets for the Group, contributing strongly to branddeclined 1.7% in real terms, after adjustment for price fluctua-

value growth.

tion, and cultural and recreational expenditure likewise fell 1.2%,

As interests and leisure pastimes diversify, we expect

creating a difficult operating environment for this segment. But

competition to come in future from the whole spectrum of

the mainstay sports and revue businesses kept the crowds com-commercial entertainment, not just from other spectator sports

ing during this difficult year, thanks to their strong fan bases.

and live-performance formats. Accordingly, we are taking steps

The Hanshin Tigers and Hanshin Koshien Stadium (sportsbusiness) and the Takarazuka Revue (stage revue and theatre

to build brand strength and customer loyalty by ensuring aconsistently high level of performance quality in future.

business) both enjoyed high levels of popularity not only inSpectator Numbers at Hanshin Tigers Home Games

General Household Expenditure andCulture and Recreation Spending(%)(Thousands)

4,000

7
General consumption

5

Culture and recreation

3

3,500

3,132

3,155

3,144

2006
Winners

2007
Second
place

2008
Third
place

3,000

2,977*

2,500
2,000

1

1,500

-1

1,000
-3
-5
(CY)

500
2004

2005

2006

2007

2008

Source: Household spending surveys, Ministry of Internal Affairs
and Communications

34 Annual Report 2009

0
(FY)

2009
Secondplace* In the fiscal 2009 season, there were approximately 4,000 fewer seats
than in the previous season, due to refurbishment work to upgrade
infield seating.

At a GlanceSports business drives earnings
In the cable television business, we enjoyed steady growth inpennant race right up to the season’s end, which kept the seats

subscriber numbers through our Cable-Plus Phone service,at our Hanshin Koshien Stadium filled with enthusiastic fans.

which offers lower rates for land-line phone and other services

Taking advantage of the opportunities provided by the renova-

offering free calls to mobile-phone subscribers. We also suc-tion of Hanshin Koshien Stadium, we revised upward baseballceeded in attracting an increased number of visitors to ourgame ticket prices, expanded restaurants and shops, and added

facilities on Mt. Rokko. We conducted vigorous marketing activi-

new advertising space. As a result, revenues from our sports

ties promoting the Rokko-Maya Enjoy Pass, a ticket that lets

operations increased.

customers use all Group facilities, and hosting the Mt. Rokko Ice

In our stage revue operations, we enjoyed particularly

Financial Highlights

In our sports operations the Hanshin Tigers remained in theFestival.

Me and My Girl and the Hoshigumi (Star troupe) shows My Dearincreased ¥5,233 million (5.5%) year-on-year to ¥100,561 million,

New Orleans and A Bientôt, and all these shows recorded strong

but operating income slipped ¥164 million (1.9%) to ¥8,384

ticket sales. In theatre operations, the Umeda Arts Theatre put

million, due mainly to increased depreciation expenses follow-

on performances of a number of plays that were much talked

ing completion of Phases I and II of the renovation of Hanshin

about in theatrical circles, notably Kurobe no Taiyo, which is a

Koshien Stadium.

Special Feature

As a result of the above, revenues from operations

Messagepositive critical acclaim for the Tsukigumi (Moon troupe) show

stage adaptation of a movie.

By further enhancing the appeal of our proprietary Hanshin Tigers professional baseball team/Hanshin Koshien Stadium and Takarazuka

Overview of Core Businesses

Basic strategy
Revue, which provide “inspiration and dreams,” and by broadening the channels through which we deliver these attractions, we will
endeavour, we are taking the following priority measures.

Financial Section(1) Increasing the appeal of live events (Hanshin Tigers, Takarazuka Revue, Umeda Arts Theatre, Billboard Live)• Create superior content, and foster or acquire star talent• Increase the appeal of live-event venues(2) Upgrading and expansion of media use• Broaden the range of media channels and strengthen online publicity• Increase the appeal of our publishing, broadcasting and advertising operations and develop a better media mix(3) Maximise the value of the Hanshin Tigers, Koshien and Takarazuka brands• Further enhance multiple use of content• Strengthen sales promotion and broaden media exposure(4) Leverage our leisure facilities (facilities on top of Mt. Rokko, Takarazuka Garden Fields, etc.)• Strengthen alliances and ties between Group facilities with strong spectator appeal

Management Organisation

strengthen our revenue base, enhance the aura of the Group and build brand strength and greater value along our lines. In thisHankyu Hanshin Holdings

35Entertainment and Communications

Future Plan and Outlook (2007 Medium-Term Management Plan)*Figures below are based on management accounting, and are different from financial accounting.

Our EBITDA estimate for fiscal 2010 is ¥17.5 billion, a ¥900 million(5.4%) increase over fiscal 2009 results, reflecting increased profitability of Hanshin Koshien Stadium after completion of main structure work, an increase in the number of Hanshin Tigers host games,
revised seating prices at Takarazuka Revue theatre and an increase inscheduled performances in Tokyo, as well as an expected jump in thenumber of subscribers to the cable television business. Our EBITDA(¥ billion)

Operating income

Revenues from operations

104.6

117.2

99.4

100
19.7

20
15

(¥ billion)

120
105.8

25

15.7

16.6

17.5

80
12.4

estimate for fiscal 2013 is ¥19.7 billion, an increase of ¥2.2 billion(12.6%) from the estimate for fiscal 2010. We expect the growth driv-

EBITDA

30

10

10.7

10.7

60

10.1

ers here to be a further rise in the number of cable TV subscribers following strengthened marketing of our “triple service” package (cable
television, high-speed internet connection and IP phone services),

5

(FY)

2008

2009

2010

2013

ResultResultEstimate

Estimate40

in the information services business, development of our Internet,
healthcare system, and solution businesses, which we have positioned as growth fields.

■ Message from Heads of Entertainment and Communication Business
Every year, the Takarazuka Revuestages over 450 scheduled performances at the 2,550-seat Takarazuka
Grand Theatre and the 2069-seat
Tokyo Takarazuka Theatre. The morethan 400 performers who make up
the five troupes (Hana (Flower), Tsuki(Moon), Yuki (Snow), Hoshi (Star) andSora (Cosmos)) work to an annual
10-show schedule, with troupes performing in rotation. With shows prov- Eiji Igata
ing consistently very popular, they are Managing Director
truly one of leaders in live entertain- Head of Entertainment businessment in Japan. Attracting 2.5 million Hankyu Corporation
spectators annually, they account forover one-tenth of the total stageshow market in Japan. Since its re-opening in 2001, the Tokyo
Takarazuka Theatre has always been booked out.
Revue performers and support staff are all based in
Takarazuka City in Hyogo Prefecture, where on- and off-stage
rehearsal facilities are also clustered. This means that shows
are taken until around the country only after opening at the
Takarazuka Grand Theatre. Performances are broadcast acrossthe nation using the Takarazuka Sky Stage communication
satellite-broadcasting service and are also covered in a range ofrevue magazines and other drama publications. Young candidates from all over Japan also take examinations to get into the
Takarazuka Music School, where the next generation of Revuetalent is given basic training and fostered.
Looking ahead, we plan to further expand our share of
the stage-show market in Japan, generating synergy from our
Takarazuka and Tokyo theatre and other live, cinema, broadcast
and printed-media entertainment in combination with thetheatre business at Umeda Arts Theatre.

36 Annual Report 2009

Work began at Hanshin Koshien
Stadium in the spring of 1923, withthe aim of outdoing the newly
completed Yankee Stadium of
the New York Yankees. For over
80 years, Koshien has been thehome of the National High School
Baseball Championship and the
Toshihiro Makita
home ground o f the Hanshin
Managing Director
Tigers. In October 2007, with theHead of EC business
Hanshin Electric Railway
aim of upholding the history andtraditions of the venue as a placeof excitement and dream fulfilment, we launched refurbishment work, with completion of the new main structure in
March 2009.
Baseball is currently reforming its business model,
relying not only on ticket sales and broadcasting rights, butalso broadening revenue sources through the more effective use of stadium facilities and product merchandising.
The Company will continue to build up profitability andsatisfy its customers through its long-term commitment to
the Hanshin Tigers brand, and through various measures
at Hanshin Koshien Stadium, such as construction of “Royal
Suite” seating, introduction of sales of naming rights at someinfield seating, installation of the "Liner Vision" video display,and construction of large merchandise stores.

■ Travel and International Transportation
Major Businesses
At a Glance

Travel Business :	Hankyu Travel International, Hanshin Travel Service
Business Volume :Overseas Travel¥246.3 billion (No. 3 in the Industry)Domestic Travel¥137.4 billion (No. 5 in the Industry)
Total Business Volume ¥385.0 billion (No. 4 in the Industry)* Business Volume is based on fiscal 2009 actual results;
total of Hankyu Travel International and Hanshin Travel Service.

Financial Highlights

I nternational Transportation Business :	Hankyu Express International, Hanshin Air Cargo
Sales¥83.0 billion* Sales are actual figures for fiscal 2009;
total of Hankyu Express International and Hanshin Air Cargo.

Core Companies

Hankyu Hanshin Express Holdings
MessageSkyrocketing fuel surcharges and economic
stagnation make for a rapid deterioration in thebusiness environment

services that meet customer needs.
The operating environment for overseas travel has beenSpecial Feature

Travelseverely impacted by the 9/11 terror attacks in the United

the overseas travel segment, consolidating the No. 3 position

increases in fuel surcharges since fiscal 2008 have led toin overseas travel business volume in the industry (combined

another reduction in the number of travellers. During fiscal

Hankyu and Hanshin business results) during fiscal 2009. The

2009 in particular, fuel surcharges reached a historic high, andGroup continues to experience growth in the domestic travel

combined with the effects of the global financial crisis, thesegment, having reached the No. 5 position in that industry.

industry experienced a challenging management environment.

Developing attractive products and exercising thoroughHowever, the Group believes that there is latent demand for

quality management, Hankyu Travel International operates theoverseas travel among the Baby Boomer generation and among

Trapics and other brands, providing services tailored to the indi-

single adults. Enhanced Customer Relationship Management

vidual style and objectives of customers. Hanshin Travel Service(CRM) strategies will be implemented to win new clients andoffers the Friend Tour line of package tours (mainly to Europe)

increase the percentage of repeat customers.

Management Organisation

had been experiencing a mild recovery, the continuing

Overview of Core Businesses

States, the Iraq War, and the SARS epidemic. While the industry

The Hankyu Hanshin Holdings Group is particularly strong inand other high-quality overseas travel support products and(¥ million)
Overseas Travel

1
2
3
4
5

JTB*
H.I.S.
Hankyu Hanshin Group*2
Kinki Nippon Tourist*3
NIPPON TRAVEL AGENCY
1

Domestic Travel

442,512305,790
246,254
198,257
131,235

Financial Section

Travel Business Volume ofHankyu Hanshin Group

Travel Agency Ranking by Business Volume
1
2
3
4
5

JTB*
Kinki Nippon Tourist*3
NIPPON TRAVEL AGENCYANA Sales
Hankyu Hanshin Group*2
1

790,679
385,716
284,080
198,147
137,445*1 Total for 14 JTB Group companies*2 Total of Hankyu Travel International and Hanshin Travel Service*3 Total for Kinki Nippon Tourist and KNT Tourist
Source: Japan Tourism Agency Bulletin: Business Volume for Major Travel Agents (April 2008 to March 2009)(¥ billion)

500
400

■ Overseas travel

372.2■ Domestic travel

409.5

411.2

425.7

2006

2007

2008

385.0

300
200
100
0
(FY)

2005

2009

Hankyu Hanshin Holdings37

Travel and International Transportation

International Transportation
Rapid deterioration in the business environment
due to the global financial crisis and worldwide
economic recession
The Group was one of the first in the air freight forwarding
industry to begin operating in the marine transportation business, constructing a system to function as one link in our cus-

International Transportation Business Sales ofHankyu Hanshin Group(¥ billion) ■ Japan■ International

100
80

77.7

79.7

2005

2006

87.7

87.0

2007

2008

83.0

60

tomers’ supply chain management. The efficient combinationof air and ocean transportation modes forms an infrastructure

40

allowing us to respond to the complex logistics needs of our20

customers as a total logistics provider.
Since late 2008, the global financial crisis and resulting

0
(FY)

2009

economic recession have created a broad year-on-year decline
in the volume of air and ocean shipments.
For the time being, we expect the business environment
to continue to be extremely challenging. However, we will be
actively establishing operations in growth markets and taking
advantage of the synergies of the Hankyu/Hanshin integration
to find growth despite such conditions.

Transition to a new structure: Hankyu Hanshin
Express Holdings as an intermediate holding
companyboth the Travel and International Transportation Businesses

The number of customers interested in travelling to Europe andintermediate holding company) on 1st April 2008. In conjunc-other distant locations decreased due to the effects of soaring

tion with this reorganisation, the domestic logistics business,

oil prices necessitating higher fuel surcharges. Travel to China

which had been included under the Travel and International

also declined, due to food safety incidents and earthquakes

Transportation Business, was placed under the “other business”

occurring during the fiscal year. Meanwhile, regional bus tours

segment beginning this fiscal year. As a result, the businessand other domestic travel enjoyed a strong performance.

segment experienced an approximately ¥15 billion decrease inWith respect to the International Transportation Business,
air transportation was severely affected by the global economic

To develop a stronger capacity to compete in the market,
were reorganised under Hankyu Hanshin Express Holdings (anrevenues. The sale of Hankyu Cargo Service to an outside entity
resulted in a further ¥10.5 billion reduction in revenues.

recession that began in the autumn of last year. Demand for

As a result, revenues from operations experienced aboth imports and exports fell dramatically. Meanwhile, marine¥28,631 million (30.3%) year-on-year decrease, amounting totransportation, which had been enjoying a steady performance¥65,806 million. Operating income amounted to ¥1,452 million,

due to aggressive sales efforts, experienced a severe downturn

representing a ¥1,755 million (54.7%) year-on-year decline.

as a whole. Despite marine imports on a par with the prior year,
demand for marine exports experienced the same precipitous
decline that affected air transportation.

38 Annual Report 2009

At a Glance

Basic strategy
TravelInternational Transportation
The International Transportation Business is pursuing a basic strat-

dreams” through the development of feature-rich products,

egy that calls for “delivering reliable services and well-being” throughthe Travel Business has been pursuing a course of high-value-

an advanced logistics systems network. Aggressive investment andadded product development. The objective is to win over the

network construction in this area will lead to stability and growth,

genuine support of customers, secure consistent profits, anddriven by improvements in the following areas.

Financial Highlights

Under a basic strategy calling for “delivering inspiration andachieve improvement in the following areas.

Travel and International Transportation Business Reorganisation

Management Organisation
Financial Section

The Travel and International Transportation Business will undergo a reorganisation in October 2009 (International Transportation) and
April 2010 (Travel Business). The objectives of this reorganisation are to further strengthen competitive capacity and to maximise integrated synergies.
The Travel Business will consolidate planned travel packages and group travel under Hankyu Travel International. Business travel
will be covered by Hankyu Hanshin Business Travel exclusively. This reorganisation by business function will facilitate decision-making,as well as faster management/sales responses. The Travel Business will work to reinforce its structure towards becoming the No. 1
company in international planned travel packages, while improving services and expanding market share in the business travel market
segment.
In the international transportation business, we will establish Hankyu Hanshin Express through the integration of Hankyu Express
International and Hanshin Air Cargo, under Hankyu Hanshin Express Holdings. The integration of these two entities will lead to more
effective use of management resources, generating the benefits of scale and establishing a more prominent position in the industry.
This integration will also serve as a springboard towards improved service levels domestically, a more extensive international network, astronger competitive platform, and a greater share of the worldwide market.

Overview of Core Businesses(2) Capitalising on integration synergies• Reduced costs/expenses through coordinated Hankyu/
Hanshin business processes(3) Stronger network• Accelerated expansion of operating locations; stronger
coordination with sales agentsSpecial Feature* Logistics business: Logistics services that supplement air/marinetransportation, such as warehousing and inventory management

Message(1) Raise customer satisfaction levels• Consistent quality management; improve employee skills;
comprehensive risk management(2) Stronger sales capacity(planned travel packages; corporate customer sales)• Comprehensive brand management; stronger planned
travel package sales; expanded sales channels; stronger
corporate client sales(3) Foundation for consistent profits• Stronger, more efficient purchasing depar tment;
improved process efficiencies in back office/administrative departments(1) A stronger revenue base
• Expanded business in East Asia, focused on China;
stronger imports from North America and Europe,
expanded exports to East Asia; promotion of consolidation and improved transportation quality; expanded
involvement in the marine cargo/logistics business*

Prior to Reorganisation
Hankyu Hanshin Express Holdings
Hankyu Travel International
After Reorganisation (April 2010)

Hanshin Travel Service

Hankyu Express International

Hanshin Air Cargo

Hankyu Hanshin Express Holdings

Planned Travel Packages/Group Travel

Hankyu Travel International

Business Travel

Hankyu Hanshin Business Travel

Hankyu Hanshin Express

International Transportation

Hankyu Hanshin Holdings

39

Travel and International Transportation

Future Plan and Outlook (2007 Medium-Term Management Plan)*Figures below are based on management accounting, and are different from financial accounting.

The EBITDA estimate for fiscal 2010 incorporates profit stabilisation
through cost reductions in international transportation. Accordingly,
we have set this estimate at ¥3.2 billion, representing a ¥500 million(18.5%) increase compared to the fiscal 2009 actual result.
This plan assumes continued negative consumer sentimentthroughout fiscal 2010 affecting the Travel Business. However, we
believe that there will be an abatement in the effects of fuel surcharges, and a recovery in overseas travel, during the second half offiscal 2010. As a result, we project that our operating results will have(¥ billion)

EBITDA

10

Operating income

Revenues from operations

79.5

75.0
65.8

6.7
6

5.2
4.3
3.1

2

2.7
1.5

80

66.4

8

4

(¥ billion)

60

40

3.2
20

1.9

bottomed during the first half of fiscal 2010.
M eanwhile, we predic t a recover y in demand for our

0International Transportation Business after fiscal 2011, assuming fiscal

(FY)

2008

2009

2010

2013

ResultResultEstimate

Estimate02010 earnings bottom out.
Our EBITDA estimate for fiscal 2013 is ¥6.7 billion, higher than
the fiscal 2008 profit level. We believe this figure is justified based on
our assumption of greater revenues (particularly overseas travel) andstronger product sales in our Travel Business, coupled with economic
recovery, accelerated expansion into growth markets, and synergistic
benefits from our business reorganisation affecting our International
Transportation Business.

■ Message from Head of Travel and International Transportation Business

Hiroshi Ojima●About the Travel Business
The Trapics and Friend Tour names are widely recognised as powerful brands in the travel industry.
Combined, Hankyu Travel International and Hanshin Travel Service represent the fourth-largest company in the travel industry in terms of business volume, and are close to overtaking the No. 2 and No. 3
firms in the industry. Both companies have a high ratio of sales in overseas travel. However, we believethat capitalising on the popular Hanshin brand while placing more focus on domestic travel will help
us near the upper echelon of the industry. Our mission in this segment is to be a firm that is particularly
oriented towards “travel quality,” winning the dedicated support of our clients, while building ongoingvolume.

President
Hankyu Hanshin Express Holdings●About the International Transportation Business
Hankyu Express International and Hanshin Air Cargo are integrating facilities and co-loading according
to plan, beginning joint operations of new facilities at the Kansai International Airport, as well as offices
and warehouses in the United States and Great Britain. These advances have contributed to greater efficiencies and cost reductions in our business processes. We will continue to integrate overlapping operations overseas, expanding our international network by redirecting excess management resources toAsia (primarily China and India) and Eastern Europe, markets where we see significant growth.

40 Annual Report 2009

■ Hotels
Major Businesses
At a Glance

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.

Hankyu Hanshin Hotels (operates Hankyu-Hanshin-Daiichi Hotel Group)

Message

Hotel Hankyu International

Since the opening of the Takarazuka Hotel in 1926, the Hankyu-

The number of hotels in Japan has increased steadily*1 since

Hanshin-Daiichi Hotel Group has grown steadily in size to thethe Ministry of Health, Labour and Welfare (formerly the Healthpoint where it is now one of the leading hotel groups in Japan,

and Welfare Ministry) began keeping such statistics 40 years

with a total of 45 hotels and 8,548 guest rooms. Approximately

ago. This trend can be expected to continue with new businesshalf are located in the Tokyo and Kinki areas.

hotel openings in urban areas and project announcements.

*As of 31st March 2009

However, according to estimates by Japan Productivity Center
for Socio-Economic Development*2, sales per hotel have been
declining, as the total number of hotels increases within a

(%)

1
2
3
4
5

Prince Hotels Group
Tokyu Group
Hankyu-Hanshin-Daiichi Hotel Group
Imperial Hotel GroupThe Royal Hotel Group

Share

10.4
4.6
4.2
3.2
3.1

difference

-0.6
-1.0
+0.3
0
-0.1

Source: Survey by Nikkei Sangyo Shimbun (Nihon Keizai Shimbun), 6th August 2009

words, hotel operation in Japan has become an increasinglycompetitive business.
To address these challenges, the Group has launchedlarge-scale refurbishment of established general-purpose “cityhotels” mainly in the Tokyo area to improve their competitiveness, and at the same time has targeted the upper end of thecity-centre no-frills “business hotel” market with the new REMM
brand, a format featuring specially designed guest rooms
ensuring “a good night’s sleep,” including custom-made beds.

Financial Section

Hotel Chain Name

YoYManagement Organisation

market capped at somewhat over ¥1 trillion since 1996. In other

Sales Share of Japan’s Hotel Chain (FY2009)

Overview of Core Businesses

Intensifying competition

Special Feature

One of the leading hotel groups in Japan

Rank

Financial Highlights

Core Companies*1 Report on Public Health Administration and Services (public healthadministration case report), fiscal 2008 edition, Ministry of Health, Labourand Welfare*2 Leisure white paper, fiscal 2009 edition, Japan Productivity Center for
Socio-Economic Development

Hankyu Hanshin Holdings41

Hotels

Economic downturn creates harsh businessconditions
Since the outbreak of the global financial crisis, there has beena dramatic deterioration in business conditions, particularlyat city hotels in the Kinki area, which have been hit by a fallin demand from overseas tourists and in corporate demandfor business trips and hospitality functions. In future, we arelooking to cut costs by further streamlining operations andstrengthening online marketing.

Demand remains robust in the Tokyo area, but
the Kinki area feels impact of economic downturnOccupancy Rates at Major Hotels(%)

Hotel New Hankyu Osaka
Hotel Hankyu International
Dai-ichi Hotel Tokyo
Senri Hankyu Hotel
The Hotel Hanshin
Dai-ichi Hotel Tokyo Seafort
REMM Hibiya
REMM Akihabara

FY2008
92.7
87.2
82.9
89.2
87.2
85.8
72.7
—

FY2009
89.3
81.4
79.5
86.4
87.4
84.8
80.3
75.5

In October 2008, in measures to acquire franchise or management contracts for chain-hotel operations, we establishedIn addition to the opening of REMM Akihabara in April 2008, we

new logos for Hankyu Hanshin Hotels Co., Ltd. and Hankyu-

have refurbished guest rooms and other facilities at our hotels

Hanshin-Daiichi Hotel Group to raise awareness of the brands.

as part of efforts to improve competitiveness. We also stepped

As a result of the above, revenues from operations fell

up promotional activities, including a special sales campaign¥2,781 million (4.0%) year-on-year to ¥66,458 million and oper-

for imported goods taking advantage of the high yen. However,ating income slumped ¥1,008 million (74.7%) to ¥342 million.

the economic downturn has undermined demand, andperformance was particularly weak in the Kinki area.

Basic strategy
Hankyu-Hanshin-Daiichi Hotel Group is undertaking thefollowing priority policies to consolidate its management basecentred on Hankyu Hanshin Hotels, enabling it to develop its
fundamental strength as a hotel chain operator.

42 Annual Report 2009

(1) Create infrastructure for hotel chain operation• Strengthen platforms for supporting hotel chain marketing and management• Ensure solid start for REMM hotel chain(2) Restructure to establish a more efficient business
management system(3) Strengthen the earnings base by overhauling the business portfolio• Develop hotels using franchise-management contracts,
based on operational capabilities and brand strengthAt a Glance

Future Plan and Outlook (2007 Medium-Term Management Plan)*A Core Business is a unit used in management accounting, and differs from business segments in financial accounting

The EBITDA estimate for fiscal 2010 is ¥3.2 billion, ¥600 million (15.8%)

EBITDA

Operating income

66.4

6

¥1.9 billion (59.4%) compared with our estimate for fiscal 2010. We

4

65
60

3.2
2.5

2

55

1.6
50

to benefit from refurbishment at established hotels and cost-cutting
measures undertaken as part of streamlining.

5.1

0.5
0

(FY)

2008

2009

0
2010

2013

ResultResultEstimate

Estimate

45

Special Feature■ Message from Head of Hotels Business

Financial Section

Hankyu Hanshin Holdings

Management Organisation

President
Hankyu Hanshin Hotels

The hotel industry is facing difficult operating conditions in all categories due to the slump in consumer
spending amid the economic downturn and the spectre of swine influenza.
Against this backdrop, we enjoyed a successful reception for our new REMM brand with its themeof offering “a good night’s sleep,” after openings in Tokyo in November 2007 in Hibiya and in April 2008
in Akihabara. Building on the popularity of these two hotels, we plan to further expand our revenue
base through new projects centred on the REMM brand, while giving due consideration to operationalrisk. In addition, we are creating a more competitive portfolio by selecting the best performers among
established hotel operators and focusing resources on them. In measures to strengthen the fundamentals of our established hotels, we are undertaking structural reforms to bolster profitability, and in April
2009 established a project team to focus on strengthening marketing and increasing efficiency.
On 1st April 2008, the Company launched operations as Hankyu Hanshin Hotels following themerger of Hankyu Hotel Management, The Hotel Hanshin and Hotel Hanshin Restaurant Systems.
Under a new concept of providing “customer delight,” we are committed to delivering “serenity andwell-being, inspiration and dreams.” To fulfil this mission, we will consolidate our position as a hotel
chain operator through the above policies, helping ensure the sustainable growth of the HankyuHanshin-Daiichi Hotel Group.

Overview of Core Businesses

Tomokazu Yamazawa

Messageomy in the years to fiscal 2013. In addition, we expect the bottom line

70

3.8

have assumed that earnings will bottom out during fiscal 2010 in the
hotel business, and gradually recover in line with a resurgent econ-

69.5
66.3

4.8

For fiscal 2013, we forecast EBITDA of ¥5.1 billion, an increase of(¥ billion)

75
69.2

profit due to the economic downturn, which has affected the Kinki
area particularly badly.

Revenues from operations

8

Financial Highlights

lower than the fiscal 2009 result, in light of our expectations of lower(¥ billion)

43

■ Retailing
Major Businesses

Retail : Hankyu Retails
Bookstore chain Book 1st., music shop chain Sound 1st., convenience store
chain asnas, station kiosk chain Lagare shop, café bakery chain FREDS,
cosmetics and accessories chain COLOR FiELD and COLOR FiELD ReLaX,
high-end supermarket chain Seijo Ishii*

Doubleday Hankyu
Furniture and daily accessories chain DOUBLEDAY* Seijo Ishii is operated under a franchise agreement with Seijo Ishii Co., Ltd.

Restaurant : Creative Hankyu
Udon and soba noodles chain Hankyu Soba, izakaya bars (Japanesepubs) chain Suibo Chotto, Natural Kitchen KOJI, etc.
Core Companies

Hankyu Corporation, Hanshin Electric Railway* as of 31st March 2009

COLOR FiELD ReLaX

Expansion for retail businesses, mainly inside
train stations

The Ekinaka business provides a format for
stable sales

Unlike many private railway groups, our Retailing Business does

The Group was one of the first rail operators to realise the value

not include department stores business*. Rather, the core ofof real estate located inside heavily trafficked train stations. In

our retail business is represented by retailing stores such as

April 1995, the Group opened the first-ever convenience store

kiosks and convenience stores located mainly inside railway

on a train platform. Since that time, the Group has continued tostations (“Ekinaka”). Other retail formats are included within thisbuild its Ekinaka business in variety of formats.

segment, including bookstore chains (Book 1st.) that we are

Retailing is highly susceptible to domestic economic

expanding not only in Kansai in areas adjacent to our railway

conditions. Negative consumer sentiment during periods oflines but also in Tokyo.

economic recession such as the present one inevitably impacts* As one component of group reorganisation related to the Hankyu/
Hanshin management integration, the Hanshin Department Store, Ltd.
and Hankyu Department Stores, Inc. integrated their managements in
October 2007, resulting in the formation of H2O Retailing Corporation,a pure holding company for the department store group. At present,
the Company owns 21.75% of the outstanding shares of H2O Retailing
Corporation, accounting for the company as an equity-method affiliate.

on the Group’s Retailing Business. However, the Group’s Ekinaka

44 Annual Report 2009business makes the most of the advantages of location andvaried business formats, raising the prospect of stable store andservice sales. We view this as one of the competitive advantagesof our Retailing Business compared to the competition.

At a Glance

Business expansion through an aggressive store
roll-out strategy

efficiencies.

In addition to opening the bookstore Book 1st. and the high-to expand the scope of our business through the opening of

end supermarket Seijo Ishii in the Hankyu Nishinomiya Gardens

new locations.

In our restaurant and food-service business, we continued

to ¥67,581 million, representing a year-on-year decrease of

expansion. We also worked to enhance the competitive capac-¥53,170 million (44.0%). Operating income experienced a year-

ity of our existing stores, including makeovers for cosmetics/

on-year decrease of ¥2,021 million (74.4%), falling to ¥697 mil-accessory retailer COLOR FiELD, café bakery FREDS, and others.

lion. This decrease was mainly due to the fact that the Hanshin

We integrated the operations of the asnas and An 3 convenience

Department Store (now Hankyu Hanshin Department Stores,

stores located along the Hankyu and Hanshin railway lines,Inc.) and its four subsidiaries were removed from the scope ofestablished stronger coordination in purchasing and merchandis-

consolidation at the beginning of the third quarter of the prioring, and engaged in other measures that improved operational

fiscal year.

Message

Revenues from operations in this segment amounted

bookstore in the Tokyo area, pursuing a course of aggressive

Financial Highlights

complex, we opened Book 1st. Shinjuku as our flagshipSpecial Feature

Basic strategy
through improved and enhanced business infrastructure (product merchandising capacity, human resources, IT environment, organisation, logistics, etc.). Concurrently, we will achieve sustainable growth by developing services that provide reliability and well-being, as
well as inspiration and dreams to our customers, including those who live outside the areas adjacent to our railway lines. In pursuit ofthis strategy, we will be implementing improvement in the following important areas.

Financial Section

Hankyu Hanshin Holdings

Management Organisation(1) Rejuvenate stores, which are our point of contact with customers; improve employee skill levels• Strengthen programmes to improve employee satisfaction/motivation• Provide an IT environment for greater efficiencies and advancement in store operations(2) Strengthen our capability as an organisation to support sustainable growth• Improve business management structures towards stronger competitive capacity and better operational efficiencies• Strengthen merchandising capacity and improve logistics systems• Stronger property development systems supporting the opening of more locations outside areas adjacent to our railway lines(3) Initiatives to capitalise on the synergies of the Hankyu/Hanshin integration• Improve operational efficiencies through convenience store business integration and brand unification
00

Overview of Core Businesses

We will contribute to increased value along Group railway lines by cultivating train stations and locations adjacent to railway lines45

Retailing

Future Plan and Outlook (2007 Medium-Term Management Plan)*Figures below are based on management accounting, and are different from financial accounting.

The plan for fiscal 2010 takes the impact of stagnated consumer
spending into account, with the EBITDA estimate at ¥2.6 billion,(¥ billion)

EBITDA

Operating income

Revenues from operations (¥ billion)

6

80
70.8

representing a ¥100 million (4.0%) increase compared to fiscal 2009

66.3

67.5

67.0
60

actual results.
The EBITDA estimate for fiscal 2013 is ¥3.3 billion, an increase4
3.3

of ¥0.7 billion (26.9%) from the estimate for fiscal 2010. Although it
seems that this challenging business environment is likely to continue, we expect our bookstore (Book 1st.) and general merchandise

2.3
2(DOUBLEDAY, COLOR FiELD) businesses to grow. The Group plans to

40

2.6

2.5

2.0

1.3

1.4

1.3

2008

2009

2010

2013

ResultResultEstimate

Estimate

20

expand from a base of 456 retail locations (all business formats) in
March 2009 to 478 locations by the end of fiscal 2010, and 515 locations by the end of fiscal 2013.

0

(FY)

0

■ Message from Head of Retailing BusinessYoshihiro Nakagawa
Managing Director
Head of Retailing
Hankyu Corporation

46 Annual Report 2009

Beginning with the food safety concerns and soaring raw materials prices of 2007, and continuing
through the “once-in-one-hundred-years” global economic recession sparked by the late-2008 subprime loan crisis, the economic environment surrounding our Retailing Business has been experiencing
a dramatic deceleration. Experts have yet to predict when this economic stagnation will end.
Despite these circumstances, we have a significant asset that other retailing companies lack. The
Hankyu Hanshin Group is able to conduct business in areas adjacent to the Hankyu and Hanshin railway lines, boasting significant purchasing power. We are also creating greater brand awareness in themarket through our flagship bookstore in the Tokyo area and our shops located in major train stationcommercial facilities.
We have identified several issues within the Group that indicate the need for organisational
restructuring in the Retailing Business. For example, our first priority to date has been expanding thescale of our businesses in this segment. Now, we are planning to transition to a strategy that emphasises quality over quantity so as to create a stronger business portfolio.
We will continue to address issues as rapidly as they are identified, making revisions to our businesses as required. Delivering reliable services and well-being, as well as inspiration and dreams, to ourcustomers will contribute to further growth in the Retailing Business and improved value in areas along
our lines, enhancing the Hankyu/Hanshin brand in the market.

Management Organisation

At a Glance

To uphold the trust of all our customers and other stakeholders, the Hankyu Hanshin
Holdings Group is strengthening its management organisation and contributing to
the creation of a sustainable society.

Financial Highlights

Basic Approachbusiness. In a further measure to ensure effective governance,core companies—Hankyu Corporation, Hanshin Electric

we have also established a Group Management Committee

Railway, Hankyu Hanshin Express Holdings and Hankyu

with powers of review and approval regarding material matters

Hanshin Hotels—operate their businesses in alliance underof business execution such as investments that exceed a certain

the Company, which is a pure holding company. Each coreamount or restructuring.

company manages its subsidiaries and affiliates in line with

Because we are a pure holding company and alreadythe Group Company Operational Standards, ensuring more

have an adequate supervisory role over operating subsidiaries

transparent and sound Group management.

(responsible for core businesses), we have no intention of
adopting the committee-based system of corporate govern-

six core business units responsible for meeting targets within

ance. However, we believe it important that external directors

set parameters in the Medium-Term Management Plan. Eachbe appointed to carry out oversight functions, and that ourcore business is given significant autonomy in this businesscompanies set up Boards of Corporate Auditors including exter-

planning, to speed up decision-making. At the same time, each

nal Corporate auditors working in partnership with accounting

core business has its own Core Business Strategy Council for

auditors (CPAs) to foster greater audit efficiency.

Management Organisation

discussion of management plans, including future businessCorporate Governance System

General Meeting of Shareholders
Appointment/
Dismissal of Directors

Appointment/
Dismissal of Auditors

Appointment/
Dismissal

ReportPart-time: 8(including 2 External
Directors)

Call/Report on
execution situation

Standing Corporate
Auditors: 2

Appointment/
Dismissal/Supervision

President

ReportReportReportBoard of Corporate Auditors

Audit

External Corporate
Auditors: 3

Accounting Auditors(CPAs)

Cooperation

Financial Section

Board of Directors
Full-time: 6

Overview of Core Businesses

For performance management, the Group has establishedSpecial Featuredevelopment, by representatives of the Company and each coreenterprise value through a corporate structure in which four

Message

The Hankyu Hanshin Holdings Group seeks to maximise

Cooperation Assistant to Auditors

Group Auditing Department

Call

Group Management
Committee
Participate

Participate(as observer)

Audit

Group Companies
Directors (representative of each core business)

Hankyu Hanshin Holdings

47

Management Organisation

Board of Directors etc.
(1) Directors etc.
Our Board of Directors has 14 members, ensuring flexibility of

judgment.

management without compromising efficacy of supervisory

The term of office of directors was reduced to one year

functions. Two of these directors, Noriyuki Inoue and Shunichiat the general meeting of shareholders in June 2006, to clarify

Sugioka, are external directors. They contribute to the Company

management responsibilities following the introduction of anti-

by enlivening deliberations of the Board of Directors with out-takeover measures (prevention of large-scale Company shareside viewpoints and bring greater objectivity to management

purchases).

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

Noriyuki
Inoue

Representative Director, Daikin Industries, Ltd. Also vice-chairman of Kansai Economic Federation. Appointed for his wealth ofmanagement experience and perspectives from top business circles. No particular conflict of interest with the Company exists.

Shunichi
Sugioka

Representative Director, H2O Retailing Corporation, the core company in The Hankyu Hanshin Toho Group. Appointed tocontribute opinions reflecting the views of The Hankyu Hanshin Toho Group in business matters such as increasing value
along Group railway lines. Sugioka is chairman and CEO of H2O Retailing Corporation, which is an affiliate of Hankyu Hanshin
Holdings. The Company has a 7.5%*1 stake in H2O Retailing Corporation, and H2O Retailing Corporation has 1.6% of theCompany’s shares. These shareholdings are not large enough to raise conflict of interest concerns.

*1 The Group overall has 22% of the voting rights in H2O Retailing.
*2 External directors attended 85% of meetings of the Board of Directors held in fiscal 2009.

(2) Board of Directors(3) Group Management Committee

The Board of Directors has powers of approval over manage-

The Group Management Committee, comprising full-timement policy, strategy and planning of the Company and the

Directors (President, representative directors, head of Personnel

Group as a whole, and also over medium-term and annual

and General Affairs Dept. and head of Corporate Planning Dept.)management planning of core businesses. It also raises theand representatives of each core business, meets to discuss

standard of operations at each core business under the Groupmatters subject to Board of Directors resolutions, systems andgovernance rules requiring reporting of major investments andrules for Group company management strategy and businessreorganisations by Group companies.

planning and maintenance of the holding company system,

In fiscal 2009, the Board dealt with management planningand major Group management matters such as investments

issues such as amendment of the Medium-Term Management

beyond above set parameters and reorganisations. During thePlan, and reviewed and gave approval for reorganisation ofyear under review, the Group Management Committee met 16

the Travel and International Transportation segment. Whentimes.

necessary, it also issued reports on progress in new railway line
construction, and on new station and major redevelopment(4) Core Business Strategy Councils

projects and other investment projects at Group companies.

Each core business has a Core Business Strategy Council,

The Board of Directors met 10 times in the fiscal year undercomprising President, representative directors, the director inreview, with average attendance at 93% for Directors and 90%

charge of the Corporate Planning Dept. of the Company andfor Corporate Auditors.

representatives of each core business. The councils deliberate
future business development for each core business anddiscuss business plans and progress management (performance
evaluation). Each Core Business Strategy Council met threetimes in the year under review.

48 Annual Report 2009

The Group Presidents’ Meeting, held twice a year, brings

we have centralised fund procurement under the holding

together presidents of over 150 Group subsidiaries and affili-company, with funding allocated to operating companies as

ates. It is designed to foster a deeper sense of solidarity withinneeded within approved parameters based on the businessthe Group and ensure that the Group philosophy and manage-plan. By strengthening governance provisions in this area, wement policies permeate the entire organisation. To ensure aare eliminating flaws in our funding framework.

joint sense of commitment to the Medium-Term Management
Plan, awards are made to subsidiaries that boost earnings orindividuals and groups that successfully launch initiatives ormake significant contributions at their units.

Financial Highlights(6) Initiatives to foster solidarity within the GroupAs part of efforts to build up comprehensive Group strength,

At a Glance(5) Better fund procurement regime

Message

Board of Corporate Auditors
comprising internal audit staff, carries out internal audits, withmanagement oversight. We have five Corporate Auditors, who

audit plans and reports perused by Corporate Auditors. The

monitor the business performance and financial position of

Corporate Auditors also receive a general report on internal

the Company and its subsidiaries, and audit the performance

audits at the Company and Group companies (includingof duties by directors. Of the five Corporate Auditors, three arewhistle-blowing reports). Moreover, the Corporate Auditors

outside experts (legal professionals and scholars), ensuring

receive regular reports from the CPAs, and also act as observers

more objective oversight.

at on-site audits of the Company and Group companies by
CPAs.

Corporate Auditors in the performance of their duties. As a rule,

In a further commitment to improving auditing efficiency,

the Corporate Auditors meet once a month to discuss issues

the standing Corporate Auditors attend Group Management

and take executive decisions.

Committee meetings as observers.

The Group Audit Division directly under the president,

Overview of Core Businesses

Specialist staff members are appointed to assist theSpecial Feature

The Company uses the corporate auditor system to bolster

Management Organisation

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

Former prosecutor-general, currently a lawyer. Appointed to advise on more compliance-based management. No particularconflict of interest with the Company exists.

Haruo
Sakaguchi

Former vice-chairman of Japan Federation of Bar Associations, currently a lawyer. Appointed to advise on more compliancebased management. No particular conflict of interest with the Company exists.

Hideki
Yoshihara

Former head of Research Institute for Economics & Business Administration, Kobe University. Appointed to advise as an expert
in business science. No particular conflict of interest with the Company exists.

Financial Section

Takaharu
Dohi* External auditors attended 83% of Board of Directors’ meetings held during fiscal 2009, and 87% of the meetings of the Board of Corporate Auditors.

Hankyu Hanshin Holdings

49

The growth of the Group has been supported over the years(3) Risk Management Committeeby the trust it has won through development of areas along

In case of actual or suspected major legal violations, the risk

its railway lines. To contribute to social development throughmanagement committee is convened with the President as

our business activities and meet the expectations of all our

Chair, and decisions are taken after discussion of corrective

stakeholders (customers, business partners, shareholders, local

actions and measures to prevent their recurrence.

communities and employees, etc.), we believe that compliancefocused management is a sine qua non.
In this regard, the Company is working to improve andstrengthen compliance awareness through measures suchas training programmes and Group newsletters. Currently,
our compliance promotion policies have the following threefocuses.
(1) Our Compliance Manual and Training ProgrammesThis manual voices the Company’s determination to not tolerateviolation of laws or social norms or betrayal of customer trust,by any Group employee from executives down. It also aims toraise awareness by pointing out cases where compliance errors
can easily be made.
In addition to providing concentrated compliance training
on a Group-wide basis for new employees, midcareer hires
and newly appointed executives, we aim to instil complianceawareness through a range of seminars for Group companies. In■ Compliance Card
The Compliance Card, with the Company code of conduct
and details of consultation desks, is small enough to be
carried around by employees.

addition, we hold compliance seminars for ordinary employeesof Group companies. Group companies also arrange their own
training programs tailored to job grade and function, aiming tofurther increase compliance awareness.
(2) Corporate Ethics Consultation Desk
(internal whistle-blower procedures)
We have set up a dedicated whistleblower hotline enabling all
employees to discuss or quickly bring to management’s noticesuspected or known legal violations and unethical conduct.
Business partners are also welcome to use this consultation andnotification facility, and when necessary we will use lawyers andother outside specialists to improve its effectiveness.

*Hanshin Group’s Compliance Card

50 Annual Report 2009

Directors and Corporate Auditors (As of 17th June 2009)
Directors

Corporate Auditors

Standing Corporate Auditor,
Hankyu Corporation

Shinya Sakai

Nobuo Minami

Chikashi Suehara

Representative Director

DirectorStanding Corporate
AuditorPresident, Hanshin Electric
Railway Co., Ltd.

President, Hanshin Tigers
Baseball Club, Ltd.

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

Isao Matsuoka

Koichi Kobayashi

Takaharu Dohi

Director

Director

Corporate Auditor(External)

Honorary Chairman,
Toho Co., Ltd.

Chairman,Takarazuka Revue Company

Lawyer and Corporate Auditor,
Hankyu Corporation (External)

Noriyuki Inoue

Mitsuo Nozaki

Haruo Sakaguchi

Director (External)

Director

Corporate Auditor(External)

Chairman and CEO,
Daikin Industries, Ltd.

Head of Personnel
and General Affairs Dept.

Lawyer and Corporate Auditor,
Hankyu Corporation (External)

Shunichi Sugioka

Takehiro Sugiyama

Hideki Yoshihara

Director (External)

Director

Corporate Auditor(External)

Head of Corporate Planning
Dept.

Hiroshi Ojima

Masao Shin

Director

Director

Professor of Graduate School ofBusiness Administration, Nanzan
University, and Corporate
Auditor of Hanshin Electric
Railway Co., Ltd. (External)

Presidents of Core Companies

Financial Section

Chairman and CEO, H2O
Retailing Corporation
Chairman, Hankyu Hanshin
Department Stores, Inc.

Management Organisation

President,
Bay Communications Inc.

Overview of Core Businesses

President, Hankyu Corporation

Special FeatureStanding Corporate
AuditorMessage

Hidekazu Sugisawa

Director

Financial Highlights

Tadashi Sano

President andRepresentative Director

At a GlanceKazuo Sumi

Hankyu Corporation

Kazuo Sumi
President, Hankyu Hanshin
Express Holdings Corporation

Head of Personnel and General
Affairs Dept.

Hanshin Electric Railway Co., Ltd.

Tomokazu Yamazawa

Toru Nakashima

Shinya Sakai

Director

Director

Hankyu Hanshin Express Holdings Corporation

Hiroshi Ojima
Hankyu Hanshin Hotels Co., Ltd.
President, Hankyu Hanshin
Hotels Co., Ltd.

Head of Corporate Planning
Dept.

Tomokazu Yamazawa

Hankyu Hanshin Holdings

51

Corporate Social Responsibility
For over 100 years, the companies under The Hankyu Hanshin Holdings Group haveoperated their businesses and built up relationships of trust in the areas served byHankyu and Hanshin lines, while enriching their communities. As a member of thelocal community, we will aim to create a better living environment for everybody inthe areas served by our lines in the coming 100 years too. Each of our companies will,
as far as resources allow, meet corporate social responsibility expectations.

The Hankyu Hanshin Dreams and Communities of the Future projectCommunities are comprised of people and the environment around them. Based on this idea, our social
contribution activities aim to create environments and nurture human capital for the future. In April 2009
we launched the Hankyu Hanshin Dreams and Communities of the Future project.

A betterenvironment

As a business tied to a particular locality, we arecommitted to sustainable community-building
with environment-friendly developments thatprovide local residents with security, peace ofmind and cultural enrichment.

Concept of the symbol markThe symbol mark consists of a railway
line representing the future, a childreaching out to a heart and a leaf
symbolising children’s dreams andcommunity-building within a richnatural environment. It is meant toevoke the spirit of our project, whichaims to bring greater prosperity andcontent to local society.

Human capital

We are creating opportunities for the healthy
development of ambitious children, upon
whose shoulders the task of building the communities of the future rests.

Threecore aspectsof the project(1) Programme for approving and fostering social contribution activities at Group companies
This programme is designed to ensure that the social and community contribution activities carried out by
each company of the Group follow the above Group-wide plan. As of the end of August 2009, 66 projects
had been approved.
(2) Hankyu Hanshin Dreams and Communities of the Future Fund
Employees of the Group are encouraged to contribute to this fund, with the collected proceeds distributed as grants to citizens’ groups involved with the above plan in the areas served by the Hankyu andHanshin railway lines. Hankyu Hanshin Holdings matches employee donations by an equal amount andtransfers the donations to the citizens’ groups.
(3) Points-based social contribution activities
This programme enables employees and former employees of the Group to support social contribution
activities as individuals. If they apply under it to engage in volunteering activities, they get points, which
can be saved up and translated into donations to (1) non-government groups (2) a project to plantseedlings on Mt. Rokko, or (3) exchanged for Fair Trade products. The programme was devised to spread
our social contribution activities more widely around the community.

52 Annual Report 2009

Major Group Company Initiatives
At a Glance

A better environment

Spreading the environmental message with the Eco-train Organised by: Hankyu Corporation
Our Eco-train titled “Dreams and Communities of the Future” was operated between December 2008 and July 2009, to help foster
environmental initiatives by enterprises, local authorities and citizens in areas along our lines, the train’s interior carried posters on
various aspects of environmental protection.

Financial Highlights

sustainable creation of communities for the future. Designed in cooperation with a non-profit organisation to encourage joint

Message

Eco-train

Environmental protection poster

Pavilion exhibition at KidZania Koshien Organised by: Hanshin Electric Railway, Hankyu Hanshin Hotels
Our pavilion at KidZania Koshien is designed to give children an idea of working life as an adult in society. By giving them hands-

Special Feature

Human capitalon experience of railway and hotel jobs, we are providing young people with a fun way of learning about usually unseen but

Train driver simulation system

Trying out a chambermaid’s job

Children’s emergency sanctuary programme for taxis and stores Organised by: Hankyu Taxi, Hankyu Retails, Hanshin Station Net
and Bay Communications

Management Organisation

KidZania Koshien

Overview of Core Businesses

important aspects of work.

The children’s emergency sanctuary programme is designed to improve neighbourhood security, particularly for children. In ourchildren trying to get away from unpleasant encounters. Our goal is to create a safer community.

Financial Section

capacity as a local business operator, we provide places of refuge such as taxis, offices and stores carrying identification stickers for

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

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

53

Corporate Social Responsibility

Frameworks for Environmental Protection Activities
In October 2006, when the company was launched, we set up an Environmental Committee, chaired by the President of Hankyu
Hanshin Holdings, to create a Group-wide mechanism for environmental preservation activities.
The Environmental Committee is charged with oversight of the environmental activities of the core companies. Each corecompany ensures that environmental activities conform to legal requirements, reduce environmental load, and promote environmental awareness among employees at each core business unit. Through an environmental team of experts that acts as a secretariat, we also offer advice and support in environmental protection activities to each company in the Group.
ISO14001 environmental management certification has been obtained by the Shojaku Plant of Hankyu Corporation, theAmagasaki rail yard of Hanshin Electric Railway, the building administration division of Hankyu Hanshin Building Management
operating Applause Tower, Hankyu Express International (the Narita Cargo Centre, and the Western Japan Logistics Centre administrative section), Amanohashidate Hotel, the Hotel New Hankyu Osaka, Hotel New Hankyu Annex, ITEC Hankyu Hanshin and otherbusiness units.
We have also obtained Green Management Certification from the Ministry of Land, Infrastructure, Transport and Tourismaffiliated Foundation for Promoting Personal Mobility and Ecological Transportation, for six depots of Hankyu Bus.

Major Initiatives by Group Companies
Japan’s first carbon neutral station Hankyu Corporation: Settsu-Shi Station
We are preparing to open the first carbon neutral station in Japan at Settsu-Shi on the Hankyu Kyoto Line,
with opening scheduled for spring 2010. Solar panels and energy-saving amenities will be used to morethan halve carbon dioxide emissions given off at the new station (54% reduction), with emission tradingused to offset emissions that are difficult to reduce directly.

Environmental measures along Hanshin Namba Line Hanshin Electric Railway, Nishi-Osaka Railway
The above-ground Nishikujo-Kujo section of the Hanshin Namba Line, opened on 20th March 2009,
incorporates energy-saving systems and environment-friendly measures such as semi-shelter-type noiseabatement walling, use of ice storage air conditioning systems with low nocturnal electricity consumption and low CO2 emissions as heat source in station air-conditioning, and illumination control systems
which match platform lighting to train length.

Biodiesel buses Hankyu Bus, Hankyu-Hanshin-Daiichi Hotel Group
Hankyu Bus operates buses that run entirely on biodiesel fuel manufactured from processed waste foodoil from company staff canteens and selected hotels of the Hankyu-Hanshin-Daiichi Hotel Group. Use ofvegetable oil means the biodiesel is a zero-waste fuel with no carbon dioxide emission into the environment, unlike fossil fuels. Nor does it emit another atmospheric pollutant, SOx (sulphur oxides), which is a
cause of acid rain.

Environmental measures at Hankyu Nishinomiya Gardens Hankyu Corporation, Hankyu Hanshin
Building Management

We aim to reduce environmental load by introducing up to 9,000m2 of rooftop greenery and solar andwind power generation facilities, with waste reduction achieved through a system of rigorous garbage
measurement.

54 Annual Report 2009

At a Glance
Financial Highlights

Financial Section
Contents

Message

56 Six-Year Summary
57 Consolidated Financial Review
61 Business Risks
62 Consolidated Balance Sheets

65 Consolidated Statements of Changes in Net Assets
66 Consolidated Statements of Cash Flows

Special Feature

64 Consolidated Statements of Income

67 Notes to the Consolidated Financial Statements
Overview of Core Businesses

83 Independent Auditors’ ReportManagement Organisation
Financial Section

Hankyu Hanshin Holdings55

Six-Year Summary Six years in the period ended 31st March 2009

2004

2005

Millions of yen
2006
2007

2008

2009

For the year:
Revenues from operations .......................... ¥ 471,483 ¥ 476,623 ¥ 486,155 ¥ 743,377 ¥ 752,301 ¥ 683,715
Operating income ............................................
47,99958,76864,84287,00390,72577,824
Income before income taxes
and minority interests ..................................
855
36,042
43,21765,30626,09834,064
Net income ...........................................................
3,102
26,07925,326
36,619628
20,551
Capital investments .........................................
24,36327,48952,09153,795
134,307
109,688
Depreciation and amortisation ................
30,10629,97429,612
43,88951,57854,799At year-end:
Total assets ............................................................ ¥1,715,806 ¥1,670,911 ¥1,609,117 ¥2,366,694 ¥2,348,476 ¥2,307,332
Total net assets ...................................................
247,840
277,393360,222522,286
476,639
473,879
Total net assets / total assets .....................
14.44%
16.60%
22.39%
21.70%
19.87%
20.07%

Thousands of
U.S. dollars (Note 1)2009$ 6,976,686
794,122
347,593
209,704
1,119,265
559,169$23,544,205
4,835,498

Per share data (in yen and dollars):
Net income — basic .......................................
Net income — diluted ...................................
Shareholders’ equity........................................

¥ 3.32
3.28
270.72¥ 28.1127.70
299.48¥ 25.3625.22
343.45¥ 31.84—405.35¥ 0.500.41
369.25¥ 16.2816.18
366.96

$0.17
0.17
3.74

Common stock price range(in yen and dollars):
High ...........................................................................
Low...............................................................................

¥386
296

¥460
362

¥886
365

¥817
502

¥719
400

¥539
406

$5.50
4.14

Notes: 1. The U.S. dollar amounts have been translated from Japanese yen, for convenience only, at the rate of ¥98 = US$1.00.
2. Effective from the year ended 31st March 2007, the Company and its domestic consolidated subsidiaries have adopted the new accounting standard, the Accounting Standard for Presentation of Net Assets in the Balance Sheet (Statement No. 5 issued by the Accounting Standards Board ofJapan on 9th December 2005) and the Implementation Guidance for the Accounting Standard for Presentation of Net Assets in the Balance Sheet(the Financial Accounting Standard Implementation Guidance No. 8 issued by the Accounting Standards Board of Japan on 9th December 2005)(collectively, the “New Accounting Standards”).
By adoption of the new accounting standard for presentation of equity, minority interests and net unrealised gains on hedging derivatives were
included in total net assets for the year ended 31st March 2007 and will be thereafter.

56 Annual Report 2009

Consolidated Financial Review

Revenues from Operations

MessageSpecial Feature
Overview of Core Businesses
Management Organisation
Financial Section

Hankyu Hanshin Holdings

Financial Highlights

Owing to the exclusion from the scope of consolidation of
The Hanshin Department Store, Ltd. (now the Hankyu Hanshin
Department Stores, Inc. under the holding company H2O
Retailing Corporation) and its four subsidiaries in October 2007,
revenues from operations for the reporting period (the fiscal year
ended March 2009) on a consolidated basis, declined 9.1% fromthe previous fiscal year to ¥683.7 billion (US$6,976.7 million).
In the Urban Transportation Segment, in our railway operations we conducted a special sales promotion campaign for the
PiTaPa smart card settlement service and also marketed special
Hankyu-Hanshin one-day train passes. This was part of wider
collaboration efforts between the Group companies to generate
greater use of our transportation services. On 20th March 2009,
the Hanshin Namba Line was opened, enabling direct journeys
between Hanshin Sannomiya Station in Kobe and Kintetsu Nara
Station. Meanwhile, we started bus operations to take spectatorsfrom the Hanshin Koshien baseball stadium after the conclusionof night games to Hankyu Nishinomiya-Kitaguchi Station, andfrom March 2009, all bus cards issued by Group companies havebeen freely transferable among all the bus networks. These measures have greatly increased convenience for our customers. To
address the increasingly important issue of global warming, we
encouraged the increased use of public transport, which has asmall carbon footprint, we launched publicity initiatives, such as
running the Eco Train. As a result of the efforts described above,
revenues from operations in the Urban Transportation Segment
came to ¥195.2 billion (US$1,992.3 million), for a year-on-yearincrease of 0.2%.
In the Real Estate Segment, we recorded sales of condominiums — principally of the Geo condominium series — in areas
served by our railway lines, while in the field of land subdivision
we also recorded sales of plots at Minoh Onohara Residences(Minoh, Osaka Prefecture) and Takarazuka-Yamatedai Residences(Takarazuka, Hyogo Prefecture). In leasing operations, we opened
the Hankyu Nishinomiya Gardens shopping centre in November.
This project, which is the largest shopping centre in WesternJapan, has been pursued through close collaboration by theentire Group and has got off to a smooth start despite the current
weak consumer spending environment. In April 2008, we opened
Akiba Tolim — a large-scale commercial facility in Akihabara,
Tokyo — and we are continuing to maintain a high occupancy
rate at our leased office buildings and commercial facilities while
taking steps to keep down operating costs. Work is also being
pursued energetically on other large-scale projects such as therebuilding of the Umeda Hankyu Building, and the Osaka Station
North Area (Umeda North Yard) development. However, given
the rapid deterioration in the real estate market, the businessenvironment during the reporting term was very difficult,particularly for our condominium and lot-subdivision operations.
As a result, revenues from operations in the Real Estate Segment
decreased by 4.5% to ¥171.7 billion (US$1,751.9 million).
Turning to the Entertainment and Communications
Segment, in our sports operations the Hanshin Tigers baseballteam remaining in the pennant race right up to the season’s
end had a positive impact on the Group’s public image. Phase
II renovation work on the Hanshin Koshien Stadium wascompleted in March 2009, and all spectator seating has been
upgraded for customer comfort. In our stage revue operations,
we enjoyed particularly positive critical acclaim for the Tsukigumi(Moon troupe) show Me and My Girl and the Hoshigumi (Startroupe) shows My Dear New Orleans and A Bientôt, and all theseshows recorded strong ticket sales. In theatre operations, theUmeda Arts Theatre put on performances of a number of playsthat were much talked about in theatrical circles, notably Kurobe
no Taiyo, which is a stage adaptation of a movie. In the Group’scable television operations, our new land-line phone service
Cable-Plus Phone, which allows users to make calls to certain
mobile phones free of charge, proved very popular, and thenumber of subscribers grew steadily. We also succeeded in
attracting an increased number of visitors to our facilities on Mt.
Rokko. We conducted vigorous marketing activities promoting
the Rokko-Maya Enjoy Pass, a ticket that lets customers use allGroup facilities, and hosting the Mt. Rokko Ice Festival. As a resultof our efforts, revenues from operations in the Entertainment
and Communications Segment rose by 5.5% to ¥100.6 billion(US$1,026.1 million).
In the Travel and International Transportation Segment,
declines were recorded in the number of passengers on
long-haul routes such as to European destinations. This was
mainly due to higher airline ticket prices as a result of risingfuel surcharges stemming from the high cost of oil, as well as
the depressive impact on spending of the global economic
downturn. In travel operations to China too, the number ofpassengers was down as a result of the food safety scandals
and the aftereffects of the Sichuan Earthquake. In domestic
travel operations, demand stayed firm for day-trip bus tours. In
international transportation operations, the rapid deteriorationin the business environment from the autumn of 2008 caused
a sharp drop in air cargo both into and out of Japan. On theother hand, imports by sea held firm at the previous year’s level,
benefiting from a shift away from air transport. As in the case

At a Glance

Business Performance57

of air transportation, however, seagoing cargo exports sufferedfrom the impact of the business downturn, and the situation wasvery difficult for transportation operations as a whole. To raise
the competitiveness of both the Group’s travel and internationaltransportation operations, we transferred these operations to
the newly-established intermediate holding company Hankyu
Hanshin Express Holdings Corporation on 1st April 2008. As
a result, the business results of certain subsidiaries that had
been included in the Travel and International Transportation
Segment up until fiscal 2008 have been recorded under “Other
Operations” from the first quarter of fiscal 2009. As a result of thischange, revenues from operations in the Travel and International
Transportation Segment recorded a year-on-year decline of
30.3% to ¥65.8 billion (US$671.5 million).
In the Hotels Segment, in April we opened the REMM
Akihabara, a new-format hotel incorporating the theme of agood night’s sleep. We also embarked on a program of renovation and upgrading of guest rooms and other facilities at ourexisting hotels to improve competitiveness. We also conducted
a number of aggressive sales campaigns, including one under
the slogan of returning some of the benefits of the strong yen
to our customers. Despite all these efforts, however, demandremained weak amid the business downturn, particularly in
the Kinki region (centered in Osaka). In October, we unveiled a
new corporate logo for Hankyu Hanshin Hotels Co., Ltd. and aGroup logo for the Hankyu-Hanshin-Daiichi Hotel Group to help
raise the brand recognition of our hotel group. As a result of ouractivities, we were able to limit the decline in revenues fromoperations in the Hotels Segment to only 4.0%, at ¥66.5 billion(US$678.1 million).
In the Retailing Segment, a branch of the Book 1st bookshop
chain and the Seijo-Ishii high-end food supermarket wereopened in the Hankyu Nishinomiya Gardens shopping centre. A
Book 1st store was also opened in the Shinjuku, Tokyo district toserve as the flagship store for the whole Tokyo area, and renovation work was undertaken on the cosmetics and accessories
outlet COLOR FiELD as well as the café-bakery FREDS CAFE,
among other retail outlets. These projects were undertaken
to raise the competitiveness of our existing retail chains. To
integrate the operations of the convenience store chains whose
stores are located in areas served by the Hankyu and Hanshin
railway lines, i.e. asnas and An 3, we have taken steps to further
collaboration between the two in procurement and productdelivery for improved operational efficiency. In our restaurant
and takeout meals businesses, too, we continued to expand thescale of business through the opening of new outlets. Despite all
our efforts, however, owing to the exclusion from the scope of
consolidation of The Hanshin Department Store, Ltd. and its four
subsidiaries in October 2007, revenues from operations in the
Retailing Segment came to ¥67.6 billion (US$689.6 million) for a
sharp year-on-year decline of 44.0%.
In the Other Segment, the business results of certain
subsidiaries that had up until fiscal 2008 been included in theTravel and International Transportation Segment were recorded

Revenues from Operations

Costs of Revenues from Operations(Billions of Yen)

(Billions of Yen)

Operating Income and Ratio of Operating
Income to Revenues from Operations(Billions of Yen / %)

800
743.4

683.7

600

13.3

700
656.4

661.6

120

500

486.2

400

400

300

300

200

200

100

100

12.3

11.7

12.1

605.9

600
476.6

15

752.3

700

500

150

800

90
417.9

87.0

11.4 12

90.7

421.3

9
77.8

60

58.8

64.8

6

30

0

0

0

05/3

06/3

07/3

08/3

09/3

3

05/3

06/3

07/3

08/3

09/3

0

05/3

06/3

07/3

08/3

09/3

Operating income
Ratio of operating income
to revenues from operations

58 Annual Report 2009

Consolidated Financial Review

Note: Profits and losses posted by H2O Retailing are accounted for using the equity
method.

Operating Income

Total Assets and Equity( Yen / %)(Billions of Yen)

(Billions of Yen)

80

15

35

2,500

31.84

70
65.3

28.11
9.93

20

43.2

2,000

9

1,500

1,670.9
7.94

8.38

1,853.2 1,881.9

1,844.3

513.5

466.6

463.0

07/3

08/3

09/3

1,609.1

Financial Section

25

12
25.36

50
16.28

36.0

34.1

15

30
26.1

20
10

5

0

0

06/3

07/3

08/3

09/3

6

1,000

3

500

0

0

4.44

10

05/3

2,307.3

30

60

40

2,366.7 2,348.5

Management Organisation

Net Income per Share — Basic and ROE

Overview of Core Businesses

After deduction of other income from other expenses for thereporting period, net other expenses decreased to ¥43.8 billion(US$446.5 million). This was due to the fact that a substantial
loss on valuation of land for sale under the Saito development
project recorded in the previous period was larger than a decline
in gains on equity-method investments and business withdrawal
expenses involved in the sell-of Station Finance Inc. recorded in
the period under review.

Special Feature

Income before Income Taxes
and Minority Interests

Other Income and Expenses

Message

Operating income for the term under review decreased by
14.2% year-on-year to ¥77.8 billion (US$794.1 million), due to theposting of valuation losses on land for lot-subdivision, and subdivision buildings to which the lower of cost or realizable value
method was applied as a result of the weakened real estatemarket. A breakdown for each segment is provided below.
In the Urban Transportation Segment, although operating
revenue increased, operating income declined by 2.0% to ¥32.5
billion (US$331.5 million) after recording advance investment
expenses for the opening of the Hanshin-Namba Line.
In the Real Estate Segment, the application of the lowerof cost or market method to land for lot-subdivision andsubdivision buildings led to the recording a valuation loss
and a decrease in operating income by 17.0% to ¥32.8 billion(US$334.9 million).
In the Entertainment and Communications Segment, operating revenue rose, but operating income declined by 1.9% to¥8.4 billion (US$85.6 million), partly due to a rise in depreciation
expenses attendant on the completion of Phases I and II of the
Hanshin Koshien Stadium renovation work.

Financial Highlights

In the Travel and International Transportation Segment, boththe Group’s travel operations and international transportation
operations faced difficult business conditions, and operating
income dropped sharply by 54.7% to ¥1.5 billion (US$14.8
million).
In the Hotels Segment, the business downturn caused operating income to plunge by 74.7% to ¥0.3 billion (US$3.5 million).
In the Retailing Segment, operating income was down
sharply, by 74.4% to ¥0.7 billion (US$7.1 million), owing to
the exclusion of Hanshin Department Store, Ltd. and its four
consolidated subsidiaries from the scope of consolidation fromthe third quarter of fiscal 2008.
In the Other Segment, operating income fell by 36.9%, to¥0.6 billion (US$5.8 million) owing to an increase in loan-loss
write-offs and repayment of interest at Station Finance Inc.,
which was excluded from the scope of consolidation following
the sale of shares on 27th February 2009.

At a Glance

under “Other Operations” from the first quarter of fiscal 2009, as
mentioned above. As a result, revenues from operations in the
Other Segment rose by 35.1% to ¥60.5 billion (US$617.7 million).

0.50
0.13

05/3

06/3

07/3

08/3

09/3

Net income per share — basic
ROE

1,393.5 1,248.9

277.4

360.2

05/3

06/3

Total assets
EquityHankyu Hanshin Holdings59As a result, income before income taxes and minority interests came to ¥34.1 billion (US$347.6 million), while net income(adjusted to minority interests) posted an improvement to ¥20.6
billion (US$209.7 million).

interest-bearing debt at the reporting term-end stood at¥1,275.6 billion (US$13,016.5 million), for a small year-on-yearincrease of ¥4.5 billion. In line with a change in accounting standards, the balance of interest-bearing debt on a consolidated
basis included lease obligations as of the end of the reportingterm.
The Hankyu Hanshin Group uses the ratio of interest-bearing
debt to EBITDA (earnings before interest, taxes, depreciation andamortization) on a consolidated basis as an indicator of financial
soundness. The Group’s goal is to lower this ratio to 7.0 by theterm ending March 2013. The ratio stood at 9.4 for the term
under review.

Financial Position
1. Equity
Equity defined as net assets after deduction of minority interests
at the reporting term-end totalled ¥463.0 billion (US$4,724.2
million), for a decline of ¥3.6 billion from the previous term-end.
Although retained earnings increased, there was also a major
increase in net unrealized losses on securities holdings as a resultof the across-the-board weakness in stock prices.
The Hankyu Hanshin Group uses ROE (return on equity)
on a consolidated basis as an indicator of capital efficiency. Its
goal is to achieve an ROE of at least 6.0% by the term ending
March 2013. ROE for the reporting term stood at 4.4% on aconsolidated basis.

3. Cash Flows
Cash and cash equivalents at the reporting term-end declinedby ¥0.5 billion from the previous term-end to ¥30.7 billion(US$313.2 million). This was the result of progress made inpressing forward with large-scale projects and by utilizing funds
provided by operating activities and financing activities. Net
cash provided by operating activities came to ¥108.6 billion(US$1,108.1 million), net cash used in investing activities cameto ¥115.0 billion (US$1,174.0 million), and net cash provided byfinancing activities came to ¥7.0 billion (US$71.6 million).

2. Fund Procurement
Despite capital investment conducted by the Group during thereporting term, notably for the Hankyu Nishinomiya Gardens
development project, the majority of these funds were financed
by net cash provided by operating activities. As a result,

Equity Ratio

Capital Investments(%)(Billions of Yen)

Interest-Bearing Debt andRatio to EBITDA(Billions of Yen / Times)

25

150
22.4

134.3

21.7
19.9

20

25

1,500

20.1

120

1,209.4

1,200

1,271.1 1,275.6

20

109.7
988.1

15

90

16.6

900

15

889.6
10.64

10

60
52.1

5

30

0

600

53.8

06/3

07/3

08/3

09/3

8.26

8.75

9.43

0

0

05/3

06/3

07/3

08/3

09/3

10

5

300

27.5

0

05/3

8.99

05/3

06/3

07/3

08/3

09/3

Interest-bearing debt
Interest-bearing debt to EBITDA
Note: EBITDA = operating income + depreciation andamortisation expenses + amortisation of goodwill
attendant on the management integration ofHankyu and Hanshin

60 Annual Report 2009

Business Risks

Management Organisation
Financial Section

In order to ensure greater convenience for users of the Hokushin
Kyuko Railway Co., Ltd., a consolidated subsidiary of Hankyu
Corporation has agreed to a plan transferring railway facilities
held by Hokushin Kyuko Railway to Kobe Rapid Transit Railway
Co., Ltd. (a consolidated subsidiary effective from the current
term ending March 2010).
To facilitate the plan, in fiscal 2003 Hankyu Corporation
provided Kobe Rapid Transit Railway Co., Ltd. with financing forpart of the funds necessary to purchase the facilities.
In September 2007, our equity method affiliate, Kobe
Electric Railway Co., Ltd., temporarily suspended support for the
rehabilitation of Hokushin Kyuko Railway Co., Ltd. To maintainthe 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 second-tier railway operator. However, thebusiness performance and financial position of the Group could
be affected by changes in this plan.

Overview of Core Businesses

The Group is working to utilise its working assets more
effectively to facilitate the development of areas served by the
Hankyu and Hanshin railway lines. To raise its asset effectiveness,
the Group is pursuing the following initiatives: reconstruction of
the Umeda Hankyu Building; development of the Chayamachi
area of the Umeda district; further development of theInternational Culture Park “Saito” (a new town). These projects
are all believed to be key to the Group’s future growth, and
the Group’s management will be working to complete thesedevelopment projects as soon as possible. However, in the eventof rapid and major changes in the business environment, suchas in land prices or changes in urban development plans, thebusiness performance and financial position of the Group could
be adversely affected.
At the previous term-end, in line with a reappraisal by
the Urban Renaissance Agency of the profitability of the Saito
development project, Land in light of deepening uncertainties
about the pace and profitability of future development at Saito,
we adopted a conservative estimate of the market value of land
helds by Hankyu Corporation, a consolidated subsidiary for salein the Saito area.

Special Feature

Transfer of equity-method affiliate

Message

Progress in large-scale development projects

Financial Highlights

In accordance with the stipulations of Article 3 of the Railway
Business Law, the Group must obtain permission, separately,
from the Ministry of Land, Infrastructure, Transport and Tourism
to engage in each category of railway operations on each routethat it intends to operate. Moreover, under Article 16 of theLaw, a railway operator must obtain the Ministry’s permission,
separately, for the passenger fares it intends to set and on eachoccasion when it wishes to change the fares. Consequently,
there is a certain risk that the Group’s railway operations may
be constrained in some way by the Ministry’s administration ofthese regulations.

This acquisition has resulted in an increase in the balanceof interest-bearing debt of the Group. On the other hand,management integration between Hanshin Electric and theHankyu Corporation Group has led to an increase in cash flow,
and the Group is not expected to have any significant difficulty
in repaying its debts. The Group will make an effort to diversify
its fund procurement methods to deal with an increase ininterest-bearing debt resulting from the integration, and will use
all possible means to minimise the negative impact of interest
rate movements. Be that as it may, in the unlikely event thatinterest rates rise suddenly and in excess of our projections, this
could exert an adverse effect on the business performance andfinancial position of the Group.

Legal risk

At a Glance

The various categories of risk to which the business performance, stock price, financial position and otheraspects of operations of the Hankyu Hanshin Holdings Group are subject are detailed below.

Decline in the market value of assets held bymembers of the Hankyu Hanshin Holdings GroupInterest-bearing debt
The balance of interest-bearing debt held by the Group as ofthe end of March 2009, on a consolidated basis, was ¥1,275,620
million.
As a result of the acquisition of shares in Hanshin Electric
Railway Co., Ltd. through a successful public tender offer in theform of a takeover bid on 27th June 2006, Hanshin Railway has
become a consolidated subsidiary of Hankyu Hanshin Holdings.

In the case of a substantial decline in the market value of
inventory assets, property and equipment and intangible
assets, investment securities, and other assets, the recording ofvaluation losses or impairment losses will likely have a negative
impact on the earnings performance and financial position of
the Hankyu Hanshin Holdings Group.

Hankyu Hanshin Holdings

61Consolidated Balance Sheets As of 31st March 2008 and 2009

AssetsCurrent assets (Note 5):
Cash and cash equivalents (Note 18) ........................................................................................................
Trade receivables....................................................................................................................................................
Short-term loans .....................................................................................................................................................
Allowance for doubtful receivables............................................................................................................
Inventories (Note 4) ..............................................................................................................................................
Deferred tax assets (Note 16) ..........................................................................................................................
Prepaid expenses and other current assets...........................................................................................
Total current assets ........................................................................................................................................

Investments and other assets (Note 5):
Investments in:
Nonconsolidated subsidiaries and affiliates ...................................................................................
Other securities ................................................................................................................................................
Long-term loans .....................................................................................................................................................
Deferred tax assets (Note 16) ..........................................................................................................................
Other investments .................................................................................................................................................
Allowance for doubtful receivables............................................................................................................
Total investments and other assets .....................................................................................................

Property and equipment (Note 5):
Land (Note 2(j)) ........................................................................................................................................................
Buildings and structures ....................................................................................................................................
Rolling stock and buses......................................................................................................................................
Machinery and equipment ..............................................................................................................................
Construction in progress ...................................................................................................................................
Less accumulated depreciation ....................................................................................................................
Property and equipment — net............................................................................................................
Intangible assets (Note 5) .......................................................................................................................................
See the accompanying notes to the consolidated financial statements.

62 Annual Report 2009

Millions of yen
2008
2009

¥

33,073
102,651
46,929(7,666)
146,089
16,18240,280377,538¥

31,974
95,703—(2,765)
152,523
16,064
43,816337,315

Thousands of
U.S. dollars (Note 1)
2009$

326,263976,566—(28,218)
1,556,355
163,916
447,1113,441,993

158,141
108,622
25,336
5,207
60,152(6,153)351,305

155,240
84,32824,867
5,293
59,285(7,314)
321,699

1,584,077
860,489
253,741
54,014604,946(74,630)
3,282,637

812,870
1,110,483
212,460
126,862
132,915
2,395,590(842,011)
1,553,579
66,054¥2,348,476

819,898
1,149,225
219,878
133,030
131,667
2,453,698(870,319)
1,583,379
64,939¥2,307,332

8,366,311
11,726,786
2,243,651
1,357,452
1,343,535
25,037,735(8,880,802)
16,156,933
662,642$23,544,205

Thousands of
U.S. dollars (Note 1)
2009

986,718
6,862
57,067701
6,499—
107,120
154,830
1,319,797

10,068,550
70,018582,319
7,150
66,313—
1,093,057
1,579,906
13,467,313

99,475150,134
211,758

99,475150,134
227,338

1,015,050
1,531,983
2,319,776(3,267)458,100(4,143)472,804(42,281)
4,824,528

6,621
(557)
2,193
212
8,469
10,070476,639¥2,348,476(9,253)(682)
1,979(1,875)(9,831)
10,906473,879¥2,307,332(94,419)(6,958)20,187(19,130)(100,320)
111,290
4,835,498$23,544,205

Contingent liabilities (Note 9)
Net assets (Note 10):
Shareholders’ equity:
Common stock
Authorised — 3,200,000 thousand shares
Issued — 1,271,407 thousand shares......................................................................................................
Capital surplus..........................................................................................................................................................
Retained earnings ..................................................................................................................................................
Less treasury stock, at cost:
7,857,884 shares in 2008 and 9,761,510 shares in 2009...............................................................
Total shareholders’ equity .........................................................................................................................
Accumulated gains from revaluation and translation adjustments:
Net unrealised holding gains on securities............................................................................................
Net unrealised gains on hedging derivatives .......................................................................................
Surplus from land revaluation (Note 2(j)) ................................................................................................
Foreign currency translation adjustments .............................................................................................
Total accumulated gains from revaluation and translation .................................................
Minority interests.........................................................................................................................................................
Total net assets .................................................................................................................................................

Hankyu Hanshin Holdings

Financial Section

929,757
7,007
59,153705
17,935681
103,487
156,596
1,275,321

Management Organisation

Long-term liabilities:
Long-term debt due after one year (Note 5) ........................................................................................
Deferred tax liabilities related to land revaluation.............................................................................
Employees’ severance and retirement benefits (Note 6) ..............................................................
Retirement benefits for directors and corporate auditors............................................................
Reserve for investment losses ........................................................................................................................
Negative goodwill .................................................................................................................................................
Deposits from tenants (Note 7) .....................................................................................................................
Other noncurrent liabilities (Notes 8 and 16) .......................................................................................
Total long-term liabilities ...........................................................................................................................

Overview of Core Businesses$ 2,143,604
784,013
1,134,895
232,030
35,606522,460
130,877—
257,9095,241,394

Special Feature¥ 210,073
76,833111,220
22,7393,489
51,201
12,826—25,275
513,656

Message¥ 202,241
139,102126,137
22,956
6,891
56,506
12,595201
29,887596,516

Financial Highlights

Liabilities and Net Assets
Current liabilities:
Short-term borrowings (Note 5) ...................................................................................................................
Current portion of long-term debt (Note 5)..........................................................................................
Trade payables .........................................................................................................................................................
Accrued expenses..................................................................................................................................................
Income taxes payable..........................................................................................................................................
Advances received ................................................................................................................................................
Employees’ savings deposits ..........................................................................................................................
Provision for restructuring costs (Note 2(g)) .........................................................................................
Other current liabilities (Note 16) .................................................................................................................
Total current liabilities ..................................................................................................................................

At a Glance

Millions of yen
2008
2009

63

Consolidated Statements of Income Years ended 31st March 2007, 2008 and 2009

2007

Millions of yen
2008

2009

Thousands of
U.S. dollars (Note 1)
2009

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

¥743,377¥752,301¥683,715$6,976,686

Costs of revenues from operations.............................................................................
Operating income ......................................................................................................

656,374
87,003

661,576
90,725605,891
77,8246,182,564
794,122

2,733(19,726)
1,517
780
3,675

2,278
(23,498)
1,048
1,975
3,748

2,056
(23,703)
739
785
887

20,977(241,868)
7,546
8,014
9,046

Income before income taxes and minority interests ...........................

7,275
(763)
(2,766)(3,930)2,680(3,399)(2,321)——(869)(4,346)
3,091(1,992)0—(3,336)(21,697)
65,306

6,381(1,012)
—
—
1,463
(717)
(69,133)——(8,796)———
16,908
9,956(5,228)(64,627)
26,098(10,781)(458)(1,644)—7,044——(1,000)(18,431)(3,448)
—
—
—
8,531
—
(4,337)(43,760)
34,064(110,005)(4,669)(16,778)—
71,874——(10,207)(188,074)(35,182)———
87,052—(44,255)(446,529)
347,593

Income taxes (Note 16):
Current ......................................................................................................................................
Deferred ...................................................................................................................................
Income before minority interests .....................................................................

9,314
17,874
38,118

9,631
15,196
1,271

6,814
6,071
21,17969,53561,944
216,114

Minority interests in income of consolidated subsidiaries ........................
Net income .....................................................................................................................

(1,499)¥ 36,619

(643)
628

(628)
¥ 20,551(6,410)$ 209,704

Net income per share — basic (Note 2(t)) ..............................................................
Net income per share — diluted (Note 2(t))..........................................................
Dividends per share of common stock (Note 2(u)) ..........................................

¥31.84—
5.00

Other income (expenses):
Interest and dividend income ....................................................................................
Interest expense..................................................................................................................
Amortisation of negative goodwill .........................................................................
Gain on sale of securities ...............................................................................................
Equity in income of affiliates .......................................................................................
Gain (loss) on disposal of property andequipment — net (Note 2(i)) ...................................................................................
Special allowance for doubtful receivables .......................................................
Special reserve for investment losses ....................................................................
Loss on financial support to subsidiaries and affiliates...............................
Gain on contributions for construction works — net (Note 2(i)) .........
Loss from disposal of real estate for sale .............................................................
Loss on valuation of real estate for sale ...............................................................
Write-down of inventories............................................................................................
Restructuring costs (Note 2(g))..................................................................................
Loss on impairment of fixed assets (Note 11) ..................................................
Contribution to construction of Osaka Monorail Saito Line....................
Gain on transfer of professional baseball player to U.S. major leagues ...
Provision for accruing interest on past consumer loans ...........................
Income from investments in silent partnerships............................................
Gain on change in equity..............................................................................................
Other — net (Note 11) ....................................................................................................

¥Yen

See the accompanying notes to the consolidated financial statements.

64 Annual Report 2009

¥0.50
0.41
5.00

U.S. dollars (Note 1)¥16.28
16.18
5.00

$0.17
0.17
0.05

Consolidated Statements of Changes in Net Assets Years ended 31st March 2007, 2008 and 2009

Surplus from land revaluation:
Balance at beginning of year .........................................................................................................
Changes for the period:
Net changes in items other than shareholders’ equity .........................................
Balance at end of year ........................................................................................................................

Minority interests:
Balance at beginning of year .........................................................................................................
Changes for the period:
Net changes in items other than shareholders’ equity .........................................
Balance at end of year ........................................................................................................................

Balance at beginning of year .................................................................................................................
Issue of new shares .....................................................................................................................................
Stock issued on share exchange..........................................................................................................
Balance at end of year ................................................................................................................................

1,930¥ 99,475—¥ 99,475—¥ 99,475—$1,015,050¥ 24,985¥150,062¥150,134$1,531,983

125,097(20)¥150,062—72¥150,134——¥150,134——$1,531,983¥196,412¥228,570¥211,758$2,160,797

36,619788(1)(5,248)¥228,570

628(11,063)(24)(6,353)¥211,758

20,551
1,156
213(6,340)¥227,338

209,704
11,794
2,171(64,690)$2,319,776¥

331¥ 2,301

¥

3,267

$

33,3371,970¥ 2,301966¥ 3,267

¥

876
4,143

$

8,944
42,281¥ 38,817¥ 34,583

¥

6,621

$

67,561(4,234)¥ 34,583(27,962)¥ 6,621(15,874)¥ (9,253)(161,980)$ (94,419)

¥

—

¥

204

¥

(557)

$

(5,687)

¥

204
204

¥

(761)
(557)

¥

(125)
(682)

$

(1,271)(6,958)¥ 2,604¥ 2,604

¥

2,193

$

22,375—¥ 2,604(411)¥ 2,193

¥

(214)
1,979

$

(2,188)20,187

¥

190

¥

333

¥

212

$

2,167

¥

143
333

¥

(121)
212

(2,087)¥ (1,875)(21,297)$ (19,130)¥ 2,328¥ 8,756¥ 10,070$ 102,754

6,428¥ 8,756

1,314¥ 10,070

836¥ 10,906

8,536$ 111,290

Financial Section

Foreign currency translation adjustments:
Balance at beginning of year .........................................................................................................
Changes for the period:
Net changes in items other than shareholders’ equity .........................................
Balance at end of year ........................................................................................................................

$1,015,050

Management Organisation

Net unrealised gains on hedging derivatives:
Balance at beginning of year .........................................................................................................
Changes for the period:
Net changes in items other than shareholders’ equity .........................................
Balance at end of year ........................................................................................................................

¥ 99,475

Overview of Core Businesses

Net unrealised holding gains on securities:
Balance at beginning of year .........................................................................................................
Changes for the period:
Net changes in items other than shareholders’ equity .........................................
Balance at end of year ........................................................................................................................

¥ 99,475

Special Feature

Less treasury stock, at cost:
Balance at beginning of year .........................................................................................................
Changes for the period:
Net changes .....................................................................................................................................
Balance at end of year ........................................................................................................................

¥ 97,545

Message

Retained earnings:
Balance at beginning of year .........................................................................................................
Changes for the period:
Net income .......................................................................................................................................
Change in scope of consolidation......................................................................................
Reversal of revaluation reserve for land ..........................................................................
Dividends from surplus .............................................................................................................
Balance at end of year ........................................................................................................................

2009

Financial Highlights

Capital surplus:
Balance at beginning of year .........................................................................................................
Changes for the period:
Issuance of new shares (Note 10) .......................................................................................
Disposal of treasury stock ........................................................................................................
Balance at end of year ........................................................................................................................

2007

Thousands of
U.S. dollars (Note 1)
2009

At a GlanceCommon stock:
Balance at beginning of year .........................................................................................................
Changes for the period:
Issuance of new shares (Note 10) .......................................................................................
Balance at end of year ........................................................................................................................

Millions of yen
2008

Number of shares of common stock issued
2007
2008
2009
1,049,538,126
1,271,406,928
1,271,406,928
214,209,324——
7,659,478——
1,271,406,928
1,271,406,928
1,271,406,928

See the accompanying notes to the consolidated financial statements.

Hankyu Hanshin Holdings

65Consolidated Statements of Cash Flows Years ended 31st March 2007, 2008 and 2009

Cash flows from operating activities:
Income before income taxes and minority interests .................................................................
Depreciation and amortisation ................................................................................................................
Loss on impairment of fixed assets .......................................................................................................
Amortisation of goodwill and negative goodwill ........................................................................
Equity in income of affiliates......................................................................................................................
Decrease in employees’ severance and retirement benefits ................................................
Increase (decrease) in allowance for doubtful receivables.....................................................
Increase (decrease) in reserve for investment losses .................................................................
Restructuring costs (Note 2(g)) ................................................................................................................
Interest and dividend income ..................................................................................................................
Interest expense ................................................................................................................................................
Gain on sale of property and equipment ..........................................................................................
Loss on sale of property and equipment...........................................................................................
Gain and loss on sale of property and equipment, net ............................................................
Loss on disposal of property and equipment.................................................................................
Loss on deduction of property and equipment............................................................................
Gain on sale of securities..............................................................................................................................
Loss on sale of marketable and investment securities ..............................................................
Gain and loss on sale of marketable and investment securities .........................................
Gain on change in equity by management integration (Note 12)....................................
Gain on contributions for construction works ...............................................................................
Income from investments in silent partnerships ..........................................................................
(Increase) decrease in trade receivables.............................................................................................
(Increase) decrease in inventories ..........................................................................................................
Loss on valuation of real estate for sale ..............................................................................................
(Increase) decrease in trade payables ..................................................................................................
Increase (decrease) in other current liabilities ................................................................................
Other.........................................................................................................................................................................
Subtotal ..........................................................................................................................................................
Interest and dividends received ..............................................................................................................
Interest paid .........................................................................................................................................................
Income taxes paid ............................................................................................................................................
Extra retirement payment ...........................................................................................................................
Net cash provided by operating activities ...............................................................................
Cash flows from investing activities:
Purchases of property and equipment ...............................................................................................
Proceeds from sale of property and equipment...........................................................................
Purchases of investment securities .......................................................................................................
Proceeds from sale of investment securities ...................................................................................
Purchases of investments in consolidated subsidiaries affecting scope of consolidation...
Proceeds from sale of investments in consolidated subsidiaries affecting scope of consolidation....
Net increase in short-term loans receivable ....................................................................................
Long-term loans advanced ........................................................................................................................
Proceeds from collection of long-term loans .................................................................................
Receipt of contributions for construction works ..........................................................................
Receipt of repayment of investments in silent partnerships ................................................
Other.........................................................................................................................................................................
Net cash used in investing activities ............................................................................................
Cash flows from financing activities:
Net increase in short-term borrowings...............................................................................................
Proceeds from long-term borrowings.................................................................................................
Repayment of long-term debt .................................................................................................................
Proceeds from new bonds issued ..........................................................................................................
Redemption of bonds....................................................................................................................................
Net decrease in commercial paper .......................................................................................................
Dividends paid....................................................................................................................................................
Dividends paid to minority shareholders of consolidated subsidiaries..........................
Other.........................................................................................................................................................................
Net cash provided by 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 subsidiaries............
Decrease in cash and cash equivalents due to exclusion of subsidiaries from consolidation...
Increase in cash and cash equivalents resulting from merger with nonconsolidated subsidiary ...
Cash and cash equivalents at end of year (Note 18) .......................................................................

See the accompanying notes to the consolidated financial statements.

66 Annual Report 2009

2007

Millions of yen
2008

2009

Thousands of
U.S. dollars (Note 1)
2009¥ 65,306
43,889869
719(3,675)(2,201)(3,992)4,228—(2,733)
19,726(12,592)
866
—
2,189
2,262
(2,948)1,882——(2,312)—(25,612)850
2,321
17,566—(3,831)
102,777
3,698(20,161)(7,332)—
78,982¥ 26,098
51,578
8,797
1,849(3,748)(1,817)729(1,116)—(2,278)23,498(10,489)
391
—
1,720
1,997
(1,975)——(9,956)(806)(16,908)(1,731)(15,013)
69,133(4,612)—(5,392)
109,949
3,141(23,135)(15,053)—
74,902¥ 34,064
54,799
3,448
1,938
(887)
(1,185)750—
18,431(2,056)
23,703
—
—
(120)
3,973
6,927
—
—
(773)
—
(7,044)(8,531)
22,207644—(7,423)(11,376)
2,528
134,017
3,008(23,328)(4,908)(191)
108,598$ 347,593
559,169
35,182
19,772(9,047)(12,090)
7,648—
188,074(20,977)
241,868——(1,221)
40,53970,687——(7,885)—(71,874)(87,052)
226,601
6,570—(75,748)(116,084)
25,793
1,367,518
30,696(238,042)(50,080)(1,950)1,108,142(53,356)
46,248(7,595)22,554(210,380)
563(5,351)
(874)
6,322
5,542
—
(3,252)(199,579)(133,994)
27,848(5,674)
4,232
(528)
—
(7,202)(10,948)
1,008
3,101
19,562
2,537(100,058)(120,346)
1,066(8,340)1,940—(1,778)(2,464)(11,900)
5,615
12,9009,181(922)(115,048)(1,228,023)
10,882(85,106)
19,797—(18,140)(25,140)(121,433)
57,292
131,632
93,685(9,402)(1,173,956)

35,362
241,463(82,991)—(49,900)(7,000)(5,248)(74)678
132,290
99
11,792
28,375———¥ 40,167

45,706140,920(117,043)
39,794(66,000)—(6,353)(235)(71)
36,718(159)
11,40340,167842(21,245)—¥ 31,167

12,982
118,524(111,979)
19,910(25,200)—(6,340)
(267)
(615)
7,015
(2,740)(2,175)31,1671,693—
5¥ 30,690

132,471
1,209,427(1,142,648)
203,158(257,143)—(64,690)(2,725)(6,273)
71,577(27,956)(22,193)
318,029
17,273—58$ 313,167

Notes to the Consolidated Financial Statements

Message

The accompanying consolidated financial statements
have been restructured and translated into English, with some
expanded descriptions, from the consolidated financial statements of the Company prepared in accordance with Japanese
GAAP and filed with the appropriate Local Finance Bureau of the
Ministry of Finance as required by the Financial Instruments andExchange Law. Some supplementary information included in thestatutory Japanese language consolidated financial statements,
but not required for fair presentation, is not presented in theaccompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars
are included solely for the convenience of readers outside Japan,
using the prevailing exchange rate at 31st March 2009, whichwas ¥98 to $1.00. The translations should not be construed as
representations that the Japanese yen amounts have been, could
have been or could in the future be converted into U.S. dollars at
this or any other rate of exchange.

Financial Highlights

The accompanying consolidated financial statements of Hankyu
Hanshin Holdings, Inc. (the “Company”) have been preparedin accordance with the provisions set forth in the Financial
Instruments and Exchange Law and its related accounting
regulations and in conformity with accounting principles generally accepted in Japan, which are different in certain respects as
to application and disclosure requirements from International
Financial Reporting Standards.
Until the fiscal period ended 31st March 2008, the accounts ofoverseas consolidated subsidiaries are based on their accounting
records maintained in conformity with generally accepted
accounting principles prevailing in the respective countries of
domicile. The accounts of overseas consolidated subsidiaries forthe year ended 31st March 2009 are prepared in accordance witheither International Financial Reporting Standards or U.S. generally
accepted accounting principles, with adjustments for six specified
items as applicable.

At a Glance

1. Basis of presenting consolidated financial statements

Special Feature

2. Significant accounting policies

Financial Section

Hankyu Hanshin Holdings

Management Organisation(b) Securities
The Companies classify securities as (1) debt securities intended tobe held to maturity (“held-to-maturity debt securities”), (2) equity
securities issued by subsidiaries and affiliated companies, and(3) all other securities that are not classified in any of the above
categories (“available-for-sale securities”).
Held-to-maturity debt securities are stated at amortised cost,
net of the amount considered not collectible. Equity securities
issued by subsidiaries and affiliated companies which are notconsolidated or accounted for using the equity method are statedat moving average cost. Available-for-sale securities are stated as
explained below.
If the market value of held-to-maturity debt securities, equity
securities issued by unconsolidated subsidiaries or affiliatedcompanies, or available-for-sale securities, declines significantly,
such securities are stated at fair market value, and the difference
between fair market value and the carrying amount is recognised
as loss in the period of the decline. If the fair market value ofequity securities issued by unconsolidated subsidiaries or affiliatedcompanies not on the equity method is not readily available, suchsecurities are written down to net asset value with a corresponding charge in the statement of income in the event net asset value
declines significantly. In these cases, the fair market value or the
net asset value will be the carrying amount of the securities at the
beginning of the next year.
The Companies have recorded their share of income held bylimited-liability investment partnerships and of similar investments
using the equity method.

Overview of Core Businesses(a) Consolidation
The consolidated financial statements include the accounts of theCompany and significant subsidiaries (together, the “Group” or“Companies”) that meet the control requirements for consolidation. The consolidated financial statements comprise the accountsof 96, 94 and 98 subsidiaries for each of the three years in the
period ended 31st March 2009.
The Company has adopted the equity method of accounting
for investments in which the Company owns 20-50% or exerts
influence over financial and operational policies 11, 7 and 8
significant affiliates, respectively for the three years in the period
ended 31st March 2009.
All significant intercompany transactions and accounts havebeen eliminated.
In the elimination of investments in subsidiaries, the assets
and liabilities of the subsidiaries, including the portion attributable
to minority shareholders, are evaluated using the fair value at thetime the Company acquired control of the respective subsidiary.
The difference between the cost of investments in subsidiaries
and affiliates and the equity in their net assets at the date of acquisition is amortised over five years. The difference derived from the
management integration with Hanshin Electric Railway Co., Ltd.
and H2O Retailing Corporation is, amortised in equal amounts overtwenty years.
Some subsidiaries and affiliates are consolidated with yearends that differ from that of the Company. However, necessary
adjustments have been made if the effect of the difference ismaterial.

67

(c) Allowance for doubtful receivables
The Companies provide for doubtful accounts principally at an
amount computed based on past experience plus estimateduncollectible amounts based on the analysis of certain individual
accounts.
(d) Inventories
Inventories are stated at cost, which is determined by theidentified cost method for real estate for sale and principally by
the moving average method for other inventories. The Company
and its domestic consolidated subsidiaries have adopted the
new accounting standard, “Accounting Standard for Valuation of
Inventories ”(Statement No. 9 issued by the Accounting Standards
Board of Japan on 5th July 2006) requiring the write-down of
inventories at the time of decline in future profitability.
By the adoption of this rule, operating income and income
before income taxes and minority interests for the year ended
31st March 2009 decreased ¥3,857 million ($39,354 thousand) and¥4,857 million ($49,561 thousand), respectively, from the amounts
that would have been recorded without the adoption.
(e) Derivatives and hedge accounting
The Companies state derivative financial instruments at fair value
and recognise changes in the fair value as gain or loss unless thederivative financial instruments was used for hedging purposes.
If derivative financial instruments are used as hedges andmeet certain hedging criteria, the Companies defer recognitionof gain or loss resulting from a change in the fair value of thederivative financial instruments until the related loss or gain on
the hedged item is recognised.
However, in cases where forward foreign exchange contracts
are used as hedges and meet certain hedging criteria, forward
foreign exchange contracts and hedged items are accounted forin the following manner:
1. If a forward foreign exchange contract is executed to hedge anexisting foreign currency receivable or payable,(a) the difference, if any, between the Japanese yen amountof the hedged foreign currency receivable or payabletranslated using the spot rate at the inception date of thecontract and the book value of the receivable or payable isrecognised in the statement of income in the period which
includes the inception date, and(b) the discount or premium on the contract (the difference
between the Japanese yen amount of the contract translated using the contracted forward rate and that translatedusing the spot rate at the inception date of the contract) is
recognised over the term of the contract.

68 Annual Report 2009

2. If a forward foreign exchange contract is executed to hedge afuture transaction denominated in a foreign currency, gain orloss on the future transaction due to market fluctuation will bedeferred as assets or liabilities using the market value estimatedby the financial institution at the balance-sheet date, and no
gain or loss on the forward foreign exchange contract will berecognised.
Also, if interest rate swap contracts are used as hedges andmeet certain hedging criteria, the net amount to be paid or
received under the interest rate swap contract is added to or
deducted from the interest on the assets or liabilities for which theswap contract was executed.
(f) Reserve for investment losses
The reserve for investment losses is provided for possible losses inexcess of investments and loans to affiliates based on an evaluation of the net assets of the investee and other factors.
(g) Provision for restructuring costs and recorded restructuring
costs
Provision for restructuring costs is stated as of 31st March 2008
at the estimated loss from the reconstruction of Nishinomiya
Stadium.
Restructuring costs relating to the exclusion of Station
Finance Inc. from the scope of consolidation consist of a loss of¥538 million ($5,487 thousand) from the sale of the shares of theCompany held by Hankyu Corporation and a loss of ¥17,893 million ($182,587 thousand) from the sale of receivables on financing
to third parties.
(h) Property and equipment
Property and equipment are stated at cost. Depreciation ofbuildings acquired after 31st March 1998 is provided on thestraight-line method, and depreciation of other property isprovided principally on the declining balance method. For certain
railway facilities, depreciation is calculated by the replacement
cost method based on the estimated useful lives as set forth by
Japanese tax regulations.
Maintenance and repairs, including minor renovations andimprovements, are usually charged to costs of revenues as
incurred, and major improvements are capitalised.
In addition, certain capital gains from sales of property aredeferred to offset the cost of acquired property as permitted by
the Corporation Tax Law of Japan.
The Company changed the depreciation method for property
and equipment due to the revision of Japanese Corporation Tax
Law and its regulation on 31st March 2008.
1. The depreciation method for property and equipment
acquired after 31st March 2007 changed to a method basedon the Japanese Corporation Tax Law after the revision. By thechange, operating income and income before income taxes
and minority interests were ¥573 million less for the year ended

Notes to the Consolidated Financial Statements

Overview of Core Businesses
Management Organisation
Financial Section(n) Employees’ severance and retirement benefits
The Companies provide two types of post-employment benefit
plans, unfunded lump-sum payment plans and defined benefit
pension plans, under which all eligible employees are entitledto benefits based on the level of wages and salary at the timeof retirement or termination, length of service and certain otherfactors.
The liabilities and expenses for severance and retirement benefits are determined based on the amounts actuarially calculatedusing certain assumptions. The Companies provide for employees’
severance and retirement benefits based on the estimatedamounts of projected benefit obligation and the fair value of plan
assets.
Prior service costs are recognised in expenses in equalamounts over 3 to 15 years, and actuarial gains and losses arerecognised in expenses using the straight-line method over 4 to
15 years.

Special Feature(m) Software cost
Software is depreciated using the straight-line method over theestimated useful life of one to six years.

Message(j) Land revaluation
Pursuant to the Law Concerning Land Revaluation, two consolidated subsidiaries and an affiliate accounted for by the equity
method revaluated land used for business activities on 31st March
2002.
With respect to the valuation differences of the two
consolidated subsidiaries, amounts equivalent to taxes related to
the valuation differences were included in “Deferred tax liabilities,”amounts belonging to minority shareholders were includedin “Minority interests,” and amounts from which these werededucted were recorded as “Surplus from land revaluation” inshareholders’ equity. For the affiliate accounted for by the equity
method, the Company’s share after deduction of taxes is included
in “Surplus from land revaluation” in net assets.
The method of land revaluation
The revaluation of the land was determined based on realestate tax values in accordance with Article 2, Paragraph 3 ofthe Enforcement Ordinance Concerning Land Revaluation on
31st March 2002.
The excess of book values after revaluation over fair values at
31st March 2008 and 2009 were ¥5,892 million and ¥5,043 million($51,454 thousand), respectively.

(l) Statements of changes in net assets
The Company and its domestic consolidated subsidiaries haveadopted the new accounting standard, “Accounting Standard
for Statement of Changes in Net Assets” (Statement No. 6 issued
by the Accounting Standards Board of Japan on 27th December2005) and “Implementation Guidance for the AccountingStandard for Statement of Changes in Net Assets” (the Financial
Accounting Standard Implementation Guidance No. 9 issued by
the Accounting Standards Board of Japan on 27th December2005).

Financial Highlights(i) Contributions for construction works
Effective from the year ended 31st March 2007, Hankyu
Corporation, a consolidated subsidiary of the Company, changed
the method of accounting for contributions for construction
works under which all assets acquired using the contributions arenow stated in property and equipment at acquisition cost after
deducting the amounts corresponding to the contributions. The
subsidiary changed methods in order to unify accounting policy
across the Group following the management integration with
Hanshin Electric Railway Co. Ltd. and to recognize the purpose ofcontributions for construction works, which is that a local authority grants property acquisition funds to serve the public interestsand urban planning, etc., but a railroad enterprise constructs
railroad facilities and acquires property.
Accumulated amounts of the deductions were ¥323,546 million, ¥324,260 million and ¥330,683 million ($3,374,317 thousand)at 31st March 2007, 2008 and 2009, respectively.

(k) Impairment accounting
The Company adopted the accounting standard for impairmentof fixed assets (“Opinion Concerning Establishment of AccountingStandard for Impairment of Fixed Assets” issued by the BusinessAccounting Deliberation Council on 9th August 2002) andthe implementation guidance for the accounting standard for
impairment of fixed assets (the Financial Accounting Standard
Implementation Guidance No. 6 issued by the AccountingStandards Board of Japan on 31st October 2003). The accumulated impairment loss was deducted from the cost of each fixed
asset.

At a Glance

31st March 2008 than they would have been with the previous
method.
2. Property and equipment acquired before 1st April 2007 wereallowed, after depreciating to 95% of their acquisition cost, tobe equally depreciated to memorandum value over five years.
By the change, operating income and income before income
taxes and minority interests were ¥2,397 million less for the year
ended 31st March 2008 than they would have been with theprevious method.

(o) Translation of foreign currencies
Monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the year-end rates.
Financial statements of consolidated overseas subsidiaries
are translated into Japanese yen at year-end rates, except thatshareholders’ equity accounts are translated at historical rates
and income statement items resulting from transactions with

Hankyu Hanshin Holdings69the Company at the rates used by the Company. The Companies
report foreign currency translation adjustments in accumulated
gains from revaluation, translation adjustments and minority
interests in net assets.
(p) Finance leases
Until the fiscal period ended 31st March 2008, finance leases
which did not transfer ownership were accounted for in the samemanner as operating leases in accordance with Japanese GAAP,
except for those of some overseas consolidated subsidiaries
which were capitalised. Effective from the year ended 31st March
2009, the Company and its domestic consolidated subsidiaries
have adopted the new accounting standards, the AccountingStandard for Lease Transactions (Statement No. 13 issued by the
Accounting Standards Board of Japan on 30th March 2007 andthe Financial Accounting Standard Implementation GuidanceNo. 16 issued by the Accounting Standards Board of Japan on
30th March 2007). Effective from the year ended 31st March 2009,
the Company and its domestic consolidated subsidiaries adopted
the new accounting standards for finance leases commencing
after 31st March 2008 and capitalised assets under such leases,
except for certain immaterial or short-term finance leases, which
are accounted for as operating leases. As permitted, financeleases which commenced prior to 1st April 2008 and have beenaccounted for as operating leases, continue to be accounted for
as operating leases, with the disclosure of certain “as if capitalised”
information. The new standard requires the recording of capitalleases as a ordinary buying and selling transactions.
The adoption of this rule had little and no total assets wasincome, respectively.
(q) Bond and new share issue costs
Bond and new share issue costs are principally charged to income
as incurred.
(r) Income taxes
The asset and liability approach is used to recognise deferred tax
assets and liabilities for tax loss carryforwards and the expected
future tax consequences of temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
(s) Cash flow statements
In preparing the consolidated statements of cash flows, cashon hand, readily available deposits and short-term highly liquid
investments with maturities not exceeding three months at thetime of purchase are considered to be cash and cash equivalents.
(t) Net income per share
Basic net income per share is based on the weighted average
numbers of shares of common stock outstanding during eachyear, retroactively adjusted for stock splits.

70 Annual Report 2009

Diluted net income per share is calculated assuming
conversion of all dilutive convertible bonds at the beginning of
the year.
Diluted net income per share for the year ended 31st March
2007 was not presented because there were no dilutive shares.
(u) Dividends per share
In accordance with the Japanese Corporate Law, declarations ofdividends and appropriations of retained earnings are approvedat the general meeting of shareholders held after the end of
the fiscal year. Therefore, cash dividends per share shown in the
consolidated statements of income reflect the final dividends
approved after the end of the relevant fiscal year.
(v) Business combinations and business separation
Effective from the year ended 31st March 2007, the Company has
adopted the new accounting standards, “Accounting Standard
for Business Combinations” (Accounting Standard issued by theBusiness Accounting Council on 31st October 2003), “AccountingStandard for Business Separation” (Statement No. 7 issued by the
Accounting Standards Board of Japan on 27th December 2005)
and “Implementation Guidance for the Accounting Standard forBusiness Combinations and Business Separation” (the financial
implementation Guidance No. 10 issued by the AccountingStandards Board of Japan on 27th December 2005).
(w) Related parties
Effective from the year ended 31st March 2009, the Company
and its domestic consolidated subsidiaries have adopted the new
accounting standards, the Accounting Standard for disclosureof related parties (Statement No. 11 issued by the AccountingStandards Board of Japan on 17th October 2006 and the Financial
Accounting Standard Implementation Guidance No. 13 issued by
the Accounting Standards Board of Japan on 17th October 2006).
The new standards require additional reporting of the transactions
with consolidated subsidiaries of related parties.

Notes to the Consolidated Financial Statements

At a Glance

3. Securities
There was no balance of held-to-maturity debt securities as of 31st March 2008 or 2009.

Securities with book value exceeding acquisition cost:
Millions of yen
2009

Acquisition
cost
Book value Difference

Acquisition
cost
Book value Difference

Thousands of U.S. dollars
2009
Acquisition
cost
Book value Difference¥12,63945
47¥12,731¥11,486
64
47¥11,597¥12,7641
0¥12,765$117,203 $247,445 $130,242
649
664
15
482
485
3
$118,334 $248,594 $130,260

2008

2009

Acquisition
cost
Book value Difference

Acquisition
cost
Book value Difference

Thousands of U.S. dollars
2009
Acquisition
cost
Book value Difference¥48,84428
2¥48,874¥48,3712
2¥48,375$493,581 $262,731 $(230,850)
20
20
(0)
21
21
(0)
$493,622 $262,772 $(230,850)¥36,398
46
49¥36,493¥23,759
1
2¥23,762¥24,25065
47¥24,362

Message

Equity securities..........................................
Bonds ................................................................
Other .................................................................
Total ...................................................................

2008

Financial Highlights

The following tables summarise acquisition costs and book values (fair values) of available-for-sale securities with available fair market
values as of 31st March 2008 and 2009:

Securities with book value not exceeding acquisition cost:¥35,17828
2¥35,208¥(13,666)(0)(0)¥(13,666)¥25,748 ¥(22,623)
2
(0)
2
(0)
¥25,752 ¥(22,623)

The following table summarises the book values of securities with no available fair values as of 31st March 2008 and 2009:

Held-to-maturity debt securities:
Discount bank debentures...............................................................................................................................
Available-for-sale securities:
Non-listed equity securities .............................................................................................................................
Investments in limited liability investment partnerships and similar investments.......
Negotiable certificates of deposit................................................................................................................

¥

5¥ 4,118¥13,928¥18,885¥5¥ 4,827¥11,149¥18,248$51$ 49,256$113,764$186,205

Hankyu Hanshin Holdings

Financial Section

Sales of available-for-sale securities during the years ended 31st March 2007, 2008 and 2009 amounted to ¥21,101 million, ¥1,988 millionand ¥1,266 million ($12,923 thousand), respectively. Within other income (expenses) in the statements of income for the years ended 31st
March 2007, 2008 and 2009 were gains on sales of available-for-sale securities amounting to ¥2,659 million, ¥1,237 million and ¥738 million($7,527 thousand), respectively, which were included in the gain on sale of securities, and losses on sales of available-for-sale securities
amounting to ¥841 million, ¥1 million and ¥39 million ($400 thousand), respectively, which were included in other-net.

Management Organisation

Thousands of
U.S. dollars
2009

Millions of yen
2008
2009

Overview of Core Businesses

Equity securities..........................................
Bonds ................................................................
Other .................................................................
Total ...................................................................

Special Feature

Millions of yen

71

Available-for-sale securities with maturities and held-to-maturity debt securities at 31st March 2008 and 2009 were to mature as follows:
Millions of yen

Due within
one year

Bonds
Government bonds ..........................
Other ..........................................................
Total ............................................................

¥10
5
¥15

Due within
one year

Bonds
Government bonds ..........................
Other ..........................................................
Total ............................................................

$102
51
$153

2008
Due after one Due after five
year through years throughfive years
ten years

¥38
—
¥38

¥26
—
¥26

Thousands of U.S. dollars
2009
Due after one Due after five
year through years throughfive years
ten years

$123
—
$123

$460
—
$460

Due after
ten years

Due within
one year

¥—
—
¥—

¥10
5
¥15

2009
Due after one Due after five
year through years throughfive years
ten years

¥12
—
¥12

¥45
—
¥45

Due after
ten years¥——¥—

Due after
ten years$——$—

4. Inventories
Inventories at 31st March 2008 and 2009 consisted of the following:
Millions of yen
2008
2009

Real estate for sale ........................................................................................................................................................
Finished products and merchandise ................................................................................................................
Materials, work in progress and supplies........................................................................................................
Total .......................................................................................................................................................................................

72 Annual Report 2009

¥127,618
7,314
11,157¥146,089¥134,831
7,105
10,587¥152,523

Thousands of
U.S. dollars
2009$1,375,826
72,500108,029$1,556,355

Notes to the Consolidated Financial Statements

Short-term borrowings consisted primarily of notes maturing within one year. The weighted average interest rate for short-term bankloans was 1.18% at 31st March 2009.

Millions of yen
2008
2009

$ 1,078,738

807,017
20,00020,00010,00020,00010,00010,00015,00010,000—15,00010,0005,200—
1,068,859
139,102¥ 929,757

817,835—
20,00010,00020,00010,00010,00015,00010,00020,00015,00010,000—1,997
1,065,548
77,283¥ 988,265

8,345,253—
204,082
102,041
204,082
102,041
102,041
153,061
102,041
204,082
153,061
102,041—
20,372
10,872,936
788,598$10,084,338

The following table shows the book value of collateral pledged against long-term debt, including the portions due within one year, in theamount of ¥116,642 million and ¥105,716 million ($1,078,738 thousand) as of 31st March 2008 and 2009, respectively.

Current assets ..................................................................................................................................................................
Investments and other assets ................................................................................................................................
Property and equipment ..........................................................................................................................................
Intangible assets ............................................................................................................................................................

¥

29
20,257555,665
1,433¥577,384¥

5
18,303
551,570
1,433¥571,311

Thousands of
U.S. dollars
2009

$

53
186,7675,628,267
14,618$5,829,705

Financial Section

Millions of yen
2008
2009

Management Organisation*1 The floating rate was then the 20-year swap rate minus the 2-year swap rate plus 0.95% from 1st October 2001. (If the result of this calculation was below 0,
the rate would be 0%)*2 The floating rate was then the 20-year swap rate minus the 2-year swap rate plus 0.15% from 29th June 2004. (If the result of this calculation was below 0,
the rate would be 0%)

Overview of Core Businesses¥ 105,716

Special Feature

Less current portion .............................................................................................................................................

¥ 116,642

Message

Secured:Banks, 0%–8.5%, maturing through 2029 ...............................................................................................
Unsecured:
Banks, insurance companies and others, 0%–6.8%, maturing through 2022 ..................
2.23% bonds, due July 2008 ............................................................................................................................
2.23% bonds, due August 2009 ....................................................................................................................
2.46% bonds, due September 2010 ...........................................................................................................
1.85% bonds, due July 2012 ............................................................................................................................
1.39% bonds, due November 2011 ............................................................................................................
1.66% bonds, due November 2013 ............................................................................................................
Floating rate bonds, due September 2010*1 ........................................................................................
Floating rate bonds, due June 2011*2 .......................................................................................................
1.46% bonds, due July 2011 ............................................................................................................................
3.525% bonds, due June 2012 .......................................................................................................................
2.22% bonds, due June 2014 ..........................................................................................................................
3% bonds issued by consolidated subsidiaries, due May 2008 to November 2008 ....
Capital lease obligations ....................................................................................................................................

Thousands of
U.S. dollars
2009

Financial Highlights

Long-term debt at 31st March 2008 and 2009 consisted of the following:

At a Glance

5. Short-term borrowings and long-term debt

As is customary in Japan, security may have to be given if requested by a lending bank, and such banks have the right to offset cash
deposited against any debt or obligation that becomes due and, in the case of default and certain other specified events, against all debts
payable to the bank. Certain long-term debt agreements provide, among other things, that the Companies are to submit to the relevant
lender, upon its request for approval, their proposed appropriations of earnings (including dividends) before such appropriations can besubmitted to shareholders. The Companies have never received such requests.

Hankyu Hanshin Holdings

73

The annual maturities of long-term debt as at 31st March 2009 were as follows:Year ending 31st March2011 ....................................................................................................................................................................................................................
2012 ....................................................................................................................................................................................................................
2013 ....................................................................................................................................................................................................................
2014 ....................................................................................................................................................................................................................
2015 and thereafter...................................................................................................................................................................................

Millions of yen

Thousands of
U.S. dollars¥128,624
163,172
167,272
192,865
336,332¥988,265$ 1,312,495
1,665,021
1,706,859
1,968,005
3,431,958$10,084,338

6. Employees’ severance and retirement benefits
Employees’ severance and retirement benefits included in the liability section of the consolidated balance sheets as of 31st March 2008
and 2009 consisted of the following:
Millions of yen
2008
2009

Projected benefit obligation ..................................................................................................................................
Prepaid pension cost...................................................................................................................................................
Unrecognised prior service costs ........................................................................................................................
Less fair value of pension assets...........................................................................................................................
Less unrecognised actuarial differences .........................................................................................................
Employees’ severance and retirement benefits .........................................................................................

¥136,967
1,967
417(75,395)(4,803)¥ 59,153¥130,786
1,965
(168)
(61,581)(13,935)¥ 57,067

Thousands of
U.S. dollars
2009$1,334,556
20,056(1,716)(628,382)(142,195)$ 582,319

Included in the consolidated statements of income for the years ended 31st March 2007, 2008 and 2009 were severance and retirement
benefit expenses that comprised the following:

Service costs — benefits earned during the year .................................................
Interest cost on projected benefit obligation .........................................................
Expected return on plan assets ........................................................................................
Amortisation of prior service costs .................................................................................
Amortisation of actuarial differences ............................................................................
Severance and retirement benefit expenses ...........................................................

2007

Millions of yen
2008

2009

Thousands of
U.S. dollars
2009¥6,205
2,988(1,622)(663)
530¥7,438¥6,912
3,033(1,685)(628)
463¥8,095¥6,9002,809(1,445)(599)
1,269¥8,934$70,410
28,662(14,742)(6,113)
12,949$91,166

The discount rate and the rate of expected return on plan assets used by the Companies are principally both 2.5%.
The estimated amount of all retirement benefits to be paid at future retirement dates is allocated equally to each service year using
the estimated number of total service years.

7. Deposits from tenants
The certain consolidated subsidiaries have received guarantee and lease deposits from tenants for leased property in accordance with thelease agreements. These guarantee deposits are refundable to the tenants, generally by 10 equal annual installments commencing in the
11th year, and lease deposits are refundable when the contracts are cancelled.

8. Other noncurrent liabilities
Other noncurrent liabilities at 31st March 2008 and 2009 consisted of the following:
Millions of yen
2008
2009

Contributions received from national and municipal governments andother corporations for long-term railway construction work in progress...............................
Deferred tax liabilities .................................................................................................................................................
Other .....................................................................................................................................................................................

74 Annual Report 2009

¥ 7,733
140,5568,307¥156,596¥ 8,513
138,765
7,552¥154,830

Thousands of
U.S. dollars
2009$

86,873
1,415,967
77,066$1,579,906

Notes to the Consolidated Financial Statements

At 31st March 2008 and 2009, the Companies were contingently liable for loan guarantees in the amount of ¥13,711 million and ¥22,788
million ($232,536 thousand), respectively.

2008
RegionOsaka

Breakdown by use
2008
RegionUse

Type of assets

Millions ofyen

Goodwill and
Land

Hyogo

Hotel, etc.
Totalling 4

Land, etc.

810

Tokyo, etc.

Retailing stores, etc.
Totalling 3

Buildings, etc.

41

Tokyo, etc.

¥8,395Use

Type of assets

Osaka

Constructionin progress, etc.

Kochi

Hotel
Totalling 1

Land andbuildings, etc.

Kyoto, etc.

Retailing stores, etc.
Totalling 6

Land andbuildings, etc.

Millions ofyen

Thousands of
U.S. dollars¥2,091$21,335

1,200
157

450

Buildings and structures

172

Machinery and equipment

188

Buildings and structures

36

Construction in progress

0

Other

3

Intangible assets

2

Region2009

Idle assets, etc.
Totalling 3

141

Land

2009

Osaka

Region¥8,254Land

12,245
1,602

Kochi

Kyoto, etc.

Type of assets

Millions of yen

Buildings and structures¥

Construction in progress

2,075

15

Thousands of
U.S. dollars$

146

Financial Section

Osaka

Goodwill, etc.
in retailing businessTotalling 2

Millions of yen

Management Organisation

Hyogo

Type of assets
Goodwill

Overview of Core Businesses

Breakdown by region

Details of impairment loss are as follows:
In the loss for 2008, a ¥450 million loss from the transfer of
fixed assets and certain businesses in the Hotels segment was
included in Other (net).

Special Feature

11. Impairment loss on fixed assets

Message

Legal earnings reserve is included in retained earnings in theaccompanying consolidated balance sheets.
By resolution of the general meeting of shareholders, statutory
reserves may be appropriated to eliminate accumulated deficits
or increase common stock. Statutory reserves, however, are notallowed to be used as a source of dividend payments.
The maximum amount that the Company may appropriate fordividend payments is calculated based on the nonconsolidated
financial statements of the Company in accordance with Japaneselaws and regulations.
At the general meeting of shareholders held on 17th June
2009, the shareholders approved cash dividends amounting to¥6,335 million ($64,648 thousand). These appropriations have notbeen accrued in the consolidated financial statements as of 31st
March 2009. Such appropriations are recognised in the period inwhich they are approved by the shareholders.

Financial Highlights

Japanese Corporate Law (“the Law”) became effective on 1st May
2006, replacing in the Japanese Commercial Code (“the Code”). The
Law is generally applicable to events and transactions occurring
after 30th April 2006 and for fiscal years ending after that date.
Under the regulations of the Corporate Law, the entire
amount paid for new shares is required to be designated ascommon stock. However, a company may, by a resolution of theboard of directors, designate an amount not exceeding onehalf ofthe price of the new shares as statutory reserve (additional paid-in
capital), which is included in capital surplus.
In the event that dividend distribution of retained earnings ismade, the smaller of an amount equal to 10% of the dividend or
the excess, if any, of 25% of common stock over the total statutory
reserves (the total of statutory reserves included in statutory
reserve and legal earnings) must be set aside as statutory reserve.

10. Net assets

At a Glance

9. Contingent liabilities

21,176

Other

1

13

Land

645

6,582

Buildings and structures

555

5,663

Land

69

706

Buildings and structures

68

697

Machinery and equipment

2

20

Other

18

178

Intangible assets

01

Hankyu Hanshin Holdings7512. Management integration and share exchange
2008
For the purpose of obtaining a competitive advantage in theretailing business in Umeda market, the central area in Kansai
district, improving customer satisfaction and maximising
shareholder value, Hankyu Department Stores Inc., one of the
major companies of the Hankyu Hanshin Toho Group, agreed tointegrate the management of Hanshin Department Store, Ltd.,
one of the consolidated subsidiaries of the Company through theshare exchange on 1st October 2007. By the integration, Hankyu
Department Stores Inc. changed the name of the company as
H2O Retailing Corporation and is now an affiliate applying equity
method.
(a) Outline of the accounting method was as follows:
The difference between the increase in the equity of the Company
relating to Hankyu Department Stores Inc. and the decrease

13. Derivative financial instruments and hedging
transactions
The Group includes companies whose line of business requires ahigh degree of reliance on external debt such as bank borrowingsand corporate bonds. For these companies, managing the riskof changing interest rates is necessary for stable operations. This
goal is being achieved by using derivative transactions — undera certain set of conditions — as a means of cost efficient interest
risk hedging. Derivative transactions employed comprise interest
rate swaps and interest swaptions, which change floating andfixed interest rates, covering outstanding bonds, borrowings, anddeposits.
The Group also includes companies operating in the travel,forwarding and other businesses whose financial statements aredenominated in foreign currencies. For these companies, protection from the risks of currency fluctuations affecting the value of
foreign currency denominated assets and liabilities is necessary forstable operations. The use of foreign exchange forward contracts
as well as currency options — within certain conditions —provides an effective and cost efficient way of protecting against
such risks.
Additionally, the Group engages in currency swap transactions to protect the principal of foreign currency denominateddeposits against the risk of fluctuations in exchange rates.

76 Annual Report 2009

in the equity of the Company relating to Hanshin Department
Store, Ltd. was treated separately as gain on change in equity andconsolidation goodwill. In the consolidated statement of income
for the year ended 31st March 2008, gain on change in equity
aggregating ¥9,388 million was presented in other income andimpairment loss of unamortised consolidation goodwill excluding
the retailing business of Hanshin Department Store, Ltd. and its
subsidiaries by aggregating ¥8,254 million was presented in otherexpenses containing loss on impairment of fixed assets of ¥8,796
million.
(b)
Revenue from operations and operating income included in the
consolidated statement of income for the year ended 31st March
2008 of Hanshin Department Store, Ltd. and its subsidiaries were¥56,843 million and ¥1,184 million, respectively.

Group companies engaging in derivative transactions are
acting according to established transaction standards, which
stipulate separate spheres of authority and limit transaction
amounts. The execution and management of derivativetransactions is carried out by each group company’s accounting
department, subject to the approval of an authorised individual.
The Group has established internal control systems, ensuringthat contracts are concluded and settled in compliance with therelevant regulations.
The following summarises hedging derivative financial instruments used by the Group and items hedged:
Hedging instruments:
Foreign exchange contracts
Currency swap contracts
Currency option contracts
Interest rate swap contracts
Interest swaption contracts

Hedged items:
Foreign currency trade receivables
and trade payables and future
foreign currency transactions
Interest on bonds and loans payable

The Group evaluates hedge effectiveness semiannually bycomparing the cumulative changes in cash flows or the changes
in fair value of hedged items and the corresponding changes in
the hedging derivative instruments, except for in cases of obvious
hedge effectiveness.

Notes to the Consolidated Financial Statements

Millions of yen
2008
2009

¥146
135
¥ (11)

Thousands of
U.S. dollars
2009

¥461
369
¥ (92)$4,7103,769$ (941)

2009

Thousands of
U.S. dollars
2009

Message

14. Lease transactions
Information for non-capitalised finance leases at 31st March 2007, 2008 and 2009 was as follows:

Original lease obligations for machinery and equipment
and other (including finance charges) ......................................................................

¥20,790¥17,889¥11,195$114,231

Minimum lease payments due within one year ....................................................
Minimum lease payments due after one year ........................................................
Total ............................................................................................................................................

¥ 3,186
5,594¥ 8,780¥ 2,496
4,690¥ 7,186¥ 1,432
3,203¥ 4,635$ 14,612
32,687$ 47,299

The Group as the lessor

There was no balance of original lease obligations as lessor side as of 31st March 2007, 2008 or 2009.

Information for operating leases at 31st March 2007, 2008 and 2009 was as follows:2009

Thousands of
U.S. dollars
2009¥11,40242,284¥53,686¥ 8,599
28,679¥37,278¥ 7,629
19,565¥27,194$ 77,844
199,641$277,485

The Group as lessor

2007

Millions of yen
2008

2009

Thousands of
U.S. dollars
2009

Minimum lease payments due within one year ....................................................
Minimum lease payments due after one year ........................................................
Total ............................................................................................................................................

¥The Group as lessee

Minimum lease payments due within one year ....................................................
Minimum lease payments due after one year ........................................................
Total ............................................................................................................................................

82
1,224
¥1,306¥82
1,142¥1,224¥82
1,060¥1,142Financial Section

2007

Millions of yen
2008Management Organisation

Both leasing receipts and depreciation for the year ended 31st March 2007 amounted to ¥0 million. The figures for the year ended 31st
March 2008 and 2009 were nil, respectively.

Overview of Core Businesses

Lease payments under such leases for the years ended 31st March 2007, 2008 and 2009 were ¥3,848 million, ¥3,279 million and ¥2,386
million ($24,352 thousand), respectively.

Special Feature

2007

Millions of yen
2008

The Group as lessee

Financial Highlights

Forward exchange contracts:
Contract principal amount due within one year .......................................................................................
Market value .....................................................................................................................................................................
Unrealised gains .............................................................................................................................................................

At a Glance

The following table summarises market value information as of 31st March 2008 and 2009 of derivative transactions for which hedge
accounting had not been applied:$833
10,824$11,657

Hankyu Hanshin Holdings7715. Segment information
The Group’s businesses are divided into the Urban Transportation
Segment, the Real Estate Segment, the Entertainment andCommunications Segment, the Travel and International
Transportation Segment, the Hotels Segment, the Retailing
Segment and the Other Segment.
The seven businesses segments for the three years ended 31st
March 2009 comprised the following:
The Urban Transportation Segment included railways, buses
and taxis, and the manufacture of rolling stock .
The Real Estate Segment included the rental of real estate, purchase and sale of real estate and property management services.
The Entertainment and Communications Segment consistedof sports-related businesses, the Takarazuka Revue Theater,
advertising, information services and publishing businesses.

The Travel and International Transportation Segment included
travel and international air cargo services.
The Hotels Segment included hotel ownership and management businesses.
The Retailing Segment included retail sales, food and drink
sales, and department stores (up to September 2007).
The Other Segment included construction, domestic logistics
services, consumer finance, computer-related services andoutsourcing services for personnel and accounting services.
* In line with the reorganisation of the Travel and International
Transportation Segment in April 2008, domestic logistics services havebeen transferred from the Travel and International Transportation
Segment to the Other Segment.

Geographic segment information is not disclosed as overseas
operations were immaterial.

By business category:Millions of yen
Urban
Transportation

2007
Net sales:
Customers .............................. ¥179,429
Intersegment ........................
2,426
181,855
Costs and expenses ................. 148,661
Operating income (loss) ....... ¥ 33,194

Real
Estate¥151,839
24,498176,337
140,061¥ 36,276

Travel &Entertainment & International
Communications Transportation

HotelsRetailing

Other

Eliminations Consolidated¥69,873
5,860
75,73370,495¥ 5,238¥65,336
94
65,43064,093¥ 1,337¥153,505
2,397
155,902151,237¥ 4,665¥35,379
8,700
44,07944,096¥ (17)¥—(44,216)(44,216)(46,277)¥ 2,061¥88,016
241
88,25784,008¥ 4,249¥743,377—
743,377
656,374¥ 87,003

Millions of yen
Urban
Transportation

2008
Net sales:
Customers .............................. ¥192,462
Intersegment ........................
2,441
194,903
Costs and expenses ................. 161,748
Operating income .................... ¥ 33,155

Real
Estate¥153,332
26,358
179,690
140,173¥ 39,517

Travel &Entertainment & International
Communications Transportation

HotelsRetailing

Other

Eliminations Consolidated¥86,906
8,422
95,32886,780¥ 8,548¥68,943296
69,23967,889¥ 1,350¥118,790
1,962
120,752
118,034¥ 2,718¥37,732
7,087
44,81943,919¥ 900¥—(46,867)(46,867)(48,197)¥ 1,330

HotelsRetailing

Other

Eliminations Consolidated¥66,042
416
66,458
66,116¥ 342¥66,291
1,290
67,581
66,884¥ 697¥54,9215,614
60,53559,967¥ 568¥— ¥683,715(44,156)—(44,156) 683,715(45,231) 605,891¥ 1,075 ¥ 77,824¥94,136
301
94,437
91,230¥ 3,207¥752,301—
752,301
661,576¥ 90,725

Millions of yen
Urban
Transportation

Real
EstateTravel &Entertainment & International
Communications Transportation

2009
Net sales:
Customers .............................. ¥190,775 ¥149,756 ¥ 90,334
Intersegment ........................
4,469
21,930
10,227
195,244 171,686 100,561
Costs and expenses ................. 162,754 138,870
92,177
Operating income .................... ¥ 32,490 ¥ 32,816 ¥ 8,384

78 Annual Report 2009

¥65,596210
65,80664,354¥ 1,452

Notes to the Consolidated Financial Statements

Real
Estate$673,897
4,245
678,142
674,657$ 3,485$676,439
13,167
689,606
682,495$ 7,111

Other

Eliminations Consolidated$560,421
57,277
617,698
611,899$ 5,799$— $6,976,686(450,567)—(450,567) 6,976,686(461,539) 6,182,564$ 10,972 $ 794,122

Urban
Transportation

Real
Estate¥116,942
1,568
—
1,779

HotelsRetailing

Other¥81,355
2,362
25
5,381

¥91,613
1,941
92
2,401

¥180,308
646
94
307

¥18,796 ¥2,366,694(377)
43,889192
869(1,454)51,853Special Feature

2007
Assets ................................................ ¥738,804 ¥1,008,765 ¥130,111
Depreciation and amortisation ...
22,07011,876
3,803
Impairment loss on fixed assets ...
10456—Capital expenditures ...............
28,5399,900
5,000

Corporate
andEliminations Consolidated

Message

Millions of yen
Travel &Entertainment & International
Communications Transportation

Financial Highlights

2009
Net sales:
Customers .............................. $1,946,679 $1,528,126 $ 921,778 $669,346
Intersegment ........................
45,609223,769
104,357
2,143
1,992,288 1,751,895 1,026,135 671,489
Costs and expenses ................. 1,660,755 1,417,042
940,579 656,676
Operating income .................... $ 331,533 $ 334,853 $ 85,556 $ 14,813

At a Glance

Urban
Transportation

Thousands of U.S. dollars
Travel &Entertainment & International
Communications Transportation
HotelsRetailing

Millions of yen
RealEstate2008
Assets ................................................ ¥760,392 ¥1,015,780 ¥133,716
Depreciation and amortisation ...
26,802
13,2904,869
Impairment loss on fixed assets ...
2
141
359
Capital expenditures ...............
22,58082,984
9,699¥128,750
1,773
—
1,852

HotelsRetailing

Other

Corporate
andEliminations Consolidated¥82,8103,129—
14,844¥22,501
1,593
8,294
1,687

¥232,469
660—
758¥(27,942) ¥2,348,476(538)
51,578
—
8,796
(910)
133,494

Urban
Transportation¥787,774 ¥1,041,786 ¥149,247
28,34014,979
5,549
5
2,087
—
29,81457,98015,060Urban
Transportation

2009
Assets ................................................ $8,038,506
Depreciation and amortisation ...
289,186
Impairment loss on fixed assets ...
51
Capital expenditures ...............
304,223

Real
Estate¥93,622
1,212
57
1,522

HotelsRetailing

Other

Corporate
andEliminations Consolidated¥79,479
3,109
1,200
1,964

¥24,278
1,019
99
2,290

¥185,456
1,130
—
1,005

¥(54,310) ¥2,307,332(539)
54,799
—
3,448
(763)
108,872

Other

Corporate
andEliminations Consolidated$1,892,405
11,532—
10,258$(554,178) $23,544,205(5,508)559,169—
35,182(7,783)
1,110,938

Thousands of U.S. dollars
Travel &Entertainment & International
Communications Transportation
HotelsRetailing$10,630,474 $1,522,929
152,843
56,624
21,297—
591,629
153,675$955,328
12,370582
15,530$811,007
31,727
12,24520,041$247,734
10,395
1,007
23,365

Hankyu Hanshin Holdings

Financial Section

2009
Assets ................................................
Depreciation and amortisation ...
Impairment loss on fixed assets ...
Capital expenditures ...............

Real
EstateManagement Organisation

Millions of yen
Travel &Entertainment & International
Communications Transportation

Overview of Core Businesses

Urban
Transportation

Travel &Entertainment & International
Communications Transportation

7916. Income taxes
The Companies are subject to a number of income taxes, which, in the aggregate, indicate an aggregate statutory income rate in Japan ofapproximately 40.7%, 40.6% and 40.6% for the years ended 31st March 2007, 2008 and 2009, respectively.
The following table summarises the significant differences between the aggregate statutory income tax rate and the Companies’
effective income tax rate for financial statement purposes for the years ended 31st March 2008 and 2009.
The difference between the rates for the year ended 31st March 2007 was immaterial.
Statutory tax rate ............................................................................................................................................................................................
Valuation allowance ..............................................................................................................................................................................
Elimination of dividends from consolidated subsidiaries ..............................................................................................
Loss on impairment of fixed assets ..............................................................................................................................................
Nondeductible expenses ...................................................................................................................................................................
Amortisation of goodwill ...................................................................................................................................................................
Reimbursement of capital surplus from consolidated subsidiaries.........................................................................
Per capita amount of citizen tax ....................................................................................................................................................
Nondeductible income .......................................................................................................................................................................
Effect of Station Finance Inc.’s secession from the Group ...........................................................................................
Gain on change in equity from management integration ..........................................................................................
Equity in income of affiliates ............................................................................................................................................................
Other ...............................................................................................................................................................................................................
Effective income tax rate ...........................................................................................................................................................................

2008
40.6%
40.6
151.8
27.8
12.8
8.1
—
(74.0)—(52.2)—(15.5)
(5.8)
1.5
95.1%

2009
40.6%
40.6
5.2
17.8
—
2.8
2.3
—
1.4
(18.1)(12.7)
—
(1.1)
(0.4)
37.8%

Significant components of the Companies’ deferred income tax assets as of 31st March 2008 and 2009 were as follows:
Millions of yen
2008
2009

Deferred tax assets:
Revaluation of assets on consolidation ....................................................................................................
Loss on revaluation of real estate for sale ...............................................................................................
Tax loss carryforwards ........................................................................................................................................
Retirement benefits ..............................................................................................................................................
Losses on revaluation of investment securities...................................................................................
Special reserve for investment losses ........................................................................................................
Unrealised profit from assets ..........................................................................................................................
Loss on valuation of properties of business reorganisation ........................................................
Loss on impairment of fixed assets .............................................................................................................
Allowance for doubtful receivables............................................................................................................
Accrued expenses..................................................................................................................................................
Enterprise taxes .......................................................................................................................................................
Depreciation and amortisation .....................................................................................................................
Retirement benefits for directors and corporate auditors............................................................
Other ..............................................................................................................................................................................
Subtotal of deferred tax assets ......................................................................................................................
Valuation allowance .............................................................................................................................................
Less amounts offset against deferred tax liabilities ..........................................................................
Net 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 of properties of business reorganisation .......................................................
Other ..............................................................................................................................................................................
Subtotal of deferred tax liabilities ................................................................................................................
Less amounts offset against deferred tax assets ................................................................................
Total deferred tax liabilities ..............................................................................................................................
Net income tax assets .........................................................................................................................................

80 Annual Report 2009

Thousands of
U.S. dollars
2009¥ 50,204
47,97333,96822,872
8,034
7,548
6,920
5,103
3,736
3,006
2,133
1,594
—
290
13,726207,107(57,152)(128,566)
21,389¥ 50,197
49,191
25,762
22,397
7,624
7,699
7,007
5,035
4,263
3,153
2,068
620
307
289
11,174
196,786(53,269)(122,160)
21,357$ 512,209
501,947
262,882
228,539
77,79878,566
71,504
51,37543,49732,174
21,103
6,330
3,131
2,952
114,0212,008,028(543,564)(1,246,534)
217,930(131,956)(104,648)(26,672)(3,156)(2,695)(269,127)
128,566(140,561)¥(119,172)(132,199)(103,422)(19,069)(3,066)(3,173)(260,929)
122,160(138,769)¥(117,412)(1,348,968)(1,055,325)(194,580)(31,289)(32,379)(2,662,541)
1,246,534(1,416,007)$(1,198,077)

Notes to the Consolidated Financial Statements

At a Glance

Net deferred tax assets as of 31st March 2008 and 2009 were included in the consolidated balance sheets as follows:
Thousands of
U.S. dollars
2009

Millions of yen
2008
2009

¥ 16,182(5)
5,207(140,556)¥(119,172)¥ 16,064(4)
5,293(138,765)¥(117,412)$ 163,916(39)
54,014(1,415,968)$(1,198,077)

Message

17. Loan commitments
A consolidated subsidiary had extended loan commitments at 31st March 2008 and 2009 as follows:
Thousands of
U.S. dollars
2009

Millions of yen
2008
2009

¥76,067
45,581¥30,486

¥—
—
¥—

$—
—
$—

18. Consolidated statements of cash flow

Thousands of
U.S. dollars
2009

Millions of yen
2008
2009

Cash and cash equivalents in the consolidated balance sheets .....................................................
Deposits with maturities over 3 months ........................................................................................................
Cash and cash equivalents in cash flow statements ...............................................................................

¥33,073(1,906)¥31,167¥31,974(1,284)¥30,690$326,263(13,096)$313,167

There were no transactions required to be reported for the year ended 31st March 2008. A summary of related party transactions for theended 31st March 2009 is as follows:

Financial Section

19. Related party transactions

Management Organisation

The year-end balances of cash and cash equivalents presented on the consolidated statements of cash flow and on the consolidatedbalance sheets at 31st March 2008 and 2009 were reconciled as follows:

Overview of Core Businesses

The above loan commitments may not be exercised in full as the consolidated subsidiary extends loans within limits set in light of the
proposed use of funds and the borrower’s financial position. The subsidiary was excluded from the scope of consolidation due to a sale ofequity shares on 27th February 2009.

Special Feature

Total loan commitments ..........................................................................................................................................
Loans extended ..............................................................................................................................................................
Remaining commitments ........................................................................................................................................

Financial Highlights

Current assets ..................................................................................................................................................................
Current liabilities ............................................................................................................................................................
Long-term assets ...........................................................................................................................................................
Long-term liabilities .....................................................................................................................................................
Net deferred tax assets...............................................................................................................................................

Transactions of related party with a consolidated subsidiary
2009
Contents of relation

Name of thecompany

Directors and related
Tateishi Sangyo
family owns majority
Co., Ltd.
sharesCapitalContents ofbusiness

100

Real estate

Related transactions

Transaction
and volume

Rent income
Lease of real estate
Mutual engagement of director Rent expense
Lease deposit

Millions of yen

Thousands of
U.S. dollars

¥ 17
273
31

$ 172
2,783
316

Hankyu Hanshin Holdings8120. Special purpose entities
Some consolidated subsidiaries invest in the following two kinds of special purpose entities. These investments have no voting rights anddispatch no directors or employees. Loss of the investment is limited to the amount invested.
Purpose of establishment(A) Diversity and stability of financing

Investment in silent partnerships (Note 1) ....................................................................................................
Total assets of special purpose entity ...............................................................................................................
Total liabilities of special purpose entity.........................................................................................................
Real estate purchased ................................................................................................................................................
Receivable amount of dividends (Note 2) .....................................................................................................
Distributed income (Note 3)...................................................................................................................................
Lease payments (Note 3) ..........................................................................................................................................
Management fees (Note 4) .....................................................................................................................................

Millions of yen
2008
2009

¥ 4,042
89,31578,83239,005
5,587
20,923
8,774
283¥ 3,392
72,64563,465
11,300
5,718
11,275
5,376
255

Thousands of
U.S. dollars
2009$ 34,612
741,279
647,605
115,306
58,342
115,052
54,8602,599

Notes:(1) Investments in silent partnerships are recorded as investment in other securities in the consolidated balance sheets.
(2) Included in receivable amount of dividends for the years ended 31st March 2008 and 2009 were suspense payments totalling ¥5,526 million and ¥5,656
million ($57,717 thousand), respectively.
(3) Distributed income for the years ended 31st March 2008 and 2009 included distributed liquidation in the amount of ¥16,908 million and ¥8,531 million($87,052 thousand), respectively, and the figures are presented in other income in the consolidated statements of income. Residual amounts of the
distributed income is presented in costs of revenues from operations after offsetting lease payments.
(4) Management fees are presented in revenue from operations in the consolidated statements of income.

Purpose of establishment(B) Development and increase value of assets

Investment in silent partnerships (Notes 1 and 2) ....................................................................................
Total assets of special purpose entity ...............................................................................................................
Total liabilities of special purpose entity.........................................................................................................
Receivable amount of dividends (Note 4) .....................................................................................................
Distributed income (Note 3)...................................................................................................................................
Distributed loss (Note 5) ...........................................................................................................................................
Management fees (Note 6) .....................................................................................................................................

Millions of yen
2008
2009

¥ 9,180
82,56556,902
528
3,846
1,016
484

¥ 7,741
81,31654,564
534
1,192
18
1,234

Thousands of
U.S. dollars
2009$ 78,993
829,758
556,780
5,446
12,160179
12,587

Notes:(1) Accrued future loss from valuation of investments in the aggregate amount of ¥2,283 million ($23,292 thousand) for the year ended 31st March 2009
was recorded.
(2) Investments in silent partnerships are recorded as investment in other securities in the consolidated balance sheets.
(3) Distributed income was recorded in revenue from operations.
(4) Dividend receivable was reserved for payment.
(5) Distributed loss was recorded in costs of revenues from operations.
(6) Management fees are presented in revenue from operations in the consolidated statements of income.

21. Subsequent events
Appropriation of retained earnings
An appropriation of retained earnings for the year ended 31st March 2009 was duly approved at the general meeting of shareholders heldon 17th June 2009 as follows:

Cash dividends (¥5.00 per share) ......................................................................................................................................................

82 Annual Report 2009

Millions of yen

Thousands of
U.S. dollars¥6,335$64,648

At a Glance

Financial Highlights

MessageSpecial Feature

Overview of Core Businesses

Management Organisation

Financial Section

83

Hankyu Hanshin Holdings

Group at a Glance (As of 31st March 2009)

Urban Transportation ■ ■ ■Travel and International Transportation ■ ■ ■Business subsegments forfinancial reporting purposes

Business subsegments forfinancial reporting purposes

Name of the consolidated subsidiary

Hanshin Electric Railway Co., Ltd.
Railway Operations

Nosé Electric Railway Co., Ltd.

Travel Agency

Hanshin Electric Railway Co., Ltd.
Hankyu Bus Co., Ltd.
Bus Operations

International
Transportation

Hankyu Hanshin Express Holdings Corporation
Hankyu Express International Co., Ltd.
Hanshin Air Cargo Co., Ltd.

Hanshin Bus Co., Ltd.
Hankyu Denen Bus Co., Ltd.
Hankyu Taxi Inc.
Hanshin Taxi Co., Ltd.

Hotels ■ ■ ■Business subsegments forfinancial reporting purposes

Dai-ichi Hotel Kyushu Co., Ltd.

Railway Technology Co., Ltd.
Globaltech Co., Ltd.

Name of the consolidated subsidiary

Hankyu Hanshin Hotels Co., Ltd.

Hankyu Railway Service Co., Ltd.

Other

Hanshin Travel Service Co., Ltd.

Hankyu Kanko Bus Co., Ltd.
Osaka Airport Transport Co., Ltd.

Taxi Operations

Hankyu Travel International Co., Ltd.
Hankyu Travel Support Co., Ltd.

Kita-Osaka Kyuko Railway Co., Ltd.
Hokushin Kyuko Railway Co., Ltd.

Name of the consolidated subsidiary

Hankyu Hanshin Express Holdings Corporation

Hankyu Corporation

Hotel Management

Hankyu Hanshin Electric System

Arima View Hotel Co., Ltd.
Amanohashidate Hotel Co., Ltd.
Hotel New Hankyu Kochi Co., Ltd.

Hankyu M-TECH Corporation

Hanshin Hotel Systems Co., Ltd.

Nippon Rent-A-Car Hankyu Inc.
Alna Sharyo Co., Ltd.

Real Estate ■ ■ ■Business subsegments forfinancial reporting purposes

Retailing ■ ■ ■Business subsegments forfinancial reporting purposes

Name of the consolidated subsidiary

Hankyu Corporation

Hankyu Corporation
Rental ofReal Estate

Hanshin Electric Railway Co., Ltd.
Hankyu Realty Co., Ltd.

Purchase and Sale ofReal Estate

Hankyu Corporation

Hankyu Community Service Co., Ltd.
Hankyu REIT Asset Management, Inc.

Entertainment and Communications ■ ■ ■Business subsegments forfinancial reporting purposes

Name of the consolidated subsidiary

Hanshin Electric Railway Co., Ltd.
SportsHanshin Tigers Baseball Club, Ltd.
Wellness Hanshin Inc.
Hankyu Corporation

Revue

Takarazuka Creative Arts Co., Ltd.
Takarazuka Stage Co., Ltd.

Theatre Operations
Advertising Agency

Umeda Arts Theater Co., Ltd.
Hankyu Advertising Agency Inc.
Hanshin Contents Link Corporation

Information
Technology Service

Itec Hankyu Hanshin Co., Ltd.

Publishing

Hankyu Communications Co., Ltd.

Cable Television

Bay Communications Inc.

84 Annual Report 2009

Doubleday Hankyu Co., Ltd.
Hanshin Station Net Co., Ltd.
Restaurants, etc.

Creative Hankyu Co., Ltd.

Hankyu Realty Co., Ltd.

High Security System Co., Ltd.
REIT Operations

Iina Dining Co., Ltd.

Hanshin Electric Railway Co., Ltd.
Hankyu Hanshin Building Management Co., Ltd.

Property Management

Hankyu Retails Co., Ltd.
Sales of Goods

Osaka Diamond Chikagai Co., Ltd.
Hanshin Real Estate Co., Ltd.

Name of the consolidated subsidiary

Other ■ ■ ■Business subsegments forfinancial reporting purposes

Construction

Name of the consolidated subsidiary

Hanshin Construction Co., Ltd.
Chuo-Densetsu Co., Ltd.

Domestic Logistics

Sanyo Jidosha Unso Co., Ltd.

Group FinanceHankyu Hanshin Financial Support Co., Ltd.

Outsourcing Services
for Personnel andAccounting Services

Hankyu Hanshin Business Asssociate Co., Ltd.

Investor Information (As of 31st March 2009)

Hankyu Hanshin Holdings, Inc.
Head Office:1-16-1, Shibata, Kita-ku, Osaka 530-0012, Japan
Phone: +81-6-6373-5001(Corporate Planning Dept., IR Office)Fax:+81-6-6373-5042

Paid-in Capital:¥99,475 million
Fiscal Year-End:
31st March
Number of Employees: 20,805 (consolidated basis)
Authorised Shares:
3,200,000,000
Issued Shares:
1,271,406,928
Number of Shareholders: 135,049
Unit of Trading:
1,000 shares
Stock Exchange Listing: Tokyo, Osaka
Transfer Agent:
Mitsubishi UFJ Trust and Banking
Corporation

Tokyo Office (Personnel and General Affairs Dept.):
Toho Twin Tower Bldg.,
1-5-2, Yurakucho, Chiyoda-ku, Tokyo 100-0006, Japan
Phone: +81-3-3503-1568
Fax:+81-3-3508-0249

Principal Shareholders:Ownership Breakdown:

Name

Number of shares(thousands)

Percentage (%)

60,668

4.77

Japan Trustee Services Bank, Ltd. (Trust account 4G)
Japan Trustee Services Bank, Ltd. (Trust account)

56,999

4.48

Nippon Life Insurance Company

42,6803.35

The Master Trust Bank of Japan, Ltd. (Trust account)

38,2443.00

Sumitomo Mitsui Banking Corporation

30,947

2.43

H2O Retailing Corporation

20,418

1.60

Japan Trustee Services Bank, Ltd. (The Sumitomo Trust & Banking Co.,
Ltd. Retirement Benefit Trust Account)

13,665

1.07

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

11,1900.88

National government andlocal public organizations

Individuals
and others

0.00%

52.39%

Financial
institutions

27.97%

Securities
companies

0.21%
Other
corporations

10.31%

Japan Trustee Services Bank, Ltd. (Trust account 4)

9,475

0.74

Foreign corporations
and individuals

Takenaka Corporation

9,291

0.73

9.12%

Stock Price Range and Trading Volume (Tokyo Stock Exchange):
Stock Price (¥)

Nikkei Average (¥)

900

21,000

Nikkei Average (right scale)600

14,000Stock Price (left scale)

300

7,000

0
150,0000

100,000
50,000
Trading Volume 0(thousand shares)

High
Low
At year-end

4

5

6

7

8

9 10 11 12

Fiscal 2007
817
502
713

1

2

3

4

5

6

7

8

9 10 11 12

Fiscal 2008
719
400
431

1

2

3

4

5

6

7

8

9 10 11 12

1

2

3

Fiscal 2009
539
406
447

Hankyu Hanshin Holdings

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