Hankyu Hanshin Holdings
Annual Report 2007

Creating New Ways to Inspire and Satisfy

Group Management Philosophy

Mission:What we are trying to achieve
Serenity and well-being, inspiration and dreams — by delivering
these to our customers, we will create satisfaction and make apositive contribution to society.

Values:What is important to us◎Customers Come First
Everything we do is for the customer. That’s where it all starts.
◎Integrity
Build trust by always acting with integrity.
◎Foresight & Creativity
With our progressive spirit and flexible thinking, we can create a newsense of value.
◎Respect for People
Each of our employees is an invaluable resource.

Hankyu Hanshin Holdings

Contents
2

Financial Highlights (consolidated)

3

To Our Stakeholders

4

Outline of the Management Integration

8

Hankyu Hanshin Holdings Group
2007 Medium-Term Management Plan

12Interview with the PresidentManagement Integration
Operating Results FY2007 and Targets
Group Medium-Term Management Plan
・ Business Management Numerical Indicator for FY2013
・ Growth Strategy of each business・ Large-scale Development Projects
Dividend Policy Earnings and Estimates for FY2008

18

New Group Card

19

Corporate Governance and Compliance

21

Environmental Preservation Activities

22

Overview of Core Businesses

24

Urban Transportation

28

Real Estate

36Entertainment and Communications

38

Retailing40

Travel and International Transportation

42

Hotels44

Business Risks

45

Financial Section

73

Corporate Data

74

Group at a Glance75

Investor Information

76

The Hankyu Hanshin Toho Group

Forward-looking Statements
The reader is advised that this report contains forward-looking
statements regarding the future plans, strategies, and earnings
performance of Hankyu Hanshin Holdings, Inc., which are notstatements of historical fact but constitute estimates or projections
based on facts known to the Company’s management as of thetime of writing. Actual results may therefore differ substantially fromsuch statements.
Figures are rounded up/down unless otherwise specified in the notes.

Annual Report 2007

1

Financial Highlights (consolidated)（Thousands of U.S. dollars）*1（Millions of yen）

2006

2007*2

2007*2

Hankyu Holdings

Hankyu Hanshin Holdings

Hankyu Hanshin Holdings¥

743,377
87,00336,61953,795$ 6,299,805
737,314
310,331455,890

1,609,117
360,2222,366,694
522,286

20,056,729
4,426,153

25.36
25.22
5.00

31.84

0.27

5.00

0.04

For the year :Revenues from operations
Operating income
Net income
Capital investments¥

486,155
64,842
25,32652,091

At year-end :Total assets
Total shareholders’ equity
Amounts per share (in yen and dollars) :Net income—basic
Net income—diluted
Cash dividends applicable to the year

*1 The U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥118=U.S. $1, the approximate Tokyo foreign exchange market rate as of 30th March 2007.
*2 The Hanshin Electric Railway is included in the scope of consolidation with effect from the second quarter of fiscal 2006.

Scope of consolidated accounts of Hankyu Hanshin Holdings
2007

Former Hankyu Holdings, Inc.,

Q1

Q2

Q3

Q4

Consolidated

Consolidated

Consolidated

Consolidated

Not Consolidated

Consolidated

Consolidated

Consolidated

and its consolidated subsidiaries

Hanshin Electric Railway, Co., Ltd.,and its consolidated subsidiaries

Within the scope of consolidation for FY2007

For reference: Financial Highlights (on the assumption of merger with Hanshin at the beginning of the term; 12-month basis)（Millions of yen）
3 4

2007*5

2006* *

YoY comparisons

For the year:
Revenues from operations
Operating income
Net income¥

799,396
90,13031,730¥813,61394,80040,507+1.8%+5.2%+27.7%*3 The above figures have been calculated for convenience of comparison, and have not been audited by the Group’s accounting auditor KPMG AZSA & Co.
*4 The figures shown are simple additions of the figures for Hankyu Holdings and Hanshin Electric Railway for the term ended March 2006.
*5 The figures shown have been calculated on the assumption that Hankyu Holdings and Hanshin Electric Railway merged at the start of the term.

2

Annual Report 2007

Hankyu Hanshin Holdings

To Our Stakeholders

Kazuo Sumi

Shinya Sakai

President

Representative director

As a result of the management integration of Hankyu Holdings,
Inc. with Hanshin Electric Railway Co., Ltd., a new holding
company came into existence on 1st October 2006 under thename of Hankyu Hanshin Holdings, Inc. However, the present
annual report, the first under the new management, retrospectively includes the business performance of Hanshin Electric
Railway and its consolidated subsidiaries with effect from 27th
June 2006.
The management integration of the two corporate entities
was followed immediately by the establishment of the Management Integration Committee and a number of subcommittees
dedicated to particular operating divisions or specific themes,
which reported to the Committee. Under the lead of this networkof committees, the management and staff of the Group worked
to devise measures to integrate and strengthen all the Group’s
operations. The Hankyu Hanshin Holdings Group 2007 MediumTerm Management Plan (from fiscal 2008 to fiscal 2013) was
drawn up to delineate the Group’s path for raising its enterprisevalue still further: the plan was announced in March 2007. Under
this six-year plan, the Group aims to achieve continuous growthby abiding by the recently released new Group management
philosophy. The plan contains specific strategies and numericaltargets, and clarifies the direction that the Group’s management
must take (for details see P.8-11).
During fiscal 2007 (ended March 31, 2007), in parallel withthe work of drawing up this medium-term management plan,
the four main operating companies of the Group — Hankyu
Corporation, Hanshin Electric Railway Co., Ltd., Hankyu Express
International Co., Ltd. and Hankyu Hotel Management Co., Ltd.
— worked to further raise the competitiveness of their core
operations and to improve collaboration among them. As aresult of these efforts, the Group’s business performance for fiscal 2007 on a consolidated basis (which includes the figures for
Hanshin Electric Railway Co., Ltd. and its consolidated

subsidiaries from the second quarter of the term onward),
showed good performances by all six core operations, resulting
in large year-on-year gains in both revenues and earnings for theGroup as a whole, for an all-time high.
To increase Group management efficiency, we continued
our overhaul of the Group in fiscal 2007 to focus resources on
selected businesses. From 2008 onward, we will center the
department store business on Hankyu Department StoresGroup, and strengthen competitiveness by integrating businesses
such as Travel and International Transportation and the property
management and building maintenance businesses of the Real
Estate business, under the direct control of Hankyu Hanshin
Holdings. These steps are aimed at boosting profitability.
Particularly notable large-scale initiatives underway at the
moment in the Group’s core businesses include the reconstruction of the Umeda Hankyu Building, the development of the former site of the Hankyu Nishinomiya Baseball Stadium, the firstphase of redevelopment of the Northern Railway Yard of Osaka
Station, work to extend the Hanshin Nishi-Osaka Line, and renovation work on the Hanshin Koshien Stadium. These projects
are making steady progress, and when completed, they will
make a significant contribution to raising the Group’s enterprisevalue.
From here onward, the reins of management of the Hankyu
Hanshin Holdings Group are in the hands of the holding company
Hankyu Hanshin Holdings, Inc., who will do their best to realisemaximum synergy from the combination of the businesses of thetwo partners to the management integration. Through the efficient
allocation of management resources, we aim to raise the Group’s
enterprise value and do everything else needful to fulfill the expectations of our shareholders and market investors in general.
We look forward to the continued support and encouragement of our stakeholders in our future efforts.

Annual Report 20073

Outline of the Management Integration

With effect from 1st October 2006, a management integration was carried out between Hankyu Holdings, Inc. andHanshin Electric Railway Co., Ltd., as a result of which the two parties to the merger came under the umbrella of the newly
created holding company Hankyu Hanshin Holdings, Inc.
Hankyu Hanshin Holdings, Inc. was set up not merely to manage the business operations of the two corporate groups,
but to create an integrated strategic direction for the unified enterprise while respecting the different corporate
cultures that have grown up over the last 100 years or so. The holding company exercises overall control of the business
operations carried out by the Group companies, principally the core operating companies Hankyu Corporation,
Hanshin Electric Railway, Hankyu Express International, and Hankyu Hotel Management.

The Integration Process
April 2006

Start of discussion regarding the integration of Hankyu Holdings
and Hanshin Electric Railway
Hankyu Holdings
HankyuCorporation

HankyuExpress International

Hankyu HotelManagement

Hanshin Electric
Railway

30th May 2006

Takeover bid for Hanshin Electric Railway commenced by Hankyu Holdings

19th June 2006

Takeover bid completed

27th June 2006

Hanshin Electric Railway becomes a consolidated subsidiary of Hankyu Holdings
Hankyu Holdings
HankyuCorporation

Hanshin Electric
Railway

HankyuExpress International

Hankyu HotelManagement(Hankyu Holdings holds 63.71% equity stake in Hanshin Electric Railway)

29th Sept. 2006

Hankyu Hanshin Holdings announces Group management philosophy

1st Oct. 2006

Managements of Hankyu Holdings and Hanshin Electric Railway integrated,and Hankyu Hanshin Holdings establishedHankyu Hanshin Holdings
HankyuCorporation

Hanshin Electric
Railway

HankyuExpress International

Hankyu HotelManagement(Hankyu Holdings holds 100% equity stake in Hanshin Electric Railway)

4

1st Oct. 2006

Launch of Hankyu-Hanshin-Daiichi Hotel Group

26th March 2007

Hankyu Hanshin Holdings Group 2007 Medium-Term Management Plan announced (see P.8-11)

Annual Report 2007

Hankyu Hanshin Holdings

Reorganisation of the groups following merger(please see P.13, “Interview with the President, Q3” for details)

Department Store BusinessTo raise the enterprise value of Hankyu Department Stores, Inc. and Hanshin Department Store,
Ltd., the management of the two stores were integrated under the joint holding company.
Strengthening Alliance with Hankyu Department Stores Group

Current
Structure(%: equity stake)

Hankyu Hanshin Holdings
100％

100％

100％

Hankyu HotelManagement

HankyuExpress International

HankyuCorporation

3％

100％
Hanshin Electric
Railway

HankyuDepartment Stores

99.95％Hanshin
Department Store

New
Structure(Scheduled for
October 2007)(%: equity stake)

Hankyu Hanshin Holdings
100％

100％

100％

Hankyu HotelManagement

HankyuExpress International

HankyuCorporation

21.8％

100％
Hanshin Electric
Railway

Holding company
for department store operations(H2O Retailing)

HanshinHankyuDepartment Store Department Stores

Hankyu Department Stores (Umeda, Osaka)(Artist’s conception of Umeda Store on reopening after
rebuilding work in second half of FY2012; in the foreground)

Hanshin Department Store (Umeda, Osaka)

Annual Report 20075

Tr a v e l a n d I n t e r n a t i o n a l Tr a n s p o r t a t i o n B u s i n e s sUnder the umbrella of the intermediary holding company, operating companies engaged in the travel agency
business and the international freight transportation business will be established. Collaboration with therespective divisions of the former Hankyu and Hanshin groups engaged in these businesses is being
strengthened to achieve greater competitiveness.

Reorganisation of Travel and International Transportation Business
Summary of Reorganisation (details currently under discussion)
Four operating companies have been set up (under the umbrella of an intermediary holding company established tosupervise operating companies in the travel and international freight transportation businesses) to provide successors to
the travel and international freight transportation businesses of Hankyu Express International Co., Ltd., to the travelbusiness of Hanshin Electric Railway Co., Ltd., and to the freight transportation business of Hanshin Air Cargo Co., Ltd.

Current Structure

New Structure (scheduled for April 2008)(%: equity stake)

100％

100％

Hankyu Express
International

Hanshin Electric
Railway

・Travel Section
・International FreightTransportation Section

Travel and International Transportation Businesses
Intermediary holding company

・Travel Section

85％
Hanshin Air Cargo(%: equity stake)

Hankyu Hanshin Holdings
100％

Hankyu Hanshin Holdings

Travel15％
Sumitomo
Corporation

International Transportation

100％

100％

100％

85％

former Hankyu
Express International
Travel Section

former Hanshin
Electric Railway
Travel Section

former Hankyu
Express International
International FreightTransportation Section
Business Alliance
SENKO

Hanshin Air Cargo

15%
Sumitomo
Corporation

Real Estate Business – Property Management and Building Maintenance Division
Divisions engaged in the same businesses will be amalgamated, and through the creation of an optimallyefficient joint organisational system, we will be able to leverage the differing strengths of the former divisions
and their established customer networks to create a powerful marketing system, raise service quality levels
and take more orders from customers outside the Hankyu Hanshin Holdings Group.

Real Estate Business — Reorganisation of Property Management and Building Maintenance Division
Summary of Reorganisation (details currently under discussion)
Hankyu Facilities, Hanshin Electric Railway’s building management division, and Hanshin Engineering are to be integrated
into one new property management and building maintenance company, Hankyu Hanshin Building Management, in which
Hankyu Corporation and Hanshin Electric Railway will have equity investments.
(%: equity stake)

Hankyu Hanshin Holdings
100％

100％
Hanshin Electric Railway

Hankyu Corporation
Investment
100％
Hankyu Facilities

100％

1st Oct. 2007
New Company,
Hankyu Hanshin Building Management

6

Annual Report 2007

■Building Management Division

Hanshin Engineering

Hankyu Hanshin Holdings

Hotel BusinessIn October 2006 the Hanshin Group’s HOTEL HANSHIN joined the hotels arm of the Hankyu Hanshin
Holdings Group, which has made a fresh start under the name Hankyu-Hanshin-Daiichi Hotel Group.

■ Sept. 2006

The Hotel Hanshin, Ltd. becomes wholly-owned subsidiary of Hankyu Hotel Management Co., Ltd.

■ Oct. 2006

Hankyu Dai-ichi Hotel Group reorganised as Hankyu-Hanshin-Daiichi Hotel Group■ June 2007

Rokko Oriental Hotel (Nada-ku, Kobe: 60 rooms) ends operations■ April 2008 (not decided)

Full merger scheduled between Hankyu Hotel Management Co., Ltd. and The Hotel Hanshin, Ltd.

Reorganisation of Hotel Business

Before reorganisation

After Oct. 2006
Hankyu Hanshin Holdings

Hanshin Electric Railway

Hankyu Holdings

The Hotel Hanshin

Hankyu Hotel Management

Hanshin Electric Railway

Hankyu Hotel Management

The Hotel Hanshin
Full merger by about April 2008
(equity stake is 100% both pre and post reorganisation)

Hankyu-Hanshin-Daiichi Hotel Group*

Direct management by Hankyu Hotel Management 14 hotels 3,101 rooms
Other (Franchisees, etc.)
29 hotels 5,118 rooms
43 hotels 8,219 rooms(As of 31st March 2007)* Excluding The Ritz-Carlton, Osaka (Kita-ku, Osaka: 292 rooms), and Rokko Oriental Hotel (operations terminated in June 2007)

Dai-ichi Hotel Tokyo (Minato-ku, Tokyo)

Hotel new Hankyu Osaka (Kita-ku, Osaka)

HOTEL HANSHIN(Fukushima-ku, Osaka)

Annual Report 2007

7

Hankyu Hanshin Holdings Group 2007 Medium-Term Management Plan

In March 2007, the Hankyu Hanshin Holdings Group released its first medium-term management plan after thebusiness integration of the two groups. Currently, the Group is pursuing major projects such as the rebuilding of the
Umeda Hankyu Building and the extension of the Hanshin Nishi-Osaka Line. These projects should be largely
completed by the end of fiscal 2013, and to reveal the overall profile of the group by that year, we have drawn up
our current medium-term management plan, from fiscal 2008 to fiscal 2013 inclusive.
To realise in a concrete manner the Management Philosophy of the Hankyu Hanshin Holdings Group — peace ofmind and convenience, dream fulfillment and passion — over the medium-to-long term, and thereby enable theGroup to achieve unity and sustainable growth, we have adopted the following three basic Group strategies.

ųBasic Strategy for the Group①Strengthen fundamental competitiveness and profitability, business by business▲

Strengthen fundamental competitiveness, business by business(1) Build value along our railway lines and revitalise the Umeda area
Deliver a safer and more convenient society and lifestyle, and better services(2) Strengthen the Hankyu and Hanshin brands
Create and expand services and content that provide dream fulfilment and passionąGenerate sustainable growth

Realise synergies across the Group, break down barriers between businesses
・Strengthen functions across the Group, develop shared services and card businesses, etc.
・Promote collaboration among businesses②Rigorously pursue and identify merger benefits
・Create demand and build profitability through a stronger business base and new services
・Streamline business management and back-office operations③Improve the financial position and return on assets
・Reduce interest-bearing debt through sale or disposal of low-yield assets
・Bring idle assets and development projects onstream quickly and cut development costs
・Restrain capital investment in development projects
・Turn around or exit under-performing and loss-making businesses quickly* For medium-term plans relating to each core business, please refer to the each Future Business Strategy in the Overview of Core Businesses (P.24-43).

8

Annual Report 2007

ŤHankyu Hanshin Holdings

Strengthening Fundamental Competitiveness

Build value along our lines andrevitalise the Umeda area
Deliver a safer and moreconvenient society andlifestyle, and better services

Strengthen the Hankyu andHanshin brands
A strong brand enhances
the image of our service areas

Urban Transportation
High-quality services through safe
transportation and strong route
networks
Real Estate
Revitalise our service areas and the
Umeda area using our expertise inbuilding communities
Retailing
Fully develop stations and service
areas through competitive formats

Synergies

Create and expand services
and content that provide
dream fulfilment and passion
Entertainment & Communications
Optimise the brand value of the Hanshin
Tigers/Koshien and Takarazuka to maximise profits over the whole value chain
from live events to media performance
TravelExpand the range of high-value-added
products through differentiation

A better image for our service
areas builds brand strength
Pursue growththrough synergy amongcore businesses

International Freight Transportation
Build a competitive lead through advanced logistics systems and service
networks
HotelsConsolidate our position as a strong
chain operator

Hankyu Railway

Hanshin Tigers

Hanshin Electric Railwayc○Takarazuka
Revue Company

Annual Report 20079

Numerical targets We booked a one-time increase in interest-bearing debt in line with our investments for future growth. We(consolidated basis) aim to bring the balance of interest-bearing debt below ¥1.1 trillion by fiscal 2013, and to bring the interest-

bearing debt / EBITDA ratio below average levels for major private railway companies, while boosting our
profitability and ability to create cash flows taking due consideration of financial soundness and capital efficiency. (please see P.15, “Interview with the President, Q5” for details)

EBITDAFY2013 operating incometarget: ¥100 billion

Substantial growth by expanding each business segment, taking full advantage of the merger

Interest-bearing debt
Despite one-time increase due to investments for business developments, the balance will decline thanks to earnings growthand gains on sale of assets, primarily low-performing and low-yield assets

Interest-bearing debt / EBITDA
Steadily decline to a level superior to those of other major private railway companies (8.4 times for FY2006 simple average)

Interest-bearing debt

EBITDA

1,500

158
10 times

160

Interest-bearing debt / EBITDA

1,400

9.2 times

1,300

Substantial group-wide
growth, partially due tomerger effect146

Investments forbusiness development

8.3
8.3times
times

1,300 billion

Major investments

1,230Billion
1,209 billion
1,200
Excluding department
store business

Steady decline

・Nishi-Osaka Line extention project・Rebuilding of Umeda Hankyu Bldg.
・Umeda North Yard area development
・Nishinomiya-kitaguchi Shopping
Center development

141

150

142

140
1,100 billion

1,100
7.0 times
1,000(¥ billion)

FY2007

FY2008(Result)(Forecast)

FY2009FY2010FY2011FY2012FY2013130(¥ billion)* Figures for fiscal 2007 are calculated on the assemption of a merger on 1st April 2006.
** Red dotted line represents EBITDA excluding department store operations up to the first half of FY2008.

Management indicators

Targets for FY2013

Operating income

Earnings from core businesses¥100 billion

1

EBITDA*

Cash flow generation capability¥150 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¥1,100 billion or lessDebt/equity (D/E) ratio*

Financial soundness

Less than two-fold

ROE*3

Capital efficiency

6.0% or more

2

1

* EBITDA = operating income + depreciation expenses + amortization of goodwill attendant on merger of Hankyu and Hanshin*2 D/E ratio = Interest-bearing debt/equity*3 ROE = net income/equity (i.e. average net assets attributable to shareholders for the year)

10

Annual Report 2007

Hankyu Hanshin Holdings

Major performance indicators(¥ billion)
1

2

FY2007 *Targets for FY2008 *3

Targets for FY2010

Targets for FY2013

142.0

158.0

3

146.5 (141.5) *135.0 (132.8) *Effects of integration

―

2.2

5.2

5.4

Interest-bearing debt/EBITDA

8.3x

9.7x

9.2x

7.0x

Interest-bearing debt

1,209.4

1,315.0

1,300.0

1,100.0

Debt/equity (D/E) ratio

2.4x

2.5x

2.3x

up to 2x

ROE

―

6.0%

5.0%

more than 6.0%

EBITDA*1 Results for fiscal 2007 are calculated assuming that the management integration had occurred at the beginning of the fiscal year.
*2 Until the first half of fiscal 2008, the department store business falls within the scope of consolidation (including equity-method affiliates).
*3 Figures within brackets do not include the department store business.

Business performance (consolidated basis)

Capital expenditure(¥ billion)

FY2007*

Targets for
FY2008*Targets for
FY2010Targets for
FY2013

Revenues fromoperations

743.3

750.0

740.0

770.0

Operating income

87.0

80.0

79.0

100.0

Recurring profit

74.8

61.0

55.0

78.0

Net income

36.6

35.0

28.0

42.0

(¥ billion)

FY2005 - FY2007

Targets for
FY2008 - FY2010

Targets for
FY2011 - FY2013

165.0

308.0

200.0

55.0

103.0

67.0

Three-year
total
Averageper year* Until the first half of fiscal 2008, the department store business will be operated by a consolidated subsidiary.

Benefits of Integration
Numerical targets for core businesses reflect synergy
effects, in terms of expansion of sales and cost reductions, forwhich quantitative estimates are available at the time ofestimation (please see P.12, “Interview with the President, Q2”
for details).

■ Benefits of Business Integration
Total

FY20082.2

FY2010
5.2

Sales synergy

0.9

2.7
0.1

■ Sales Synergy
・Strengthen alliances within Urban Transportation,use companies of both Groups
・Collaborate in condominium unit sales business
・Link up on detached house business・Open retail outlets at facilities of both companies
・Use joint sales promotion of travel products using storesas well as direct mailing and websites

0.1
0.7
0.2
0.7
0.1
0.5

■ Cost-savings synergy
・Effective use of HR and know-how
・Strengthen purchasing at each business・Withdraw from duplicated facilities
and rationalise duplicated businesses
・Streamlining and system harmonisation
at support departments

FY2013 (EBITDA basis; ¥billion)
5.4
2.6
0.1

Urban Transportation

2.4

2.2

0.3

0.4

1.8

1.8

Urban Transportation

0.1

0.1

Real Estate

0.7

1.0

Real Estate
OthersOthersCost-saving synergy

1.3
2.5
2.8
Notes: Sums given are those which can be calculated at the current time.
Figures may not total exactly due to rounding.

Annual Report 200711

Interview with the President

We seek to sustain growth and to contribute to the community as ahighly competitive corporate group.
In October 2006, Hankyu Holdings, Inc. and Hanshin Electric Railway Co., Ltd. amalgamated in the first merger
involving two major private railway groups in postwar Japan. We interviewed Kazuo Sumi, president of Hankyu
Hanshin Holding, Inc., the company created out of the merger, and asked him about the merger’s significance for future
growth, how its effects will manifest themselves, strategies for operational restructuring, and the company’s
Medium-Term Management Plan.

Building on our individual management foundations
to bolster corporate value as a single entity

Q1

What do you think is the significance of themerger of the Hankyu Group and the Hanshin Group?
I think there is real historic significance in this team, which wasformed by two major private railway groups in the Kansai region thatboth have a history of about 100 years. We have many things incommon. Both groups are based in Osaka’s Umeda district, amajor centre for offices and commercial facilities. Both groups
have built diverse operations covering such fields as real estate,retailing, travel, international freight transportation, hotels, culture andsports, with urban transportation as the basis. In particular, theHanshin Tigers and the Takarazuka Revue both enjoy enormous fanbases and boast national name recognition. The two groups also
share a business model in which comprehensive operational
development helps to raise the value of areas served by railway lines,
and to expand demand for rail services.
We are developing commercial and other large facilities such as
hotels around the Umeda district, the site of a number of large urban
redevelopment projects. In addition, we share the Hanshin(Osaka-Kobe) area, the most promising residential zone in the
Kansai region. According to one questionnaire on preferred
residential areas that a group of major condominium developers
conduct every year, 19 out of the 20 most favoured areas (theexception is the Tezukayama district in 19th place) are served byrailway lines operated by both groups (refer to attached Table ofP.30). We can take advantage of these strengths and develop
new businesses in areas served by our lines. We firmly believethat the consolidation and integration of the business know-how,personnel and other strengths of the Hankyu and Hanshingroups, along with cooperation and partnership in our diverse
areas of operations, will lead to better urban development thanseparate management efforts by Hankyu and Hanshin.
The declining population and ageing of society characterise ourchallenging operating environment. In my view, the greatest
significance of this business integration lies in managing joint andintegrated businesses, bolstering competitiveness and consistently
enhancing enterprise value, building on the brands developed by thetwo groups.

Rapidly achieving synergies
by combining the knowledge of the two groups

Q2 What kind of effects do you expect the merger tohave in Urban Transportation and other segments? Whateffects were identified in fiscal 2007, the initial year forthe merger, and what operations were integrated?
We expect to boost both the competitiveness and profitability of ourrespective operations through an exhaustive pursuit of efficiency andcost reduction effects (or cost synergies), in addition to therevenue effects (sales synergies) of new business developments,
which have been enabled by the merger. In the Medium-Term
Management Plan developed recently, we projected effects
totalling ¥5.4 billion in fiscal 2013, the final year of the plan. In thecourse of examining actions to integrate Hankyu and Hanshin,
we incorporated only those effects that were very achievable at thetime of examination and that could be quantitatively estimatedKazuo Sumi
President
Hankyu Hanshin Holdings, Inc.
12

Annual Report 2007

Hankyu Hanshin Holdings(refer to Chart on P.11). Sales synergies primarily incorporate
revenue-positive effects in the real estate business. As a specificexample, we could expand our business area by including theHanshin Group as a participant or collaborator in thecondominium subdivision business of Hankyu’s real estatepart of joint sales promotions using each other’s facilities. We
also stepped up alliances and tie-ups aimed at increasing
customer numbers, for example by reciprocally discounting
admissions at Mt. Rokko and Takarazuka recreational facilities.
In the Travel segment, we shared our sales channels by

operations, which are already firmly established. Or we could
strengthen the fundamentals and competitiveness of thedetached house business through an alliance of both Groups, forexample using Hanshin Group’s know-how to market singlefamily residences in Hankyu Group subdivision lots, increasing
supply of units. Cost synergies principally refer to the costcommencing joint sales of special products such as Hanshin
Tigers support tours, in addition to each group’s original brandpackage travels.

savings in the urban transportation business. We intend to
steadily reduce our costs by comprehensively reviewing our
expenditures and making effective use of our personnel andknow-how. Moreover, we are dedicated to realising synergies
beyond those described in the Medium-Term Management Plan, by
continuing to introduce new initiatives that are currently underconsideration or in the planning stage.
I would like to briefly introduce several of our initiatives infiscal 2007.
First, in the Urban Transportation segment, we took steps toincrease convenience for our customers by revising timetables
for the Hankyu Kobe Line, the Hankyu Takarazuka Line and theHanshin Main Line. We also launched the PiTaPa IC commuter passservice on the Hankyu and Hanshin lines in July 2006. In
addition, we stepped up efforts to overhaul our line operations, forexample by opening new bus routes to provide direct accessbetween separate railway lines operated by either Group.
In the Real Estate segment, we launched an initiative toimprove the attractiveness of the neighbourhoods around Umeda,
where the terminal stations for both Hankyu and Hanshin railways arelocated, through joint shopping-centre promotion. We also began
jointly developing condominiums in areas served by Hankyu andHanshin lines, mobilising the know-how of the two groups, which
both boast abundant experience in real estate development.
In the Entertainment and Communications segment, webegan advertising the Hanshin Tigers at the Hankyu Umeda
Station and the Takarazuka Revue at the Hanshin Umeda Station as

Our Hotels segment made a new start as the HankyuHanshin-Daiichi Hotel Group. With the addition of HOTEL
HANSHIN, the group grew in size to 44 hotels with more than
8,200 guest rooms. In April 2008, we will merge Hankyu HotelManagement Co., Ltd. with The Hotel Hanshin, Ltd. to further
strengthen our sales capabilities, increase operational efficiency,
and thus maximise the effects of the merger.
As explained above, our integrated management has beensteadily producing real results in each segment. We expect theseachievements to lend greater momentum to the development ofour business.

Bolstering competitiveness and showing ourcollective strength through operational restructuring

Q3 The Medium-Term Management Plan calls forthe merger to be used as an opportunity to restructure theorganisation to facilitate operations. Please explain the
restructuring objective.
For Hankyu Hanshin Holdings, the key objective of operational
restructuring is to achieve sustainable growth by taking fulladvantage of its competitive strengths.
Let me start by discussing the integration of Hankyu
Department Stores, Inc. and The Hanshin Department Store, Ltd.
Managing the two department stores together by taking
advantage of their individual brands, we aim to make ourselves
formidable competitors in the Umeda district, where large-scale
redevelopment projects are in progress and other department
stores are planning to open or refurbish their branches. With thisAnnual Report 200713

management integration, The Hanshin Department Store Groupwill move outside the scope of our consolidation. However, we will be
stepping up cooperation with the department store group through the
integration, because our equity stake in the pure holding company ofthe department store group (which will be called H2O Retailing) will rise
to more than 20%, and the holding company will become an
equity method affiliate of Hankyu Hanshin Holdings, Inc.
Let us now turn to the adoption of the intermediate holding
company system in the Travel and International Transportation
segment. We have decided to split Hankyu Express International
into two companies to manage these operations separately.
This will increase our competitiveness by speeding up decisions foreach operation and introducing systems suited to thecharacteristics of the business. With this split, we will step up
cooperation with the travel and international freight transportation
divisions of both groups. We will seek to draw benefits from themerger and improve our competitiveness through initiatives such as
reciprocal travel package sales, joint purchases, joint cargo
pickup and delivery, and joint warehouse use. We expect toexpand earnings by operating each business in tandem with theother (see P.6).
In the integration of property management and building
maintenance divisions in the Real Estate segment, we aredeveloping the optimum system for joint operation. This system
will make effective use of the two groups’ respective operational
strengths and customer networks (see P.6).
In the Hotels segment, which made a new start as the
Hankyu-Hanshin-Daiichi Hotel Group, we will seek to quickly
establish ourselves as a leading hotel chain operator (see P.7).
We will place the new organisation that is created through therestructuring of these operations on the right track at the earliest
possible stage, and at the same time, strive to demonstrate
greater collective strength as a Group.

14

Annual Report 2007

Record earnings achieved, with strong
performances in six core businesses

Q4

Please share your impressions of theconsolidated business results for fiscal 2007, the firstyear of the integrated organisation.
Our consolidated results for fiscal 2007 include the results of the
Hanshin Group, which were added to the figures for the former
Hankyu Holdings from the second quarter onward. (Results ofHanshin for only nine months from July were consolidated.) As aresult, both revenues and earnings increased sharply from theconsolidated results of the former Hankyu Holdings reported infiscal 2006. Revenues from operations achieved impressive year-onyear growth of 52.9%, rising to ¥743.377 billion. Operating
income rose 34.2% year on year, to ¥87.003 billion, and net
income climbed 44.6%, to ¥36.619 billion. Each of these earnings
figures represented a new record high.
The Hankyu and Hanshin groups also did well if we assume
consolidation of Hanshin Electric Railway occurred at the
beginning of the term. Consolidated revenues and earnings
increased from the simple aggregate totals of the results that theformer Hankyu Holdings and Hanshin Electric Railway reported infiscal 2006 (see P.2).
Looking at individual businesses, in Urban Transportation,
railway operations by both Hankyu and Hanshin are performing
exceptionally well, with Hanshin showing a year-on-year increase inrevenues from passenger operations in fiscal 2007 and Hankyu
showing signs of at last getting back into positive territory in realterms (that is, after factoring in the one-time increase that
followed the derailment disaster on JR West’s network in 2006). In
real estate operations, subdivision operations (condominiums)
have had an exceptionally good year amid buoyant demand in a
recently resurgent real estate market. In Entertainment andCommunications, Hanshin Tigers, despite not winning theCentral League title this year, fought a strong campaign to theend, enabling us to attract even more spectators than in fiscal
2006 when the Tigers won the title. We expect this strong
performance to continue into fiscal 2008 and beyond.

Hankyu Hanshin Holdings

We expect large-scale projects to progress satisfactory during the last three years of the mediumterm management plan, with performanceindicators showing significant improvement

the ratio of interest-bearing debt to EBITDA, we aim to realise asubstantial improvement from 8.3 times at the end of fiscal 2007 to
7.0 times at the end of fiscal 2013, by balancing the expansion of
EBITDA with the reduction of interest-bearing debt (see P.10).

Q5 In your latest Medium-Term Management Plan, you

Expect improvement in service area value from
Hanshin Nishi-Osaka Line extension and new
stations

have adopted numerical targets for fiscal 2013. Please
explain the key points regarding these targets, includingchanges in management indexes and capital investment
plans during the planned period.
In our new Medium-Term Management Plan, we adopted
numerical targets for our earnings capacity, cash flow generating
capacity and balance of interest-bearing debt. These are,respectively, ¥100 billion in consolidated operating income, atleast ¥150 billion in consolidated EBITDA, and ¥1,100 billion or lessin interest-bearing debt.
This plan is characterised by two stages, the first covering
the period to fiscal 2010 and the second continuing until fiscal
2013. In the first three years, we plan to invest a total of some ¥300
billion in operations centring on real estate and urban transportation,
where development investment will be concentrated in anticipation of
future growth. We anticipate that a number of indexes will betemporarily aggravated by the adverse effects of changes in
depreciation (the abolition of residual value) — including anaemic
earnings and a rise in interest-bearing debt.
The subsequent three years will be the harvest period. In
other words, the effects of integration worth ¥5 billion or more
will be manifest each year, thanks to sales and cost synergies.
Earnings expansion attributable to the operation of a series oflarge projects, including the rebuilding of the Umeda Hankyu
Building, will add to the integration effects and enable us toachieve our target of ¥150 billion or more in consolidated
EBITDA in fiscal 2013.
In the meantime, we plan to reduce interest-bearing debt instages to ¥1,100 billion or less at the end of fiscal 2013. This will bedone through the sale of assets centring on low-operationallevel, low-return assets, as well as by reaping the benefits of thefactors to bolster revenues already mentioned. With respect to

Q6 Please explain growth strategies for respective
segments based on the Medium-Term Management
Plan. Could you explain the strategies for the Urban
Transportation segment?
In terms of expanding our railway network, I’m looking forward to theextension of the Hanshin Nishi-Osaka Line to the Namba district(Nishi-Kujo to Kintetsu Namba stations), a project being
undertaken by Hanshin Electric Railway Co., Ltd. When theextended section opens for service, currently slated for thespring of 2009, reciprocal through-train operations with Kintetsu Linewill create a wide-area railroad network linking Kobe, Osaka andNara. The extension will bring two of Osaka’s commercial
centres, the Kita district in the north (centred on Umeda) and theMinami district in the south (centred on Namba), into Hanshin’s
service area. In addition, all three new stations to open on theextended section will connect to existing lines. The project willbring significant new vitality to Hanshin’s service area. We havedecided to name the new line the Hanshin-Namba Line between
Amagasaki with Kintetsu Namba, where it incorporates theexisting Nishi-Osaka Line.
Our railway operator, Hankyu Corporation, is also planning toopen two new stations, tentatively named Settsu New Stationand Minami Nagaokakyo New Station, on the Hankyu Kyoto
Line, in line with local governments’ urban development plans
and the improvement of the highway network. We intend to link the
opening of the two stations to improved value in the Kyoto Lineservice area, while also increasing the number of passengers
embarking and disembarking.
At the same time, the touch-free PiTaPa IC-card payment

Annual Report 200715

service provided under the Through-Kansai wide area network
for the Kansai area is now also accepted by Kobe Electric
Railway, Kintetsu Corporation and Kyoto Municipal Transportation
Bureau. This marks the effective completion of our introduction of
IC cards to the Kansai railway network. Up to now, Hankyu andHanshin’s card strategies have focused on encouraging use of
HANA Plus and CoCoNet cards including PiTaPa functions
separately. But the expansion of the PiTaPa usage area presents amajor business opportunity, and through the current management
integration we have decided to launch, in second half of fiscal
2008, a joint card product: the Stacia card. Looking ahead, we aim
to further strengthen marketing and build up the customer base of
the entire Group, by ramping up Stacia card subscriptions andexpanding “point-service” programs from daily transportation

Hanshin Koshien Stadium, scheduled for completion in the spring of2009. We expect these projects to have positive implications foroverall Group operations by reinvigorating local communities in
Umeda and areas served by our lines, increasing the population in ourrailway service areas, and encouraging more passengers fromremote areas.

Better margins at the core hotel business andhigher revenues for retail operations

Q8

to shopping, dining and hotel transactions involving credit(see also P.18).

What comment do you have regarding thedevelopment of the hotel and retail business?

Major new projects will lift earnings
from development activities for whole GroupIn the hotel business, we aim to unify customer datamanagement systems through our overhaul. Through this move, we
aim to enhance the operating margin by reducing costs throughmore efficient marketing and increase the appeal of establishedhotels, as well as a find ways to ensure the success of the
REMM brand of accommodation - (rather than function-) oriented
hotels scheduled for launch in Hibiya in November 2007 — apriority under our integration. In April 2008, we also plan an
opening in Akihabara, also in Tokyo. We believe these projects will
boost our operating margin.
In the retail operations, we have increased the number ofoutlets and boosted sales for the Book 1st. chain of bookstores. In
October 2007, we will open outlets in Kyoto (Kawara-machi) in the
Kansai area and in Shibuya (Bunkamura) in Tokyo. In November
2008, we plan to open a more than 3,300m2 large-scale flagship

Q7

What is the status of large-scale projects, which
are anticipated to become major revenue sources in
the future?
In fiscal 2008, construction work on our large-scale development
projects – a major earnings driver – will go into full swing,
including work on the rebuilding of the Umeda Hankyu Building andthe development of the site where the Hankyu Nishinomiya
Baseball Stadium once stood. Fiscal 2008 will be an important year
for our Real Estate segment.
In addition, we will be taking part in the advance blockdevelopment (70,000m2) in the project at Northen Railway Yard of
Osaka Station, a prime location immediately north of JR Osaka
Station. Development work will be completed by the end of 2011.
Ultimately, 240,000m2 will be developed. This will give birth to a
new hub of excitement in Osaka.
This development will take place in Umeda. The district is amajor base of operations for both the Hankyu and Hanshin groups. By
strengthening cooperation between the two groups, we will be able to16

provide – as a single entity – broader attractions and services (withgreater customer circulation) in this inner city district.
In the Entertainment and Communications segment, the Group
has a large number of promising projects, including renovation of theAnnual Report 2007

store in Shinjuku in Tokyo. We will continue to aggressively
expand the brand going forward.

Hankyu Hanshin Holdings

While raising enterprise value, our goal is astable dividend based on a balanced approachto retained earnings and future growth

Q9

Please explain the dividend policy andprojections for consolidated results for fiscal 2008.
Management Plan, our first after the merger. We are determined to
Our basic policy is to strengthen our management foundations
and financial standing so as to be able to pay annual dividends at
a stable rate of at least ¥5 per share.
We paid an annual dividend for the term under review (year-end
dividend) of ¥5 per share, to maintain the stability of our dividend
payments. Under this policy, we anticipate that our annual
dividend for the current term will remain unchanged at ¥5 pershare. We are resolved to meet the expectations of ourshareholders by continuing to increase our enterprise value, and by
maintaining a stable dividend and keeping our share price at a levelcommensurate with the rising enterprise value.
We will place The Hanshin Department Store, Ltd. groupoutside the scope of our consolidation on 1st October 2007.
Despite this, revenues from operations should rise to ¥750 billion in
the current term, thanks to the full-term consolidation of Hanshin
Electric Railway Co., Ltd. and its consolidated subsidiaries,
whose performance will be included in the scope of
consolidation on a 12-month basis. As for earnings, we expect
operating income to total ¥80 billion, and net income at ¥35
billion — lacklustre levels in each case. The forecasts reflect theadverse effects of factors including the increase in depreciation
expenses (removal of residual value) in line with the tax reforms
mentioned above.

Raising enterprise value with rapid progress,
enabled by the collective commitment of the Hankyu
Hanshin Holdings Group

Q10 Finally, please share your ambitions for the
future and convey a message to stakeholders.
Fiscal 2008 is the first year of our current Medium-Term

execute such basic Group strategies as improving thecompetitiveness of each of our operations, bolstering earnings
levels, and rapidly reaping the benefits of the merger to position us
to reach fiscal 2008 financial goals. In line with this, we will strive toextend cooperation among Group members, win the trust ofcustomers by offering more convenient and attractive products
and services, and bolster solidarity among Group members.
To achieve our goal of improving enterprise value, we must
become a corporate group that —・ is trusted by society
・ is capable of sustaining growth・ realises a high level of satisfaction among its shareholders,
employees and other stakeholders
Our new Group management philosophy can be considered a
guideline for turning ourselves into a corporate group thatsatisfies these conditions. In particular, four keywords – peace ofmind, convenience, dream fulfilment, and passion – clearly
indicate the directions we should take and the values we shouldseek in our day-to-day operations. We strongly urge all Group
members to adopt these keywords as their goals and makeevery effort to achieve them.
To ensure that our corporate activities are fair and appropriate, wehave also set up a Group Auditing Department within Hankyu
Hanshin Holdings, Inc. This department is continuing the work ofestablishing internal controls, evaluating the state of its operation andmaking improvements. We intend to bolster our internal controls
and proactively fulfil our corporate social responsibilities bystepping up compliance and internal audit activities.
We remain committed to increasing our enterprise value andachieving further growth under a shared management philosophy
by mobilising all the resources of the Hankyu Hanshin HoldingsGroup.

Annual Report 200717

IC cards : Toward the issuance of a new Group card targeting 700,000 holdersof smart cards (incorporating an IC chip) by fiscal 2011
Up to now, both companies have offered PiTaPa ticket and small-sum settlement services on their HANA PLUS
Card (Hankyu) and CoCoNet (Hanshin) cards, with the HANA PLUS Card additionally including a bonus-point
accumulation feature – measures which have lifted sales for the whole Group. Now, in line with the integration of ourbusinesses, we are issuing a new Group card, Stacia Card, in the second half of fiscal 2008, to strengthen ourGroup marketing and customer base.

■ Basic Card Strategy
By expanding the number of holders of cards issued by the Group, members of the public will be encouraged to utilise the Group’s transportation network and other services.

■ Issuance of new Group card in second half of FY2008
・New cards are to be issued as a means of encouraging greater usage of the Group’s services as soon
as possible.
・Cards without credit card functions (i.e. PiTaPa function only) will be added to the card lineup.
・A system will be established to promote the Group’s marketing through the issuance of a series ofGroup cards.

■ Customers to receive more points on payment for use of Group's services
・Points to be given when customers use the Group’s rail or bus services (including buying train passes)
・We aim to promote sales turnover at Group amenities by increasing the total of points awarded by 2-10
times when our credit cards are used for payment at our shopping centres, travel agencies, hotels andretail outlets (Book 1st., leisure and entertainment facilities, etc.) in the Umeda area and in other areas
served by our lines.

■ Fiscal 2011 Targets
・Cardholders: approx. 700,000 (up from 230,000 in fiscal 2007)* Total for fiscal 2007 is for holders of HANA PLUS and CoCoNet cards

PiTaPa used for the Through Kansai transportation network
Features of PiTaPa
・Contactless post-paid card settlement service
・Frequent-user discounts on transportation fares can be earned
・Card also functions as credit card for small-amount payments at member retail outlets(shops, restaurants and bars)
・Train pass IC card also introduced to card lineup
From July 2006 : Hankyu, Hanshin, Nosé and Kita-Osaka Express lines
From April 2007 : Interchangeable IC-card train passes for Hankyu and Hanshin lines
Nankai and Semboku Rapid Railway lines

Main railway companies accepting the cards○ The PiTaPa transportation network will be essentially completed during fiscal 2007
Aug. 2004 : Hankyu, Nosé and Keihan lines
Jan. 2006 : Joint use of PiTaPa and JR West’s ICOCA cards begins
Feb. 2006 : Hanshin lines, Osaka Municipal Transportation (subway and bus), the Kita-Osaka Kyuko Railway line,
Hankyu Bus services (phased introduction), and on the Osaka Monorail
July 2006 : Nankai, Sanyo Railway, Kobe Rapid Transit Railway, Kobe Shin Kotsu and Semboku Rapid Railway
Oct. 2006 : Kobe Municipal Transportation (subway), and Hokushinkyuko Railway line
April 2007 : Kintetsu, Kobe Electric Railway, and Kyoto Municipal Transportation (subway)

18

Annual Report 2007

PiTaPa-Surutto Kansai’s IC card system

Hankyu Hanshin Holdings

Corporate Governance and ComplianceAs part of our ongoing commitment to remaining a corporate group that is trusted and valued by its
stakeholders and respected as a corporate citizen, we have taken steps to reinforce the pillars that support our
corporate governance system. We plan to implement full-scale audits of business operations and accounting acrossthe board. Moreover, we are also working on effective implementation of our system of internal controls, based as
it is on our commitment to compliance-based management.

Š The basic idea of corporate governanceWe understand that strengthening corporate governance istransparency and soundness as well as through rigorous

important for us to remain a corporate group that is trusted bycompliance with laws and regulations, and timely andall our stakeholders, particularly our customers. We seek toappropriate disclosure of corporate information.

bolster corporate governance by improving managementŠ Corporate governance system
Ტ1ᲣReinforcing the Management Supervisory Functions and the establishment of a Group Management Committee
The Board of Directors consists of 18 members, three ofsuch as the management strategies for the Company and thewhom are external appointments. In addition to these three

corporate group as a whole, as well as management planningexternal directors, an additional eight directors serving on a non-issues. When Group companies act on matters that haveregular basis perform supervisory and oversight functions asmaterial implications for Group management, for instance when

their main duties.

operating companies are planning to make an investment that

We have also established a Group Management Committee inwhich executives responsible for each of our core businesses

exceeds a specified amount, they are required to seek priorapproval from the Company.

participate. The committee deliberates on important mattersᲢ2ᲣGroup Management Policy
Under a pure holding company system centered on Hankyu

increasing our management transparency.

Hanshin Holdings, Inc., four core operating companies work

Moreover, fund procurement has come under one roof –towards the best interests of the corporate group as a whole.

that of Hankyu Hanshin Holdings – and based on the overall

Each business unit is given autonomy extending to thestrategy of the holding company (the maximum amount for

scope of management planning related to its businesses.

fund procurement) said funds will be allocated to each

It is the responsibility of the corporate group as a whole tobusiness unit by the holding company. In addition todeliver a return to all of its shareholders and investors. We

minimizing procurement costs, this approach strengthens theare striving to maintain a good balance of management

governance of the corporate group.

information disclosure across our business projects, while

Annual Report 200719

Ტ3ᲣAuditing
The Company has six statutory auditors, including four

The Group Audit Division, the internal audit organization, in

outside auditors, who audit the performance of directors and the

addition to reviewing the audit plans and reports, also

businesses and financial position of the Company and Groupoversees all of the internal audit processes (including thecompanies.

workings of the whistle-blowing system) for the corporate

Four staff members are appointed to assist the auditors ingroup as a whole. Moreover, in addition to receiving regularthe performance of their duties. As a rule, the auditors meet

reports from the accounting auditors (as stipulated in theonce a month so that they can discuss and debate issues

Corporation Law), this Division also acts as an observerand come to executive decisions.

when the corporate group is subject to a visiting audit.

Ტ4ᲣEnsuring Transparency in Accounting Audits
In accordance with the Corporation Law and the Securities

ing to the auditing firm) and the Company.

and Exchange Law, we have entered into an agreement with

Measures are also in place to ensure that no employees of

KPMG AZSA & Co. to carry out accounting auditing. There

the said auditing company are engaged in accounting audits

are no special interests that compromise the relationshipof the Company beyond the ordinary period of duration.

between the external auditors (including employees belong-Ტ5Უ
Promotion of Compliance-Focused Management
Through our business activities, we have learned thecontrols, and by establishing the following measures, we areimportance of carrying out business tasks in the proper andworking to increase awareness with regard to compliance.

appropriate manner. The corporate group believes that the・ Establishment of compliance management divisions

establishment, operation and review of an internal control

・ Creation and distribution of a compliance manualsystem are of great importance. Compliance management is・ Running compliance-related seminars and workshops

being emphasised as a key part of this system of internal

Ტ6ᲣCompensation for Directors and Auditors（¥ million）

The following table shows the compensation for theInternal

External

Total

Directors（17）

85

28

113

Auditors（ 7 ）

10

8

18

Total

95

36

132

Company’s directors and statutory auditors for the term
ended 31st March 2007.

(rounded down to the nearest ¥1 million)

20

Annual Report 2007

Hankyu Hanshin Holdings

Environmental Preservation Activities

In October 2006, Hankyu Hanshin Holdings, Inc. established an Environmental Committee (Committee Chairman:
President of Hankyu Hanshin Holdings, Inc.) to set up a system to promote environmental preservation activities
across the corporate group. The Environmental Committee is charged with oversight of the environmental
activities of the core operating companies as well as companies supporting their businesses.
Ტ1ᲣIssuance of an Environmental Report by Hanshin Electric Railway Co., Ltd.
The Hanshin Electric Railway Co. Ltd. produced their 2006
Environmental Report to acquaint all persons involved with thedetails of the varied environmental programs that the HanshinGroup had undertaken in line with its Environmental Protection
Philosophy.
This report was broken down by business unit to make iteasier to understand. It covers environmental protection policies andactivities relating to the company’s railway, bus, and taxi
operations, as well as its businesses in the fields of real estate,
sports and leisure and travel.
*Please visit our website to access the 2006 Environmental Report.
http://www.hanshin.co.jp/company/csr/environment/report2006.html

Ტ2ᲣHankyu Express International Co., Ltd. and the Amanohashidate Hotel, Ltd. Awarded ISO14001 Certification
The internationally recognised environmental management certification ISO14001 was awarded to the International Transportation Division of Hankyu Express International Co., Ltd. (specificallythe Narita Cargo Centre, the Atsugi Cargo Centre and theWestern Japan Logistics Centre) on 30th June 2006; and to the
Amanohashidate Hotel, Ltd. on 24th July 2006.
Moreover, several other businesses in the Group wereawarded the same certification, including Shojaku Plant ofHankyu Corporation, Amagaski rail yard of Hanshin Electric
Railway, the Building Administration Division of Hankyu Facilities,
the Hotel New Hankyu Osaka and the Hotel New Hankyu Annex.
In addition to these businesses, many other business units havemade their own changes and improvements to their environmental
protection management systems.

Ტ3ᲣEstablishment of the Green Purchasing Regulations
Green procurement (purchase of environment-friendly products)
has been spreading steadily throughout Japan. As part of ourcommitment to make effective use of natural resources, on 1st
April 2006 the corporate group established a set of Green Purchasing Regulations promoting the responsible purchasing ofenvironmentally friendly office supplies and other products.

Our priority going forward is to reduce as much as possible
the environmental burden generated by the products and services that we purchase, and this policy will continue to proliferate
across our many companies and business units.

Ტ4ᲣDisclosure of our Groupwide CO2 Emissions
Every year, the corporate group compiles data on its CO2
emissions across all business units. From fiscal 2007 onwards, thisdata was made available on the internet. Please note that ourcurrent figures reflect the situation as of the end of March 2006, andaccordingly, data for the Hanshin Group is not included, as theintegration with the Hanshin Group did not take place until
October of 2006.

Travel and International
Transportation: 1.1%
Entertainment andCommunications: 2.2%
Retailing: 2.9%
Real Estate: 12.3%
Hotels: 13.6%

Our CO2 emissions
for fiscal 2006
(per business unit)

Others: 9.7%

total of
428,000
tons

Urban Transportation: 58.2%
As the corporate group consists ofnumerous business units and locations,
we were unable to obtain data for someunits and locations in time for printing.

Our Basic Stance on CSR（Corporate Social Responsibility）
In addition to our pursuit of profitability across the rangeof our businesses, we are also aware of the need tobalance this with the fulfillment of our social andenvironmental responsibilities, which include culturalcontributions, environmental preservation, and theimportance of respecting the rights of the individual. To
strengthen CSR, it is necessary to find the right balance
between social and cultural contributions, environmental
preservation and respect for employee rights.

Annual Report 200721

Overview of Core Businesses

Real Estate

The Urban Transportation business, centred on Hankyu Corporation and Hanshin
Electric Railway Co., Ltd., operates
railway, bus and taxi services forming an
extensive transportation network throughout the Kansai area. Its mission is toprovide safe, comfortable and highly
convenient transportation services in ourservice area, the Kyoto-Osaka-Koberegion. We are encouraging the use of IC
cards as an important business development tool. Through the Nishi-Osaka Line
Extension Project, now underway, we arealso creating a wide area railway network
linking Kobe, Osaka (Minami) and Nara.

Consisting of real estate leasing, trading
and management businesses, the Real
Estate business derives its core earnings
from rental properties and its condominium
business. Centred on the Hankyu-Sanbangai
and Herbis OSAKA developments in the
Umeda area of Osaka, this business is
engaged in major attractive projects(such as the rebuilding of Umeda Hankyu
Building, and the development ofNishinomiya-Kitaguchi area) aimed atreinvigorating areas served by our lines,
drawing on our track record in creating
value along our lines through development projects.

This segment consists of the sports business, centred on baseball interests (thenationally popular professional baseballteam “Hanshin Tigers” and the Hanshin
Koshien Stadium); the stage revue business(Takarazuka Revue); the advertising agency
business, which uses advertising spaces
on railways and other public transport;
and the publishing business, which deals
mainly with magazines. The Entertainment
and Communications business aims torealise dreams and bring excitement to its
customers all over Japan through a wide
range of live entertainment.

(¥ billion)(¥ billion)

Total length of lines operated:
Hankyu Corporation
Hanshin Electric Railway

146.5 km45.1 km

Revenues from operations(¥ billion)200
150(190.9)(189.6)

181.9
154.0

(188.8)200(167.3)
150

176.3

100

(90.2)

100

50

50

0

2006/3

2007/340

Operating income

30

40

75.7

(34.4)

33.2

30.6

40.1

20

2006/3

2007/3(¥ billion)(34.8)

0

2006/3

2007/3(¥ billion)(38.5)

40(31.9)
30

36.3

12

(11.2)

10

(8.5)

8

20

20

10

10

6

21.6

4

5.2

4.1

2
0

Share of total revenues
from operations
Annual Report 2007

0

111.8

(88.8)

80
60

100(¥ billion)

22

Entertainment andCommunications

Urban Transportation

2006/3

2007/30

2006/3

2007/30

2006/3

2007/3

24.1%

20.4%

9.4%

P.24-27 >>>P.28-35 >>>P.36-37 >>>Hankyu Hanshin Holdings

Retailing

Travel and International
Transportation

This segment comprises the department
store business (The Hanshin Department
Store’s Umeda store in Osaka as wellas the chain operated by The Hanshin
Department Store, Ltd.); retailing, whichspans a wide range of outlets in areas
served by our lines, such as bookshops,
convenience stores and cosmetics andaccessory stores; and the food anddrink business operated by Creative
Hankyu Co., Ltd. Our Book 1st. chain has
also opened stores in the Tokyo area. We
plan to place the department store business outside the scope of consolidation
when The Hanshin Department Store, Ltd.
is integrated into Hankyu Department
Stores, Inc. in October 2007.

In the travel business, Hankyu Express
International Co., Ltd. offers the Trapics
brand of products tailored to customers’
vacation styles, based on development ofappealing products and rigorous quality
management. Hanshin Travel service offers the high-quality Friend Tour line of
package tours, with a focus on European
destinations and customised tours forbusiness travellers. The internationaltransportation business offers highquality logistics services through Hankyu
Express International and Hanshin Air
Cargo. Based on our competitiveness indelivering what the customer needs, weare focusing on expanding logistics operations in East Asia centred on China.

Hankyu-Hanshin-Daiichi Hotel group operates 43 hotels, consisting of 14 directly
managed by Hankyu Hotel Management
Co., Ltd., and 29 belonging to chainsoperated by franchise. It is one ofJapan’s most important hotel chains,with approximately 8,200 guest rooms. It
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 andKansai areas. In addition to chain
operations, it also manages the new andalready very popular The Ritz-Carlton,
Osaka, an international luxury brand withwhich it has formed an alliance.

(¥ billion)(¥ billion)(¥ billion)(188.7)(185.8)

88.3

80

150

155.9
60

(93.9)(93.8)

100

80(70.3)

67.3(69.4)

65.4

60

53.9

100

40
40

50
0

62.0
2006/3(¥ billion)

2007/3

0

(5.8)

4.7

(4.4)

2

2.4

4.2
(2.7)

3

3

0

(1.4)

1.3

1.2
0.9

2.5

(0.6)

0.6

1

0.3

0

0

0

2007/3

2007/3

1.5

1

2006/3

2006/3(¥ billion)

5
4

4

2007/3

2006/3

2007/3

0.4
2006/3Operating income

52

2006/3(¥ billion)

(6.0)

6

20

20

Revenues from operations

200

Hotels2007/3

11.9%

8.8%

P.38-39 >>>P.40-41 >>>P.42-43 >>>Share of total revenues
from operations

20.6%

Numerical values are by segment.
Revenues from operations represent amounts prior to consolidation adjustments; that is, revenues from outside customers plus intersegment transfers and transactions• For the term ended 31st March 2006, consolidated results for Hankyu Holdings are shown and consolidated results for Hankyu Hanshin Holdings (with consolidation of the Hanshin Group dated from the second
quarter) are given for the term ended 31st March 2007
• Figures in brackets for the term ended 31st March 2006 are simple additions of the results of Hankyu Holdings and Hanshin Electric Railway, while figures in brackets for the term ended 31st March 2007 assume
consolidation of Hanshin Electric Railway at the beginning of the term (12-month period)
Breakdown of revenues from operations for each segment show proportions of such revenues from outside customers in the term ended 31st March 2007 (with consolidation of the Hanshin Group dated from thesecond quarter). Others represent 4.8% of the total
Annual Report 200723

Urban Transportation Core companies : Hankyu Corporation, Hanshin Electric Railway

Overview of the year ended 31st March 2007

Management integration helps upgrade transportation networks,
while IC cards stimulate demand
PiTaPa IC card payment service encourages use of railways
In July 2006, the HANA PLUS PiTaPa IC commuter pass was introduced by Hankyu Corporation, Nosé Electric
Railway Co., Ltd., and Kita-Osaka Kyuko Railway Co., Ltd., while the CoCoNet PiTaPa IC commuter pass waslaunched by Hanshin Electric Railway Co., Ltd.
Through measures such as offering payment by PiTaPa at automatic bicycle parking facilities in station
precincts, we are increasing the appeal and practical value of IC cards, bringing more people onto our railways.

Measures to attract passengers to our other facilities in our service areas
Measures to attract customers to areas served by our stations include the issue of the Hankyu and Hanshin
version of the “Ii Koto” ticket for seasonal promotions.

Safety measures and barrier-free facilities
To increase the safety of railway transportation, we have upgraded automatic train-stop (ATS) systems on the
Hankyu Kobe line, and are taking measures to ensure that station facilities and railway cars are barrier-free.

Increasing convenience and cutting journey times through timetable changes
We have revised our timetables to bring our customers still greater convenience. From October 2006,
Hankyu Railway’s expresses and commuter expresses have stopped at Hankyu Shukugawa station, while
Hanshin Electric Railway expresses are now stopping at Hanshin Koroen station. From March 2007,
Hankyu expresses have stopped at Hankyu Awaji station. Due to the above-mentioned ATS upgrade,
Hankyu Corporation has been able to shorten journey times between Hankyu Sannomiya and Umeda from 28
minutes to 27 minutes, without compromising safety.

Progress on the Nishi-Osaka Line Extension Project (Hanshin Namba Line)
Hanshin Electric Railway has been preparing for the opening in spring 2009 of the Nishi-Osaka Lineextension (Nishikujo — Kintetsu Namba stations, with main works undertaken by Nishi-Osaka Railway Co., Ltd.,a third-sector company, with financing from Hanshin Electric Railway). It has also been carrying out
improvement works at Amagasaki station, where the Nishi-Osaka Line (Nishi Kujou to Amagasaki) meets the
Hanshin Main Line, and adjacent areas.
We have decided to call this line the Hanshin Namba Line, comprising the line
between Amagasaki and Kintetsu Namba, including the existing Nishi-Osaka Line.

New bus routes between Hankyu and Hanshin stations
In bus operations, Hankyu Bus and Hanshin Bus have established new routes
linking Hankyu Nishinomiya-Kitaguchi station and Hanshin Nishinomiya station,
further enhancing customer convenience.
Hanshin Bus

24

Annual Report 2007

Hankyu Hanshin Holdings

Five Kansai private railways: total distance operated
and total number of passengers (fiscal 2007)
Kilometres

Thousands of passengers

582.3 Kintetsu 611,865
154.8

Nankai 231,662

146.5 Hankyu 618,877
88.1

Hanshin 179,871

45.1
600

500

400

300

200

100

Keihan 291,712

0

0

300,000

600,000

Arashiyama

Source: Securities reports of each company

Hankyu Kobe Line46.9kmHankyu Takarazuka Line

28.5kmHankyu Kyoto Line

65.4kmHanshin Electric Railway

40.1kmHanshin Nishi-Osaka Line
Extension Project
Hanshin Namba Line

3.8km (under construction)*1

Nisseichuo

Kobe Rapid Transit Railway Line 5.7km *1, 2
Kobe Rapid Transit Railway Line 5.0km *1, 2
Nosé Electric Railway Line

Kawanishinoseguchi

14.8kmMino-oKawaramachi

Kyoto

Myokenguchi

Senri- KitaChuo senri

Takarazuka

Kita-Osaka Express Railway Line 5.9km

Kobe
Tokyo
Kyoto
Osaka

Itami
Nishinomiya-kitaguchi
KoyoenEsaka
ShukugawaJuso Awaji
KoroenKobe
Nishinomiya Imazu
Tenjimbashisuji-rokuchome
Sannomiya
Mukogawa
Umeda
Mukogawa-danchi-mae
Kosoku Kobe
Nishikujo
Osaka
Amagasaki
Motomachi
Kintetsu-namba

Nishidai*1 Tier 2 Railway Operations*2 Some 3.5km of the Kobe Rapid Transit Railway line is shared by several operators (Kosoku Kobe to Nishidai)■ Hanshin Namba Line

Sanno
miya

Hanshin Main Line

Amagasaki

Umeda

Daimotsu
Dekijima

Existing
Nishi-Osaka Line

Fuku
Dempo
Chidoribashi

ya L

ine

ine/ ine/ neiya Li Ko dosuji L bashi L
a
k
i
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u
um
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n
ne/Y
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s
i
L
T
m
L
e
e
u
in
n
ri
n
jyo
Mai i Line/S mae Li
o Li
aho
nich
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kai
j
Chu
Nag
Sen
Nan amato nnichisaka
way
way
way
O
b
b
b
u
u
u
Y
e
R
J
S
S
S
JR way S
Sub
ine

iL
esak

New!

Nishikujo

Kujo

umi

New!

Dome-mae

uc
r yok

hi L

ine

Line

New!

Sakuragawa

Kintetsu

Namba

ka
/Nan

i Ko

Kintetsu
Line Kintetsu
Nara

Hanshin-Namba line (Amagasaki to Kintetsu Namba)

Annual Report 200725

Business Performance
Despite a dent in revenues as passengers returned to JR West after the tragic derailment in 2005 on their
Fukuchiyama line, Hankyu Corporation’s operating performance picked up on a rise in non-commuter
passengers.
Meanwhile, Hanshin Electric Railway Co., Ltd. enjoyed healthy growth in revenues, drawing in residents ofcondominiums and other developments along areas served by its stations.

■ Business performance (consolidated) in the term ended 31st March 2007
Revenues from operations: ¥181.9 billion (up ¥27.8 billion year-on-year)
Operating income:¥ 33.2 billion (up ¥ 2.6 billion year-on-year)(Note) Hanshin Group’s first-quarter results are not included (i.e. consolidated figures cover only 9 months of Hanshin’s business year).
Year-on-year comparisons are against the results of Hankyu Holdings, Inc. on a consolidated basis for the year ended 31st March2006.

For reference only: Below is a results calculation assuming that the Hanshin Group had integrated its management with
Hankyu Holdings, Inc. at the beginning of the fiscal term (i.e. consolidated results assuming a full 12-month period).
Revenues from operations: ¥191.0 billion (up ¥1.3 billion year-on-year)
Operating income:¥ 34.4 billion (down ¥0.4 billion year-on-year)(Note) For the previous term, the simple sum of the results of Hankyu Holdings, Inc. and Hanshin Electric Railway Co., Ltd. on aconsolidated basis in the year ended 31st March 2006 is employed.

Hankyu Railway

Hanshin Electric Railway

Hankyu Bus

26

Annual Report 2007

Hankyu Hanshin Holdings

Future Business Strategy

Safer, more convenient and appealing transportation services throughcombined technologies and expertise□ Basic Strategies
While addressing the issues of declining population and intensifying competition in areas served by our
stations, as well as structural change in demand and markets (such as providing barrier-free environments), we
will adopt the following three priority policies to build competitiveness for sustainable growth and increase value
along Group railway lines.

(1) Provide services of real value to our customers(2) Rigorously commit to low-cost operation(3) Provide safe, high-quality transportation services
that are trusted by the community

Policies to be launched in the year ended March 2008
Increase value along Group railway lines○ Hankyu Corporation and Hanshin Electric Railway will deepen their collaboration over fares(frequent passenger discount tickets etc)
○ Expand services available with IC cards
・Launch of commuter passes valid on both Hankyu and Hanshin Lines
・Increase the number of Hankyu Bus routes using IC cards○ Strengthen collaboration in public relations and advertising, using each others’ retail and entertainment facilities
in areas served by our stations

Expand the network○ Steady progress on the Nishi-Osaka Line Extension Project (scheduled to begin operations in spring 2009)○ Open new stations on Hankyu Railway lines: Settsu-shineki (tentative name), Minami Nagaokakyoshineki (tentative name)○ Consider improvements to bus routes operated jointly by Hankyu and Hanshin

Share and enhance technology and know-how○ Shared use of facilities○ Joint project ordering, and harmonisation of specifications for equipment○ Exchange of personnel

Infrastructure upgrades along our lines○ Continue works on elevated lines in areas served by stations along Hankyu and Hanshin lines○ Promote safety improvement policies○ Barrier removal at stations earmarked for upgrades

Annual Report 200727

Real Estate Core companies : Hankyu Corporation, Hanshin Electric Railway

Overview of the year ended 31st March 2007

Strong performance driven by the condominium business

Good year for condominium projects and housing projects
Sales were strong in the condominium business at Geo Saito Nozomioka (Ibaraki, Osaka Prefecture), Geo Park
Square Ikeda (Ikeda, Osaka Prefecture), THE TOWERS DAIBA (Minato-ku, Tokyo) and St. Place Osaka(Miyakojima-ku, Osaka), and in the housing-lot sales business (Geo Park Square Ikeda Premium (Ikeda,
Osaka Prefecture), Hankyu Takarazuka Yamatedai (Takarazuka, Hyogo Prefecture), Kobe Hanayamate
project (Kita-ku, Kobe,) and Shioya Tobiodai (Tarumi-ku, Kobe).

Business was also robust in real estate leasing
We took measures to attract tenants and lower management and operation costs at all of our rental
properties and commercial facilities, including Umeda Hanshin Daiichi Building (Herbis OSAKA; Kita-ku,
Osaka). In addition, these measures partially offset the loss of revenues at Umeda Hankyu Building due torebuilding works. We also broadened our profit base by aggressively undertaking operation andmanagement of office buildings and commercial facilities from companies outside the Group.

■ Business performance (consolidated) in the term ended 31st March 2007
Revenues from operations: ¥176.3 billion (up ¥64.5 billion year-on-year)
Operating income:¥ 36.3 billion (up ¥14.7 billion year-on-year)(Note) Hanshin Group’s first-quarter results are not included (i.e. consolidated figures cover only 9 months of Hanshin’s business year).
Year-on-year comparisons are against the results of Hankyu Holdings, Inc. on a consolidated basis for the year ended 31st March2006.

For reference only: Below is a results calculation assuming that the Hanshin Group had integrated its management with
Hankyu Holdings, Inc. at the beginning of the fiscal term (i.e. consolidated results assuming a full 12-month period).
Revenues from operations: ¥188.8 billion (up ¥21.5 billion year-on-year)
Operating income:¥ 38.5 billion (up ¥ 6.6 billion year-on-year)(Note) For the previous term, the simple sum of the results of Hankyu Holdings, Inc. and Hanshin Electric Railway Co., Ltd. on aconsolidated basis in the year ended 31st March 2006 is employed.

Numbers of Condominiums Sold*1(Total for Hankyu Corp., Hankyu Realty*2
and Hanshin Electric Railway)*3
1,200

1,194

1,000
800
600

973
785

914
703

400
200
0

28

Annual Report 2007

2003/3 2004/3 2005/3 2006/3 2007/3*1 Indicates the number of units calculated using the equity method.
*2 Hankyu Realty became Hankyu Corporation’s consolidated
subsidiary in the term ended 31st March 2003.
*3 Hanshin Electric Railway became a consolidated subsidiary in theterm ended 31st March 2007.

Hankyu Hanshin Holdings

Future Business Strategy

We will provide safe and convenient basic infrastructure that supports
community lifestyles, while creating new value in areas served by our stations
and enhancing enterprise and asset value.
□ Basic Strategies
Leveraging our strengths in building our brand and trust in the Kyoto-Osaka-Kobe area, in planning anddevelopment of attractive commercial facilities in the Umeda area, and in value creation in areas served by ourrailways through urban development projects and high quality housing, we have adopted the following
priority strategies.
○ By leveraging our expertise in community building, provide safe and convenient basic infrastructure andproviding services that support community lifestyles, we will・Develop Nishinomiya-Kitaguchi (former Hankyu Nishinomiya Baseball Stadium area) and the area around
Hanshin Mikage station
・Strengthen the condominium business and focus on the detached house business throughcollaboration between Hankyu and Hanshin○ Enhance enterprise value and optimise cash flow by striking an appropriate balance between
investments and returns○ Raise our profile in the Umeda area, through renovations of established properties
・Undertake large-scale development projects such as the rebuilding of the Umeda Hankyu Building

Geo Tower Nishinomiya Kitaguchi (Nishinomiya, Hyogo)

Geo Grande Takarazuka Yamatedai (Takarazuka, Hyogo)

HEP FIVE (Kita-ku, Osaka)

Geo Itami Gocho Premium (Itami, Hyogo)

HERBIS ENT (Kita-ku, Osaka)

Annual Report 2007

29

Policies to be launched in the year ended March 2008
Combine the expertise and brand strength of Hankyu and Hanshin in condominiums toboost earnings potential○ Broaden the business portfolio and strengthen the operating structure by providing a stable supply of
approximately 1,200 condominium units per year (we plan to deliver 1,190 units during the year ending
March 2008)○ Develop the Geo brand of condominiums○ Develop Hankyu and Hanshin joint projects (Geo Grande Rokko, Kobe)○ Leverage Hanshin’s expertise to strengthen the house-building business

Large-scale projects that have got fully underway○ Launch of full-scale works in the reconstruction of Umeda Hankyu Building and development of Hankyu
Nishinomiya Baseball Stadium site (see P.31 and P.33)○ With the extension of the Osaka Monorail Saito Line in March 2007, accelerate housing development inresponse to the opening of Saito-Nishi station○ Develop new office building construction projects in Akihabara (Tokyo) and Tsukiji (Tokyo) and
Kawaramachi (Kyoto)

Reorganise property management and building maintenance business○ We aim to streamline Group management by creating a new comprehensive property management andmaintenance company with the registered trade name Hankyu Hanshin Building Management Co., Ltd., tobe financed by Hankyu Corporation and Hanshin Electric Railway Co., Ltd. The new company, to beformed in October 2007, will integrate the operations of Hankyu Facilities Co., Ltd., Hanshin’s building
operation business and Hanshin Engineering Co., Ltd.

■ Street Survey into Preferred Living Areas （Kansai region）

represents areas along Hankyu and Hanshin Lines

Preferred Living Areas
Rank Place

Improved Imaged Areas(Location)

Rank Place(Location)(Ashiya City, Hyogo Prefecture)

Mikage(Kobe City, Hyogo Prefecture)

1

Saito

Takatsuki(Takatsuki City, Osaka Prefecture)2

Nishinomiya (Nishinomiya City, Hyogo Prefecture)

Rank Place(Location)

1

Ashiya2

Nishinomiya (Nishinomiya City, Hyogo Prefecture)

11
12

3
4

Kobe

13

Minoh

(Minoh City, Osaka Prefecture)

3

Sanda

Shukugawa (Nishinomiya City, Hyogo Prefecture)

14

Umeda

(Osaka City, Osaka Prefecture)

4

Amagasaki (Amagasaki City, Hyogo Prefecture)5

Okamoto(Kobe City, Hyogo Prefecture)

15

Suita

(Suita City, Osaka Prefecture)

Kyoto(Kyoto City, Kyoto Prefecture)

16

Sannomiya (Kobe City, Hyogo Prefecture)

5
6

Kobe

6
7

Takarazuka (Takarazuka City, Hyogo Prefecture)

17

Kurakuen(Nishinomiya City, Hyogo Prefecture)

7

Ikoma

8

Ibaraki(Ibaraki City, Osaka Prefecture)

18

Kitasenri(Suita City, Osaka Prefecture)

8

Seishin-Chuo (Kobe City, Hyogo Prefecture)9

Toyonaka(Toyonaka City, Osaka Prefecture)

19
20

Tezukayama (Osaka City, Osaka Prefecture)

9

Takatsuki(Takatsuki City, Osaka Prefecture)

Rokko

10

Yamada(Suita City, Osaka Prefecture)(Kobe City, Hyogo Prefecture)

10 Senri-Chuo (Toyonaka City, Osaka Prefecture)(Kobe City, Hyogo Prefecture)(Ibaraki and Minoh Cities, Osaka Prefecture)(Sanda City, Hyogo Prefecture)(Kobe City, Hyogo Prefecture)

Tomigaoka (Nara City, Nara Prefecture)(Ikoma City, Nara Prefecture)

Source: Survey of 3rd August, 2006 by Sumitomo Real Estate and 7 other major real estate firms

30

Annual Report 2007

Hankyu Hanshin Holdings

Major development projects
In the year ended March 2008, we will finally launch full-scale construction at large development
projects along areas served by Hankyu and Hanshin stations. Below is a progress report on
projects that underpin the growth of the real estate business, from the bustling Hankyu Umeda area
and JR Osaka station area projects to major commercial/entertainment facilities in the Osaka and Kobe
areas and community-building projects that emphasise harmony with nature.

Building a new pillar of real estate operations■ Rebuilding of Umeda Hankyu BuildingThis is one of the projects through which we are commemorating the 100th anniversary of the establishment of Hankyu. We
aim to construct a multiple-use commercial building on a scale that will make it a landmark in the Umeda area, with barrier-freeconnections with surrounding facilities and enhanced pedestrian traffic flows.
The application of the Urban Renaissance Special Measures Law, enabling 800% relaxation of floor-area ratios, means that
we can build to a floor-area ratio of 1,800%. At Umeda we plan one of Japan’s largest department stores, a high-rise buildingthat will dwarf rivals in the neighbourhood in terms of earthquake-resistance and profitability, with 2 floors below ground and
13 floors above; offices will occupy floors 17-41. We expect this project to develop into a major pillar of the real estate businessgoing forward, giving the Umeda area prestige as a commercial centre and greatly increasing its rental area.

Artist’s impression of completed new Umeda Hankyu Building

Artist’s impression of the concourse of the new building■ Project overview (planned)
Current building

Planned buildingScale

2 floors below ground, 12 floors above ground 2 floors below ground, 41 floors above ground, and a rooftop level

Height45m

Total area

112,600m

Floor-area ratio

1,000%

187m
2252,000m2
1,800%

Total investment : ¥57.5 billion
Grand opening: second half of fiscal year ending March 2012

Annual Report 200731

Prime location developments in Osaka by cross-section of Group companies■ Osaka Station North Area (Northern Railway Yard of Osaka Station) Development
This project will contribute significantly to the revitalisation of the economy of the Kansai area. In the preliminary
development area (blocks A, B and C, totaling 7ha), the alliance of corporations in which Hankyu Corporation isparticipating was selected as scheduled developer for the entire project.
In the preliminary development area, we are involved in a project to build a “Knowledge Capital” zone (facilities forresearch into robots and IT), as well as commercial/office and hotel/residential facilities. With opening targeted for 2011, thisproject, drawing on our development record and expertise in the Umeda area, and bringing together the publicorganisations for urban development and railway and transportation that selected the contractors, Osaka city government, andan alliance of developer companies, will contribute to building an attractive setting and revitalisation of the Umeda area of Osaka.
Development concept: Create a community with a bright future founded on innovation and knowledge

Buildings associated with our groupin Umeda area
Preliminary development of Northern Railway Yard of Osaka Station(with supplementary images)

Hankyu Chayamachi Bldg.
(Hotel Hankyu International)

C Block
B Block■ Proposed project overview

Hotel newHankyu Annex

A Block* Subject to change depending on discussions with authorities

A Block Total site area: 1.1ha
Gateway for “Palace of Creativity” concept aimed at
attracting people in the know
New functions: Commercial facilities, offices,
centre of lifestyle information

The Osaka Station
north exit area
(Northern Railway
Yard of Osaka Station)(about 24 hectares)

B Block Total site area: 1.5ha
Main zone for “Palace of Creativity” centered on
world-class “Knowledge Capital”
New functions: “Knowledge Capital” functions,commercial facilities, offices

NU＿ chayamachi
Eastern Chayamachi district
Hankyu Sanbangai

HankyuUmeda
Station Hankyu Terminal Bldg.
Hotel newHankyu Osaka

Preliminary
development area
(about 7 hectares)

HEP FIVEHEP NAVIOC Block Total site area: 1.2ha
Hospitality zone of the “Palace of Creativity,” ameeting place for bright minds to linger andexchange views
New functions: Hotels, rental housing,condominiums, commercial facilities
Group Representative:
A and C Blocks: Mitsubishi Estate
Block B: Orix Real Estate Corp.
Delivery of land: June 2007
Opening: 2011

n

io
tat

J

ion

a

at
St

h
us

k

Fu

tion
n
shia Sta.
ore)nldg t StHamedn B artmenihUns DepHERBIS ENTHERBIS OSAKAThe Ritz-Carlton, Osaka

HOTEL HANSHIN
Annual Report 2007

Umeda Hankyu Bldg.
(Hankyu Department Store)ai-H hin
Da e Hans
h
(T

im

32

aS

ak

s
RO

Shin Hankyu Bldg.

Hankyu Grand Bldg.

NHankyu Hanshin Holdings

After the Western section, development begins at the Eastern section■ Chayamachi redevelopment
Following on from the NU– chayamachi commercial facilities opened in theWestern section in October 2005, we will launch a multi-purpose
development project in the Eastern section, comprising a commercial
and residential block, a school building and a services-oriented block.
We plan to undertake management of the lower-level commercial
facilities in the commercial wing, and sell off condominium units.

■ Project overview (planned)
Site area : about 5,130m2
Total floor area : about 34,700m2
Building size : 1 floor below ground, 31 floors above
Launch of operations of commercial facilities and transfer of residential facilities : Yearending March 2011

NU
_ chayamachi

One of Japan’s largest commercial facilities - a new landmark between Osaka and Kobe

■ Nishinomiya-Kitaguchi development project (Hankyu Nishinomiya Gardens)
In the year ending 31st March 2008, we are launching full-scale development of the Hankyu Nishinomiya Gardens large-scalecommercial facility near Hankyu Nishinomiya-Kitaguchi station, which stands in the middle of a residential area between Osakaand Kobe. In the Nishinomiya-Kitaguchi station area, the Hyogo Performing Arts Centre on the south side and at the north exit
the Kitaguchi-Minami Hankyu building were opened. Hankyu Realty Co., Ltd. is progressing with the construction of the Geo
Tower Nishinomiya-Kitaguchi condominium block.
This project, aimed at creating a new community, is a part of the redevelopment of the former site of the Hankyu
Nishinomiya Baseball Stadium. With Hankyu Department Store forming the core retail complex, and a multiplex cinema built
by Toho Co., Ltd. and OS Co.,Ltd., we are creating a commercial and entertainment space that draws on the combined strengthsof the Hankyu Hanshin Toho Group.

■ Project overview (planned)
Rental area : 100,000m2
Number of retail outlets : approximately 250
Opening date : Autumn 2008

Annual Report 200733

Creating an appealing community■ Development of former Takarazuka Familyland site
In the year ended March 2006, we completed the commercial wing (total floor area 7,400m2) and began development in thefollowing fiscal year of a 50,000m2 residential zone comprising roadside retail outlets, the Kwansei Gakuin Elementary
School, condominiums and parks.
During the year ending March, 2008 and beyond, a range of retail outlets along major roads is scheduled to open. The
Kwansei Gakuin Elementary School is scheduled to open in 2008. We plan to sell some 600 condominium units in two phases
between 2008 and 2009. The project concept is “a status symbol home at a prestige address: Takarazuka.”■ Project overview (planned)
Year ending March 2009:
Condominium unit sales, Phase I :294 units completed
Year ending March 2010:
Condominium unit sales, Phase II :Approximately 300 units completed
Geo Tower Takarazuka (Takarazuka, Hyogo)

Commercial Wing

Houses and land lots were sold out on the day of sales■ Saito Development Project
The Saito project is a 21st-century public-private sector new-town development, located on approximately 743ha of hilly country
between Ibaraki and Minoh cities, some 20km north of central Osaka. With harmony between human communities and natureas the theme, we intend this to be a cluster of international academic, cultural and research and development institutions, mainlyin the life sciences. We also have in mind development of a new residential neighbourhood based on the concept of“building a new garden city”.
Up to the year ended 31st March 2007, we sold out all condominiums and residential lots, including at our newest condo
development at Geo Saito Nozomioka (Phase I), on the same day they were marketed. In March 2007, the Saito-Nishi stationon the Osaka Monorail Saito Line opened, meaning that Senri Chuo can be reached in 17 minutes and Umeda in 36
minutes (not including time needed to change trains). In the spring of 2007, the total population reached some 4,500
permanent residents, with a working population of some 1,000.

■ Project overview(Condominiums to be marketed between year
ending 2008 and year ending 2013)
Condominiums : Approximately 850 units
Detached homes (ordinary):
Approximately 250 lots
Land for amenity use (parks) : 8.7ha
As of 31st March 2007, we have only included
designated properties.
Geo Saito Nozomioka (Ibaraki-shi, Osaka)

34

Annual Report 2007

Hankyu Saito Garden Village Asagi (Ibaraki-shi, Osaka)Hankyu Hanshin Holdings

A new landmark in Kyoto

Setting the trends in fashion, lifestyle and dining■ Kawaramachi development project “Kotocross Hankyu Kawaramachi”
The Shijo Kawaramachi project is a commercial building linking directly with theHankyu Kyoto Line terminus in Shijo Kawaramachi, an ideal location for enjoying thebustle of Kyoto’s tourist and shopping areas. This commercial building has nine
floors above ground and one below, and will also contain a directly managed Book 1st.
store by Hankyu Corporation.

■ Project overview (planned)
Site area : 640m2
Rental area : 3,000m2
Building size : 1 floor below ground, 9 floors above
Tenants: 8 stores
Opening : October 2007

Perspective drawing of the Kotocross Hankyu Kawaramachi Building

Redevelopment of land owned by Hanshin Electric Railway

Residential development area

■ Nishinomiya City Uedahigashimachi development projectAt 14,400m2 of land owned by Hanshin Electric Railway Co., Ltd. adjacent to Mukogawa
Danchimae station on the Hanshin rail network, the Hapia Gardens MUKOGAWA
detached housing estate at the North entrance is being integrated with rental commercial
facilities at the south entrance. Units went on the market in October 2006. The location next
to commercial and station facilities, without raising environment or security concerns, has beenhighly praised for its convenience.

Detached houses for sale

Mukogawa
Danchimae station

Commercial
Facilities

Commercial development area

Site area : 8,900m2
Total number of units : 55

Rental commercial facilities

Development plan

Site area : 5,500m2
Retail area : 2,000m2
Building size : 1 floor above ground(rooftop parking facilities)
Opening : July 2007

Residential development area

Annual Report 200735

Entertainment & Communications Core companies : Hankyu Corporation, Hanshin Electric Railway

Overview of the year ended 31st March 2007

Hanshin Tigers, Takarazuka Revue both have strong year

Hanshin Tigers post year-on-year increase in number of spectators
In the sports business, the professional baseball team “Hanshin Tigers” were aiming for their second
consecutive Central League title, and a shot at the Japan Series. Their campaign, lasting to the end of the season,
pulled the fans in. Total attendance for home games was 3,155,000, approximately 20,000 more people thanin 2005, when the Hanshin Tigers won the Central League pennant.

Takarazuka Revue maintains high operating ratios
In stage promotions, we kept operating ratios (seats taken compared with tickets
available) at a high level at Takarazuka Grand Theatre (Takarazuka, Hyogo Prefecture) andTokyo Takarazuka Theatre (Chiyoda-ku, Tokyo), thanks to productions such as“Never Say Goodbye - Aru Ai no Kiseki” by Soragumi (Cosmos Troupe) and “Lucifer’s
Tears” by Yukigumi (Snow Troupe), and farewell performances by leading stars taking
male role. Takarazuka Revue merchandise marketed by Quatre Rêves also sold well in
the year.
©Takarazuka Revue Company

Umeda Arts Theatre stages a wide variety of productions
Umeda Arts Theatre (Kita-ku, Osaka) proved popular, with a wide range of performances such as“Copacabana” by Takarazuka Revue and “Elisabeth” by Vereinigte Bühnen Wien (United Stages Vienna), which
staged a memorial production in Japan.

Expansion of cable television
As terrestrial digital broadcasting spreads, Bay Communications Inc. expanded our digital television
services and launched our “cable-plus telephone” service, in measures to attract more customers.

■ Business performance (consolidated) in the term ended 31st March 2007
Revenues from operations: ¥75.7 billion (up ¥35.6 billion year-on-year)
Operating income:¥ 5.2 billion (up ¥ 1.1 billion year-on-year)(Note) Hanshin Group’s first-quarter results are not included (i.e. consolidated figures cover only 9 months of Hanshin’s business year).
Year-on-year comparisons are against the results of Hankyu Holdings, Inc. on a consolidated basis for the year ended 31st March2006.

For reference only: Below is a results calculation assuming that the Hanshin Group had integrated its management with
Hankyu Holdings, Inc. at the beginning of the fiscal term (i.e. consolidated results assuming a full 12-month period).
Revenues from operations: ¥88.9 billion (down ¥1.4 billion year-on-year)
Operating income:¥ 8.5 billion (down ¥2.8 billion year-on-year)(Note) For the previous term, the simple sum of the results of Hankyu Holdings, Inc. and Hanshin Electric Railway Co., Ltd. on aconsolidated basis in the year ended 31st March 2006 is employed.

36

Annual Report 2007

Hankyu Hanshin Holdings

Future Business Strategy□ Basic Strategies
We are further strengthening our revenue base by maximising the appeal of our proprietary Hanshin Tigers,
Koshien and Takarazuka brands, with their mission of fulfilling dreams and providing excitement. We are also
focusing on increasing the excitement of live events, and the various media they use.
Ũ Increasing the appeal of live events (Hanshin Tigers, Takarazuka Revue, Umeda Arts
Theatre, “Billboard Live” club and restaurant, etc.)
・ Renovation of Hanshin Koshien Stadium (with reopening scheduled for March 2009)
Ũ Upgrading and expansion of media we operate
・ Increase the number of channels offered, and strengthen content provision throughenhanced mobile services
・ Enhance appeal of publishing, broadcasting and advertising products, and develop
mixed-media operations
Ũ Leverage our leisure facilities (Rokko mountaintop leisure facilities, Takarazuka“Billboard Live” club and restaurant
Garden Fields, etc)
・Strengthen alliances and partnerships with Group operations that attract large numbers of people

Policies to be launched in the year ended March 2008
Launch of refurbishment works at Hanshin Koshien Stadium
We plan two-phase works during the off-season, with completion scheduled for March 2009
■ Refurbishment concept○ Respecting history and tradition
Ivy-lined outer walls and “silver umbrella” roof (covering all infield seats
but leaving outfield seats and playing area open)○ Improved safety measures
Structural strengthening against earthquakes○ Improved convenience
Improvements to seating, installation of “Suite” seating (tentative name) andup-close front seating, installation of stores and toilets, etc, more facilities forwheelchairs, installation of lifts, etc○ Environmental measures
Use well water and rainwater for pitch-watering, get the ivy to grow back,and consider introduction of solar-power facilities

Renovation of Hanshin Koshien Stadium■ Renovation schedule
October 2007 to March 2008:
October 2008 to March 2009:
March 2009:

Works on the in field seating area
Works on the “Alps” and outfield seating,installation of “silver umbrella” roof cover
Reopening■ Total cost of works
Approximately 20 billion

Annual Report 200737

Retailing Core companies : Hankyu Corporation, Hanshin Electric Railway

Overview of the year ended 31st March 2007

Addition of department store business generates higher revenues andearnings
Strengthening profitability of the department store businessIn the department store business, chief measures to strengthen profitability were 1) expansion andenhancement of stock ranges at Hanshin department stores (marketing measure), and 2) opening of the Hanshin
Department Store’s Sannomiya branch (called the Sannomiya Hanshin Food Hall) within the M-INT KOBE
commercial complex.

Opening new stores and strengthening the competitiveness of established stores
In our merchandise marketing business, we opened arange of new stores in the Umeda area such as theFreds bakery and café chain in stations, the Color
Field Relax cosmetics chain and the An 3 S∧M miniconvenience store chain.
Outside areas served by our stations, we opened aFreds café station
new Book 1st. store in Hachioji, Tokyo, and at
established stores continued refurbishment and extension of business hours measures to make our stores more appealing and convenient and improvetheir competitiveness.

Color Field Relax

An 3 S∧M mini convenience store

Book 1st.

Aqua Kouji restaurant

Store refurbishment and new store openings in our restaurant andready-to-eat meal businessIn our restaurants and ready-to-eat business, we refurbished established stores, upgraded services andmade format changes, as well as opening a new store in our Aqua Kouji chain of healthy eateries (Kitaku, Osaka) and other new stores, chiefly outside of the areas served by our stations, under the
Cook Deli Gozen delicatessen brand.

■ Business performance (consolidated) in the term ended 31st March 2007
Revenues from operations: ¥155.9 billion (up ¥93.9 billion year-on-year)
Operating income:¥ 4.7 billion (up ¥ 2.2 billion year-on-year)(Note) Hanshin Group’s first-quarter results are not included (i.e. consolidated figures cover only 9 months of Hanshin’s business year).
Year-on-year comparisons are against the results of Hankyu Holdings, Inc. on a consolidated basis for the year ended 31st March2006.

For reference only: Below is a results calculation assuming that the Hanshin Group had integrated its management with
Hankyu Holdings, Inc. at the beginning of the fiscal term (i.e. consolidated results assuming a full 12-month period).
Revenues from operations: ¥185.8 billion (down ¥2.9 billion year-on-year)
Operating income:¥ 5.8 billion (down ¥0.3 billion year-on-year)(Note) For the previous term, the simple sum of the results of Hankyu Holdings, Inc. and Hanshin Electric Railway Co., Ltd. on aconsolidated basis in the year ended 31st March 2006 is employed.

38

Annual Report 2007

Cook Deli Gozen

Hankyu Hanshin Holdings

Future Business Strategy

Enhancing value of areas served by our lines, and expanding operations into
new areas□ Basic Strategies
We are committed to building value in areas served by our stations and achieving sustainable growththrough expansion of operations outside areas served by our stations, by creating and strengthening ouroperating base in terms of product development capability and human resources. Here are the main
policies we have adopted:○ Revitalise our stores, our point of contact with our customers, and raise employee standards
ȷEstablish IT infrastructure to streamline and modernise store operation○ Strengthen our capability as an organisation to support sustainable growthȷEstablish a logistics system to enhance product development capability, and create organisationalframeworks to support store openings outside areas served by our stations○ Find ways to generate synergies from the integration of Hankyu and Hanshin managements
ȷOpen new stores within each other's stations and properties
ȷStrengthen partnerships in purchasing and product delivery to convenience-store chains, etc

Policies to be launched in the year ended March 2008
Accelerated expansion of the Book 1st. chain○ 26 stores in the Kansai area, and 16 stores in the Tokyo area (as of 31st March 2007)○ As we open new large-scale stores, we will continue to introduce point-of-sale systems to enhance services
and streamline store operation○ In October 2007, we plan to open a Kyoto store in the Kawara-machi Ekimae Hankyu Building (Kyoto:
1,420m2) and in Bunkamura in Shibuya in Tokyo (Shibuya-ku, Tokyo: 670m2).
○ In November 2008, we plan to open a Tokyo flagship store functioning jointly as a “gallery café” at Mode
Gakuen Cocoon Tower in Shinjuku in Tokyo (Shinjuku store (tentative name)) (Shinjuku-ku, Tokyo: 3,600m2)

Reorganisation of department store business (see P.5)

Annual Report 200739

Travel and International Transportation Core companies : Hankyu Express International, Hanshin Electric Railway

Overview of the year ended 31st March 2007

Overall earnings growth on strong performance by the travel business
Overseas and domestic travel operations perform well
In travel, overseas operations had a good year, with strong customer volume for European destinations and China
and other Asian destinations despite a decline in airline seating availability and an increase in airfares due tosoaring crude oil prices. In travel operations in Japan, we increased the number of customers for our
package tours to the popular Tohoku (north Honshu) region of Japan and our bus tours, through aggressive
advertising.

Capturing new customers through Hankyu-Hanshin collaboration
In measures to attract new customers, we marketed Hanshin Tigers fan club tours with reservation services
through stores of both Hankyu Express International and Hanshin Travel Service. In November 2006, we also
launched The Oyado online reservation service.

A good year for marine transportation in the international transportation businessAirfreight (exports) posted weak growth due to inventory adjustment at manufacturers of IT products and a shift
to marine transportation for mainstay products. Volumes handled by our airfreight (imports) business also declined
due to unseasonal summer weather and a warm winter, which affected demand for clothing and fresh
produce. Against this backdrop, large-scale air shipments of game consoles for the end-of-year holiday
period, and a strong performance in the shipping business (both exports and imports) notably in China
trade ensured a solid year overall for international transportation operations.

Expansion of our overseas network
As part of our efforts to aggressively expand our overseas network, we launched operations at local units inIndonesia (May 2006) and in Beijing in China (October 2006).

■ Business performance (consolidated) in the term ended 31st March 2007
Revenues from operations: ¥88.3 billion (up ¥21.0 billion year-on-year)
Operating income:¥ 4.2 billion (up ¥ 1.8 billion year-on-year)(Note) Hanshin Group’s first-quarter results are not included (i.e. consolidated figures cover only 9 months of Hanshin’s business year).
Year-on-year comparisons are against the results of Hankyu Holdings, Inc. on a consolidated basis for the year ended 31st March2006.

For reference only: Below is a results calculation assuming that the Hanshin Group had integrated its management with
Hankyu Holdings, Inc. at the beginning of the fiscal term (i.e. consolidated results assuming a full 12-month period).

Revenues from operations: ¥93.9 billion (up ¥0.0 million year-on-year)
Operating income:¥ 4.4 billion (up ¥1.7 billion year-on-year)(Note) For the previous term, the simple sum of the results of Hankyu Holdings, Inc. and Hanshin Electric Railway Co., Ltd. on aconsolidated basis in the year ended 31st March 2006 is employed.

Gross billings from Travel Business(¥ billion)

Domestic
Overseas

60

400

50
30
20

100
0

Japan
Overseas

40

200

10

2002

2003

2004

2005

2006

Transaction amount for the Travel segment consists of revenues fromoperations booked under financial accounting, plus sums equivalent tocost of sales.

Annual Report 2007(¥ billion)

500

300

40

International Transportation Sales

0

2004

2005

2006

Transaction amount for the International Transportation segment consistsof revenues from operations booked under financial accounting, plus
sums equivalent to cost of sales for export.

Hankyu Hanshin Holdings

Future Business Strategy

Complete business restructuring resulting frommanagement integration by April 2008, to boost
competitiveness and raise earnings of both operations□ Basic Strategies
Travel
We aim to ensure steady profit growth and consolidate our customer base by broadening our range of highvalue-added productsŨ Increase customer satisfaction
ȷShow rigorous commitment to product quality and customer relationship management (using a database)Ũ Strengthen marketing capability (for tailor-made tours and corporate business)
ȷOptimise brand management, strengthen marketing of tour group products and strengthen marketing ofproducts for corporate customers
Ũ Position the company for stable profit growthȷCreate and strengthen centralised purchasing, and overhaul back-office and management operations

International Transportation
We aim to achieve sustainable growth of our business through highly advanced logistics systems andnetworks
Ũ Bolster the revenue base
ȷStrengthen the revenue base in the airfreight (exports and imports),
shipping and logistics businesses, and provide higher-quality services
Ũ Enhance productivity
ȷAchieve low-cost operations, and create synergies through allianceswith warehousing and shipping companiesŨ Strengthen Group collective strengthȷExpand network of local units in the Asian region, especially in China
ȷEstablish a marketing network with five hubs (Japan, United States, Europe, East Asia and ASEAN)

Policies to be launched in the year ended March 2008
Reorganisation of the Travel and International Transportation businesses (see P.6)
The Travel business○ To supplement our conventional PC-based online services, we established in April 2007 a website(http://hankyu.travel) for access by mobile phone○ Strengthen package-tour operations by Hanshin Travel to meet diversifying customer needs○ Generate synergies by cross-marketing of package-tour products of Hankyu and Hanshin

The International Transportation business○ Take further steps toward a total logistics system by creating national logistics networks within China andother Asian countries, and by improving warehousing functions○ Leverage synergies through joint pickup and delivery of cargo

Annual Report 2007

41

Hotels Core companies : Hankyu Hotel Management, Hanshin Electric Railway

Overview of the year ended 31st March 2007

Profits improving steadily thanks to upgraded sales
force and guest room renovation
Strengthen competitiveness by reforming hotel management andrefurbishing guest rooms
In April 2006, we launched centralised systems for reservation and day-to-day
operational management, as part of integration of the managements of the Hankyu andHanshin hotel chains. To strengthen competitiveness, we also took steps to refurbish
facilities including the guest rooms at Dai-ichi Hotel Tokyo and Hotel New Hankyu Kyoto.
Beyond our own chains, we also carried out full-scale room refurbishments at The RitzCarlton, Osaka, an international luxury brand in which we participate through a joint venture.

Addition of Hotel HANSHIN to Hankyu-Hanshin-Daiichi Hotel group
In September 2006, The Hotel Hanshin, Ltd. became a fully consolidated subsidiary of Hankyu
Hotel Management Co., Ltd. In October of the same year, Hankyu Daiichi Hotel Group was
relaunched as Hankyu-Hanshin-Daiichi Hotel group.

Hotel Hankyu International(Kita-ku, Osaka)

Promotional initiatives
Sales promotion activities included a celebration to mark the founding of HankyuHanshin-Daiichi Hotel group, and the Happy Retirement Plan which offers package
products at our hotels for members of Japan's baby-boom generation.

■ Business performance (consolidated) in the term ended 31st March 2007

The Ritz-Carlton, Osakarenovated hotel room

Revenues from operations: ¥65.4 billion (up ¥11.6 billion year-on-year)
Operating income:¥ 1.3 billion (up ¥ 0.9 billion year-on-year)(Note) Hanshin Group’s first-quarter results are not included (i.e. consolidated figures cover only 9 months of Hanshin’s business year).
Year-on-year comparisons are against the results of Hankyu Holdings, Inc. on a consolidated basis for the year ended 31st March2006.

For reference only: Below is a results calculation assuming that the Hanshin Group had integrated its management with
Hankyu Holdings, Inc. at the beginning of the fiscal term (i.e. consolidated results assuming a full 12-month period).
Revenues from operations: ¥69.4 billion (down ¥0.9 billion year-on-year)
Operating income:¥ 1.4 billion (up¥0.8 billion year-on-year)(Note) For the previous term, the simple sum of the results of Hankyu Holdings, Inc. and Hanshin Electric Railway Co., Ltd. on aconsolidated basis in the year ended 31st March 2006 is employed.

42

Annual Report 2007

Hankyu Hanshin Holdings

Future Business Strategy

Further consolidate our position as a chain operator□ Basic Strategies
The Hankyu-Hanshin-Daiichi Hotel group is building its management base around Hankyu HotelManagement, as it pursues its goal of consolidating its position as hotel chain operator. We adopted the following
priority policies:

Create infrastructure for hotel chain operation
・Enhance chain operation capabilities through centralised reservations and integrated hotel management
・Develop new hotels and franchise/contracted management hotels

Establish an efficient business management system
・Prepare for opening of REMM Hibiya and REMM Akihabara hotels
・Reconfigure business portfolio to optimise all resources

Strengthen marketing capabilities of each hotel management company
・Strengthen marketing capability and establish a solid profit base

Policies to be launched in the year ended March 2008
Opening of REMM Hibiya
・With a focus on providing a luxurious night’s sleep, we plan to open our first hotel under the
REMM brand REMM Hibiya (Chiyoda-ku, Tokyo: 255 rooms, accommodation rather
than function-oriented) in the theatre/hotel building Toho Theatre Creation Bldg.
・In April 2008, we plan to open the REMM Akihabara hotel (Chiyoda-ku, Tokyo: 260
rooms) in the TX Akihabara station development building (tentative name)

Optimising the synergies of integration
・In June 2007, we withdrew from operation of Rokko Oriental Hotel (Nada-ku,
Kobe, 60 rooms)
・In April 2008, we plan to merge Hankyu Hotel Management and Hotel Hanshin

Artist’s impression of completed
REMM Hibiya

REMM Hibiya hotel room

Annual Report 200743

Business Risks
The various categories of risk to which the business performance, stock price, financial position andother aspects of operations of the Hankyu Hanshin Holdings Group are subject are detailed below.
Legal risk

In accordance with the stipulations of Article 3 of the Railway Business Law, the Group mustobtain permission, separately, from the Ministry of Land, Infrastructure and Transport toengage in each category of railway operations on each route that it intends to operate.
Moreover, under Article 16 of the Law, a railway operator must obtain the Ministry’s
permission, separately, for the passenger fares it intends to set, and on each occasion 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 of theseregulations.

Progress in large-scale
development projects

The Group is working to utilise its working assets more effectively to facilitate the developmentof areas served by the Hankyu and Hanshin railway lines. To raise its asset effectiveness, theGroup is pursuing the following initiatives: reconstruction of the Umeda Hankyu Building;development of the Chayamachi area of the Umeda district; development of NishinomiyaKitaguchi Station; development of the former Takarazuka Familyland site; further developmentof the International 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 these development projects as soon as possible.
However, in the event of rapid and major changes in the business environment, such as inland prices or changes in direction in the urban development plans, the business performanceand financial position of the Group could be adversely affected.

Interest-bearing debt

Transfer of equity-method
affiliate44

Annual Report 2007

The balance of interest-bearing debt held by the Group as of the end of fiscal 2006, on aconsolidated basis, was ¥1,209,382 million.
As a result of the acquisition of shares in Hanshin Electric Railway Co., Ltd. through a
successful public tender offer in the form of a takeover bid on 27th June 2006, Hanshin
Railway has become a consolidated subsidiary of Hankyu Hanshin Holdings. This has resulted
in an increase in the balance of interest-bearing debt of the Group. On the other hand,management integration between Hanshin Electric and the Hankyu Corporation Group has led
to an increase in cash flow, and the Group is not expected to have any significant difficulty inrepaying its debts. Additionally, the Group is responding to this increase in the balance ofinterest-bearing debt as a result of the management integration with Hanshin Electric bydiversifying its fund procurement methods, using all possible means to minimize the negative
impact of interest rate movements. Be that as it may, in the unlikely event that interest rates
rise suddenly and in excess of our projections, this could exert an adverse effect on thebusiness performance and financial position of the Group.

In order to ensure greater convenience for users of the Hokushin Kyuko Railway Co., Ltd., anaffiliate accounted for under the equity method, the company has agreed to a plan transferringthat railway’s facilities to Kobe Rapid Transit Railway Co., Ltd.
To facilitate the plan, in 2002 we provided Kobe Rapid Transit Railway Co., Ltd. withfinancing for part of the funds necessary to purchase the facilities. We will continue to provide
assistance to ensure that Hokushin Kyuko Railway can conduct smooth and efficient
operations as a second-tier railway operator based on the above-mentioned plan. However,the business performance and financial position of the Group could be affected by changes inthis plan.

Financial Section

Contents
46 Six-Year Summary
47 Consolidated Financial Review
50 Consolidated Balance Sheets
52 Consolidated Statements of Income
53 Consolidated Statements of Changes in Net Assets
54 Consolidated Statements of Cash Flows
55 Notes to the Consolidated Financial Statements
72 Independent Auditors’ Report

Annual Report 200745

Six-Year Summary Six years in the period ended 31st March 2007

Thousands of
U.S. dollars (Note)

Millions of yen
2002

For the year:
Revenues from operations ...........
Operating income ........................
Income (loss) before income
taxes and minority interests ........
Net income (loss) .........................
Capital investments ......................
Depreciation and amortisation ....
At year-end:
Total assets .................................
Total shareholders’ equity ............
Total shareholders’ equity/
total assets ................................
Per share data (in yen and dollars):
Net income (loss) — basic ...........
Net income — diluted ...................
Shareholders’ equity ....................
Common stock price range(in yen and dollars):
High .............................................
Low .............................................

2003

2004

2005

2006

2007

2007

¥ 424,831 ¥ 477,719 ¥ 471,483 ¥ 476,623 ¥ 486,155 ¥ 743,377
37,84848,06847,9995,522(145,063)

855

4,329

(89,318)

3,102

18,251

22,771

24,36330,777

32,10930,10658,768$ 6,299,805

64,84287,003

737,31436,042

43,21765,306553,441

26,07925,326

36,619310,331

27,48952,09153,795455,890

29,97429,612

43,889371,941¥1,572,815 ¥1,754,211 ¥1,715,806 ¥1,670,911 ¥1,609,117 ¥2,366,694$20,056,729

287,380

229,845

247,840

277,393360,222522,286

4,426,153

18.30%

13.10%

14.44%

16.60%

22.39%

21.70%¥

4.97¥ (97.92)¥

3.32¥ 28.11¥ 25.36¥ 31.84

4.95

—

3.28

27.70

25.22

—

—

329.90251.05270.72299.48343.45405.35

3.44

¥441

¥418

¥386

¥460

¥886

¥817

$6.92

378

300

296

362

365

502

4.25

$0.27

Notes: 1. The U.S. dollar amounts have been translated from Japanese yen, for convenience only, at the rate of ¥118=US$1.00
2. Effective 1st April 2002, the Company adopted the new accounting standard for earnings per share and the related guidance(Accounting Standards Board Statement No. 2, “Accounting Standard for Earnings Per Share” and Financial Standards
Implementation Guidance No. 4, “Implementation Guidance for Accounting Standard for Earnings Per Share,” issued by the
Accounting Standards Board of Japan on 25th September 2002). The amounts of net income (loss) per share for 2002 have not been
restated. Diluted net income per share for the year ended 31st March 2003 is not presented because of the net loss.
3. 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 of Japan 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 unrealized gains on hedging derivatives were included in total shareholders’ equity for the year ended 31st March 2007.

46

Annual Report 2007

Consolidated Financial Review

Revenues from Operations

147 residential land lots during the term under review. In condominium

For the term under review (ended 31st March 2007) revenues fromoperations, we maintained strong sales and a stable supply in areas

operations increased 52.9% to ¥743.4 billion (US$6,299.8 million),close to our railway lines, thanks mainly to the Geo condominium series.

reflecting the inclusion of the results achieved by Hanshin Electric

We also actively supplied properties in the Tokyo area. In addition, we

Railway Co., Ltd. and the companies under its scope of consolidation

rehabilitated old condominiums in the Senri New Town area. In leasingfrom the second quarter onward, as well as strong performances in ouroperations, we attempted to increase revenues in the face of the recon-

six core segments. A breakdown for each segment is provided below.

struction of the Umeda Hankyu Building, which had adverse effects, by

In the Urban Transportation Segment, in spite of a year-on-year

undertaking sales activities designed to attract tenants to our rental anddecline owing to the nonrepetition of the one-time increase in passengers

commercial facilities. We also received orders for operating and manag-

during the previous term caused by the tragic derailment in April 2005 of aing office buildings and commercial facilities from customers outside thetrain on the JR West Fukuchiyama Line, the number of individual ticket

Hankyu Corporation Group, thanks to our vigorous activities, and con-passengers (those not travelling on a season ticket) remained high forcentrated on expanding our revenue base. As a result of these efforts,

both Hankyu Corporation and Hanshin Electric Railway Co., Ltd. During

revenues from operations in the Real Estate Segment grew 57.7% year

the term under review, we revised our timetables and took steps toon year to ¥176.3 billion (US$1,494.4 million).
In the Entertainment and Communications Segment, both the

improve the level of passenger convenience by stopping limited express
trains and rush-hour limited express trains at Hankyu Shukugawa

Takarazuka Grand Theater and the Tokyo Takarazuka Theater achieved

Station, limited express trains at Hankyu Awaji Station, and area-

high operating ratios, thanks to farewell performances given by a retiring

restricted limited express trains at Hanshin Koroen Station. With regard

top Takarazuka Revue star, among other factors. Related merchandise

to the PiTaPa IC card settlement service, Hankyu Corporation, Hanshin

also sustained favourable sales. In sports operations, the Hanshin Tigers

Electric Railway Co., Ltd., Nosé Electric Railway Co., Ltd. and Kita-

professional baseball team, the defending Central League champion,

Osaka Kyuko Railway Co., Ltd. each endeavoured to add value to thestayed in the race for the pennant until the final stages of the season.

PiTaPa card by introducing IC commuter passes and expanding theConsequently, attendance at Tigers-sponsored games exceeded thescope of the PiTaPa settlement service to affiliated stores, such as retail-figure recorded in the previous year, when the team won the Central

ing stores, eating and drinking establishments. At the end of March

League championship, and remained at impressive levels. As a result of

2007, PiTaPa IC card users totalled approximately 238,000 per day,the developments stated above, revenues from operations in the

including holders of cards issued by both Hankyu Corporation andEntertainment and Communications Segment climbed 88.9% from theHanshin Electric Railway Co., Ltd. As a result of the developments

previous year to ¥75.7 billion (US$641.8 million).
In the Retailing Segment, we worked to make our existing stores

described above, revenues from operations in the Urban Transportation
Segment increased 18.1% from the previous year to ¥181.9 billion

more competitive with initiatives such as store renewal and service(US$1,541.1 million).

standard improvement. As a result of these measures, our existing
stores, including Book 1st bookstores and asnas convenience stores,

In the Real Estate Segment, we sold 1,194 condominium units andRevenues from Operations(Billions of Yen)

Costs of Revenues
from Operations(Billions of Yen)

Operating Income and Ratio of
Operating Income to
Revenues from Operations(Billions of Yen / %)
656.4

743.4

477.7

471.5

476.6

486.2

2003 2004 2005 2006 2007

429.7

423.5

87.0

64.8
417.9

421.3

2003 2004 2005 2006 2007

48.1

48.0

10.1

10.2

58.8
12.3

13.3

11.7

2003 2004 2005 2006 2007
Operating income
Ratio of operating income to revenues from operations

Annual Report 200747

posted higher sales than in the previous term. In department store

attributable to factors such as the addition of Hanshin Kensetsu Co., Ltd.

operations, we sought to improve our earnings capabilities with such ini-

to the scope of consolidation.
As a result of the developments described above, the percentage oftiatives as the opening of the Hanshin Department Store’s Sannomiya
branch (called the Sannomiya Hanshin Food Hall) within the M-INT

consolidated operating revenues accounted for by each segment was

KOBE commercial complex. As a result of these developments, rev-

as follows: 24.1% for Urban Transportation, 20.4% for Real Estate,enues from operations in the Retailing Segment jumped 151.6% year on

9.4% for Entertainment and Communications, 20.6% for the Retailingyear to ¥155.9 billion (US$1,321.2 million).

Segment, 11.9% for Travel and International Transportation, 8.8% forHotel, and 4.8% for the Other Business Segment.

In the Travel and International Transportation Segment, our organized trips to Europe attracted steady numbers of customers. Travel toEast Asian destinations, especially China, also recovered. In domestic

Operating Income

travel operations, our organized trips to the Tohoku region and bus tours

Operating income increased 34.2% year on year to ¥87 billion

produced satisfactory results. In international transportation operations,(US$737.3 million) in the term under review, reflecting the substantial

air shipments failed to expand as our customers switched export meth-increase in operating revenues. A breakdown for each segment is pro-ods for certain major products from air to sea, among other factors.

vided below.

However, our overall performance in international transportation opera-

In the Urban Transportation Segment, operating income rose 8.5%

tions remained strong, thanks to increased volumes of exports andyear on year to ¥33.2 billion (US$281.3 million), even after passengers

imports by sea led by transactions with China. As a result of develop-

who had temporarily switched to using our line after the derailment

ments stated above, revenues from operations in the Travel andtragedy in April 2005 had resumed using the JR West Fukuchiyama Line.

International Transportation Segment grew 31.2% from the previous

In the Real Estate Segment, operating income grew 67.9% from theyear to ¥88.3 billion (US$747.9 million).

previous year, to ¥36.3 billion (US$307.4 million) due to various factors

In the Hotel Segment, we renovated a number of our facilities, includ-

including strong condominium sales.

ing the refurbishment of guest rooms, in a bid to boost their competitive-

In the Entertainment and Communications Segment, operatingness. In addition to Hotel Hanshin, which joined the Hankyu Corporation

income increased 26.7% to ¥5.2 billion (US$44.4 million), thanks primar-

Group through our management integration with Hanshin Electric Railway

ily to contributions made by our stage revue shows.

Co., Ltd., we opened the Tokyo Dai-ichi Hotel OKINAWA GRAND MER

In the Retailing Segment, operating income climbed 91.1% year on

RESORT, our first hotel in Okinawa Prefecture, as part of our efforts toyear to ¥4.7 billion (US$39.5 million), supported by increased revenues

increase the number of affiliated hotels. As a result of the developmentsfrom department store operations centering on the new store opening.
In the Travel and International Transportation Segment, operating

described above, revenues from operations in the Hotel Segment roseincome expanded 72.2%, to ¥4.2 billion (US$36 million) as a result of

21.5% year on year to ¥65.4 billion (US$554.5 million).

factors including the steady number of customers in European travel

In our Other Business Segment, revenues increased 102.7% fromoperations.

the previous year to ¥44.1 billion (US$373.6 million). The result was

Income (Loss) before
Income Taxes andMinority Interests

Net Income (Loss) per Share —Basic and ROE

Total Assets and Equity(Billions of Yen)
2,366.7(Yen / %)(Billions of Yen)

31.84

65.3

28.11
9.93

43.2

25.36

1,754.2 1,715.8

1,670.9

8.38

36.0

1,609.1
1,853.2

7.94
0.9

3.32

–34.5448

1,524.4 1,468.0 1,393.5 1,248.9

1.30
360.2

513.5

–145.1–97.92229.8

2003 2004 2005 2006 2007

2003 2004 2005 2006 2007

2003 2004 2005 2006 2007

Net Income (Loss) per Share — Basic
ROE

Total assets
EquityAnnual Report 2007

247.8

277.4

Consolidated Financial Review

2. Fund Procurement

In the Hotel Segment, operating income soared 203.6% from theprevious year to ¥1.3 billion (US$11.3 million) as a result of aggressive

We borrowed ¥250 billion in June 2006 to buy shares in Hanshinsales activities.

Electric Railway Co., Ltd. Consolidated interest-bearing debt at the end

The Other Business Segment recorded an operating loss of ¥17 mil-of the interim period rose substantially in the short term, with the addi-

lion (US$144 thousand) owing to factors including increased expenses

tion of such debts totalling ¥193.6 billion owed by the Hanshin Electric

related to refunds for excessive interest rates and bad debt in consumer

Railway Group accompanying the conversion of Hanshin Electric

finance operations as a result of revisions to the Money Lending

Railway Co., Ltd. into a consolidated subsidiary. However, as a result ofBusiness Law.

the disposal of nonessential or low-operating assets owned by Hankyu
Corporation and Hanshin Electric Railway Co., Ltd., and efforts to

Other Income and Expenses

reduce interest-bearing debt using surplus Group funds, the balance of

Net other expenses totalled ¥21.7 billion (US$183.9 million) in the term

the consolidated interest-bearing debt came to ¥1,209.4 billion at theunder review. Notwithstanding increased interest payments for loans

end of the term under review. The balance represented an increase ofmade to fund a takeover bid (TOB) for Hanshin Electric Railway Co., Ltd.,¥319.8 billion from the end of the previous term.

expenses stayed very close to the ¥21.6 billion reported in the previous

The Hankyu Corporation Group adopts the ratio of interest-bearing

term.

debt to earnings before interest, taxes, depreciation and amortization

As a result of the above, income before income taxes and minority(EBITDA) on a consolidated basis (excluding financial businesses) as aninterests came to ¥65.3 billion (US$553.4 million), and net income

indicator of financial soundness. The Group aims to bring the ratio to 7.0

totalled ¥36.6 billion (US$310.3 million).

or thereabouts in fiscal 2012.

Financial Position

Cash Flows

1. Equity

Cash and cash equivalents increased ¥11.8 billion from the end of theEquity defined as net assets after deduction of minority interests grew

previous term, reaching ¥40.2 billion (US$340.4 million) at the end of the¥153.3 billion from the end of the previous term and totalled ¥513.5 billion

term under review.

(US$4,352 million) at the end of the term under review. The result was

Cash flows from operating activities amounted to ¥79 billion

attributable to a share exchange with Hanshin Electric Railway Co., Ltd.,(US$669.3 million). Cash flows from investing activities produced a net

conversion of convertible bonds, and increased retained earnings,

outflow of ¥199.6 billion (US$1,691.3 million). Cash flows provided by

fuelled by strong business performance. The Hankyu Corporation Groupfinancing activities totalled ¥132.3 billion (US$1,121.1 million). The

adopts consolidated ROE (return on equity) as an indicator of capital effi-

acquisition of shares in Hanshin Electric Railway Co., Ltd. was financed

ciency. The Group aims to raise its consolidated ROE to 6.0% or above

by bank loans. This was the primary factor behind these performancein fiscal 2012.

results for the term under review.

Equity Ratio(%)

Capital Investments

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

(Billions of Yen / Times)
1,108.9
22.4

21.7

52.1

1,209.4

1,064.4

53.8

988.1
889.6

16.6

13.42

14.4
13.1

2003 2004 2005 2006 2007

12.95
10.64

22.8
18.3

24.4

27.5

8.99

2003 2004 2005 2006 2007

8.26

2003 2004 2005 2006 2007
Interest-bearing debt(including financial business)
Interest-bearing debt to EBITDA(excluding financial business)

Note: EBITDA refers to the total sum of operating income anddepreciation & amortisation expenses.
Annual Report 200749

Consolidated Balance Sheets

As of 31st March 2006 and 2007

Thousands of
U.S. dollars (Note 1)

Millions of yen

Assets

2006

2007

2007

Current assets:
Cash and cash equivalents (Note 18) .........................................................

¥

29,036¥41,806$354,288

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

43,55895,945

813,093

Short-term loans (Note 5)...........................................................................

37,58143,444368,169

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

(4,877)(7,270)(61,610)Inventories (Note 4)....................................................................................

162,181

194,957

1,652,178

Deferred tax assets (Note 16) ....................................................................

15,096

18,778159,136

Prepaid expenses and other current assets...............................................

33,75537,821

320,517

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

316,330

425,4813,605,771

Nonconsolidated subsidiaries and affiliates ............................................

107,679

114,507970,398

Other securities ......................................................................................

86,989140,855

1,193,686

Long-term loans .........................................................................................

47,074

42,834363,000

Deferred tax assets (Note 16) ....................................................................

8,199

6,939

58,805

Other investments .....................................................................................

57,543

88,135746,907

Investments and other assets (Note 5):
Investments in:Allowance for doubtful receivables ............................................................

(10,471)(5,852)(49,593)

Total investments and long-term loans ...............................................

297,013

387,418

3,283,203

Property and equipment (Note 5):
Land (Note 2 (j))..........................................................................................

529,197

777,338

6,587,610

Buildings and structures.............................................................................

700,270

1,093,585

9,267,670

Rolling stock and buses .............................................................................

146,952

199,387

1,689,720

Machinery and equipment .........................................................................

88,067126,093

1,068,585

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

81,93988,180747,288

1,546,425

2,284,583

19,360,873

Less accumulated depreciation..................................................................

563,845(807,664)(6,844,610)

Property and equipment — net...........................................................

982,580

1,476,919

12,516,263

Intangible assets (Note 5) ............................................................................

13,19476,876

651,492¥1,609,117¥2,366,694$20,056,729

See the accompanying notes to the consolidated financial statements.

50

Annual Report 2007

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liabilities and Net Assets
Current liabilities:
Short-term borrowings (Note 5) .................................................................

2006

¥

2007

2007

94,029¥ 137,689

Current portion of long-term debt (Note 5) ................................................
Trade payables ...........................................................................................

127,058
74,851

179,868
124,314$ 1,166,856
1,524,305
1,053,509

Accrued expenses......................................................................................
Income taxes payable ................................................................................
Advances received .....................................................................................

18,2392,125
37,48926,425
4,959
52,848

223,941
42,025447,865

Employees’ savings deposits.....................................................................
Provision for restructuring costs ................................................................

14,301
201

12,529201

106,178
1,703

Other current liabilities (Note 16) ...............................................................

30,042

49,999423,720

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

398,335

588,832

4,990,102

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..............................

661,528
6,825
42,477455

891,825
6,825
64,405554

7,557,839
57,839545,805
4,695

Reserve for investment losses ......................................................................
Consolidation difference ................................................................................
Deposits from tenants (Note 7) .....................................................................
Other noncurrent liabilities (Notes 8 and 16) .................................................

25,5572,980
71,93836,472

29,7852,769
97,007
162,406

252,415
23,466
822,093
1,376,322

97,54524,98599,475150,062

843,009
1,271,712

196,412228,570

1,937,034

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:
915,518 shares in 2006 and 4,536,540 shares in 2007............................

(331)(2,301)(19,500)

Total shareholders’ equity ...................................................................
Accumulated gains from revaluation and translation adjustments
Net unrealised holding gains on securities.................................................
Net unrealised gains on hedging derivatives..............................................

318,611475,806

4,032,255

38,817—

34,583204

293,076
1,729

Surplus from land revaluation (Note 2(j)) ...................................................

2,604

2,604

22,068Foreign currency translation adjustments ..................................................

190

333

2,822

Total accumulated gains from revaluation and translation ..................

41,61137,724

319,695

Minority interests.........................................................................................
Total net assets...................................................................................

2,328
362,550

8,756
522,286

74,203
4,426,153¥1,609,117¥2,366,694$20,056,729

Annual Report 200751

Consolidated Statements of Income

Years ended 31st March 2005, 2006 and 2007

Thousands of
U.S. dollars (Note 1)

Millions of yen
2005

2007

2007

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

¥476,623 ¥486,155 ¥743,377$6,299,805

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

417,855
58,768421,31364,842

656,374
87,0035,562,491
737,314

Other income (expenses):
Interest and dividend income ...............................................................
Interest expense...................................................................................
Amortisation of consolidation difference..............................................

831(16,147)
2,255

1,018
(15,071)
2,265

2,733
(19,726)
1,517

23,161(167,170)
12,856

Gain on sale of securities .....................................................................
Equity in income of affiliates ................................................................
Gain (loss) on disposal of property and equipment — net....................

1,768
2,825
15,216169
4,003(2,414)

780
3,675
7,275

6,610
31,14461,653Special 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)) ...........

(1,979)(1,105)(763)(6,466)(3,104)(1,000)7,101(4,893)—
1,114(2,766)(3,930)2,680(23,441)(33,305)
22,712

Loss on real estate for sale ..................................................................
Write-down of real estate for sale ........................................................
Restructuring costs ..............................................................................
Loss on impairment of fixed assets (Note 11)......................................
Contribution to construction of Osaka Monorail Saito Line ..................

(28,345)
—
(891)
—
—

—
—
(187)
(6,988)(1,998)(3,399)(2,321)—(869)(4,346)(28,805)(19,670)—(7,364)(36,831)

Special early retirement benefits..........................................................

(310)

—

—

—

Gain on transfer of professional baseball player to U.S major leagues...
Provision for accruing interest on past consumer loans.......................

—
—

—
—

3,091
(1,992)

26,195(16,881)

Dividend from investment in silent partnership....................................

2,397

6,222

0

0

Other — net..........................................................................................

(3,343)(3,760)(3,336)(28,271)

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

(22,726)
36,042(21,625)
43,217(21,697)
65,306(183,873)
553,441

Income taxes (Note 16):
Current..................................................................................................

3,881

2,746

9,314

78,932

Deferred ...............................................................................................

5,626

14,83917,874

151,475

Income before minority interests .....................................................

26,53525,632

38,118323,034

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

(456)

(306)

(1,499)(12,703)¥ 26,079 ¥ 25,326 ¥ 36,619$ 310,331

Yen

U.S. dollars (Note 1)

Net income ......................................................................................

Net income per share — basic ..............................................................
Net income per share — diluted (Note 2(u)) .........................................

¥28.11
27.70¥25.3625.22¥31.84—$0.27—

Dividends per share of common stock.................................................

3.00

5.00

5.00

0.04

See the accompanying notes to the consolidated financial statements.

52

2006

Annual Report 2007

Consolidated Statements of Changes in Net Assets Years ended 31st March 2005, 2006 and 2007

Thousands of
U.S. dollars (Note 1)

Millions of yen
2005

Common stock:
Balance at beginning of year ................................................................
Stock issue of new share (Note 10) .....................................................
Conversion of convertible bonds (Note 10) ..........................................
Balance at end of year ..........................................................................
Capital surplus:
Balance at beginning of year ................................................................
Stock issued on share exchange .........................................................
Stock issued of new share (Note 10) ...................................................
Conversion of convertible bonds (Note 10) ..........................................
Effect of sale of treasury stock.............................................................
Balance at end of year ..........................................................................
Retained earnings:
Balance at beginning of year ................................................................
Net income ..........................................................................................
Effect of changes in consolidated subsidiaries and investments
accounted for by the equity method — net........................................
Effect of sale of treasury stock.............................................................
Disposal of deficit .................................................................................
Transfer from land revaluation..............................................................
Appropriations:
Cash dividends..................................................................................
Directors’ and corporate auditors’ bonuses ......................................
Balance at end of year ..........................................................................
Less treasury stock, at cost:
Balance at beginning of year ................................................................
Net decrease ........................................................................................
Balance at end of year ..........................................................................
Net unrealised holding gains on securities:
Balance at beginning of year ................................................................
Net increase during the year ................................................................
Balance at end of year ..........................................................................
Net unrealised gains on hedging derivatives:
Balance at beginning of year ................................................................
Net changes during the year ................................................................
Balance at end of year ..........................................................................
Surplus from land revaluation:
Balance at beginning of year ................................................................
Transfer to retained earnings................................................................
Effect of change in the aggregate statutory income tax rate ...............
Other — net..........................................................................................
Balance at end of year ..........................................................................
Foreign currency translation adjustments:
Balance at beginning of year ................................................................
Adjustments from translation of foreign currency financial statements....
Balance at end of year ..........................................................................
Minority interests:
Balance at beginning of year ................................................................
Net increase (decrease)........................................................................
Balance at end of year ..........................................................................

2006

2007

2007

¥ 75,969 ¥ 75,969 ¥ 97,545—
19,895
1,930
—
1,681
—
¥ 75,969 ¥ 97,545 ¥ 99,475$ 826,653
16,356—$ 843,009¥— ¥ 3,367 ¥ 24,985
3,300
—
—
—
19,812 125,097
—
1,679
—
67
127
(20)
3,367 ¥ 24,985 ¥150,062$ 211,737—
1,060,144—(169)$1,271,712¥ 45,348 ¥ 76,775 ¥196,412
26,07925,326
36,619$1,664,508
310,331

¥

517
—
—
4,864

788
—
—
(1)

6,678
—
—
(8)

—
(2,781)(5,248)(33)(40)—¥ 76,775 ¥196,412 ¥228,570(44,475)—$1,937,034

¥

$

¥

877 ¥
(177)
700 ¥

871
—
—
96,261

700 ¥
(369)
331 ¥

331
1,970
2,301

$

2,805
16,695
19,500¥ 21,026 ¥ 21,423 ¥ 38,817
397
17,394(4,234)¥ 21,423 ¥ 38,817 ¥ 34,583$ 328,957(35,881)$ 293,076

¥

$

— ¥
—
— ¥

— ¥
—
— ¥

—
204
204

¥106,608 ¥100,815 ¥(4,864) (96,261)
(6)
—
(923)
(1,950)¥100,815 ¥ 2,604 ¥

2,604
—
—
—
2,604

$

¥

¥

$

$

(234) ¥
(22)(256) ¥

(256) ¥
446
190 ¥

190
143
333

$

9,059 ¥
(7,072)¥ 1,987 ¥1,987 ¥
341
2,328 ¥

2,328
6,428
8,756

$

¥
¥

$

$

—
1,729
1,729
22,068———22,068
1,610
1,212
2,822
19,72954,474
74,203

Number of shares of common stock issued
At beginning of year.................................................................................
Issue of new shares ................................................................................
Stock issued on share exchange ............................................................
At end of year ..........................................................................................

2005

2006

2007

917,744,452—
10,123,203
927,867,655

927,867,655
121,670,471—
1,049,538,126

1,049,538,126
214,209,324
7,659,478
1,271,406,928

See the accompanying notes to the consolidated financial statements.
Annual Report 200753

Consolidated Statements of Cash Flows

Years ended 31st March 2005, 2006 and 2007

Thousands of
U.S. dollars (Note 1)

Millions of yen
2005

2006

2007

2007

Cash flows from operating activities:
Income before income taxes and minority interests................................ ¥ 36,042 ¥ 43,217 ¥ 65,306 $ 553,441
Depreciation and amortisation .................................................................
29,97429,612
43,889371,941
Amortisation of consolidation difference .................................................
(2,255)(2,265)719
6,093
Equity in income of affiliates ....................................................................
(2,825)(4,003)(3,675)(31,144)
Decrease in employees’ severance and retirement benefits...................
(1,379)(2,071)(2,201)(18,653)
Increase in allowance for doubtful receivables ........................................
251
3,071
(3,992)(33,831)
Increase in reserve for investment losses ...............................................
2,857
4,558
4,228
35,831
Interest and dividend income...................................................................
(831)(1,018)(2,733)(23,161)Interest expense ......................................................................................
16,147
15,071
19,726167,170
Gain on sale of property and equipment ..................................................
(22,668)(333)(12,592)(106,712)
Loss on sale of property and equipment..................................................
6,741
1,108
866
7,339
Loss on disposal of property and equipment ...........................................
—
1,639
2,189
18,551
Loss on impairment of property and equipment......................................
—
6,988
869
7,364
Loss on revaluation of real estate for sale ...............................................
—
—
2,321
19,669Gain on sale of securities .........................................................................
(1,768)(169)(2,948)(24,983)
Loss on sale of marketable and investment securities ............................
—
—
1,882
15,949Gain on contributions for construction work ............................................
(6,992)(1,016)(2,312)(19,593)
Loss on deduction of property and equipment ........................................
—
240
2,262
19,169Dividend from investment in silent partnership .......................................
(2,397)(6,222)——
Restructuring costs ..................................................................................
891
—
—
—
(Increase) decrease in trade receivables ..................................................
210
4,642
(25,612)(217,051)(Increase) decrease in inventories............................................................
18,318(12,732)850
7,203
Increase in trade payables........................................................................
9,047
8,546
17,566
148,864
Other ........................................................................................................
4,057
1,395
(3,831)(32,464)
Subtotal ................................................................................................
83,42090,258102,777
870,992
Interest and dividends received ...............................................................
3,881
8,053
3,698
31,339Interest paid .............................................................................................
(16,253)(13,885)(20,161)(170,856)
Income tax paid........................................................................................
(3,398)(4,196)(7,332)(62,136)
Net cash provided by operating activities.............................................
67,65080,23078,982
669,339
Cash flows from investing activities:
Purchases of property and equipment .....................................................
(32,529)(47,692)(53,356)(452,170)
Proceeds from sales of property and equipment.....................................
66,866
5,296
46,248391,932
Purchases of investment securities .........................................................
(2,116)(9,067)(7,595)(64,364)
Proceeds from sales of investment securities.........................................
3,645
9,739
22,554
191,136
Purchases of investments in consolidated subsidiaries
affecting scope of consolidation ............................................................
—— (210,380) (1,782,881)
Proceeds from sales of investments in consolidated subsidiaries
affecting scope of consolidation ............................................................
—
—
563
4,771
Net increase in short-term loans receivable.............................................
(12,388)(8,123)(5,351)(45,347)
Long-term loans advanced .......................................................................
(1,694)(1,038)(874)(7,407)
Proceeds from collection of long-term loans ...........................................
3,227
873
6,322
53,576
Receipt of contributions for construction.................................................
3,361
2,228
5,542
46,966
Other ........................................................................................................
(4,196)
4,584(3,252)(27,559)
Net cash provided by (used in) investing activities...............................
24,176(43,200) (199,579) (1,691,347)
Cash flows from financing activities:
Net increase (decrease) in short-term borrowings...................................
(26,759)(5,604)35,362299,678
Proceeds from long-term borrowings ...................................................... 147,108
139,487
241,4632,046,297
Repayment of long-term debt .................................................................. (157,484) (223,802)(82,991)(703,314)
Proceeds from new shares issued...........................................................
—
39,433——
Redemption of bonds...............................................................................
(35,070)(15,160)(49,900)(422,881)
Net increase (decrease) in commercial paper ..........................................
(3,000)
7,000(7,000)(59,322)
Dividends paid..........................................................................................
—(2,781)(5,248)(44,475)
Dividends paid to minority shareholders of consolidated subsidiaries.....
(70)
(69)
(74)
(627)
Other ........................................................................................................
(198)
(464)
678
5,746
Net cash used in financing activities ....................................................
(75,473)(61,960) 132,290
1,121,102
Effect of exchange rate changes on cash and cash equivalents .................
(15)
446
99
839
Increase (decrease) in cash and cash equivalents .......................................
16,338(24,484)
11,792
99,933
Cash and cash equivalents at beginning of year..........................................
34,95552,37028,375
240,465
Cash and cash equivalents of newly consolidated
subsidiaries at beginning of year ...............................................................
1,077
489
—
—
Cash and cash equivalents at end of year (Note 18).................................... ¥ 52,370 ¥ 28,375 ¥ 40,167 $ 340,398
See the accompanying notes to the consolidated financial statements.
54

Annual Report 2007

Notes to the Consolidated Financial Statements

1. Basis of presenting consolidated financial statements
The accompanying consolidated financial statements ofHankyu Hanshin Holdings, Inc.(the “Company”) have been
prepared in accordance with the provisions set forth in theJapanese Securities and Exchange Law and its related
accounting regulations and in conformity with accounting
principles generally accepted in Japan, which are different incertain respects as to application and disclosure requirementsfrom International Financial Reporting Standards.
The accounts of overseas subsidiaries are based on theiraccounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective
countries of domicile. The accompanying consolidated financial statements have been restructured and translated into
English, with some expanded descriptions and the inclusionof consolidated statements of shareholders’ equity, from theconsolidated financial statements of the Company prepared inaccordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as
required by the Securities and Exchange Law. Some supplementary information included in the statutory Japanese language consolidated financial statements, but not required forfair presentation, is not presented in the accompanying 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
2007, which was ¥118 to $1.00. The translations should not
be construed as representations that the Japanese yenamounts have been, could have been, or could in the future
be converted into U.S. dollars at this or any other rate ofexchange.

2. Significant accounting policies(a) Consolidation
The consolidated financial statements include the accounts of
the Company and significant subsidiaries (together, the“Group” or “Companies”) that meet the control requirements for consolidation. The consolidated financial statements comprise the accounts of 68, 65 and 96 subsidiaries
for each of the three years in the period ended 31st March2007.
The Company has adopted the equity method of accounting for investments in which the Company owns 20-50% orexerts influence over financial and operational policies 12,11
and 11 significant affiliates, respectively for the three years in
the period ended 31st March 2007.
All significant inter-company transactions and accounts
have been eliminated.
In the elimination of investments in subsidiaries, theassets and liabilities of the subsidiaries, including the portion
attributable to minority shareholders, are evaluated using thefair value at the time the Company acquired control of therespective subsidiary.
The difference between the cost of investments in subsidiaries and affiliates and the equity in their net assets at thedate of acquisition is amortised over five years. The difference derived from the management integration with Hanshin
Electric Railway Co., Ltd is, in principle, amortised in equalamounts over twenty years.
Some subsidiaries and affiliates are consolidated with
year-ends that differ from that of the Company. However,necessary adjustments have been made if the effect of thedifference is material.
(b) Securities
The Companies classify securities as (1) securities held for

trading purposes (“trading securities”), (2) debt securities
intended to be held to maturity (“held-to-maturity debt securities”), (3) equity securities issued by subsidiaries and affiliatedcompanies, and (4) all other securities that are not classified inany of the above categories (“available-for-sale securities”).
Trading securities are stated at fair market value. Gains
and losses realised on disposal and unrealised gains andlosses from market value fluctuations are recognised as gains
or losses in the period of the change. Held-to-maturity debt
securities are stated at amortised cost, net of the amountconsidered not collectible. Equity securities issued by subsidiaries and affiliated companies which are not consolidated
or accounted for using the equity method are stated atmoving average cost. Available-for-sale securities are statedas explained below.
If the market value of held-to-maturity debt securities,
equity securities issued by unconsolidated subsidiaries oraffiliated companies, 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 of equity securities issued by unconsolidated subsidiaries or affiliated companies not on theequity method is not readily available, such securities 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 heldby limited-liability investment partnerships and of similar
investments using the equity method.

Annual Report 200755

(c) Allowance for doubtful receivables
The Companies provide for doubtful accounts principally at
an amount computed based on past experience plus estimated uncollectible 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 principallyby the moving average method for other inventories.
(e) Derivatives and hedge accounting
The Companies state derivative financial instruments atfair value and recognise changes in the fair value as gains
or losses unless the derivative financial instruments areused for hedging purposes.
If derivative financial instruments are used as hedges andmeet certain hedging criteria, the Companies defer recognition of gains or losses resulting from the changes in the fairvalue of the derivative financial instruments until the related
losses or gains on the hedged items are 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 areaccounted for in the following manner:
1. If a forward foreign exchange contract is executed tohedge an existing foreign currency receivable or payable,(a) the difference, if any, between the Japanese yenamount of the hedged foreign currency receivable orpayable translated using the spot rate at the inception
date of the contract and the book value of the receivable or payable is recognised in the statement ofincome 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 thattranslated using the spot rate at the inception date of
the contract) is recognised over the term of thecontract.
2. If a forward foreign exchange contract is executed tohedge a future transaction denominated in a foreign currency, the future transaction will be recorded using thecontracted forward rate, and no gains or losses on the forward foreign exchange contract are recognised.
Also, if interest rate swap contracts are used as hedges
and meet certain hedging criteria, the net amount to be paidor received under the interest rate swap contract is added toor deducted from the interest on the assets or liabilities forwhich the swap contract was executed.
(f) Reserve for investment losses
The reserve for investment losses is provided for possible
losses in excess of investments and loans to affiliates basedon an evaluation of the net assets of the investee and other56

Annual Report 2007

factors.
(g) Provision for restructuring costs
Provision for restructuring costs is stated as of 31st March
2005 and 2006 at the estimated loss from the reconstructionof Nishinomiya Stadium.
(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 cost 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.
(i) Contributions for construction works
Prior to the year ended 31st March 2007, contributions forthe construction of railway facilities, for example building
grade separations and widening railroad crossings, granted by
the national and municipal governments and other corporations, are accounted for in the following manner:
1. If assets acquired with contributions are regarded as
improving the economic value of the Company, for example grade separations, the assets are stated at the acquisition cost in property and equipment.
2. If assets acquired with contributions are not regarded as
improving the economic value, the assets are stated inproperty and equipment after deducting the contributions
from the acquisition cost.
Effective from the year ended 31st March 2007, a consolidated subsidiary of the Company, Hankyu Corporation,changed the method of accounting for contributions for construction works under which all assets acquired using thecontributions are now stated in property and equipment at
acquisition cost after deducting the amounts corresponding
to the contributions. This change was made to unify accounting policy across the group following the management integration with Hanshin Electric Railway Co. Ltd., and torecognize the purpose of contributions for construction
works, which is that a local authority grants property acquisition funds to serve the public interests and urban planning,etc, but a railroad enterprise constructs railroad facilities andacquires property. This change in the accounting policy hascaused income before Income taxes to decrease by ¥754 million ($6,390 thousand).
Accumulated amounts of the deductions were ¥153,211
million, ¥153,260 million and ¥323,546 million ($2,741,915
thousand) at 31st March 2005, 2006 and 2007, respectively.

Notes to the Consolidated Financial Statements(j) Land revaluation
Pursuant to the Law Concerning Land Revaluation, two consolidated subsidiaries and an affiliate accounted for by theequity method revaluated land used for business activities on
31st March 2002.
With respect to valuation differences in two consolidated
subsidiaries, amounts equivalent to taxes related to the valuation differences were included in “Deferred tax liabilities,”amounts belonging to minority shareholders were included in“Minority interests,” and amounts from which these arededucted were recorded as “Surplus from land revaluation”
in shareholders’ equity. For an affiliate accounted for by theequity 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 onreal estate tax values in accordance with Article 2,
Paragraph 3 of the Enforcement Ordinance Concerning
Land Revaluation on 31st March 2002.
The excess of book values after revaluation over fair values at
31st March 2006 and 2007 were ¥5,757 million and ¥6,371
million ($53,992 thousand), respectively.
(k) Impairment accounting
In the year ended 31st March 2006, the Company adopted
the new accounting standard for impairment of fixed assets(“Opinion Concerning Establishment of Accounting Standard
for Impairment of Fixed Assets” issued by the BusinessAccounting Deliberation Council on 9th August 2002) and theimplementation 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). Thischange in accounting method resulted in income before
income taxes and minority interests of ¥6,988 million($59,726 thousand) less in 2006 than it would have been if
the new standard had not been adopted. The accumulated
impairment losses were deducted from the cost of each fixed
asset.
(l) Accounting Standard for Presentation of Net Assets in
the Balance Sheet
Effective from the year ended 31st March 2007, theCompany and its domestic consolidated subsidiaries haveadopted the new accounting standards, the AccountingStandard for Presentation of Net Assets in the Balance Sheet(Statement No. 5 issued by the Accounting Standards Boardof Japan on 9th December 2005) and the implementation
guidance for the accounting standard for presentation of net
assets in the balance sheet (the Financial AccountingStandard Implementation Guidance No. 8 issued by the
Accounting Standards Board of Japan on 9th December2005), (collectively, the “New Accounting Standards”).
Under the New Accounting Standards, the balance sheet

comprises the assets, liabilities and net assets sections.
Previously, the balance sheet comprised the assets, liabilities,
minority interests and shareholders’ equity sections.
The net assets section comprises three subsections,which are shareholders’ equity, accumulated gains (losses)
from revaluation and translation adjustments, and minority
interests, as applicable. The net assets section includes items
which were not included in the previously presented shareholders’ equity section. The accumulated gains (losses) on
valuation and translation adjustments section included net
unrealized gains on hedging derivatives. Under the previous
standards, minority interests were presented between noncurrent liabilities and the shareholders’ equity.
The amounts posted under shareholders’ equity and certain other balance sheet items for prior years ended March
2006 or before have been restated in accordance with the
New Accounting Standards. As a result, minority interests
amounting to ¥2,326 million are included in the net assets
section as of 31st March 2006.
The adoption of the New Accounting Standards had no
impact on the consolidated statement of income for the year
ended 31st March 2007. If the new accounting standards had
not been adopted and the previous standards had been
applied to the shareholders’ equity section, shareholders’equity as of 31st March, 2006 and 2007 would have been
¥360,222 million and ¥513,326 million ($4,350,221 thousand),
respectively.
(m) Accounting Standard for Statement of Changes in
Net Assets and reclassifications and restatement
Effective from the year ended 31st March 2007, theCompany 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
December 2005) and the implementation guidance for theaccounting standard 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 December 2005), (collectively, the “Additional New
Accounting Standards”).
Previously, consolidated statements of shareholders’equity were prepared for purposes of inclusion in the consolidated financial statements although not mandatory in Japan.
As discribed in Note 2(l), Accounting Standard for
Presentation of Net Assets in the Balance Sheet, reclassification was made for items previously posted under shareholders’ equity and other balance sheet items to conform with the
New Accounting Standards. Consolidated statements ofchanges in net assets for the years ended March 2005 and2006 have been prepared in accordance with the New
Accounting Standards to conform with the presentation forthe year ended March 2007. These restatements had no

Annual Report 200757

impact on the Company’s business results for the said
periods.
(n) Software cost
Software is depreciated using the straight-line method overthe estimated useful life of five years.
(o) Employees’ severance and retirement benefits
The Companies provide two types of post-employment benefit plans, unfunded lump-sum payment plans and funded noncontributory pension plans, under which all eligible
employees are entitled to benefits based on the level ofwages and salaries at the time of retirement or termination,
length of service and certain other factors.
The liabilities and expenses for severance and retirement
benefits are determined based on the amounts actuarially calculated using certain assumptions. The Companies provide
for employees’ severance and retirement benefits based on
the estimated amounts of projected benefit obligation andthe fair value of plan assets.
Prior service costs are recognised in expenses in equalamounts over 3 to 15 years, and actuarial gains and losses
are recognised in expenses using the straight-line method
over 4 to 15 years.
(p) 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
the Company at the rates used by the Company. The
Companies report foreign currency translation adjustments inaccumulated gains from revaluation, translation adjustments
and minority interests in net assets.
(q) Finance leases
Finance leases which do not transfer ownership areaccounted for in the same manner as operating leases inaccordance with Japanese GAAP. Some overseas consolidated subsidiaries capitalise finance leases.
(r) Bond and new share issue costs
Bond and new share issue costs are principally charged toincome as incurred.
(s) 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 forfinancial reporting purposes and the amounts used forincome tax purposes.
(t) Cash flow statement
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

58

Annual Report 2007

the time of purchase are considered to be cash and cash
equivalents.
(u) 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.
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.
(v) Dividends per share
In accordance with the new Japanese Corporate Law becoming effective on 1st May 2006, replacing the JapaneseCommercial Code, declarations of dividends and appropriationsof unappropriated retained earnings are approved at 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.
(w) Business Combination and Business Separation
Effective from the year ended 31st March 2007, the Company
has adopted the new accounting standards, AccountingStandard for Business Combinations (Accounting Standard
issued by the Business Accounting Council on 31st October2003), Accounting Standard for Business Separation(Statement No.7 issued by the Accounting Standards Board ofJapan on 27th December 2005) and implementation Guidance
for the Accounting Standard for Business Combinations andBusiness Separation (the financial implementation Guidance
No.10 issued by the Accounting Standards Board of Japan on
27th December 2005).

Notes to the Consolidated Financial Statements

3. Securities
The following table summarises book values and fair values of held-to-maturity debt securities as of 31st March 2006 and 2007:
Millions of yen
2006

Thousands of U.S. dollars
2007

2007

Book value Fair value Difference Book value Fair value Difference Book value Fair value Difference

Securities with available fairvalue exceeding book value....
Other securities ........................
Total..........................................

¥—
—
¥—

¥—
—
¥—

¥—
—
¥—

¥1,400500¥1,900¥1,412493¥1,905¥12 $11,865 $11,966
(7)
4,237
4,178
¥ 5 $16,102 $16,144

$101
(59)
$ 42

The following tables summarise acquisition costs and book values (fair values) of available-for-sale securities with available fairmarket values as of 31st March 2006 and 2007:
Securities with book values exceeding acquisition costs:
Millions of yen
2006
Acquisition
cost

Book
value

Thousands of U.S. dollars
2007

2007
Difference

Acquisition
cost

Book
value

Difference

Acquisition
cost

Equity securities.................... ¥16,090 ¥71,135 ¥55,045 ¥38,823 ¥89,801 ¥50,978 $329,008
Bonds....................................
—
—
—
1,847
1,867
20
15,653
Other.....................................
—
—
—
1,190
1,312
122
10,085
Total ...................................... ¥16,090 ¥71,135 ¥55,045 ¥41,860 ¥92,980 ¥51,120 $354,746

Book
value

Difference$761,025
15,822
11,119$787,966$432,017
169
1,034$433,220

Securities with book values not exceeding acquisition costs:
Millions of yen
2006

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

Thousands of U.S. dollars
2007

2007

Acquisition
cost

Book
value

Difference¥1,438——¥1,438

¥979
—
—
¥979

¥(459)——¥(459)

Acquisition Book
cost
value

Acquisition
cost

Difference¥26,436 ¥23,506 ¥(2,930)
744
740
(4)
947
846
(101)
¥28,127 ¥25,092 ¥(3,035)

Book
value

Difference$224,034 $199,203 $(24,831)
6,305
6,271
(34)
8,025
7,170
(855)
$238,364 $212,644 $(25,720)

The following table summarises book values of securities with no available fair values as of 31st March 2006 and 2007:
Millions of yen
2006
2007

Held-to-maturity debt securities:
Discount bank debentures .........................................................................
Available-for-sale securities:
Non-listed equity securities........................................................................
Investments in limited liability investment partnerships andsimilar investments ..................................................................................

Sales of available-for-sale securities during the years ended
31st March 2005, 2006 and 2007 amounted to ¥2,881 million,¥2,589 million and ¥21,101 million ($178,822 thousand),
respectively. Within other income (expenses) in the statements of income for the years ended 31st March 2005, 2006
and 2007 were gains on sales of available-for-sale securities

¥

20

¥

Thousands of
U.S. dollars
2007

20

$169,492¥ 3,547¥ 4,378$ 37,102¥11,328¥16,720$ 141,695

amounting to ¥1,769 million, ¥41 million and ¥2,659 million($22,534 thousand), respectively, which were included in thegain on sale of securities, and losses on sales of available-forsale securities amounting to ¥111 million, nil, and ¥841 million ($7,127 thousand), respectively, which were included inother-net.

Annual Report 2007

59

Available-for-sale securities with maturities and held-to-maturity debt securities at 31st March 2006 and 2007 were to mature as
follows:
Millions of yen

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

2006

2007

Due after one Due after fiveDue within year through year through Due after
one yearfive years
ten yearsten years

Due after one Due after fiveDue within year through year through Due after
one yearfive years
ten yearsten years

¥—
—
20
¥20

¥—
—
—
¥—

¥—
—
—
¥—

¥—
—
—
¥—

¥153
—
20
¥173

¥2,604297—¥2,901¥1,128—49¥1,177

¥327
—
—
¥327

Thousands of U.S. dollars
2007
Due after one Due after fiveDue within year through year through Due after
one yearfive years
ten yearsten years

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

$1,297—169$1,466$22,068
2,517—$24,585$9,560—415$9,975$2,771——$2,771

4. Inventories
Inventories at 31st March 2006 and 2007 consisted of the following:
Millions of yen
2006
2007

Real estate for sale ........................................................................................
Finished products and merchandise ..............................................................
Materials and supplies ...................................................................................
Total ...............................................................................................................

60

Annual Report 2007

¥152,347
6,126
3,708
¥162,181¥173,710
10,171
11,076¥194,957

Thousands of
U.S. dollars
2007$1,472,119
86,19593,864$ 1,652,178

Notes to the Consolidated Financial Statements

5. Short-term borrowings and long-term debt
Short-term borrowings are represented generally by notes maturing within one year. The weighted average interest rate forshort-term bank loans was 1.2049% at 31st March 2007.
Long-term debt at 31st March 2006 and 2007 consisted of the following:
Millions of yen
2006
2007

Secured:Banks, 0.835%–8.5%, maturing through 2026..........................................
Unsecured:
Banks, insurance companies and others,
0.8%–6.8%, maturing through 2022 .......................................................
1.79% bonds, due May 2006.....................................................................
3.4% bonds, due August 2006 ..................................................................
1.5% bonds, due September 2006 ............................................................
1.27% bonds, due June 2007 ....................................................................
0.96% bonds, due November 2007 ...........................................................
2.8% bonds, due February 2008................................................................
2.23% bonds, due July 2008 .....................................................................
2.23% bonds, due August 2009 ................................................................
2.46% bonds, due September 2010 ..........................................................
Floating rate bonds, due September 2010*1 ..............................................
Floating rate bonds, due June 2011*2 ........................................................
1.5% Euro convertible bonds, due September 2006 .................................
3.1% bonds, due June 2007 ......................................................................
3.525% bonds, due June 2012 ..................................................................
2.22% bonds, due June 2014 ....................................................................
0.4%–3.4% bonds issued by consolidated
subsidiaries, due August 2005 to November 2008 ..................................
Less current portion ...................................................................................
Less inter transactions ...............................................................................

Thousands of
U.S. dollars
2007¥ 88,164¥ 115,923$ 982,398

520,362
5,000
10,00030,00020,00010,00015,00020,00020,00010,00015,00010,0003,960———

784,669———
20,00010,00015,00020,00020,00010,00015,00010,000—20,00015,00010,0006,649,737———
169,491
84,746
127,119
169,491
169,491
84,746
127,119
84,746—
169,491
127,119
84,746

11,100788,586
127,058—¥661,528

6,200
1,071,792
179,867100¥ 891,825

52,5439,082,983
1,524,297
847$7,557,839*1 The floating rate is currently the 20-year swap rate minus the 2-year swap rate plus 0.95% from 1st October 2001. (If theresult of this calculation is below 0, the rate would be 0%)*2 The floating rate is 1.3% to 28th June 2004 and the 20-year swap rate minus the 2-year swap rate plus 0.15% from 29th June

2004. (If the result of this calculation is below 0, the rate would be 0%)
The following table shows the book value of collateral pledged against long-term debt, including the portions due within one
year, in the amount of ¥88,164 million and ¥115,923 million (US$982,398 thousand) as of 31st March 2006 and 2007,
respectively.
Millions of yen
2006
2007

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

¥

152
23,961
437,11771¥461,301¥

153
28,431
540,65096¥569,330

Thousands of
U.S. dollars
2007

$

1,297
240,941
4,581,779
814$4,824,831

Annual Report 200761

As is customary in Japan, security may have to be given if
requested by a lending bank and such banks have the right tooffset cash deposited against any debt or obligation that
becomes due and, in the case of default and certain otherspecified events, against all debts payable to the bank.
Certain long-term debt agreements provide, among otherthings, that the Companies are to submit to the relevant
lender, upon its request, for approval their proposed appropriation of earnings (including dividends) before such appropriation can be submitted to shareholders. The Companies havenever received such requests.

The annual maturities of long-term debt as at 31st March 2007 were as follows:Year ending 31st March2009 .......................................................................................................................
2010 .......................................................................................................................
2011 .......................................................................................................................
2012 .......................................................................................................................
2013 and thereafter................................................................................................

Millions of yen

Thousands of
U.S. dollars¥136,623
72,000120,456
99,039463,707¥891,825$1,157,822
610,169
1,020,814
839,3143,929,720$7,557,839

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 2006 and 2007 consisted of the following:
Millions of yen
2006
2007

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 ............................................

¥105,560
184
1,677(65,731)787¥ 42,477¥150,690
2,027
969(93,185)
3,904¥ 64,405

Thousands of
U.S. dollars
2007$1,277,034
17,1788,212(789,704)
33,085$ 545,805

Included in the consolidated statements of income for the years ended 31st March 2005, 2006 and 2007, were severance andretirement 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 ...............................

62

2005

Millions of yen
2006

2007

¥4,8882,368(1,056)(529)
1,942¥7,613¥4,331
2,285(1,071)(669)
1,224¥6,100¥6,205
2,988(1,622)(663)
530¥7,438

Thousands of
U.S. dollars
2007$52,585
25,322(13,746)(5,619)4,492$63,034

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 Company and certain consolidated subsidiaries havereceived guarantee and lease deposits from tenants for leased
property according to the lease agreements. These guarantee

deposits are refundable to the tenants, generally by 10 equal
annual installments commencing in the 11th year, and leasedeposits are refundable when contracts are cancelled.

Annual Report 2007

Notes to the Consolidated Financial Statements

8. Other noncurrent liabilities
Other noncurrent liabilities at 31st March 2006 and 2007 consisted of the following:
Millions of yen
2006
2007

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

¥ 5,304
21,765
9,403¥36,472¥ 6,681
138,460
17,265¥162,406

Thousands of
U.S. dollars
2007$

56,6191,173,390
146,313$1,376,322

9. Contingent liabilities
At 31st March 2006 and 2007, the Companies were contingently liable for guarantees of loans in the amounts of¥21,032 million and ¥33,700 million ($285,593 thousand),
respectively.

10. Net assets
As described in Note 2(l), “Accounting Standard for
Presentation of Net Assets in the Balance Sheet,” net assets
comprises four subsections, which are the shareholders’equity, accumulated gains (losses) from revaluation and translation adjustments, subscription rights to shares, and minority
interests.
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 andtransactions 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
the board of directors, designate an amount not exceeding
one-half of the 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
is made, 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. Legal earnings reserve is included
in retained earnings in the accompanying 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 not allowed to be to use as a source of dividend
payments.
The maximum amount that the Company may appropriate
for dividend payments is calculated based on the nonconsolidated financial statements of the Company in accordancewith Japanese laws and regulations.

11. Impairment loss on fixed assets
Details of impairment loss are as follows:

Breakdown by region

Breakdown by use

Region2006

2006
RegionUse
Parking lots
Idle assets
Osaka
Offices, etc.
Totaling 16
Golf courses, etc.
Okayama
Totaling 2
Hotel, etc.
Kyoto
Totaling 2
Idle assets, etc.
Hyogo
Totaling 6

Type of assets

Osaka

Millionsof yenOkayamaLand, etc.

¥2,542Land and buildings, etc.

2,522Land and buildings, etc.

1,031

Land and buildings, etc.

893

Kyoto

Hyogo

Use
Leasing assets
Osaka
Idle assets, etc.
Totaling 20
Leasing assets
Hyogo, etc. Idle assets, etc.
Totaling 20

Millionsof yen¥1,210
1,332
1,661
857
4
244
787
0
569
294
30

2007
Region2007
RegionType of assets
Land
Other
Land
Buildings and structures
Other
Land
Buildings and structures
Other
Land
Buildings and structures
Other

Type of assets

Millions Thousands ofof yen U.S. dollars

Land, etc.

¥414

$3,508Land, etc.

455

3,856

Osaka

Hyogo, etc.

Type of assets
Land
Buildings and structures
Construction in progress
Other
Land
Buildings and structures
Construction in progress
Other

Millions Thousands ofof yen U.S. dollars¥152$1,288
96
814
144
1,220
22
186
182
1,542
13
110
20
169
240
2,034
Annual Report 200763

12. Management integration and share exchange
Hankyu Holdings, Inc., the predecessor of the Company andHanshin Electric Railway Co. Ltd. (“Hanshin”) agreed to integrate management under a mutual holding company for the
purpose of increasing enterprise and shareholders’ value
through the strengthening of management structure andenhancing know-how in various businesses. On 29th May
2006, the two parties entered into a share exchange agreement on the condition of the successful take-over bid by theCompany. Upon the successful bid, the share exchange
agreement went effect and the share exchange was made on
1st October 2006.
(a) Purchase of shares
The Company purchased 63.71% of the shares of “Hanshin”

at the cost of ¥249,841 million ($2,117,297 thousand); related
expenses aggregated ¥2,131 million ($18,059 thousand). For
the purchase of the shares, the amount of ¥54,238 million($ 459,644 thousand) was recorded under goodwill, and the
profits and losses of “Hanshin” for the period from 1st July
2006 to 31st March 2007 were included in the Consolidated
Statements of Income of the Company for the year ended
31st March 2007. The goodwill is being amortized over 20
years on a straight-line basis.
The assets and liabilities received by the business combination on 27th June 2006 set forth in the table below.
Regarding profits and losses, estimates were made on theassumption that the date of the business combination was
1st April 2006.
Millions of yen

Thousands of
U.S. dollars

Current assets........................................................................................................
Fixed assets ...........................................................................................................
Total assets ............................................................................................................

¥120,786
652,613773,399$1,023,610
5,530,619
6,554,229

Current liabilities.....................................................................................................
Noncurrent liabilities...............................................................................................
Total liabilities.........................................................................................................
Minority interest.....................................................................................................

130,165
325,984
456,159
6,874

1,103,093
2,762,661
3,865,754
58,254

Millions of yen

Thousands of
U.S. dollars¥813,613
94,80170,43240,50732.47$6,895,025
803,398
596,881343,280
0.275

Sales.......................................................................................................................
Operating income...................................................................................................
Income before income taxes .................................................................................
Net income.............................................................................................................
Net income per share (yen and dollars)..................................................................
(b) Exchange of shares
Under the share exchange agreement, the Company issued
214,209 thousand new shares at the exchange rate of 1.4 of
the Company’s ordinary shares of common stock for eachshare of “Hanshin.” As a result of the issuance of new

64

Annual Report 2007

shares, investments in subsidiaries and statutory reserve
included in capital surplus increased ¥123,209 million, respectively. Simultaneously, the Company recognised goodwill in
the amount of ¥8,093 million ,which is being amortised over
20 years on a straight-line basis.

Notes to the Consolidated Financial Statements

13. Derivative financial instruments and hedging
transactions
The Group includes companies whose line of business
requires a high degree of reliance on external debt such asbank borrowings and corporate bonds. For these companies,
managing the risk of changing interest rates is necessary forstable operations. This goal is being achieved by using
derivative transactions — under a certain set of conditions —as a means of cost efficient interest risk hedging. Derivativetransactions employed comprise interest rate swaps andinterest swaptions, which change floating and fixed interest
rates, covering outstanding bonds, borrowings, and deposits.
The Group also includes companies operating in the travel,forwarding and other businesses whose financial statements
are denominated in foreign currencies. For these companies,
protection from the risks of currency fluctuations affecting
the value of foreign currency denominated assets and liabilities is necessary for stable operations. The use of foreignexchange 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.

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 derivative transactions 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,
ensuring that contracts are concluded and settled in compliance with the relevant 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

Hedged items:
Foreign currency trade receivables
and trade payables and future
foreign currency transactions

Interest rate swap contracts
Interest swaption contracts

Interest on bonds and loans payable

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

The following table summarises market value information as of 31st March 2006 and 2007 of derivative transactions forwhich hedge accounting had not been applied:
Millions of yen
2006
2007

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

¥13
13
¥ 0

¥—
—
¥—

Thousands of
U.S. dollars
2007

$—
—
$—

Annual Report 200765

14. Lease transactions
Information for non-capitalised finance leases at 31st March 2005, 2006 and 2007 was as follows:
2005

Millions of yen
2006

2007

Thousands of
U.S. dollars
2007

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

¥19,253¥19,830¥20,790$176,186

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

¥ 2,846
6,706¥ 9,552¥ 3,294
5,905¥ 9,199¥ 3,186
5,594¥ 8,780$ 27,000
47,407$ 74,407

The Group as lessees

Lease payments under such leases for the years ended 31st March 2005, 2006 and 2007 were ¥3,041 million, ¥3,137 millionand ¥3,848 million ($32,610 thousand), respectively.

2007

Thousands of
U.S. dollars
2007

The Group as lessors

2005

Millions of yen
2006

Original lease obligations (machinery and equipment and other) ......

¥ 4

¥ 4

¥—

$—

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

¥ 1
—
¥ 1

¥ 0
—
¥ 0

¥—
—
¥—

$—
—
$—

Leasing receipts for the years ended 31st March 2005, 2006 and 2007 amounted to ¥1 million, ¥1 million and ¥0 million ($2 thousand), respectively. Depreciation for the years ended 31st March 2005, 2006 and 2007 amounted to ¥0 million, ¥1 million and ¥0
million ($2 thousand), respectively.
Information for operating leases at 31st March 2005, 2006 and 2007 was as follows:
2005

Millions of yen
2006

2007

Thousands of
U.S. dollars
2007¥14,530
73,749¥88,279¥12,698
53,144¥65,842¥11,40242,284¥53,686$ 96,627
358,339$454,966

The Group as lessors

2005

Millions of yen
2006

2007

Thousands of
U.S. dollars
2007

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

¥ 82
1,387
¥1,469¥ 82
1,305¥1,387

The Group as lessees

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

66

Annual Report 2007

¥

82
1,224
¥1,306$695
10,373$11,068

Notes to the Consolidated Financial Statements

15. Segment information
The Group’s businesses are divided into the Urban
Transportation Segment, the Real Estate Segment, the Traveland International Transportation Segment, the Hotels
Segment, the Entertainment and Communications Segment,
the Retailing Segment and the Other Segment.
The seven businesses segments for the three years
ended 31st March 2007 comprised the following:
The Urban Transportation Segment included railways, bus
and taxi, and the manufacture of rolling stock .
The Real Estate Segment included purchase and sale ofreal estate, rental of real estate and property management
services.

The Travel and International Transportation Segment
included travel and international air cargo services.
The Hotels Segment included hotel ownership and management businesses.
The Entertainment and Communications Segment consisted of sports-related business, the Takarazuka Revue
Theater, advertising and publishing businesses.
The Retailing Segment included department stores, retailsales and food and drink sales.
The Other Segment included construction, consumer
finance, computer-related services and outsourcing services
for personnel and accounting services.
Geographic segment information is not disclosed as overseas operations were immaterial.

Annual Report 200767

By business category:Millions of yen
Urban
Transportation

2005
Net sales:
Customers............................
Intersegment........................
Costs and expenses.................
Operating income (loss) ...........

¥149,732
1,682
151,414122,005¥ 29,409

Real Entertainment &Travel & International
Estate Communications Retailing Transportation

HotelsOther¥100,551
12,047
112,598
92,676¥ 19,922¥54,41742
54,45954,257¥ 202¥15,295 ¥—5,563 (23,797)
20,858 (23,797)
22,049 (26,454)¥ (1,191) ¥ 2,657

Real Entertainment &Travel & International
Estate Communications Retailing Transportation

HotelsOther¥99,008
12,794
111,80290,197¥21,605¥53,715147
53,86253,421¥ 441¥16,868 ¥—
4,876 (24,596)
21,744 (24,596)
21,253 (27,261)¥ 491 ¥ 2,665

Real Entertainment &Travel & International
Estate Communications Retailing Transportation

HotelsOther¥151,839
24,498176,337
140,061¥ 36,276¥65,336
94
65,43064,093¥ 1,337¥35,379 ¥— ¥743,377
8,700 (44,216)—
44,079 (44,216) 743,377
44,096 (46,277) 656,374¥ (17) ¥ 2,061 ¥ 87,003¥35,095
3,414
38,50935,747¥ 2,762¥57,004932
57,93656,406¥ 1,530¥64,529
117
64,646
61,169¥ 3,477

Eliminations Consolidated¥476,623—
476,623
417,855¥ 58,768

Millions of yen
Urban
Transportation

2006
Net sales:
Customers............................
Intersegment........................
Costs and expenses.................
Operating income ....................

¥151,963
2,046
154,009
123,411¥ 30,598¥36,511
3,578
40,08935,955¥ 4,134¥61,034926
61,96059,519¥ 2,441¥67,056229
67,28564,818¥ 2,467

Eliminations Consolidated¥486,155—
486,155
421,313¥ 64,842

Millions of yen
Urban
Transportation

2007
Net sales:
Customers............................
Intersegment........................
Costs and expenses.................
Operating income (loss) ..........

¥179,429
2,426
181,855
148,661¥ 33,194¥69,873 ¥153,505
5,860
2,397
75,733 155,902
70,495 151,237¥ 5,238 ¥ 4,665¥88,016
241
88,25784,008¥ 4,249

Eliminations Consolidated

Thousands of U.S. dollars
Urban
Transportation

Real Entertainment &Travel & International
Estate Communications Retailing Transportation

2007
Net sales:
Customers ................................. $1,520,585 $1,286,771 $592,144 $1,300,890
Intersegment ............................
20,559207,610
49,661
20,314
1,541,144 1,494,381 641,805 1,321,204
Costs and expenses.................... 1,259,839 1,186,957 597,415 1,281,670
Operating income (loss) ............. $ 281,305 $ 307,424 $ 44,390 $ 39,534

68

Annual Report 2007

HotelsOther

Eliminations Consolidated$745,898 $553,695 $299,822 $— $6,299,805
2,042
797
73,729 (374,712)—
747,940 554,492 373,551 (374,712) 6,299,805
711,932 543,161 373,695 (392,178) 5,562,491$ 36,008 $ 11,331 $ (144) $ 17,466 $ 737,314

Notes to the Consolidated Financial Statements

Millions of yen
Urban
Transportation

2005
Assets ......................................
Depreciation and amortisation....
Capital expenditures ................

¥592,483
16,943
9,829

Real Entertainment &Travel & International
Estate Communications Retailing Transportation
Hotels¥595,396
7,318
9,451

¥79,508
1,423
1,956

¥17,385813
1,947¥84,907
790
1,107

Other

Corporate andEliminations Consolidated¥56,453 ¥178,767 ¥66,009 ¥1,670,911
2,067
800
(183)
29,974
1,922
425
(567)
26,072Millions of yen
Urban
Transportation

2006
Assets ......................................
Depreciation and amortisation....
Impairment loss of fixed assets...
Capital expenditures ................

¥584,178
17,446
1,407
14,071

Real Entertainment &Travel & International
Estate Communications Retailing Transportation

Hotels¥606,048
6,388
1,939
13,573¥71,359 ¥168,976 ¥12,950 ¥1,609,117
1,945
741
(138)
29,612
1,744
1,898
—
6,988
19,844314(278)
50,438¥62,274
1,387
—
654

¥17,037
907
—
1,023

¥86,295
936
—
1,237

Other

Corporate andEliminations Consolidated

Millions of yen
Urban
Transportation

2007
Assets ......................................
Depreciation and amortisation....
Impairment loss of fixed assets...
Capital expenditures ................

Real Entertainment &Travel & International
Estate Communications Retailing Transportation¥738,804 ¥1,008,765 ¥130,111
22,07011,876
3,803
10
456
—
28,5399,900
5,000¥91,613
1,941
92
2,401

¥116,942
1,568
—
1,779

Hotels

Other

Corporate andEliminations Consolidated¥81,355 ¥180,308 ¥18,796 ¥2,366,694
2,362
646
(377)
43,889
25
94
192
869
5,381
307
(1,454)51,853Thousands of U.S. dollars
Urban
Transportation

Real Entertainment &Travel & International
Estate Communications Retailing Transportation

2007
Assets ...................................... $6,261,051 $8,548,856 $1,102,636 $776,381
Depreciation and amortisation....
187,034
100,644
32,22916,449Impairment loss of fixed assets...
85
3,864
—
780
Capital expenditures ................
241,856
83,89842,373
20,347

Hotels

Other

Corporate andEliminations Consolidated$991,034 $689,449 $1,528,034 $159,288 $20,056,729
13,28820,017
5,475(3,195)371,941
—
212
796
1,627
7,364
15,07645,6022,602 (12,322)
439,432

Annual Report 200769

16. Income taxes
The Companies are subject to a number of income taxes, which, in the aggregate, indicate an aggregate statutory income ratein Japan of approximately 40.7% for the years ended 31st March 2006 and 2007.
The following table summarises the significant differences between the aggregate statutory income tax rate and theCompanies’ effective income tax rate for financial statement purposes for the years ended 31st March 2005.
The difference between the rates for the year ended 31st March 2006 and 2007 was immaterial:
2005

Statutory tax rate..................................................................................................................................................

40.7%

Nondeductible expenses ..................................................................................................................................
Inhabitants per capita taxes ..............................................................................................................................
Loss carryforwards of subsidiaries that don’t record deferred taxes ...............................................................
Exclusion of loss carryforward of subsidiaries..................................................................................................
Losses on revaluation of investments in consolidated
subsidiaries and affiliates accounted for by the equity method, and other ....................................................
Equity in income of affiliates.............................................................................................................................
Amortisation of consolidation difference ..........................................................................................................
Tax credits and other in consolidated subsidiaries ...........................................................................................
Other.................................................................................................................................................................
Effective income tax rate .....................................................................................................................................

0.5
0.6
10.0
(21.0)
4.8
(3.2)
(2.7)
(1.0)
(2.3)
26.4%

Significant components of the Companies’ deferred income tax assets as of 31st March 2006 and 2007 were as follows:

Deferred tax assets:
Revaluation of assets on consolidation ...........................................................
Retirement benefits.........................................................................................
Loss on revaluation of real estate for sale .......................................................
Tax loss carryforwards ....................................................................................
Special reserve for investment losses.............................................................
Allowance for doubtful receivables..................................................................
Unrealised profit from assets ..........................................................................
Loss on valuation of properties of business reorganisation.............................
Losses on revaluation of investment securities ..............................................
Loss on impairment of fixed assets.................................................................
Accrued expenses ...........................................................................................
Enterprise taxes...............................................................................................
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:
Valuation difference of assets from consolidation...........................................
Gain on reversal of difference from land revaluation .......................................
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 .....................................................................................
70

Annual Report 2007

Millions of yen
2006
2007

Thousands of
U.S. dollars
2007¥ 53,552 ¥ 53,497
17,31024,081
17,13718,086
14,427
13,91010,74911,978
4,142
7,490
3,662
7,319
—
5,235
2,822
4,026
4,378
3,116
1,213
2,475
593
858
186
227
5,060
14,218135,231
166,516(13,762)(24,189)(98,174) (116,610)
23,29525,717$ 453,364
204,076
153,271
117,881
101,508
63,47562,02544,364
34,11926,407
20,975
7,271
1,924
120,492
1,411,152(204,991)(988,220)
217,941—(104,451)(86,353) (102,295)(31,467)(42,952)—(3,255)(2,119)(2,117)(119,939) (255,070)
98,174
116,610(21,765) (138,460)¥ 1,530 ¥(112,743)(885,178)(866,907)(364,000)(27,585)(17,940)(2,161,610)
988,220(1,173,390)$ (955,449)

Notes to the Consolidated Financial Statements

Net deferred tax assets as of 31st March 2006 and 2007 were included in the consolidated balance sheets as follows:

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

Millions of yen
2006
2007

Thousands of
U.S. dollars
2007¥15,096—
8,199(21,765)¥ 1,530$ 159,136—
58,805(1,173,390)$ (955,449)¥ 18,778—
6,939(138,460)¥(112,743)

17. Loan commitments
A consolidated subsidiary had extended loan commitments at 31st March 2006 and 2007 as follows:
Millions of yen
2006
2007

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

¥62,006
36,548¥25,458¥81,953
41,866¥40,087

Thousands of
U.S. dollars
2007$694,517
354,797$ 339,720

The above loan commitments may not be exercised in full, as the consolidated subsidiary extends loans within limits set in lightof the proposed use of funds and the borrower’s financial position.

18. Consolidated statements of cash flow
The year-end balances of cash and cash equivalents presented on the consolidated statements of cash flow and on the consolidated balance sheets at 31st March 2006 and 2007 were reconciled as follows:
Millions of yen
2006
2007

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

19. Subsequent events(a) Share exchange of a subsidiary:With the intention of securing superior competitiveness in the
Umeda district in Osaka and increasing customer satisfaction,
thereby enhancing enterprise value, a consolidated subsidiaryof the Company, Hanshin Department Store Co. Ltd., agreed
to integrate its management with Hankyu Department Store¥29,036(661)¥28,375¥41,806(1,639)¥40,167

Thousands of
U.S. dollars
2007$354,288(13,890)$ 340,398

Co. Ltd., on 26th March 2007. The companies entered into ashare exchange agreement on 10th May 2007. Upon approvalof the agreement by resolutions of shareholders at the general shareholder meetings of both companies held in June
2007, the share exchange is expected to be made on 1st
October 2007.

(b) Appropriation of retained earnings:
An appropriation of retained earnings for the year ended 31st March 2007 was duly approved at the ordinary shareholders’meeting held on 28th June 2007 as follows:
Cash dividends(¥5.00 per share).........................................................................................................

Millions of yen

Thousands of
U.S. dollars¥6,353$53,839

Annual Report 2007

71

72

Annual Report 2007

Corporate Data

Head Office: Corporate Planning Dept., IR Office
1-16-1, Shibata, Kita-ku, Osaka 530-0012, Japan
Phone: +81-6-6373-5001 Fax: +81-6-6373-5042

Tokyo Office:Toho Twin Tower Bldg., 5F
1-5-2, Yurakucho, Chiyoda-ku,
Tokyo 100-0006, Japan
Phone: +81-3-3503-1568 Fax: +81-3-3508-0249

Board of Directors
President andRepresentative Director Kazuo Sumi

Corporate Auditor

Takaharu Dohi
Lawyer andCorporate Auditor,
Hankyu Corporation

President, Hankyu Corporation

Representative Director Shinya Sakai

Corporate Auditor

Haruo Sakaguchi
Lawyer andCorporate Auditor,
Hankyu Corporation

President, Hanshin Electric Railway Co., Ltd.

Representative Director Tsunenori Kawashima
Executive Director, Hankyu Corporation

Director

Isao Matsuoka

External Director

Noriyuki Inoue

Corporate Auditor

Shinichi Kawai
Lawyer andCorporate Auditor,
Hanshin Electric Railway Co., Ltd.

Chairman, Toho Co., Ltd.

Corporate Auditor

Hideki Yoshihara
Professor of
Graduate School ofBusiness Administration,
Nanzan University, andCorporate Auditor of
Hanshin Electric Railway Co., Ltd.

Chairman and CEO, Daikin Industries, Ltd.

External Director

Shunichi Sugioka

External Director

Hiroshi Ishikawa

Director

Katsuhiko Minohara

Director

Hiroshi Ojima

Director

Tomokazu Yamazawa

Director

Tsuneaki Miyazaki

Chairman, Hankyu Department Stores, Inc.
Advisor, The Kansai Electric Power Co., Inc.

(As of 28th June 2007)

President, Hankyu Realty Co., Ltd.
President, Hankyu Express International Co., Ltd.
President, Hankyu Hotel Management Co., Ltd.

Operating Companies

President, Hanshin Contents Link Corporation

Director

Yoshinobu Honjyo

Director

Tadashi Sano

Chairman, Hanshin Station Net Co., Ltd.
President, Bay Communications Inc.

Director

Koichi Kobayashi

Director

Mitsuo Nozaki

Hankyu Corporation
President
Kazuo Sumi

Chairman, Takarazuka Revue Company
General Manager of Personnel andGeneral Affairs Dept.

Director

Takehiro Sugiyama

Director

Masao Shin

Hanshin Electric Railway Co., Ltd.
President
Shinya Sakai

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

Director

Toru Nakashima

Hankyu Express International Co., Ltd.
President
Hiroshi Ojima

Head of Corporate Planning Dept.

Standing Corporate Auditor Yasuro Yamauchi
Standing Corporate Auditor, Hankyu Corporation

Hankyu Hotel Management Co., Ltd.
President
Tomokazu Yamazawa

Standing Corporate Auditor Hidekazu Sugisawa
Standing Corporate Auditor, Hankyu Corporation(As of 28th June 2007)

Annual Report 200773

Group at a Glance

Urban transportation
Business subsegments for financial reporting purposes

Retailing
Name of the consolidated subsidiaryBusiness subsegments for financial reporting purposes

Hankyu Corporation
Railway operations

Bus operations

Hanshin Electric Railway Co., Ltd.
Nosé Electric Railway Co., Ltd.

Hanshin Midorikai Co., Ltd.
Department store

Hanshin Unso Co., Ltd.

Kita-Osaka Kyuko Railway Co., Ltd.

Hanshin Shoji Co., Ltd.

Hanshin Electric Railway Co., Ltd.

Hänsel Co., Ltd.

Hankyu Bus Co., Ltd.

Hankyu Corporation

Hankyu Sightseeing Bus Co., Ltd.
Hanshin Bus Co., Ltd.

Taxi operations

Name of the consolidated subsidiary

The Hanshin Department Store, Ltd.

Hankyu Retails Co., Ltd.
Sales of goods

Hanshin Taxi Co., Ltd.
Hankyu Railway Service Co., Ltd.

Iina Dining Co., Ltd.
Doubleday Hankyu Co., Ltd.

Hankyu Taxi Co., Ltd.

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

Creative Hankyu Co., Ltd.

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

Travel and international transportation

Hankyu Electric Communication

Other

Systems Co., Ltd.

Business subsegments for financial reporting purposes

Hankyu Motor Technology Co., Ltd.
Nippon Rent-A-Car Hankyu Inc.

Name of the consolidated subsidiary

Hankyu Express International Co., Ltd.
Travel agency

Alna Sharyo Co., Ltd.

Hanshin Electric Railway Co., Ltd.
Hankyu Travel Support Co., Ltd.
Hankyu Express International Co., Ltd.

Real estateBusiness subsegments for financial reporting purposes

Freight transport
Name of the consolidated subsidiary

Hankyu Cargo Service Co., Ltd.
Hanshin Air Cargo Co., Ltd.
Sanyo Jidosha Unso Co., Ltd.

Hankyu Corporation
Hanshin Electric Railway Co., Ltd.
Rental of real estate

Osaka Diamond Chikagai Co., Ltd.

Purchase and sale of real estate

REIT operations

Business subsegments for financial reporting purposes

Name of the consolidated subsidiary

Hanshin Real Estate Co., Ltd.

Hankyu Hotel Management Co., Ltd.

Hankyu Corporation

Dai-ichi Hotel Kyushu Co., Ltd.

Hanshin Electric Railway Co., Ltd.

Arima View Hotel Co., Ltd.

Hankyu Realty Co., Ltd.

Amano Hashidate Hotel Co., Ltd.

Hankyu Facilities Co., Ltd.
Property management

HotelsHankyu Realty Co., Ltd.

Hankyu Community Service Co., Ltd.

Hotel management

Hotel New Hankyu Kochi Co., Ltd.
Hotel Hanshin, Ltd.

Hanshin Engineering Co., Ltd.

Hanshin Electric Railway Co., Ltd.

High Security System Co., Ltd.

Hanshin Hotel Systems Co., Ltd.

Hankyu REIT Asset Management, Inc.

Rokko Oriental Hotel Co., Ltd.
Hanshin Enterprise Co., Ltd.

Entertainment and communications
Business subsegments for financial reporting purposes

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

Revue
Theatre operations
Advertising agency

74

Business subsegments for financial reporting purposes

Construction

Name of the consolidated subsidiary

Hanshin Kensetsu Co., Ltd.
Chuo-Densetsu Co., Ltd.

Hankyu Corporation

Consumer finance

Station Finance Inc.

Takarazuka Creative Arts Co., Ltd.

Group financeHanshin Financial Support Co., Ltd.

Takarazuka Stage Co., Ltd.

Computer related services and outsourcing

Umeda Arts Theater Co., Ltd.

services for personnel and accounting services

Hankyu Advertising Agency Inc.
Hanshin Contents Link Corporation

Information service

Itec Hanshin Co., Ltd.

Publishing

Hankyu Communications Co., Ltd.

Annual Report 2007

Other

Name of the consolidated subsidiary

Hankyu Business Associate Co., Ltd.

Investor Information

Authorised Shares:
3,200,000 thousand
Issued and Outstanding Shares:
1,271,406 thousand
Shareholders:
132,164
Stock Exchange Listings:
Tokyo, Osaka
Transfer Agent:
Mitsubishi UFJ Trust and Banking Corporation

Principal Shareholders:Privée Investment Holdings Co., Ltd.
Japan Trustee Services Bank, Ltd. (Trust account)
Nippon Life Insurance Company
The Master Trust Bank of Japan, Ltd. (Trust account)
Sumitomo Mitsui Banking Corporation
Japan Trustee Services Bank, Ltd. (Trust account No.4)
Hankyu Department Stores, Inc.
The Sumitomo Trust & Banking Co., Ltd.
Japan Securities Finance Co., Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
(As of 31st March 2007)

Stock Price Range / Turnover Trend (Tokyo Stock Exchange)
Nikkei Average (¥)
21,000Stock Price (¥)
900

600

300

14,000

Nikkei Average (right scale)

Stock Price (left scale)

7,000

0
150,0000

100,000
50,0000

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7

2004

2005

2006

2007

Turnover (thousand shares)

Annual Report 2007

75

The Hankyu Hanshin Toho GroupThe Hankyu Hanshin
Holdings GroupThe Hankyu
Department StoresGroup

The Toho Group76

Annual Report 2007

The Group’s operations revolve around the railway business, and its business sphereis expanding in parallel with the ongoing development of the area served by Hankyu’s
train services. Activities currently encompass the full spectrum of urban transportation
including not only railways, but also buses and taxis, as well as real estate development. In the fields of travel, international transportation, hotels, and sports/theatres,
too, the Hankyu Corporation Group is one of the best-known corporate players inJapan. Recent years have seen further expansion into new business fields such as
publishing and the operation of retail outlets such as bookstores.
The operating income of Hankyu Holdings on a consolidated basis for the term
ended March 2007 was ¥743.4 billion.

Hankyu Corporation opened its department store at Umeda Station in downtown
Osaka in 1929. The department stores operation was subsequently spun off as anindependent company. Today, Hankyu Department Stores, Inc. is one of Japan’s
leading department store operators, with 10 stores in the Kansai region as well as theTokyo area. It also runs a chain of supermarkets located near Hankyu railway stations,and has recently moved into home food delivery and development and managementof shopping centres.
The operating income of Hankyu Department Stores on a consolidated basis forthe term ended March 2007 was ¥396.0 billion.

Toho Co., Ltd. was established in 1932 to manage the Tokyo Takarazuka Theater,which gave its first performance in 1934. Today, the company produces motion pictures and operates an extensive chain of cinemas throughout Japan, and also produces stage performances. In both fields, Toho is one of Japan’s leading companies,
and it also engages in the business of real estate rentals, taking advantage of its realestate holdings in prime downtown locations, particularly the sites of former cinemas.
The operating income of Toho on a consolidated basis for the term ended
February 2007 was ¥201.0 billion.

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/