To Our Stakeholders

Background to the Establishment of a Long-Term Vision 
Overview of the Group’s Current Position
More than 10 years have passed since the management integration of Hankyu Holdings and Hanshin Electric Railway. During
this period, we have reorganised operations in respective business areas. The many integration benefits that have resulted
from this reorganisation as well as the progress of large projects
have given us one of the highest levels of operating income
among major private (non-JR) railway operators. Meanwhile, ourfinancial position is improving steadily thanks to interest-bearing
debt reduction. Among major private (non-JR) railway operators,
we have an industry-leading interest-bearing debt/EBITDA ratio.
In fiscal 2017, the Group posted operating income of ¥104.1

billion. Breaking this down by business area (Umeda and lineside areas versus the Tokyo metropolitan area and overseas)
and by business model (“stock” businesses*1 versus “flow”
businesses*2), stock businesses in Umeda and line-side areas
currently account for approximately two-thirds of the Group’s
overall operating income. Adding flow businesses shows that
the Group depends on Umeda and line-side areas for morethan 90% of operating income.
Given this situation, whether the Group can sustain growth
going forward while remaining dependent on Umeda and lineside areas, particularly on stock businesses, is a moot point.

Tokyo metropolitan area and overseas markets + Stock businesses
Tokyo metropolitan area and overseas markets + Flow businesses

FY2017
Operating income

104.1 billion¥

Umeda andline-side areas+Flowbusinesses

Businesses in Umeda
and line-side areas
generate

90% of operating income.

Umeda and line-side areas+
Stock businesses

2/3 of the Group’s overall
operating income*1 Businesses that own or use such stock as property and other fixed assets (including the railway business, real estate leasing business, broadcast and communications
business, and Hotels Business)*2 Businesses that, instead of owning large-scale stock, use business know-how, human resources, brand assets, and other intangible assets (including the real estate
sales business and other businesses, sports business, stage business, information services business, Travel Business, and International Transportation Business)

To Our Stakeholders

Changes in Future Business Conditions
Naturally, the external environment will change going forward.
In particular, the decline in Japan’s population is expected toaccelerate from 2025. In 2040, the Kansai area’s population is
projected to be 16% lower than it was in 2015. Further, due to acontinuous rise in the population group aged 65 or above, society will become increasingly aged as 2040 approaches.
Consequently, there will be fewer consumers of the Group’s
products and services. Moreover, higher workforce participation
by women and the elderly could reduce the time available for
consumption and leisure activities. Meanwhile, securing employees will become more problematic as supply tightens in thelabour market. As the above trends advance, they will inevitably
have a correspondingly negative effect across a range of businesses in the Group. Given this scenario, remaining significantly
dependent on stock businesses in Umeda and line-side areas
would expose the Group to risk. Therefore, we must slough off
over-reliance on these areas.

Population of the Kansai area
(Millions of people)
20

(%)

18.3

80

18.0

17.5
15.4

15

60.0

58.7

60

53.5

58.5

10

40

36.7

0

2015

30.8

29.8

27.6

5

2020

20

2025

0

2040

(CY)

Total population
Average working-age population percentage (right axis)
Average elderly population percentage (right axis)
Source: National Institute of Population and Social Security Research, “Population Projection
for Japan by Prefectures”
Note: “The Kansai area” comprises Osaka, Kyoto, Hyogo, and Nara prefectures.

Overseas visitors to Japan(Millions of people)

80

On the other hand, not all changes in business conditions will
impact the Group negatively. Various factors will bring
opportunities. One such factor is demand from overseas visitors
to Japan. The past several years have seen a steep rise in thenumber of overseas visitors to Japan, with the increase being
particularly dramatic in the Kansai area. This increase has
contributed significantly to the growth of our railway operation
revenue and earnings from the Hotels Business. Japan’s
government aims to increase the number of overseas visitors
to Japan from 2016’s level of 24 million to 40 million by 2020
and 60 million by 2030. Thus, demand promises to continue
robust growth.
Further, our line-side areas enjoy advantages over other lineside areas in the Kansai area. They are comparatively close tosuch international hubs as Osaka International Airport andKobe Airport as well as to Shin-Osaka Station, which provides
access to the Kansai area from the Tokyo–Nagoya–Osaka axis.
Also, our line-side areas are seeing steady progress in thedevelopment of road and rail infrastructure. For example, a new
direct rail link between the Umeda area and Kansai International
Airport is planned.

60.0

60

40.0

40

20

0

13.4
10.4
4.8
3.5
2013

2014

19.7
7.9
2015

24.0
10.2
2016

18.0
2020
Target2030
Target(CY)

Overseas visitors to Japan (total)
Overseas visitors to the Kansai area
Sources: Japan National Tourism Organization (JNTO), “Visitors Arrivals, Japanese Overseas
Travellers”; Japan Tourism Agency, “Consumption Trend Survey for Foreigners
Visiting Japan”; KANSAI Tourism Bureau, “Kansai International Tourism Policy
2016–2018”
Note: Overseas visitors to the Kansai area have been calculated based on the numbers ofoverseas visitors to Japan announced by JNTO, the “Consumption Trend Survey for
Foreigners Visiting Japan” of the Japan Tourism Agency, and overseas visitors to the
Kansai area as percentages of overseas visitors to Japan, which are included in the“Kansai International Tourism Policy 2016–2018” of the KANSAI Tourism Bureau.

To Our Stakeholders

Meanwhile, the real estate leasing business will lead efforts toincrease our presence in Tokyo’s five central business districts (Chiyoda, Chuo, Minato, Shinjuku, and Shibuya), which are expected tostill have their current population levels in the 2040s. Overseas,
we are making forays into the ASEAN region, where population
growth and strong economic growth are likely to continue.
If we can deftly capitalise on the business opportunities
accompanying such changes in business conditions and tap into
the ASEAN region’s growth, we can realign our line-side areas.
Particularly with respect to the Umeda area, we can develop
from “Umeda in Kansai” into “Umeda in Asia.” Also, the Tokyo metropolitan area and other countries will offer ample opportunities
to apply the business strengths and expertise that we havedeveloped over many years in line-side areas.
Other positives include technological advances anticipatedin such fields as artificial intelligence (AI) and the Internet ofThings (IoT). Society is on the brink of a major transformation,
which has been dubbed “the fourth industrial revolution.” By
actively exploiting or repurposing the array of new technologies emerging from this revolution, our businesses will be able
to curb costs and eliminate labour shortages. In addition, they
will be able to transform existing business models and create
new growth opportunities.

Population of the Tokyo metropolitan area andTokyo’s five central business districts(Millions of people)

(Millions of people)

40

1.6

35.9

35.7

35.2

30

1.0

20

1.1

1.2

32.3
1.2

0.8

10

0

1.2

0.4

2015

2020

2025

2040

0

(CY)

Total population of the Tokyo metropolitan area
Population of Tokyo’s five central business districts (right axis)
Sources: N ational Institute of Population and Social Security Research, “Population Projection for Japan by Prefectures”; Tokyo Metropolitan Government Bureau ofGeneral Affairs, “Population Projection for Tokyo by Ward, City, Town, and Village”
Note: “ The Tokyo metropolitan area” comprises Saitama, Chiba, Tokyo, and Kanagawa
prefectures.

Population of the ASEAN region(Millions of people)
800

600

633.4

667.6

698.9

2020

2025

768.7

400

200

0

2015

2040
(As of 1st July of each year)

Source: United Nations, “World Population Prospects: The 2017 Revision”
Note: The medium variant has been used.

To Our Stakeholders

Establishment of a Long-Term Vision 
In light of the abovementioned changes in business conditions,
we decided to prepare a long-term vision. Reflecting ourdetermination to have advanced as a growth-focused corporategroup by fiscal 2026—the 20th anniversary of management
integration—and to continue advancing thereafter, the vision
sets out the company we hope to be in the long term as well as thebasic approach and strategies for achieving this target profile. In
preparing the vision, we outlined the company we hope to bein fiscal 2026, while to some extent looking ahead to thesignificant effect of demographic changes by the 2040s.
Based on the categorisation by business area and businessmodel mentioned earlier and taking into consideration changes
in business conditions going forward, the long-term vision
describes our target profile and strategies in each category.
The vision sets out four goals based on the company we hope

to be. Stating these goals in order, the vision calls on (1) stockbusinesses in Umeda and line-side areas to make our railway theabsolute best among the Kansai networks, (2) stock businesses in
the Tokyo metropolitan area and overseas to construct a stablerevenue base in the Tokyo metropolitan area and overseas
markets, and (3) flow businesses to strengthen competitivenessby thoroughly pursuing brand optimisation and differentiation.
Lastly, to complement and raise the basic level of efforts focusedon achieving the above goals, the vision calls on (4) businesses tomake greater use of the Group’s collective strength and develop
new business fields. (For details, please see pages 22–25.)
Going forward, the Hankyu Hanshin Holdings Group will
make concerted efforts to steadily advance measures aimed atrealising the above long-term vision, thereby enhancing thewhole Group’s corporate value continually.

September 2017

Kazuo Sumi

Takehiro Sugiyama

Chairman and
Representative Director,
Group Chief Executive Officer

President andRepresentative Director

Special Feature: Long-Term Management Vision for 2025
From Management Integration to the Present Day(¥ billion)
1,700

The Hankyu Hanshin Holdings Group celebrated its 10th anniversary
in October 2016. During this decade, the Group worked unstintingly
to enhance overall corporate value. The section below explains 10
years of progress by breaking down our history into three management phases.
First Phase

Second Phase

1,400

Interest-bearing debt
(left axis)

1,275.6

1,282.6

1,271.1

1,251.7

145.2
1,100

135.3

133.2
127.1

EBITDA (right axis)

800

2008

2009

2010

2011

Realised numerous integration benefits andadvanced large projects

Advancing large projects for growth

Improving financial position steadily(fiscal 2012–fiscal 2015)

After major investments peaked around fiscal 2012, improving theGroup’s financial position became the top priority in business management. Interest-bearing debt reduction was uppermost in our
minds as we allocated funds. Consequently, by the end of fiscal 2015
we had lowered interest-bearing debt to the ¥950 billion level. Moreover, during this phase completion of the abovementioned large
projects helped grow EBITDA to the ¥150 billion level. As a result, theinterest-bearing debt/EBITDA ratio improved significantly, decreasing to 6.4 times.
Third Phase

9.8 times
9.6 times

8.8 times

Advancing large projects for growth(fiscal 2007–fiscal 2011)

Immediately after the management integration of Hankyu Holdings
and Hanshin Electric Railway, we took measures to realise numerous
integration benefits while forging ahead with large projects for
growth. Improving its financial position was of course an importanttask, but the Group made large projects that were in progress before
integration the first priority as they promised to generate significant,stable cash flows. These projects included the rebuilding of Umeda
Hankyu Building and the implementation of plans for the Hanshin
Namba Line. However, the high level of development investment
accompanying such projects pushed up interest-bearing debt toa peak of ¥1,280 billion. Meanwhile, earnings dipped due to theglobal recession triggered by the credit crisis. As a result, the interestbearing debt/EBITDA ratio rose as high as 9.8 times.

Interest-bearing debt/
EBITDA ratio
9.4 times

Developing foundations for medium-tolong-term growth (fiscal 2016–)

With the prospect of a better financial position having come largely
within reach, in fiscal 2016 we established a new medium-term­management plan with the aim of shifting the focus of business
management toward achieving further growth. To this end, the planset out two business strategies: enhance the value of Umeda andother line-side areas and develop new markets for medium-to-longterm growth. While pursuing these overriding strategies, we are balancing three tasks: investment for the future, continuous
strengthening of our financial position, and returns to shareholders.

Capital investment

Approx. ¥320 billion*
Approx. ¥130 billion

Approx. ¥190 billion

FY2008 – FY2011* Excluding capital investment related to the repurchase of securitised assets and the­exchange of the assets with Hankyu REIT, Inc.

3/20083/20093/20103/2011

Hankyu Nishinomiya Gardens Development(September 2004 – November 2008)
Extension of Hanshin Namba Line (Opening of
new extension) (October 2003 – March 2009)

Renovation of Hanshin Koshien Stadium* (October 2007 – March 2010)

Setting our sights even further ahead, in 2017 we prepared theHankyu Hanshin Holdings Group Long-Term Management Vision
for 2025.

September 2009: Opening of
Department Store Building (Phase I)

April 2010: Completion of Office Tower* Renovation work conducted during three off-seasons.

Special Feature: Long-Term Management Vision for 2025(¥ billion)
220

Target¥200.0 billion

8.9 times

180

7.8 times

166.5
159.3

1,183.6
145.1
133.5

2012

1,126.6

2013

149.2

150.1

6.9 times

6.4 times

1,032.3

955.8

2014

157.0

152.0

140

6.0 times

5.9 times

916.6

5.6 times

5.5 times

899.5

910.0

920.0

2016

2017

2018

2019

2015

Reduced interest-bearing debt by growing
EBITDA and curbing capital investment

TargetBetween5 and 6 times
2026

100

(FY)

Established long-term vision

Development of foundations
for medium-to-long-term growthFirst step toward realisationof long-term vision

Steady improvement
in financial standing

Approx. ¥390 billion
Investment in major
development projects andnew market development
Approx. ¥170 billion

Approx. ¥240 billion*
Approx. ¥60 billion

Approx. ¥180 billion

Approx. ¥220 billion

FY2012 – FY2015

3/20123/20133/2014

Investment for growthInvestment in maintenance and renewal

Investment in maintenanceand renewal of existing
infrastructure, etc.

FY2016 – FY2019

3/20153/20163/20173/2018Completion of phase I construction (around spring 2018)

3/2019Completion of phase II construction(around autumn 2021)

Umeda 1-1 Project (around spring 2022)

Kobe Hankyu Building, Rebuilding of
East Building and Renewal of West
Building Project (around spring 2021)
Development of Nishinomiya Kitaguchi Hankyu Building(provisional name) (around autumn 2018)
Rebuilding of Umeda Hankyu Building (May 2005 – November 2012)
November 2012: Grand opening of the Umeda Flagship Store ofHankyu Department Store
Osaka Station North District (Umekita) Phase I
Development Area Project (GRAND FRONT OSAKA)(March 2010 – March 2013)

Other projects ( Strategy 1, Strategy 2, Strategy 3)
Ebie 1-Chome Development Plan
Kita-Osaka Kyuko Railway Line Extension Project (around spring 2021)
Redevelopment Project for Area in Front of JR Yotsuya Station (around winter 2019)
Kyobashi 2-6 Redevelopment Plan (around spring 2019)
Sale of condominiums and detached houses in Vietnam, Indonesia, Thailand, and the Philippines
Note: Project start times are as of works commencement. Also, finish times are project completion
dates (completion of A and B blocks for Osaka Station North District (Umekita) Phase I Development Area Project).

Special Feature: Long-Term Management Vision for 2025

Long-Term Vision Summary

Looking at the Group’s business conditions over the mediumto-long term, the population of line-side areas is expected todecrease due to declining birth rates. Also, as technologicalinnovation progresses, lifestyles and living environments arelikely to change significantly.
Aiming to advance as a growth-focused corporate group inthese conditions, we established the Hankyu Hanshin HoldingsGroup Long-Term Management Vision for 2025, which sets out
the company we hope to be in the long term as well as the basic
approach and strategies for achieving this target profile.

Anticipating the abovementioned changes in businessconditions, the long-term vision sets out four business strategies based on two categories: business areas and businessmodels. With enhancing line-side areas and expanding fields asa slogan, the vision targets fiscal 2026. By this fiscal year, theGroup will have begun stable operations of the flagship project of management integration, the Umeda 1-1 Project, due
for completion around spring 2022.

Slogan for the Hankyu Hanshin Holdings Group Long-Term Management Vision for 2025 (Fiscal 2026)“Enhancing line-side areas and expanding fields”
Sustainably enhance corporate value

Enhance daily life (customer) value

Enhance social value

Strategy 1

Umeda and line-side areas + Stock businesses
Make our railway the absolute best among
the Kansai networks.
We aim to increase the resident and non-resident population of lineside areas. To this end, we will channel into these areas the dynamismof the Tokyo-Nagoya-Osaka axis and the power of Asia and otherregions of the world, attract new industries and cutting-edge technologies ahead of other companies, and support efforts to develop
thriving local communities.

Enhance economic value

Strategy 2

Tokyo metropolitan area andoverseas markets + Stock businesses
Construct a stable revenue base in the Tokyo
metropolitan area and overseas markets.
(Diversify the portfolio, which is currently concentrated in
Umeda and line-side areas.)
Our property portfolio is currently concentrated in Umea and line-side
areas. To compensate for reduction in the scale of businesses in the
Kansai area, we will diversify our property profile by acquiring additional assets including rental property in the Tokyo metropolitan area’s
large market and in overseas markets that are set to grow.

Strategy 3

Strategy 4

Flow businesses

Groupwide initiatives and new business fields

Strengthen competitiveness by thoroughly pursuing
brand optimisation and differentiation.

Make greater use of the Group’s collective strengthand develop new business fields.

Thoroughly optimise the Hankyu Hanshin brand value and differ­entiate
the products and services from the competition so as to strengthen
competitive edge and achieve further business expansion.

In addition to pursuing Groupwide initiatives, we will introduce cuttingedge technologies into existing businesses, venture into new business fields, and thereby provide culturally enriched and innovative
lifestyle options.

Special Feature: Long-Term Management Vision for 2025

Strategies under Long-Term Management Vision for 2025

Strategy 1 Umeda and line-side areas + Stock businesses

As mentioned in the “To Our Stakeholders” section, the Group’sline-side areas enjoy advantages over other line-side areas in the
Kansai area and have tremendous potential. In addition to thegrowth opportunities resulting from expected increases in overseas visitors to Japan, new possibilities are emerging. For example, in the fields of health and medicine such industrial clusters
as the KOBE Biomedical Innovation Cluster and the Umekita
Phase II Development Project could develop further.
With this potential in mind, we aim to increase the resident
and non-resident population of line-side areas. To this end, ourstock businesses in Umeda and line-side areas will benefit theseareas by leveraging the dynamism of the Tokyo–Nagoya–Osakaaxis and the economic power of Asia and other overseas regions.
At the same time, ahead of competitors we will attract new
industries and leading-edge technology companies. In addition,
we will develop appealing towns in line-side areas.
Specifically, the Group plans to tap into the growth of theASEAN region and demand from overseas visitors to Japan byadvancing plans for new railway lines, such as the Shin-Osaka rail
link, and by strategically rebuilding and enhancing the value ofbuildings in the Umeda area through the Umeda 1-1 Project andother projects. Further, we will encourage the formation ofMajor Development Projects in Umeda and Line-Side Areas
Projects in Progress· Umeda 1-1 Project (Dai Hanshin Building andShin Hankyu Building Rebuilding Project)· Kobe Hankyu Building, Rebuilding of East Building andRenewal of West Building Project· Development of Nishinomiya Kitaguchi Hankyu Building(provisional name)· Ebie 1-Chome Development Plan

Project summary
Location

1-1 Umeda, Kita-ku, Osaka

Site area

Approx. 12,200 square metres*

Total floor space

Approx. 260,000 square metresSize

38 floors above ground and 3 below groundPurpose

Department store, offices, halls, etc.

Planned total investment¥89.7 billion

Construction completion

Around spring 2022

* Including 750 square metres of road between Dai Hanshin Building andShin Hankyu Building

clusters of companies belonging to new industries in the fieldsof health and medicine. Other initiatives will give concrete form
to the “Umeda in Asia” goal by transforming the Umeda area intoa hub city connected to the Tokyo–Nagoya–Osaka axis and international airports.
In addition, with the compact cities concept* in mind, theGroup will capitalise on new technologies and collaborations
with outside partners to introduce highly convenient services
that make its line-side areas desirable places to live. Also, indeveloping towns we will not only provide safety and peace ofmind but also numerous educational and cultural facilities. As
part of these efforts, the Group plans to redevelop and renovate
key line-side areas.
As stated in the “To Our Stakeholders” section, maintaining thecurrent degree of reliance on stock businesses in Umeda andline-side areas going forward would expose the Hankyu Hanshin
Holdings Group to risks. However, invigorating Umeda and otherline-side areas remains the greatest mission of the Group, andthese areas will continue to be its most important businessfoundations.
* A town planning concept that entails concentrating commercial and residential facilities as well as essential everyday services within walking distance of railway stations

Umeda 1-1 Project (Dai Hanshin Building andShin Hankyu Building Rebuilding Project)
Symbolizing management integration, this project entails
creating a single integrated building by reconstructing theDai Hanshin Building and the adjacent Shin Hankyu Building. Moreover, the project will use the space above a roadseparating the two buildings.
Increasing total floor space from 150,000 square metres to
260,000 square metres and situated at the centre of the Umeda
area, the new multipurpose building for commercial premises and offices will have outstanding accessibility.

A rendering of the Umeda 1-1 Project uponcompletion

Special Feature: Long-Term Management Vision for 2025

Strategies under Long-Term Management Vision for 2025

Kita-Osaka Kyuko Railway Line Extension Project
Minoh City and Kita-Osaka Kyuko Railway Co., Ltd., are­advancing a project to extend the Kita-Osaka Kyuko Railway
Line approximately 2.5 kilometres from Senri-Chuo Station
to Minoh City. Scheduled to open in fiscal 2021, the extension
will improve the convenience of public transportation andincrease the non-resident population.

Development plan summary• Extension distance: 	2.5 km, from Senri-Chuo Station to
Shin-Mino-o Station (provisional name)• New stations: 	Mino-o-Semba Station (provisionalname) and Shin-Mino-o Station(provisional name)• Demand:

45,000 people per day• Estimated project cost: 	¥65.0 billion(Of which, Kita-Osaka Kyuko Railway’s
contribution to be ¥11.0 billion, whichcorresponds to expected earnings*)* Including the expected increase in demand arising from related town development

Strategy 2 Tokyo metropolitan area and overseas markets + Stock businesses

At present, the Hankyu Hanshin Holdings Group’s stock businesses
are concentrated in Umeda and line-side areas. Given projected
demographic changes, we need to give due attention to theconcentration of risk that this entails. Meanwhile, as described in
the “To Our Stakeholders” section, in the Tokyo metropolitan area
and overseas there are extensive markets which promise excellent stability and growth going forward.
In response to the above trends, we are taking far-sighted
measures to offset the expected contraction of businesses in the
Kansai area. These measures include the acquisition of additional
rental property and other assets for stock businesses in the Tokyo
metropolitan area’s large market and in overseas markets that are
set to grow. At the same time, we have begun diversifying ourportfolio to mitigate its focus on Umeda and line-side areas.

Specifically, focusing on Tokyo’s five central business districts—
where even in the 2040s the effect of population decline is likely
to be very limited—the real estate leasing business will steadily
accumulate “stock” in the Tokyo metropolitan area while carefully
monitoring market conditions. We aim to increase assets in theTokyo metropolitan area to approximately ¥200 billion, or around
20% of the assets of the real estate leasing business. Overseas,
meanwhile, this business will develop logistics and real estatebusinesses (logistics centres) in the ASEAN region. In the future,with our sights set on exploring trial developments of commercial
facilities in the region, we will ascertain whether it is possible toaccumulate “stock.”
Further, in acquiring assets we will continue to rigorously­analyse and monitor fluctuations in economic conditions andmarket climates and proceed in light of due consideration ofeach project’s significance, business potential, and risks.

Projects in Progress· Yotsuya Station District Redevelopment Project· Kyobashi 2-6 Redevelopment Plan
· Ginza 3-chome Project

A rendering of the Kyobashi 2-6 Redevelopment Plan upon completion

Special Feature: Long-Term Management Vision for 2025

Strategy 3 Flow businesses

Flow businesses leverage business expertise, human resources,or brand assets in business activities but do not own “stock.”
These businesses will maximise the value of the Hankyu Hanshinbrand and thoroughly differentiate their offerings to create
unique products and services. Such initiatives will increase thecompetitiveness and scale of businesses even further.
Among the above businesses, the sports business and thestage business own unique content that already has strong
brand value. Therefore, while continuing to hone and heighten
this brand value, both businesses will take on new challenges
and initiatives.
On the other hand, due to lower market entry barriers, thereal estate sales, information services, Travel, and International
Transportation businesses have many competitors.
Of these businesses, given the likely gradual contraction of the

Kansai area’s market, plans call for the real estate sales business to
expand businesses in the Tokyo metropolitan area and overseas
in stages. Our goal is to achieve the same level of sales in theTokyo metropolitan area as we have in the Kansai area, namely
sales of approximately 800 condominium units and 100 detachedhouses annually.
Overseas, we are already engaged in multiple housing sales
projects in Vietnam. We plan to develop such projects in several
countries in the ASEAN region and generate operating income
on a scale commensurate with this expansion in business size.
Also, we will assess the current competitiveness of information
services, Travel, and International Transportation businesses andthen either expand operations to establish unique businesses orreform business portfolios and business models. These efforts
will strengthen each business.

Strategy 4 Groupwide initiatives and new business fields

To prevail amid increasingly fierce competition in markets, theGroup must draw on its collective strength through such measures as the combination of stock businesses and flow businesses.
Also, it is vital to open up new business fields by exploiting theopportunities that emerge from changes in social conditions.
With this in mind, as well as advancing Groupwide initiatives
even further, we aim to use leading-edge technologies in existing businesses and take on the challenge of opening up new
business fields. Our goal in these efforts will be to provide culturally enriched and innovative lifestyle options into the future.
We intend to consider specific initiatives based on the three
approaches outlined below. First, we will use existing resources
to pursue Groupwide initiatives. For example, the Group is currently making concerted efforts to further credit and point card
measures. Also, the International Transportation and Real Estatebusinesses are collaborating to develop logistics centre operations overseas. Going forward, we will accelerate such Groupwide initiatives.

Second, we want to rejuvenate Group assets and utilise humanresources. Decreases in asset utilisation rates as the population
declines is a concern. Even in such business conditions, however, we
will revitalise assets in the same way that we have been developing
domestic logistics and real estate businesses—by proactively
collaborating with outside partners and incorporating new perspectives. In addition, the Group will explore new business fields
by leveraging its human resources to the utmost. These efforts
will include extending a new-business-proposal system throughout the Group.
Third, the Group will explore the potential for utilising leadingedge technologies throughout the Group. Further advances in AI
and the IoT are expected. Although not directly engaged in competition over the development of leading-edge technologies,
the Group will gather information about the many different
types of new technology that open source initiatives are creatingworldwide. By actively using or repurposing these technologies
in our various businesses, we will enhance services for customers
and strengthen the competitiveness of businesses.

Special Feature: Long-Term Management Vision for 2025

Management Indicators

We will steadily move forward with initiatives under strategies 1 through 4 to become a corporate group that can sustain operating
income at its current level or higher even when the effect of demographic changes becomes marked in the 2040s. In fiscal 2026, we aim
to have operating income of ¥120 billion, EBITDA of ¥200 billion, and an interest-bearing debt/EBITDA ratio between 5 and 6 times.
By achieving these targets, we will remain an industry leader among major private (non-JR) railway operators based on indicators of
profitability and financial soundness.

Profitability

Financial soundness

Operating income¥

EBITDA¥

120
200

billionInterest-bearing debt/EBITDA ratio

billionBetween

5 6
and

times

Organisational Improvements Aimed at Realising the Long-Term Vision
So that it can advance strategies and measures more decisively and thereby realise the long-term vision, the Group will improve its
organisation as explained below.
 nification within Hankyu Hanshin Holdings of theU
Divisions for New Business Development of Hankyu
Corporation and Hanshin Electric Railway (implemented
in April 2017)
To advance measures under strategy 4, which is focused onGroupwide initiatives and new business fields, we have established a framework that is stepping up the pace of initiatives for
new businesses. Specifically, the Group unified the divisions for
new business development of Hankyu Corporation and Hanshin
Electric Railway within Hankyu Hanshin Holdings.

Integration and Reorganisation of the Real Estate Divisionsof Hankyu Corporation and Hanshin Electric Railway Aimed
at Establishing a Core Company for the Real Estate Business(assessment under way with a view to implementation in
April 2018)
The long-term vision calls on the Group to strengthen andexpand the real estate leasing business in Umeda and line-side
areas as well as in the Tokyo metropolitan area and overseas markets (strategies 1 and 2) and to rigorously differentiate the realestate sales business (strategy 3). To these ends, we will establish
a core company for the Real Estate Business by reorganising thereal estate divisions of Hankyu Corporation and Hanshin Electric
Railway and other core real estate businesses.
This core company will maximise the collective strength of theGroup’s Real Estate Business and advance and accelerate initiatives aimed at growing the business.

Special Feature: Long-Term Management Vision for 2025

Medium-Term Management Plan (Fiscal 2016–Fiscal 2019)

Business Strategies
During the medium-term management plan, which covers fiscal 2016 through fiscal 2019, we aim to develop foundations for mediumto-long-term growth and take the first step toward achieving the long-term vision. Therefore, we will advance measures in accordancewith strategies 1 through 4 of the long-term vision.

Strategy 1

Further strengthen stock businesses in Umeda and line-side areas(e.g., railways, real estate leasing, media and communications, hotels)

Strategy 2

Accumulate stock in the Tokyo metropolitan area and overseas markets

Strategy 3

Strengthen competitiveness of flow businesses(real estate sales, sports, stage, information services, travel, and international transportation)

Strategy 4Make greater use of the Group’s collective strength and venture into new business fields

Financial Policy
Aiming to realise the long-term vision and grow operating
income and EBITDA further, we will allocate funds by giving priority to growth investment in accordance with strategies 1
through 4. Specifically, the updated medium-term management
plan calls for increased growth investment in the Tokyo metropolitan area and other areas. Compared with the previous plan,
the amount earmarked for investment in major development
projects and new market development has risen by ¥40 billion,to ¥170 billion.

However, we intend to maintain financial soundness. Given
that we will implement growth investment in accordance withstrategies 1 through 4 of the long-term vision, we will ensure
financial soundness by emphasizing the interest-bearing debt/
EBITDA ratio rather than interest-bearing debt.
As for returns to shareholders, in fiscal 2018 we project yearon-year increases in annual dividend payments from profits, from¥35 per share to ¥40 per share, as well as in the total payout ratio.

Forward-looking investment
While striking a balance with financial soundness, we willprioritise growth investment under strategies 1 to 4.

Maintaining financial soundness

Returns to shareholders

Prioritise the interest-bearing debt/EBITDA ratio
over interest-bearing debt as a benchmark
for financial soundness.

For the period of the plan, we envisage a total payout
ratio of 25% for fiscal 2017, and 30% for fiscal 2018
and onward.

Special Feature: Long-Term Management Vision for 2025

Medium-Term Management Plan (Fiscal 2016–Fiscal 2019)

Capital investment (including lending) from fiscal 2016 to fiscal 2019

Approx.
¥350 billion

Approx.
¥130 billion

Approx.
¥220 billion

Approx.
¥ 390 billion

Approx.
¥170 billion

Tokyo metropolitan area
and overseas markets

Approx.

Umeda andline-side areas40%

Approx.

60%

Approx.
¥220 billion

Investment in maintenance and renewal of existing infrastructure
Investment in major development projects and new market development
Previous plan

Current plan

Outlook for Management Indicators
In fiscal 2018, due to a rise in sales expenses in the development
and sale of condominiums and higher depreciation and amortisation in the Urban Transportation Business, the Group is expected
to record operating income of ¥96 billion, net income attributable to owners of the parent of ¥60 billion, and an interest-­
bearing debt/EBITDA ratio of 6.0 times.

Further, in fiscal 2019 we forecast operating income of ¥98 billion, net income attributable to owners of the parent of ¥61 billion, and an interest-bearing debt/EBITDA ratio of 5.9 times.

FY2018 forecasts

FY2019 forecasts

Operating income¥96.0 billion¥98.0 billion

EBITDA¥152.0 billion¥157.0 billion

Net income attributable to owners of the parent¥60.0 billion¥61.0 billion

7.5%

7.2%

¥910.0 billion¥920.0 billion

Financial soundness Interest-bearing debt/EBITDA ratio

6.0 times

5.9 times

D/E ratio

1.1 times

1.1 times

Profitability

Capital efficiency

ROE
Interest-bearing debt