Annual Report 2012

Building a Base for New Growth
Hankyu Hanshin Holdings

Securities code: 9042

Building a Base for New GrowthCentred on the Kansai district of Japan, Hankyu Hanshin Holdings Group operates six core businesses—Urban Transportation,
Real Estate, Entertainment and Communications, Travel and International Transportation, Hotels, and Retailing. The Group is
one of the primary private-sector railways operators in Japan. In October 2006, the Hankyu Hanshin Holdings Group came into
being through the management integration of Hankyu Holdings, Inc. and Hanshin Electric Railway Co., Ltd.

The Kansai district, the main base of our operations, accounts for approximately 16% of Japan’s GDP. In this, the second-largest
economic area in the country, the Group operates railway networks linking Osaka, Kobe and Kyoto and a wide range of secondary businesses in areas served by our stations ranging from housing and shopping centres to the Hanshin Tigers professional
baseball team and Takarazuka Revue. By providing services that did not exist previously, the Group offers more fulfilling lifestyles
and contributes to community-building in areas served by its lines. In pursuing future growth, the Group will work to increasevalue along Group railway lines while leveraging its know-how in community-building and its brand power.

The theme of the 2012 Annual Report is “Building a Base for New Growth.” Through it, the Group aims to give stakeholders
an overall understanding of our business operations, including the steady progress we have made in improvement of financial
standing to position us for the next stage of growth.

Contents

Introduction

Annual Report 2012

Introduction
Our Business Field248Snap Shot
Our Medium-Term Plan

Part 1 Management Report Section
Consolidated Financial Highlights

10
14

Message from the Management

Part

1

Management Report Section

Part 2 Special Feature
Search Index

Making Umeda even more attractive

28

Group Overview

2~7, 36~37, 112, 113
Business Performance10~13, 16~17, 77~80
Group: 25
Urban Transportation: 41
Real Estate: 46
Entertainment and Communications: 50
Travel and International Transportation: 53
Hotels: 55
Retailing: 57

At a glance
Section 1

Urban Transportation

Section 2

Real Estate

Section 3

Entertainment and Communications

Section 4

Travel and International Transportation

Section 5

HotelsSection 6

Retailing

Part

2

36
38
42
48
51
54
56

Special Feature

Forecasts for Fiscal 2013 Onward

Part 3 Core Businesses: Overview and Outlook

Medium-Term Management Plan and Growth Strategies

A Message from the President

24, 33~35, 45
Safety Measures in the Railway Business

65~71, 82
Financial Policy and Shareholder Returns

18~20, 26~27

3

58
59
62
63
64
64
65
72
74

Corporate GovernanceInternal Control System

Progress in Large-Scale Projects

Part

Part 4 Social Responsibility and Management Organisation

Core Businesses: Overview and Outlook

Group: 18~23, 26~27
Urban Transportation: 38~41
Real Estate: 42~47
Entertainment and Communications: 48~50
Travel and International Transportation: 51~53
Hotels: 54~55
Retailing: 56~57

Compliance
Measures to Prevent Takeovers
Risk Management
Safety Management System
Corporate Social Responsibility

4Social Responsibility and Management Organisation

Directors and Corporate Auditors

Part

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 not statements of historical fact but
constitute estimates or projections based on facts known to the Company’s
management as of the time of writing. Actual results may therefore differ
substantially from such statements.

Part 5 Financial Section and Corporate Data
Financial Section
Consolidated Six-Year Summary

About the compilation of this Annual Report and the auditing company used

Consolidated Financial Review
Business Risks
Consolidated Balance Sheets
Consolidated Statements of Income/Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Net Assets

Definition“Fiscal 2012” refers to the fiscal year ended 31st March 2012. Other fiscal years
are referred to in a corresponding manner in this Annual Report. Figures arebasically rounded off. Sums expressed in units of ¥100 million are rounded to
the nearest ¥100 million.

Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Major Group Companies
Investor Information

Part

5

Financial Section and Corporate Data

The financial section of this Annual Report includes a digest of information
including consolidated financial statements in the Company’s Securities
Report for the 174th period, audited by KPMG AZSA LLC presented in somewhat changed format. We have presented this information in such a way as
to ensure that there is no discrepancy with the data presented in the Annual
Securities Report. However, the Annual Report itself has not been audited by
KPMG AZSA LLC.

76
77
78
81
84
86
87
88
89
112
113

Annual Report 20121

Our Business Field
The history of the Hankyu Hanshin Holdings Group goes back to the start of operation of a railway business in the early 1900s, based on Umeda (Osaka) district. This
was at a time when railways were spreading across the whole of Japan. Aiming
to secure a stable revenue from passenger transportation services, right from thestart the predecessor companies of Hankyu Hanshin Holdings Group aggressively
acquired and developed residential districts for service by their railway stations. The
Ikeda-Muromachi housing development, where subdivision sales were commenced
in 1910, was the first residential district to be developed by a Japanese private railway company.
Subsequently, our predecessor companies branched out into one new service after
another, including the provision of entertainment, operation of department storesat railway terminuses, and management of commercial facilities and office buildings.
They also persuaded educational institutions such as private colleges to build new
facilities on sites served by their railway stations. In this way, by offering innovative
and attractive services to residents of the communities served by their railway lines,
the companies’ core railway operations and other businesses were able to realisestrong growth through synergy. This reciprocal development also served to promotecultural development in the areas served by the companies’ railway lines, and thispioneering business model later became standard for private railway operators allover Japan.
Looking ahead, while placing a very high priority on maintaining a relationship oftrust with the residents of areas served by our railway lines, the Group will continue
to develop these areas to enhance the attractiveness of each community as a whole.
This is in line with our basic policy of attracting more and more people to come andlive in communities served by our railway stations.

Urban Transportation
Develop businesses that will optimallyleverage the potential of the areas
served by our lines connecting Kobe,
Kyoto and Namba through the central
point of Umeda in the Kansai
economic zone

Real Estate
Develop and manage high-quality
housing, commercial facilities, andoffices in the areas served by our lines

2 Annual Report 2012

Introduction

Travel and International Transportation
Offer travel agency services through our mainstay
Trapics brand, and high-quality logistics services
mainly through Hankyu Hanshin ExpressPart

1

Management Report Section

HotelsOperate Japan’s major hotel groups underthe Hankyu-Hanshin-Daiichi Hotel Group,and manage The Ritz-Carlton, Osaka

Part

2

Special FeaturePart

3Core Businesses: Overview and Outlook

Entertainment and Communications
Expand businesses of high brand value
such as Hanshin Tigers, Hanshin Koshien
Stadium, and Takarazuka Revue

Part

4

Social Responsibility and Management Organisation

RetailingPart

5

Financial Section and Corporate Data

Provide a wide range of retailing services primarily at Ekinaka in-station
storesAnnual Report 20123

Snap Shot
Revenues
fromoperations

OperatingincomeNet income

649.7
¥73.8
¥39.3

¥

billionbillionbillionLeasable area (m2)Real estateholdings

Total
attendances at
Hanshin Tigers
Home Games

Travelbillings

GrouphotelsNumberof retailoutlets

1.6

million

2.9 million

Total
attendancesat Takarazuka
Revue

2.4 million¥345.7 billion

4 Annual Report 2012¥77.7 billion

48 hotels / 10,069 rooms
312
Hankyu Railway Network

Annualnumber ofpassengers
carriedInternationaltransportation
sales

608,632

Hanshin Electric Railway Network

thousand

218,560

thousandIntroduction

Composition
ratio by corebusiness(Fiscal year ended
March 2012)

The Group has focused on the development of areas along its lines since its opening, and the Urban
Transportation and Real Estate businesses together now account for almost 60% of revenues fromoperations and approximately 80% of operating income. In the Urban Transportation Business,railways account for most earnings, and the same is true of leasing operations in the Real EstateBusiness. This ensures stable cash flow in both segments. The Group’s railway operations connect
the central cities of the Kansai economic zone – Osaka, Kobe, and Kyoto – and they display hightransportation efficiency. The most distinctive feature of our real estate leasing operations is thelarge number of properties we own in prime locations near our railway terminuses, principally in
Umeda (Osaka) district.

¥649.7

¥73.8

28.9%
24.6%
14.6%
10.4%
9.8%
8.2%
3.5%

43.8%
39.5%
13.7%
4.3%
—
1.8%
1.0%

billion2

billionPart

3Core Businesses: Overview and Outlook

Urban Transportation
Real EstateEntertainment and Communications
Travel and International Transportation
HotelsRetailing
Other

Part

Special Feature

Operatingincome1Management Report Section

Revenues fromoperations

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

Operating Income by Core Business(¥billion)
Urban Transportation

100.0Entertainment and Communications

Total of Other Core Businesses

Part

4

3.4
10.7

41.7

4.2
10.1

11.1
3.0
10.0

33.7
30.9

60.0

Social Responsibility and Management Organisation

6.0
10.8

80.0

Real Estate

29.1

24.0
40.0

32.2

32.3

31.0

Part

5

32.3

Financial Section and Corporate Data

29.4

20.0

-1.0

0

08/3

09/3

10/3

11/3

12/3 (an accounting term)

Annual Report 20125

Snap Shot
< Kansai Area >

7

Area

16

Kansai’spopulation% of Japan About

About% ofof JapanTokyo

14,256(¥ billion)
14,000Kansai

6,000

Overall, Kansai is on a parwith the Netherlands

5,068 4,908

GRP*
3,352
3,000

2,183
1,235

997

874

832

794

813

615

…

*Gross Regional ProductFigures are 2009 GDP

TurkeyNetherlands

Kansai Area

Korea

MexicoAustralia

India

United Kingdom

Germany

China

Japan

United States0

Sources: IMF/World Economic and Financial Surveys 2009
Cabinet Office, Government of Japan, “Prefectural
Accounts FY2009”< Hankyu Railway and Hanshin Electric Railway Network >Arashiyama

N

Kyoto Pref.

Kawaramachi
KatsuraHankyu Arashiyama Line

Kyoto

Myokenguchi
Nissei-chuo

Hankyu Kyoto Line

Osaka Pref.

Hyogo Pref.
Nosé Electric
Railway Line

Hankyu Mino-o Line
Mino-oHankyu Senri Line

Kawanishi-noseguchi

Kita-senri

Hankyu Koyo Line

Tanigami

yuko
shin K
Hoku lway Line
Rai
Sannomiya

Nishinomiyakitaguchi

Shinkaichi Motomachien

Tsukaguchi
Shin-Osaka

Mukogawa

Daimotsu

Amagasaki

Juso

Tenjimbashisujirokuchome

Umeda

Mukogawadanchi-mae

Hanshin Main Line
Hanshin Mukogawa Line

Nishidai

Hanshin Namba Line

Osaka Bay

6 Annual Report 2012

Nara Pref.

Awaji

Imazu
Imazu

Osaka-Namba

Subway Sakaisuji Line

Minatogawa

in
Esaka

Shukugawa

Kobe Rapid Transit Railway Line
Shin-Kobe

Hankyu Takarazuka Line

KoyoenHankyu Kobe Linens

Kita-Osaka Kyuko
Railway Line

Itami

Hankyu Itami Line

Ishibashi SenrichuokaHankyu Imazu Line

Osaka
International
AirportSh

Takarazuka

Kintetsu Nara Line
To Kintetsu-Nara
To Kintetsu-NaraIntroduction< Business Models/Sources of Competitiveness >High potential of areas served by our stations
The Umeda area of Osaka, the strategic cornerstone of Group operations, (for more information, please see page 28,
special feature) is one of the most famous shopping and entertainment districts of Japan, served by JR Osaka Stationand the Umeda stations of the Hankyu and Hanshin lines and the Osaka Municipal Subway. It is at the heart of the
Kansai economy. In line with the Act on Special Measures concerning Urban Regeneration, on 20th January 2012 theUmeda area was designated as an “area specified for urgent urban regeneration work,” and the government is expected
to provide support for improvement work to transform the area into an international business hub. In the Umeda area,
the Group operates railway terminuses serving both the Hankyu and Hanshin networks, and also runs key commercial
facility, office building and hotel businesses (For more information, please see page 47, Major Group Facilities).

Part

1

Management Report Section

Also, the Group’s railway network links Umeda (Osaka) with Kobe and Kyoto and other towns constituting the economic
hubs of the Kansai district and their suburbs. Areas served by our stations have relatively high population density in the
Kansai district.
Population trends in areas served by 105
Hankyu and Hanshin lines (1991=100) 104

2

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

Part

103

The Great Hanshin-Awaji Earthquake

102

Kansai area

101
100
99

Areas served by Hankyu and Hanshin lines

98
97

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Part

3

Core Businesses: Overview and Outlook

Ability to create value in areas served by our stations
The Group creates new demand in the areas served by our lines by developing and managing high-class housing andcommercial/amusement facilities, and attracting schools and colleges to these areas. By playing a clear role in establishing and developing local cultural institutions, we are working with local people to develop local communities. The Grouphas earned an excellent reputation thanks to our long-term efforts to enhance the value of the communities served byour lines, and the areas along the Group’s railway lines now enjoy higher popularity levels than other parts of the Kansai
region.
Survey of preferred
residential areas (Kansai
Region)Areas along Hankyu and Hanshinlines topped the rankings overall(exception:10th-ranked Tennoji)

Place

1
2
3
4
5
6
7
8
9
10

AshiyaNishinomiya
ShukugawaUmeda
Okamoto
Kobe
Senri-chuo
Sannomiya
MikageTennoji

Location

Ashiya, Hyogo
Nishinomiya, Hyogo
Nishinomiya, Hyogo
Osaka (Kita-ku)
Kobe, Hyogo (Higashi-nada-ku)
Kobe, Hyogo (Chuo-ku)
Toyonaka, Osaka
Kobe, Hyogo (Chuo-ku)
Kobe, Hyogo (Higashi-nada-ku)
Osaka (Tennoji-ku)

Rank

Place

11
12
13
14
15
15
17
18
19
20

Kyoto
Suita
Takarazuka
IbarakiToyonaka
Takatsuki
Namba
Minoh
Osaka
Kurakuen

Location
Part

Kyoto

4

Suita, Osaka

Social Responsibility and Management Organisation

Source: Survey by Sumitomo Realty &Development and six other major realestate firms (30th September 2011)

Rank

Takarazuka, Hyogo
Ibaraki, Osaka
Toyonaka, Osaka
Takatsuki, Osaka
Osaka (Chuo-ku)
Minoh, Osaka
Osaka (Kita-ku)
Nishinomiya, Hyogo

Part

5

Financial Section and Corporate Data

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

Annual Report 20127

Our Medium-Term Plan
Steady progress in improving our financial position,with the interest-bearing debt/EBITDA ratio set to fall
to seven times by fiscal 2016
< Background >The Group is building enterprise value through major projects
such as rebuilding of Umeda Hankyu Building and the Hanshin
Namba Line, as well as following a basic policy of improving Groupfinancial standing through effective use of returns from thesemajor projects. As part of this endeavor, we set a target of reducing
the consolidated interest-bearing debt/EBITDA ratio to seven times
in the Medium-Term Management Plan announced in 2007.

1,900

1,800

Interest-bearing debt/EBITDA ratio

9.4

times
1,700

8.3

1,600

times

8.8

times

EBITDA (¥ billion) (right scale)
1,500

We had originally intended to achieve this target by the year ending March 2013, but this proved unfeasible for various reasons,
including schedule changes in the Umeda Hankyu Building
reconstruction project, which in turn pushed back the anticipated
payback from major projects, and the worsening business environment due to the economic slowdown. However, the Group
recognises that it is essential to improve our financial standing toassure sustainable growth into the future, to (1) maintain a certain
level of sustained strategic investment to revitalise strategic areas
for the Group such as Umeda and areas served by our lines, and(2) to protect ourselves against the risk of rising interest rates in the
future. For these reasons, we have set the target of a consolidated
interest-bearing debt/EBITDA ratio of seven times, having pushed
back the final year of the Medium-Term Management Plan to 31st
March 2016, to position us for fresh growth.

146.5

145.2

1,400

1,300

135.3

Interest-bearing debt (¥ billion) (left scale)
1,271.1

1,275.6

1,200

1,209.4
1,100

1,000

900

Investment in developments for growth

800

07/3

08/3

09/3

September 2009: Opening of Umeda Hankyu
Building Phase I Department Store Building* Project start times are as of works commencement. Also, finish times are projectcompletion dates (completion of A and B blocks for Umekita Development Area).

8 Annual Report 2012

Introduction

Leveraging cash flow generation through largescale projects, reduce total interest-bearing debt
and steadily improve our financial position so that
total capital investment is roughly equivalent todepreciation and amortisation costs, even while
maintaining a certain level of strategic capitaloutlaysPart

1

Management Report Section

Improve cash flow generation
through earnings from major
projects such as Hankyu
Nishinomiya Gardens, Hanshin
Namba Line, the Hanshin Koshien
Stadium refurbishment and Umeda
Hankyu Building (Office Tower)

180

9.8

9.6

times

170

times

Part

8.9

2

160

Special Feature

times

8.5

times
150

142.0
140

133.2

137.0
127.1

1,282.6

7.0

133.5

130

times

Part

3

1,183.6

10/3

11/3

12/3

90

Part

120

1,160.0
1,000.0

Payback from major projects

100

Core Businesses: Overview and Outlook

1,251.7

110

Reconciling growth and financial soundness
14/3

15/3

4

16/3
(plan)

Social Responsibility and Management Organisation

13/3(estimate)

Hankyu Nishinomiya Gardens Development (September 2004 – November 2008)
Hanshin Namba Line (opening of new extension) (October 2003 – March 2009)
Renovation of Hanshin Koshien Stadium (October 2007 – March 2010) *Renovation work conducted during three off-seasons

5

Financial Section and Corporate Data

April 2010: Completion of Office Tower

Part

Rebuilding of Umeda Hankyu Building(May 2005 – 21st November 2012 (scheduled))
Shin-Osaka Hankyu Building Development (May 2010 – July 2012)
Osaka Station North District (Umekita) Development
Area Project (March 2010 – March 2013 (scheduled))

Annual Report 20129

Part 1

Management Report
SectionConsolidated Financial Highlights(¥ million)

2007/3Result of Operations:
Revenues from operations
Operating income
EBITDA
Income before income taxes andminority interests
Net income
Comprehensive income
Capital expenditure
Depreciation and amortisation
Cash Flows:
Cash flows from operating activities
Cash flows from investing activities
Free cash flow
Cash flows from financing activities
Financial Position:
Total assets
Total net assets
Interest-bearing debt
Per Share Data (yen and U.S. dollars):
Basic
Net income
DilutedNet assets
Dividend
Ratios:Operating income margin (%)
ROA (%)ROE (%)
Interest-bearing debt/EBITDA (times)
Equity ratio (%)
Debt/equity (D/E) ratio (times)
Stock Price Index:
Stock price at the end of fiscal year
(yen and U.S. dollars)Market capitalisation (¥ billion, $ million)
PER (times)
PBR (times)
Business Data:
Hankyu Railway (thousand)Hanshin Electric Railway (thousand)Average vacancy rates of rental officebuildings (Umeda area, Osaka; %)($ thousand)2008/3

2009/3

2010/3

2011/3

2012/3¥ [813,613][94,800][146,500]¥752,300
90,724145,200¥683,715
77,823
135,300¥653,287
70,126133,200¥638,770
64,743
127,100¥649,703
73,809133,500$7,923,207
900,110
1,628,049

65,30526,09834,06433,89932,76043,419529,500[40,507]—53,79543,888627—
134,307
51,577

20,550—109,688
54,798

10,793
12,541
132,386
60,41818,06814,72868,431
59,66939,252
44,99255,26756,968478,683
548,683
673,988694,732¥ 78,981(199,578)(120,596)
132,289¥ 74,902(100,058)(25,155)
36,718¥108,597(115,047)(6,449)7,014¥146,955(132,737)
14,217(24,200)¥103,252(62,516)
40,735(39,544)¥124,525(44,295)
80,230(78,978)$1,518,598(540,183)
978,415(963,146)¥2,366,694
522,286
1,209,382¥2,348,476
476,639
1,271,100¥2,307,332
473,878
1,275,620¥2,337,331
480,633
1,282,583¥2,314,669
486,947
1,251,665¥2,274,380
524,801
1,183,647$27,736,341
6,400,012
14,434,720

8.55
8.51
371.705.00¥ 14.32
14.27
377.175.00¥ 31.1331.13
407.01
5.00

$0.38
0.38
4.96
0.06
—
—
—
—
—
—

¥ 31.84—405.355.00¥¥

2012/30.50
0.41
369.255.00¥ 16.2816.18
366.96
5.00

11.7
3.8
8.4
8.3
21.7
2.4

12.1
3.2
0.1
8.8
19.9
2.7

11.4
2.5
4.4
9.4
20.1
2.8

10.7
2.2
2.3
9.6
20.1
2.7

10.1
2.0
3.8
9.8
20.6
2.6

11.4
2.8
7.9
8.9
22.6
2.3

¥ 713

¥ 431

¥ 447

¥ 433

¥ 384

¥ 361

9,065
22.4
1.8

5,480
862.0
1.2

5,683
27.5
1.2

5,505
50.6
1.2

4,882
26.8
1.0

4,590
11.6
0.9

55,976——

618,877
179,871

618,373
180,906

618,585
182,997

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

—
—

2.95

3.08

5.88

8.90

11.22

7.29

—

$

4.40

Notes:The U.S. dollar amounts have been translated, for convenience only, at ¥82 = $1, the prevailing exchange rate on the Tokyo Foreign Exchange Market at 31st March 2012.
From the second quarter of the fiscal year ended 31st March 2007, consolidated results of Hanshin Electric Railway Co., Ltd. are included as a result of management integration, in the scope of consolidation of
the Group. Figures in [ ] are calculated assuming the management integration had entered effect from the beginning of the term.
EBITDA = operating income + depreciation expenses + amortisation of goodwill attendant on the management integration of Hankyu and Hanshin. EBITDA figures are rounded to the nearest ¥100 million.
Free cash flow = cash flows from operating activities + cash flows from investing activities
ROA = ordinary income/total assets (average of period-start and period-end totals)
ROE = net income/equity (average of period-start and period-end totals)
D/E ratio = interest-bearing debt/equity
Average vacancy rate figures are overall rates for the Umeda downtown area at the end of March for major rental office buildings (including properties not owned by the Group) with a total floor area of atleast 3,300 m2. Based on Latest trends in the office-building market in Osaka, Miki Shoji.
Calculations are based on EBITDA assuming that the management integration had taken place at the beginning of the fiscal period.
Annual number of passengers carried

10 Annual Report 2012

Introduction

Revenues from operations: ¥649.7 billion(up ¥10.9 billion or 1.7% from the previous fiscal year)

Operating income: ¥73.8 billion

Operating income: Factor analysis (YoY change)(¥ million)

64,743

2011/3+5,136

Real Estate(up ¥9.1 billion or 14.0% from the previous fiscal year)+2,963

Urban Transportation+619

Hotels+370

Travel and International Transportation+219

Entertainment and Communications

+147

Other

+310

Adjustments
2012/3

Part

1

Management Report Section

Revenues from operations increased by 1.7%, or ¥10,933
million, to ¥649,703 million, due to a year-on-year increasein condominium unit sales in the Real Estate Business. Inline with this growth, operating income increased 14.0%, or¥9,065 million, to ¥73,809 million.

Retailing-700
73,809Part

2

Special Feature

Net income: ¥39.3 billion (up ¥21.2 billion or 117.2% from the previous fiscal year)
Net non-operating expenses more than halved, by ¥9,833 million, to ¥8,416 million, due to an increase in equity in income ofaffiliates from an increase in our stake in the equity affiliate H2ORetailing Corporation.

Net income: Factor
analysis (YoYchange)Part

3Core Businesses: Overview and Outlook

However, the net extraordinary loss worsened by ¥8,239 million to¥21,973 million, partly due to recognition of impairment losses onland used for major development projects.

At the same time, income tax payments declined 77.1%, or¥10,810 million year-on-year, to ¥3,219 million, due to a decrease
in income taxes-deferred following a reversal of deferred tax assets
and deferred tax liabilities triggered by reforms to the tax system
in Japan that have brought down corporate tax rates.
The above factors and the increase in operating income pushed
net income up by 117.2%, or ¥21,183 million year-on-year, to¥39,252 million.

¥10.9 billion

Increase in non-operating income (primarily increase in equity in income of affiliates)¥7.8 billion

Decrease in non-operating expenses (primarily a decrease in interest expenses)¥2.0 billion

Reduction in income taxes (including income taxes-deferred)¥10.8 billion

Increase in operating expenses and cost of sales of transportation¥(1.2) billion

Increase in selling, general and administrative expenses¥(0.7) billion

Decrease in extraordinary income¥(0.4) billion

Increase in extraordinary loss (chiefly increase in loss on impairment of fixed assets)¥(7.8) billion

Part

4

Social Responsibility and Management Organisation

Increase in revenues from operations

Part

5

Financial Section and Corporate Data

Interest-bearing debt: ¥1,183.6 billion (down 5.4% or ¥68.0 billion from the previous fiscal year)
The balance of interest-bearing debt decreased by 5.4%, or¥68,017 million year-on-year, to ¥1,183,647 million, due to net cashfrom operating activities surpassing capital investment outlays forrebuilding of Umeda Hankyu Building and other works.

Annual Report 201211

Consolidated Financial Highlights

Revenues from operations

Operating income/Operating income margin(¥ billion)
800.0(¥ billion)
100.0

743.4 752.3
683.7

(%)
20

87.0
653.3 638.8 649.7

90.7
77.8

80.0

600.0

73.8

70.1

15

64.7
60.0

12.1
11.7

11.4

11.4

10.7

400.0

10

10.1
40.0

5

200.0
20.0

0

07/3

08/3

09/3

10/3

11/3

12/3

Net income

0

07/3

08/3

09/3

10/3

0

12/3

11/3

Interest-bearing debt and Debt/Equity ratio(¥ billion)
40.0

39.3

(¥ billion)
1,500.0(times)3.0

36.6

1,200.0

1,271.1 1,275.6 1,282.6 1,251.7
1,209.4
1,183.6
2.8

30.0

2.7

2.7

2.6

900.0

20.6
20.0

2.5

18.1
2.4

600.0

2.3

10.8
10.0
300.0

0.6
0

07/3

12 Annual Report 2012

08/3

09/3

10/3

11/3

12/3

0

07/3

08/3

09/3

10/3

11/3

12/3

2.0

Part 1 Management Report Section

Introduction

Total assets/ROA(¥ billion)
2,500.0

Equity/ROE

2,366.7 2,348.5 2,307.3 2,337.3 2,314.7

2,000.0(¥ billion)
600.0

(%)
5

2,274.4
500.0

4

3.8

524.8

522.3
8.4
476.6

480.6

473.9

486.9

7.9

Part

8

1

Management Report Section

400.0

3.2

1,500.0

(%)
10

2.8

2.5

3

6
300.0

2.2

4.4

1,000.0

2

2.0

3.8

4

200.0
500.0

2.3

1

0

0
12/3
07/3
08/3
09/3
10/3
11/3
ROA = ordinary income/total assets (average of period-start and period-end totals)

0.1

0

12/3
07/3
08/3
09/3
10/3
11/3
ROE = net income/equity (average of period-start and period-end totals)

0

Part

2

Special Feature

Annual number of passengers carried/Hankyu Railway

2

100.0

Annual number of passengers carried/
Hanshin Electric Railway(thousand)
900,000(thousand)
300,000

800,000

Opening of Hanshin Namba Line
(20th March 2009)

Total

700,000
600,000

200,000

3

Core Businesses: Overview and Outlook

500,000

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

Commuter pass

400,000

Part

Total

300,000

100,000

Other tickets

Commuter pass
Other tickets

200,000
100,000
0

02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3

0

02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3
* Sum of tier 1 and tier 2 operators for bothHankyu and Hanshin* Among tier 2 operators, we have modified
our method of recognising Kobe Rapid Transit
Railway Line’s passenger volumes followingchanges to its management organisation,effective October 2010 (for both Hankyu andHanshin-operated stretches of the line)

(%)
14

4

Social Responsibility and Management Organisation

Average vacancy rates of rental office buildings(Tokyo/Osaka business area)

Part

12
10
8

Osaka business area
Umeda area

Part

5

6

Financial Section and Corporate Data

4
2

Tokyo business area

0

06/3

07/3

08/3

09/3

10/3

11/3

12/3

Source: Miki Shoji, Latest trends in the officebuilding market

Annual Report 201213

Message from the Management

Building a Base for
New Growth
We are committed to strengthening the operating
fundamentals of the Group for future growth,by steadily expanding cash flows from major
projects in the Hankyu Hanshin Holdings Group
2007 Medium-Term Management Plan, and bycontinuing to reduce interest-bearing debt.
July 2012

Kazuo Sumi
President and Representative Director

14 Annual Report 2012

Part 1 Management Report Section

Introduction

Part

1

Management Report Section

Part

2

Special Feature

Part

3

Core Businesses: Overview and Outlook

Part

4

Social Responsibility and Management Organisation

Part

5

Financial Section and Corporate Data

15

Annual Report 2012

Message from the Management

The year ended 31st March 2012 in review
In the year under review, the Group boosted both revenues and earnings, as it proved possible
to mitigate the impact of the Great East Japan Earthquake to a much greater extent than
anticipated through intensified marketing and cost-cutting, while condominium unit sales rose
year-on-year. Net income also hit a record high, due partly to a reversal of deferred tax liabilities
following a reduction in corporate income tax rates.

In the year ended 31st March 2012, we had hesitantly forecast
operating income of ¥58.0 billion, factoring in an estimatedloss of ¥8.0 billion, primarily in the Travel and Hotels businesses,
due to the Great East Japan Earthquake, which coincided
with, and greatly complicated, the forecast compilation work.
Although the Travel Business was severely impacted by thedisaster in April and May 2011, Group measures to stimulate
travel demand resulted in recovery in tourist numbers in Japan
from summer. Overseas travel in particular performed strongly.
Likewise, in the Hotels Business, we were able to mitigate thedamage through cost-cutting and other measures, though
hotels mainly in the Tokyo area struggled due to a drop-off
in corporate demand and in overseas visitor numbers in themonths following March 11. As a result, we were able to containthe impact of the disaster on operating income at ¥2.9 billion,
across the Group.

Revenues from operations came to ¥649.7 billion, and operating income totalled ¥73.8 billion, an increase at both top andbottom lines, reflecting (1) a robust fare revenue performanceat both Hankyu Corporation and Hanshin Electric Railway(Hankyu: up 0.8%; Hanshin: up 3.5%)* 1, (2) a year-on-yearincrease in condominium unit sales in the Real Estate Business(from 680 to 1,210), and (3) increased occupancy at Umeda
Hankyu Building Office Tower.

16 Annual Report 2012

Ordinary income increased 40.6%, or ¥18.9 billion year-on-year,to ¥65.4 billion, due largely to an increase in equity in incomeof affiliates following an increase in our stake in equity-method
affiliate H2O Retailing Corporation*2.

Net income rose by a hefty 117.2%, or ¥21.2 billion, to ¥39.3
billion. Here, the chief factors were, in addition to the increasein ordinary income, a significant decrease in income taxesdeferred following reversal of deferred tax assets and deferred
tax liabilities triggered by tax reform in Japan, including a lowering of corporate income tax rates*3. This offset recognition of
extraordinary loss in the form of impairment losses on land for
major development projects.

The above-mentioned increase in equity in income of affiliates
and reduction in income taxes-deferred were one-time factorsthat only applied in the year under review. However, net cashfrom operating activities, which is not affected by such onetime factors, also grew, by 20.6%, or ¥21.3 billion year-on-year,to ¥124.5 billion as a result of steady earnings growth in all
segments. Furthermore, net cash used in investing activities(absolute total) decreased by 29.1%, or ¥18.2 billion from theprevious fiscal year, as capital expenditure tailed off, with the
Umeda Hankyu Building, Phase I Development Area of Osaka
Station North District (Umekita) and other large-scale projects
approaching their scheduled completion within one year. As
a result, free cash flow increased by nearly ¥40 billion yearon-year, and the Group has significantly improved its ability togenerate cash flow.

Part 1 Management Report Section

Introduction*1 Year-on-year comparison of change, total for commuter passes and other tickets. Sum of tier 1
and tier 2 operators for both Hankyu Corporation and Hanshin Electric Railway.

Operating income*2 On 30th June 2011, H2O Retailing Corporation acquired gratis treasury shares held by its major
shareholder Hankyu Hanshin Department Stores Kyoeikai. In February and March 2012, almost
these shares were sold off at market value. As a result of this, the number of Group shares has
not changed, but its stake in H2O Retailing Corporation has increased by approximately 1%,
as a result of an increase in the number of treasury shares deducted from the total number ofissued shares outstanding (denominator of the calculation). Likewise, the sale of the treasury
shares has increased H2O Retailing’s net assets. As a result of that, equity in income of affiliates
has increased on generation of negative goodwill recognised in the consolidated financial
statements of the Company.

(¥ billion)
80.0

Real EstateBusiness
70.0

Total for all corebusinesses except Urban
Transportation and Real
Estate(including
Urban
Transportation adjustments)

73.8

+1.0
+3.0

64.7

Part

1

Management Report Section

+5.1
60.0

*3 The balance of deferred tax liabilities of the Group exceeds the balance of deferred tax assets
due to the recognition of deferred tax liabilities relating to market valuation gains and land
revaluation gains at the time of consolidation of consolidated subsidiaries. For this reason,
income taxes-deferred have decreased due to the significant impact of the reversal of deferred
tax liabilities from lowering of corporate income tax rates.

50.0

40.0

2012/3

2011/3Part

Net income(¥ billion)
700.0(¥ billion)
50.0
for all core businesses
Real Estate
Other Totalexcept
Real EstateBusiness Businesses (including adjustments)

650.0

638.8

-12.6
+23.4

Total incometaxes
and others
39.3
Non-operating Extraordinary
income
loss

649.7
40.0

+0.1

600.0

Operatingincome30.0

Revenues fell due to exclusion of
Sanyo Jidosha Unso Co., Ltd. fromscope of consolidation following apartial stock transfer.

550.0

2

+9.8
20.0

Special Feature

Revenues from operations

-8.2

+10.5

18.1

Part

3

+9.1
2011/3

2012/310.0

2011/3

Core Businesses: Overview and Outlook

500.0

2012/3Part

4

Social Responsibility and Management Organisation
Part

5

Financial Section and Corporate Data

Annual Report 201217

Message from the Management

As major project outlays tail off, focus turns toreconciling growth with improvement of
our financial standing
Final year for the 2007 Medium-Term Management Plan deferred to 31st March 2016

With major projects in the Hankyu Hanshin Holdings Group Medium-Term Management
Plan approaching completion this year, the Group now plans to improve its financial
standing and bring down the interest-bearing debt/EBITDA ratio to around seven times by
31st March 2016.

The Hankyu Hanshin Holdings Group was created from the
management integration of Hankyu Holdings, Inc. and Hanshin
Electric Railway Co., Ltd. in October 2006. In March 2007, the
new entity compiled and announced a six-year business planfor the period fiscal 2008 to fiscal 2013 (the original “2007
Medium-Term Management Plan”). At the time, the high levelof interest-bearing debt had already become a major issue
for the Hankyu Holdings group. The management integration
also necessitated funding for a takeover bid, so improving ourfinancial standing by reducing interest-bearing debt becamea matter of some urgency. However, the fact that investment
projects that promised high returns (the rebuilding of Umeda
Hankyu Building*1 and Hankyu Nishinomiya Gardens*2 projects)
and others that are of particular public benefit and promised
medium-term growth (opening of the Hanshin Namba Line*3
and Hanshin Koshien Stadium*4 refurbishment) were alreadyon the drawing board or underway persuaded us to put off theissue of bolstering our finances and give priority to investment,
to build up enterprise value.

18 Annual Report 2012

Accordingly, in the first half of the current Medium-Term
Management Plan, from fiscal 2008 to fiscal 2010, we concurrently pursued multiple major projects, and this period was
earmarked for investment in developments for growth. The latter part of the plan, from fiscal 2011 to fiscal 2013, would thenbe dedicated to reducing interest-bearing debt and improving
our financial standing and strengthening our fundamentals for
future growth, based on the payback from the investments inthe first period.

However, we had to shelve plans to shore up our financial
position due to failure to meet earnings targets as the Japanese
economy rapidly wilted following the sub-prime loan crisisand changes to the completion schedule for the Umeda
Hankyu Building project. It had become clear that it would be
impossible to meet the consolidated interest-bearing debt/
EBITDA ratio target of around seven times by March 2013.
However, even against such a challenging backdrop, theHankyu Nishinomiya Gardens project and the Hanshin NambaLine were well-received by customers and sales continued
to exceed initial projections. This gave us confidence about
growth prospects for the Group.

Part 1 Management Report Section

Introduction

Based on this approach, we believe we can reduce the ratio
of interest-bearing debt/EBITDA to around seven times bysteadily whittling down interest-bearing debt. We believe we
can do this, by (1) extending the current 2007 Medium-Term
Management Plan to 31st March 2016 and by (2) keeping overall capital expenditure within the scope of depreciation andamortisation, even while maintaining a certain level of strategic
investment after April 2013, when major projects currently
under way such as the Umeda Hankyu Building and Phase I
Development Area of Osaka Station North District (Umekita)
projects will be completed.

Part

1

Management Report Section

So, as things stand, plans to shore up our financial standing
are behind schedule. However, as noted above, we believe weshould stick to our seven-times goal for the interest-bearing
debt/EBITDA ratio, in light of the longstanding priority of building a strong financial base for operations and of sustained
investment in large-scale modernisations and new projects, tocreate value in areas served by our lines and ensure sustainablestrategic investment. We also intend to reduce the balance ofinterest-bearing debt in absolute terms to at least ¥1 trillion,
given the prospect of headline interest rates rising.

*1 The rebuilding work is divided into three sections. The Grand Opening is scheduled for 21st
November 2012. Already open are the Umeda Hankyu Building Phase I Department Store
Building (September 2009) and the Office Tower (May 2010). Remaining works are Phase II of
the Department Store Building). For more detail, please see page 33.
*2 Grand opening in November 2008
*3 Opened in March 2009
*4 Completed in March 2010

Part

2

Special FeaturePart

3Core Businesses: Overview and Outlook
Part

4Social Responsibility and Management Organisation
Part

5

Financial Section and Corporate Data

Annual Report 201219

Message from the Management

Targeting a reduction in the interest-bearing debt/
EBITDA ratio to 7 times
To ensure that we remain one of the most financially sound leading private railway operators inJapan, we selected seven times as our target for reducing the ratio of interest-bearing debt/EBITDA.

The necessity for huge expenditures on fixed assets is characteristic of our mainstay railway and real estate leasing businesses. Because of this structural constraint, our Group cannot
avoid taking on a heavy burden of interest-bearing debt. At
the same time, given that we expect steady inflows of net
cash from the railway and real estate leasing businesses, a
relatively high degree of leveraging, can, we believe, contributeto improvement of enterprise value. It is extremely difficult
to pinpoint in a general way the ideal interest-bearing debt/
EBITDA ratio (consolidated) within the private railway sector
in Japan. However, to ensure sustainable growth, our businessmust have firm financial foundations that make it resistant tointerest-rate fluctuation and other risks. One very basic benchmark in setting this ratio is to reduce the interest-bearing debt/
EBITDA ratio to a minimum level among other major private
railway operating companies. As you can see from figures
below, this is how we arrived at a target of seven times.
Interest-bearing debt/EBITDA ratios for major listed private railway operators(as of 31st March 2012; estimates by Hankyu Hanshin Holdings Group)

14.8

15

11.9
8.9

8.9

Tokyu Odakyu Electric Hankyu
Corporation
Railway
HanshinHoldings

NagoyaRailroad

10

8.1
4.9

8.4

9.3

9.4

9.6

9.6

10.0

5.3

5

0

Nishi-Nippon
Keio
RailroadCorporation

Keihan Electric Keikyu
Railway
Corporation

Sotetsu
Holdings

Keisei Electric Tobu Railway Nankai Electric Kintetsu
RailwayCo., Ltd.
Railway
Corporation

EBITDA = operating income + depreciation and amortisation.
In the case of Hankyu Hanshin Holdings, amortisation of goodwill attendant on the management integration of Hankyu and Hanshin was added (around ¥2.7
billion). Excluding the amortisation of goodwill, the ratio would be 9.1 times.

20 Annual Report 2012

Part 1 Management Report Section

Introduction

Ensuring steady growth through March 2016
Part

We target consolidated operating income of ¥83.0 billion for the year ending March 2016

1

Management Report Section(an increase of ¥5.0 billion compared with the forecast for the year ending March 2013),
on the revenues and earnings boost from the rebuilding of the Umeda Hankyu Building, now
under way, and from steady growth across all our segments.

Looking beyond March 2013, we expect the Umeda Hankyu
Building to be a revenue and earnings driver, on the back ofimprovement in occupancy at the Office Tower and the fullyear contribution of the department store section. Likewise,
we expect major projects scheduled to open in fiscal 2013 andafter such as the Shin-Osaka Hankyu Building (completed at
the end of July 2012) to gradually contribute to earnings. Whilelarge-scale projects such as the Umeda Hankyu Building willcontribute to earnings boosts, steady growth is expected in all
segments*2. Accordingly, for the year ending 31st March 2016,
the final year of the Medium-Term Management Plan, we haveset a consolidated operating income target of ¥83.0 billion, an
increase of 6.4% or ¥5.0 billion compared with our projections
for the year ended 31st March 2013.

Part

2

Special FeaturePart

3Core Businesses: Overview and Outlook

First, in the year ending 31st March 2013, we expect a reboundas the impact on our operations of the Great East Japan
Earthquake that struck in 2011 fades away. As mentioned earlier, this disaster shaved ¥2.9 billion off our operating income
in fiscal 2012, mostly in the Travel and Hotels businesses. In the
Hotels Business, we think it unlikely that the number of visitors
to Japan will return to its pre-disaster levels, given the highyen and the adverse impact of the Fukushima Daiichi nuclear
disaster. For similar reasons we also expect room prices, which
plunged immediately after the disaster, to take time to returnto pre-disaster levels. For this reason, we cannot count on covering all of our pecuniary losses in the previous fiscal year in the
Hotels Business despite the coming rebound referred to above.
By contrast, the Travel Business is in better shape now becauseof the high yen.

*1 Grand opening scheduled on 21st November 2012 (announced on 12th September 2012 by
H2O Retailing Corporation).
*2 Please see page 23 for targeted figures in each segment.

Part

4

Social Responsibility and Management Organisation

Consolidated basis(¥ billion)
90.0

700.0
Revenues fromoperations(right)

80.0

670.0

83.0

649.7
Operatingincome(left)(¥ billion)
700.0

Part

650.0

78.0

5

Financial Section and Corporate Data

We expect the new Umeda Hankyu Building to contributesignificantly to revenues and earnings, due to the high rates
of occupancy at the Office Tower, open since May 2010, andthe boost from the Grand Opening of the Umeda FlagshipStore of Hankyu Department Store in late November 2012*1.
Additionally, we expect growth in condominium unit sales andother factors to make the Real Estate Business the main engineof the Group in the year ending 31st March 2013, driving a
3.1% or ¥20.3 billion increase in revenues from operations, anda 5.7% or ¥4.2 billion increase in earnings compared with theyear ended 31st March 2012 (For details of ordinary income
and other targets, please see Performance Outlook for the
Fiscal Year Ending March 2013).

73.8
70.0

600.0
2012/3

2013/3(Est.)

2016/3(Plan)

Annual Report 201221

Message from the Management

With regard to net income, in the year ended 31st March 2012,
we posted impairment losses of some ¥20.0 billion, partly onland owned in certain major development projects, due toadjusting our business plans to accommodate future instability,
in light of current economic conditions. This has enabled us
to greatly reduce the risk of posting further massive appraisal
losses. As a result, we forecast net income in the year ending
31st March 2016 to rise 33.3% or ¥10.0 billion to ¥40.0 billion,
compared with our projections for the year ending 31st March
2013, driven chiefly by steady growth in operating income inthe years ahead.

< Consolidated Performance and Key Performance Indicators during the Medium-Term Management Plan Period >(¥ billion)

FY3/08Results*1

FY3/09Results

FY3/10Results

FY3/11Results

FY3/12
Results

FY3/13
Estimate

FY3/16
Plan

Revenues fromoperations

752.3

683.7

653.3

638.8

649.7

670.0

700.0

Operatingincome

90.7

77.8

70.1

64.7

73.8

78.0

83.0

Ordinary income

74.9

57.4

50.4

46.5

65.4

60.0

70.0

Net income

0.6

20.6

10.8

18.1

39.3

30.0

40.0

145.2
*2 [143.2]

135.3

133.2

127.1

133.5

137.0

142.0

Effects ofintegration *3

2.2

4.6

7.1

7.9

8.8

9.7

—

Interest-bearing
debt/EBITDA

8.8
times

9.4
times

9.6
times

9.8
times

8.9
times

8.5
times

7.0
times

Interest-bearing
debt

1,271.1

1,275.6

1,282.6

1,251.7

1,183.6

1,160.0

1,000.0

Debt/equity ratio

2.7
times

2.8
times

2.7
times

2.6
times

2.3
times

2.2
times

1.6
times

ROE

0.1%

4.4%

2.3%

3.8%

7.9%

6.0%

6.5%

EBITDA*1 The department store business (The Hanshin Department Store, Ltd. (currently Hankyu Hanshin Department Stores, Inc.) and its four subsidiaries (“Hanshin Department Store Group”)) was treated as aconsolidated subsidiary up to the first half of the fiscal year ended March 2008.
*2 Figures in [ ] exclude those of the department store business (the former Hanshin Department Store Group)*3 Calculations based on EBITDA. As some time has passed since the management integration between the former Hankyu Holdings Group and Hanshin Electric Railway Group, the integration boost effectis factored in only up to the year ending March 2013.

22 Annual Report 2012

Part 1 Management Report Section

Introduction< Capital Investment and Depreciation and Amortisation during the Medium-Term Management Plan Period >(¥ billion)

Capitalinvestment

FY3/08- FY3/10
Results

FY3/11- FY3/13
Plan

376.4

Annual average

125.5

195.0

Part

165.0

1

Management Report Section

Three-year total

FY3/14- FY3/16
Plan

65.0
55.0
(Estimate for FY3/13) 71.0

Depreciation andamortisation

FY3/08- FY3/10
Results

FY3/11- FY3/13
Plan

FY3/14- FY3/16
Plan

173.0

Part

167.0

Three-year total

2

169.0

Special Feature(Estimate for FY3/13) 56.0

Urban Transportation(¥ billion)
40.0(¥ billion)
200.0

Revenues from operations(right)

192.7
35.0

Real Estate

191.1

190.0

202.2
Revenues fromoperations(right)

35.0

33.5

12.0

29.1

160.0

Revenues fromoperations(right)

180.0

10.0

Operatingincome(left)

170.0

8.0

116.5
108.7

102.3

190.0

30.0
170.0

25.0

(¥ billion)
14.0

200.0

36.5

176.1

180.0

29.0

193.8

(¥ billion)
210.0

Operatingincome(left)

12.7 110.0

10.5
10.1

150.0
2012/3

2013/3(Est.)

80.0
70.0

6.0
140.0

20.0

2016/3(Plan)

3

90.0

150.0
20.0

Part

100.0

160.0

25.0

(¥ billion)
120.0Core Businesses: Overview and Outlook

31.5

30.0

(¥ billion)
40.0

192.4

Operating income(left)

32.3

Entertainment andCommunications

2012/3

2013/3(Est.)

60.0
50.0

4.0

2016/3(Plan)

2012/3

2013/3(Est.)

2016/3(Plan)
Part4(¥ billion)
5.0

Revenues from operations(right)
70.0

67.6

4.0

Operating income(left)

Hotels74.5(¥ billion)
75.0(¥ billion)
2.5

4.7

4.0

65.0

3.2

2.0

Retailing

Revenues from operations(right)

64.1

66.5

69.6
2.0

(¥ billion)
75.0(¥ billion)
1.5

65.0

1.4

55.0

1.3

45.0

1.2

1.5

3.0

55.0

2.0

45.0

1.0

35.0

1.0

25.0

0
2012/3

2013/3(Est.)

2016/3(Plan)

0

Operating income(left)

0.5-0.5
2013/3(Est.)

56.9

53.9

54.6

1.3

1.3

(¥ billion)
60.0

1.4
50.0

Operatingincome(left)

Part

5

40.0

-0.3

2012/3

Revenues fromoperations(right)2016/3(Plan)

35.0

1.1

25.0

1.0

Financial Section and Corporate Data

0.5

Social Responsibility and Management Organisation

Travel and International
Transportation

30.0
2012/3

2013/3(Est.)

2016/3(Plan)

Annual Report 201223

Message from the Management

Rebuilding of Umeda Hankyu Building project,
an important growth driver in the current
Medium-Term Management Plan
With steady growth in the occupancy rate at the Office Tower, we expect contributions torevenues and earnings through fiscal 2016.
At the department store, we expect the planned grand opening in late November 2012 tounderpin earnings.
Department store will be planned grand opening on 21st November 2012 (announced on 12th September 2012 by H2O Retailing Corporation).

Now I want to say some things about the Umeda Hankyu
Building project (for more details, please see Page 33). In the(current) Medium-Term Management Plan, this rebuilding
project is the main growth driver. Previously, the building wasleased to Hankyu Department Stores, Inc. (currently Hankyu
Hanshin Department Stores, Inc.) as the Umeda Flagship Storeof Hankyu Department Store. Based on regulations in the Act
on Special Measures concerning Urban Reconstruction relaxing
floor-area ratio rules, the sales area of the rebuilt department
store will be increased by approximately 1.3 times to around80,000m², helping to cement its overwhelmingly dominantposition in the Umeda area. At the same time, we have added
an Office Tower using the upper floors. This new rental space,which leverages the new floor-area ratio rules, means that thisportion of the building will significantly increase earning levels.
The Office Tower occupies a premium site in the Umeda area,
and is a local landmark. The combined rate of occupancy andinformal tenancy commitments covered approximately 85% of
the leasable area in the Office Tower as of 31st July 2012. We
are still involved in negotiations with a number of tenants over
informal commitments, and when these are completed, thisratio is expected to steadily climb higher. This will contribute to
the increase in revenues and income in the years before March
2016, the final year of the current Medium-Term Management
Plan.

24 Annual Report 2012

In the department store part of the development, the south
section (Phase I) is already open for business, but the north section (Phase II) is still under reconstruction. We plan the grandopening of the whole development in late November 2012.
We expect full-year earnings contributions from the project
to begin in the year ending 31st March 2014, and this too will
become a steady contributor to earnings. Because new department store sales space is increasing at the moment in Osaka,with both new store building and extensions*1, concerns havebeen expressed about our ability to meet our sales targets*2
amid this intensified competition. However, we are confident
that we can, given the sound reputation within the department store sector of Hankyu Hanshin Department Stores,
Inc.’s capabilities. By keeping our customers abreast of lifestyletrends through our new Umeda Flagship Store, we aim to win
their support. This concept has already proven itself throughthe success of the similar Coto Coto Stage*3 concept at the
recently opened Nishinomiya Hankyu Department Store and
Hakata Hankyu Department Store. This I believe will enable us
to significantly differentiate ourselves from rivals.
*1 March 2011: Takashimaya Osaka increased its floor space (Nankai Namba Station, sales ¥117.9
billion (year ended February 2012)).
April 2011: Daimaru Osaka Umeda Store increased its floor space (JR Osaka Station, sales ¥61.8
billion (year ended February 2012)).
May 2011: JR Osaka Mitsukoshi Isetan opened (JR Osaka Station, sales ¥31.0 billion (year ended
March 2012)).
Spring 2014: Kintetsu Department Store, Abeno increased its floor space (Kintetsu Abenobashi
Station (re-launch planned)).
*2 Total including Hankyu MEN’S Store (Osaka): ¥213.0 billion (full-year operation). In addition, sales
for the fiscal year ended 31st March 2005 were approximately ¥192.0 billion (before building).
*3 In this space, storytelling and lectures by specialists in various fields such as photography,
picture book readings, cookery and childrearing classes are arranged, giving customers
hands-on experience of the value of various products in daily life.

Part 1 Management Report Section

Introduction

Performance Outlook for the Fiscal Year Ending March 2013
Part

We expect to increase revenues from operations and operating income as the adverse impact of the1

Management Report Section

earthquake disaster fades away, given the rise in the number of condominium units sold and thelikely boost from the grand opening of the new Umeda Hankyu Building. However, we forecast net
income for the year to fall in a correction from one-time factors in the previous fiscal year, including
a decrease in equity in income of affiliates and reduced income taxes-deferred.

Part

We expect net income for the fiscal year ending March 2013 todecrease 23.6%, or ¥9.3 billion year-on-year, to ¥30.0 billion, due
to an expected increase in income taxes-deferred, reflecting acorrection from the reversal of deferred tax assets and deferred
tax liabilities triggered by reforms to the tax system in Japanthat brought down corporate tax rates.

Part

3

Core Businesses: Overview and Outlook

As things stand, we believe we are strongly positioned to reachour operating income target (consolidated basis) of ¥78.0 billion, as long as there is no significant worsening of negative
factors such as the financial instability in Europe. Net income islikely to slip back somewhat from its rise caused by tax-related
one-time factors, but we expect our improved ability to generate stable cash flows to bring net income up to a record ¥30.0
billion (excluding the year ended 31st March 2012 affected by
one-time factors), keeping us at the forefront of private railway
operators* in Japan in earnings.

Part

4

Social Responsibility and Management Organisation

We expect operating income for the fiscal year ending March2013 to increase 5.7%, or ¥4.2 billion year-on-year, to ¥78.0
billion. In addition to the above-mentioned revenue drivers, we
expect lower costs. Non-recurring depreciation on non-current
assets in connection with the revision of the Japanese tax
system in fiscal 2008 (abolition of maximum sums for depreciation), which ended in fiscal 2012, is expected to cut depreciation and amortisation expenses by ¥1.0 billion.

2

However, ordinary income is set to decrease 8.2%, or ¥5.4 billion year-on-year, to ¥60.0 billion, due largely to an expected
decrease in non-operating income. This in turn is due to acorrection after the one-time increase in equity in income ofaffiliates following an increase in our stake in equity-method
affiliate H2O Retailing Corporation.

Special Feature

We expect revenues from operations to increase by 3.1%, or¥20.3 billion year-on-year, to ¥670.0 billion. This assumes a fading of the impact of the Great East Japan Earthquake disaster,which affected chiefly the Travel and Hotels Businesses, higher
condominium unit sales in the Real Estate Business (up from
1,210 units in fiscal 2012 to around 1,500 units in fiscal 2013),
and rising occupancy at the Office Tower of the Umeda Hankyu
Building, as well as the boost from the grand opening of thedepartment store after completion of its reconstruction.

Part

5

* Private railway operators excluding the Japan Railways Group

Financial Section and Corporate Data

Annual Report 201225

Message from the Management

Issues for the future(Directions of next Medium-Term Management Plan)
While increasing value along Group railway lines, we are making progress in striking the rightbalance between strategic investment in sustainable growth and improvement of
our financial standing.

When we compiled the current Medium-Term Management
Plan, we initially (that is, in March 2007) saw the railway businessas a stable cash flow generator, while the engine of growth
was to be real estate leasing. However, in light of the sudden
cooling of the real estate market since the collapse of Lehman
Brothers in the autumn of 2008, we realised that there was little
prospect of the rapid growth in real estate leasing that we werecounting on.

However, the Kyoto-Osaka-Kobe triangle*1, the areas served
by our lines, is the economic hub of Kansai, which has a grossregional product of $813.2 billion*2. In this triangle, our Group
has a firm business footing. Against a background of population shrinkage due to the low birth rate, we expect competition among Japanese regions to become even more severe inyears ahead. However, in partnership with local government,
it is our basic strategic policy to attract as many people aspossible to areas served by Hankyu and Hanshin stations, byinvesting in them to increase their appeal. As a result of over
100 years of commitment to a creation of communities rich incultural amenities along our lines, in partnership with residents,
these areas have now become very popular. In April 2009, welaunched the Hankyu Hanshin Dreams and Communities of the
Future project, aiming to create residential communities withlasting appeal, in a spirit of community contribution basedon policies of creating desirable local living environments anddevelopment of the next generation. Looking ahead, we willtake further measures to increase value along Group railway
lines, through business and community contribution channels,
to maintain the popularity of areas served by our stations.

26 Annual Report 2012

The Kansai innovation international strategic comprehensive
special plan has now been recognised under the general special zoning law. In response to this deregulation, initiatives are
now underway in Kansai to create a framework for innovation
targeting practical fields and markets in sectors such as medical care and energy. In addition to the above designation, theUmeda area, a strategic zone for the Group, is also earmarked
for urgent regeneration works based on the Act on Special
Measures concerning Urban Reconstruction. This Act enables
deregulation in Umeda aimed at strengthening the international competitiveness and appeal of large urban areas. We are
now thinking of redeveloping both the Dai Hanshin Building(main Hanshin Department Store) and the Shin Hankyu Building
next door to it. As deregulation proceeds in Umeda, we expect
more flexible project planning rules to work favourably for us.
In addition, in areas served by Group stations, buildings such as
the Kobe Hankyu Building (Hankyu Sannomiya Station building), currently operated as a provisional facility after sustaining
damage in the Kobe earthquake, is one of the properties inour portfolio with redevelopment potential. Although thetiming is not decided, by steadily proceeding with projects
at such properties, we will be able to further progressively
increase value along Group railway lines. But here too, we firsthave to rapidly improve our financial standing to fashion a firm
foundation for business operations, before embarking on new
redevelopments.

Part 1 Management Report Section

Introduction*1 The combined area of Kyoto, Osaka and Kobe and their satellite communities.
*2 Figures for the year ended March 2010. Source: Prefectural Accounts (2009) issued by Cabinet
Office, and Osaka and other prefectures of the Kansai district. The exchange rate (¥92.80/ US$)is the simple average of the 12-month average market price on the interbank foreign exchange
spot market on the Tokyo Stock Exchange for 2009.

Part

1

Management Report Section

Given that our free cash flow now stands at nearly ¥80 billion,
and it is exceptional to see such a concentration of multiple
large-scale projects under way as in the 2007 Medium-Term
Management Plan’s first three years (fiscal 2008 — 2010), it isunlikely that after April 2016, growth-oriented capital investment will increase and interest-bearing debt again start toclimb. Accordingly, in the next Medium-Term Management
Plan for the period, we believe we will be striking an appropriate balance between strategic investment for sustainablegrowth and improvement of our financial standing, although
we cannot give specific numerical targets just now. In that connection, in the face of deepening globalisation, I believe that
we need to carefully watch and work out ways of responding
to international economic trends.

Part

2

Special Feature

Returns to shareholders
Part

3Core Businesses: Overview and Outlook

In view of our current consolidated dividend payout ratio, we regard ensuring adequate returns toshareholders as an issue that management has to deal with. That said, given that improvement of
our financial standing has become the overriding concern for the Group at the moment, only after
we close in on our goal of reducing the interest-bearing debt/EBITDA ratio to around seven times
can we start considering how to ensure adequate shareholder returns.

Part

4

year ending 31st March 2013, provided that there is no dramatic deterioration in the economy such as that caused by
the collapse of Lehman Brothers. Because ¥5 per share equates
to something over ¥6 billion, our payout ratio would be 20%
assuming net income of ¥30 billion. That is certainly not a highlevel. We recognise that increasing shareholder returns is something we need to be thinking more about. And so we will soonlaunch a review, once we are certain of achieving our target of
reducing the consolidated interest-bearing debt/EBITDA ratio
to around seven times. At the same time, we will further build
up enterprise value to underpin our share price, and will work
unstintingly to meet the expectations of all our shareholders.

Annual Report 2012

Part

5

Financial Section and Corporate Data

In addition, as stated above, we believe we have the resourcesto achieve an annual net income level of ¥30 billion from theSocial Responsibility and Management Organisation

For the fiscal year ended 31st March 2012, we paid out adividend of ¥5 per share of common stock (at the moment,
the dividend is paid only at the end of the fiscal year). As mentioned above, because improvement of financial standing is
the priority issue, we have decided to use free cash flow tomeet funding demand to strengthen our competitiveness inall segments, and to improve our financial standing. For thisreason, our basic policy will be to maintain a stable annual
dividend of at least ¥5 for the time being. This is the payout thatwe plan for the year ending 31st March 2013.

27

Part 2

SpecialFeatureSpecial FeatureSpecial Feature:

Making Umeda even more attractive
Umeda — the area surrounding Osaka Station — lies at the centre of the Kansai region, which is one of theworld’s biggest conurbations.
Umeda is the strategic cornerstone of the Group’s operations, containing many of our principal commercial
facilities and multipurpose buildings.
To make the most of the Umeda district’s outstanding feature — the largest railway terminus in westernJapan — we are currently pursuing a wide variety of development projects to make Umeda into an even more
attractive community.

28 Annual Report 2012

Introduction

The Umeda area’s potential

Excellent
transportation
accessPart

1

Umeda Station (including Osaka Station and Kitashinchi Station) is an important transportation node, with railway
lines leading to all the major cities of the Kansai region. Roughly 1.2 million users enter the station every day, whichis the highest figure for the whole of western Japan. As the station also connects directly with the leading cities ofEast Asia via Kansai International Airport, Umeda is Japan’s “gateway to Asia.”(Thousands/day)
2,000

Part

1,526
1,500

1,309

1,190
1,000

617
500

0

Umeda
(Osaka)

376

334

Namba

Tennoji

2

Umeda: Osaka Municipal Transportation Bureau, JR West, Hankyu, Hanshin
Namba: Kintetsu, Nankai, Osaka Municipal Transportation Bureau
Tennoji: JR West, K intetsu (Abenobashi), Hank ai, Osak a Municipal
Transportation Bureau
Tokyo: JR East, Tokyo Metro
Shinjuku: JR East, Keio, Odakyu, Bureau of Transportation Tokyo Metropolitan
Government, Tokyo Metro, Seibu
Shibuya: Tokyu, JR East, Tokyo Metro, Keio
Ikebukuro: JR East, Tobu, Seibu, Tokyo Metro

1,774

Special Feature

Number of persons
catching a train at Umeda
Stationdrawing board. The completion of these projects will magnify
the attractions of the Umeda area still further, and we expect
it to develop into a major international hub that will play aleading role in the revitalization of the Kansai region.

Management Report Section

Umeda’s strong points are its excellent transportation access,one of the largest concentrations of commercial facilities anda high potential as business district. Numerous development
projects, both large and small, are now underway or on the

Source: Urban Transportation Report 2010 Edition (Institution for Transport
Policy Studies)Tokyo

Shinjuku

Shibuya

IkebukuroPart

3

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

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

Approx. 29 min. (43km)

Beijing

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

Kyoto

Approx. 21 min. (31km)

Seoul

Approx. 39 min. (53km)

Otsu

Kobe

ShanghaiUmeda Area

KansaiInternational
AirportFrom Osaka Station: 4 hours 30 min.
From Tokyo Station: 5 hours 20 min. Hong Kong

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

Core Businesses: Overview and Outlook

The Umeda area’stransportation potential

Gakkentoshi

Approx. 41 min. (38km)

Singapore

Wakayama
Approx. 51 min. (68km)

Approx. 60 min. (45km)

Nara

Part

Approx. 42 min. (49km)

4

Low-Cost Carriers start services to andfrom Kansai International Airport

List of LCCs that operate services out of Kansai International Airport
Destinations (including planned services)

AirlineOverseas
Seoul (Incheon), Hong Kong,
TaipeiPeach Aviation
Jetstar JapanJapan

Narita, Sapporo, Fukuoka

Skymark Airlines

Sapporo, Asahikawa, Naha

Jeju AirAir Busan

Domestic
Sapporo, Fukuoka, Nagasaki,
Kagoshima, Naha

Part

5

Seoul (Incheon, Gimpo), Jeju
South Korea

Easter Jet

Financial Section and Corporate Data

Kansai International Airport operates 24 hours a day,and low cost carriers (LCCs), whose operations within
Japan are projected to grow rapidly, have recently
been commencing operations from the airport. Ten
airlines are currently operating services or planningto do so, which is the largest number for any airport
in Japan.
A dedicated terminus for LCCs is currently
under construction at Kansai International Airport,scheduled for completion in the autumn of 2012, andthe airport is expected to play an even more crucialrole as a gateway to the cities of East Asia, where
economic growth continues unabated.

Social Responsibility and Management Organisation*Excluding time taken to change trains
Source: Basic city planning for Osaka Station North District

Busan
Seoul (Incheon)

Cebu Pacific Air

Philippines

Air Asia X

Malaysia

ManilaKuala Lumpur

Jetstar Asia

Singapore

Taipei, Manila, Singapore

Jetstar

Australia

Cairns, Sydney, Gold Coast

Source: Kansai International Airport Official Site
(http://www.kansai-airport.or.jp/flight/lccspecial/index.html)

Annual Report 201229

Special Feature

Largest concentration of commercial facilities inJapan
Comparison ofconcentration ofcommercial facilities byregion (store area)

The Umeda area currently contains Japan’s largest concentration of large-scale commercial facilities (department
stores, shopping centres, and so on). It attracts people from within and also outside the Kansai area.
From here on, too, Umeda will see the opening of pioneering new commercial facilities as part of the Osaka
Station North District (Umekita) Development Area Project. According to a paper on 12th July 2011, by Kazutaka
Nagaya of the Nikkei’s Research Institute of Industry and Regional Economy, Umeda will become a centre of highfashion and cultural trends, and a “city-centre lifestyle zone” (“Prospects for the Changing Kansai Trading Zone”).
Store area (m2)Commercial district(official designation)

Existing stores, etc.

New stores, etc.

Total

Umeda (Kita-ku, Osaka)

599,875

73,487673,362

Namba, Shinsaibashi(Chuo-ku, Osaka)*

453,713

14,750468,463

Shibuya, Omotesando(Shibuya-ku, Tokyo)

424,1642,203

426,367

Shinjuku (Shinjuku-ku, Tokyo)

419,0560

419,056

Ikebukuro (Toshima-ku, Tokyo)

378,1174,460

382,577

Ginza, Nihonbashi(Chuo-ku, Tokyo)

358,448

0358,448

Marunouchi, Yurakucho(Chiyoda-ku, Tokyo)

339,351

10,071

350,615

Source: Toyo Keizai, Inc. “List of Large-Scale Retail Outlets 2013”
Store area calculated on basis of official designation in the above table.
Stores surveyed are those with areas in excess of 1,000m2, as of June 2012, based on data on large-scale stores registered with prefectural governments
under the Large-Scale Retail Stores Location Law.
* Including 54,042m2 for Namba Parks (Naniwa-ku, Osaka)

High potential as
business district

Average Vacancy Rates
for Office Buildings(Osaka Business Areas)
Source: Miki Shoji, Latest trends in theoffice-building market

In the last few years, many businesses have taken a close look at the Umeda area, attracted by the transportation
convenience it offers as the largest railway terminus in western Japan. Umeda has been the first of Osaka’s business
districts to profit from the growing trend among companies in Osaka as a whole to enlarge their office space ormove to larger premises. In reflection of this, office rents in Umeda maintain the highest level in Osaka businessareas.
(%) 25
Entire Osaka Business Area
Umeda
Minami-Morimachi
Yodoyabashi/Honmachi
Shinsaibashi/Namba

20

15

2010.10 11.94%

10

5

2012.06 6.77%
2007.10 2.55%

0

2005.
04

Average Rents for (¥/3.3m2) 17,000
Office Buildings
16,000(Osaka Business Area)
Source: Miki Shoji, Latest trends inthe office-building market

2005.
07

2005.
10

2006.
04

2006.
07

2006.
10

2007.
04

Entire Osaka Business Area
Umeda

2007.
07

2007.
10

2008.
04

2008.
07

2008.
10

Minami-Morimachi
Yodoyabashi/Honmachi

2009.
04

2009.
07

2009.
10

2010.
04

2010.
07

2010.
10

2011.
04

2011.
07

2011.
10

2012.
04

2012.
06

Shinsaibashi/Namba

2012.06 ¥14,407

15,0002008.04 ¥15,965

14,00013,00012,00011,00010,0009,000

30 Annual Report 2012

2005.
04

2005.
07

2005.
10

2006.
04

2006.
07

2006.
10

2007.
04

2007.
07

2007.
10

2008.
04

2008.
07

2008.
10

2009.
04

2009.
07

2009.
10

2010.
04

2010.
07

2010.
10

2011.
04

2011.
07

2011.
10

2012.
04

2012.
06

Part 2 Special Feature

Introduction

The Hankyu Hanshin Holdings Group — a strong presence in the Umeda area
The origins of the Hankyu Hanshin Holdings Group go back to
1906, when the Hanshin Electric Railway opened a station at
Umeda next to the Osaka Station of then Japanese National
Railways (JNR, now JR West). Mino-Arima Electric Railway
Company, the predecessor of Hankyu Corporation, opened its
own adjacent station at Umeda in 1910.
Subsequently, both Hankyu and Hanshin developed a large
number of commercial facilities and multipurpose buildings(complexes incorporating commercial facilities and offices) in
the Kansai region, centred on their own railway terminuses.
The most notable landmarks in this development process were
the opening of the Hankyu Department Store in 1929, andthe opening of the new Hankyu Umeda Station in 1973 after
platform relocation and extension work. These were followedby redevelopment work by Hanshin Corporation in the West
Umeda area, culminating in the opening of HERBIS OSAKA in
1997 and HERBIS ENT in 2004, which greatly changed the faceof the Umeda area.
Hankyu Department Store, opened in 1929, was one of
the first railway terminus department store in the world, andwas ideally placed to take advantage of the newly dawning
age of rail commuting in Japan. The department store wasa great success, contributing to the Company’s constantly
growing business performance, and it has long held the No.1
spot among retail stores in the region. Recently, we haveundertaken the rebuilding of the Umeda Hankyu Building,which houses the department store, to cement the store’s
top position even more firmly. The grand opening of the new
Hankyu Department Store, featuring sales floorspace expandedfrom 60,000m2 to 80,000m2, is scheduled for 21st November
2012.
The work on relocating the platforms of Hankyu Umeda
Station and expanding the station, completed in 1973, wasnecessitated by a sharp increase in rail travel demand. Hankyu
Umeda Station had hitherto been located to the south of theelevated tracks of the JNR, and the relocation plan called forthe station to be transferred to the north side of the tracks, forreasons of convenience. Up to then, the most bustling andlively part of the Umeda area had been the south side of the
JNR’s elevated tracks, while the north side was filled with old

Part

1

Management Report SectionPart

2

Special FeaturePart

3Core Businesses: Overview and Outlook

Umeda Area in Detail
Hankyu Chayamachi Bldg.
Hotel Hankyu
International(Chayamachi
Applause)

Owned solely by the Group
Joint ownership

Hotel Hankyu
International

Owned by Hankyu REIT Inc.
Master lease (underground)
Kitano Hankyu
Bldg.

C

NU
– Chayamachi
Plus

Block
NU
–
chayamachi

Kita Hankyu Bldg.

B

Nishi Hankyu Bldg.

Umeda
Centre Bldg.

Part

4

Social Responsibility and Management Organisation

Hankyu Umeda Station

Block

Hankyu Sanban Gai
Umekita(OsakaStation
StationOsaka
North
North District)
District(about(about 24ha)
24ha)

Hotel new Hankyu

Hankyu Terminal Bldg.
HigashiHankyu Five Bldg. Hankyu(HEP FIVE)
Bldg.
HankyuGrand Navio Hankyu(HEP
NAVIO)
Bldg.

A
Block

Phase 1Development Area(about 7ha)

aka
Os
JR

n
tio
Sta
da

in
nsh n
HatatioS

Umeda Hankyu Bldg.
(Hankyu Department Store)(under rebuilding)

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

Part

5

Financial Section and Corporate Data

Umeda Hanshin
Daini Bldg.
(HERBIS ENT)e
Um

Umeda Flagship Store of Hankyu Department Stores at
the time of opening (1928)

Diamor Osaka(underground mall)

Umeda Hanshin
Daiichi Bldg.
(HERBIS OSAKA)ntatio
LAXA OSAKA(Hotel Hanshin)

aS

him

us
Fuk

The Ritz-Carlton, Osaka* HEP FIVE is jointly owned with Hankyu REIT Inc.
* Hotel Hanshin is operated by Hankyu Hanshin Hotels(As of the end of July 2012)

Hankyu Umeda Station under construction and its
neighbouring area in around 1966

Annual Report 201231

Special Featurehouses and dilapidated commercial buildings dating frombefore World War II. This district was known as “the back of thestation (eki-ura),” indicating its somewhat shabby image among
the public. The opening of the relocated and refurbishedHankyu Umeda Station, together with the Hankyu Sanban Gai,a large-scale shopping centre in basements under the newstation, was aimed at totally changing the district’s image, andit played a major role in revitalising the entire Umeda area.
Meanwhile, the West Umeda area, on the west side of JR
Osaka Station, was relatively undeveloped compared withthe areas around Hankyu Umeda Station and in front of Osaka
Station. This was because it was occupied mainly by the former
JNR’s South Umeda Freight Yard and surface railway tracks
belonging to Hanshin. With the aim of implementing a worldclass urban redevelopment project for the 21st Century, weseised the opportunity of the termination of operations at theSouth Umeda Freight Yard to undertake a large-scale redevelopment project with the cooperation of the land-owningparties, notably Hanshin Electric Railway Co., Ltd.
We mobilised the resources of the entire Group to implement this redevelopment project, with Hanshin as the maindeveloper. While continuing work to move the railway lines
underground, in 1997 we opened the HERBIS OSAKA, a multipurpose high-rise building whose tenants include The RitzCarlton, Osaka hotel and other commercial facilities, as wellas suites of high-technology offices. We then launched otherredevelopment projects, including the opening in 2004 of the
HERBIS ENT, a multi-purpose high-rise building that constitutes
the culmination of our overall redevelopment of the West
Umeda district. Both HERBIS buildings are built to very highstandard specifications, and the tenants of the commercial
facility portions include many of the world’s most renowned
luxury brands. These two buildings have greatly enhanced thecachet of Umeda — Osaka’s gateway.
As described above, the Group has been engaged in developing Umeda for almost a century, and has made a considerable contribution to the area’s appeal. As you can see from themap provided on page 31, the Group has a strong presence inthe Umeda area.

Hankyu Umeda Station and its neighbouring area in around 1973

Hankyu Sanban Gai at the time of opening (1969)

West Umeda area prior to redevelopment (1984)

Current West Umeda area

32 Annual Report 2012

Part 2 Special Feature

Introduction

Measures taken by the Group to further enhance the attractiveness of the Umeda area
The Umeda Hankyu Building is at the north end of Midosuji, Osaka’s main street, and is in a prime location within
five minutes’ walk from each of the Hankyu, Hanshin, JR and subway Umeda (Osaka) stations. It also contains the
Hankyu Department Store Umeda Flagship Store. Rebuilding work on the Umeda Hankyu Building has been pursued without closing the department store, even temporarily, and because of this the work was divided into two
sections (north and south). In September 2009 the Phase I of the department store on the south side was opened
for business, and in May 2010 the upper portion — the Umeda Hankyu Building Office Tower — was opened.
At present, work continues on Phase II of the department store on the north side, and it should be completed
on 21st November, 2012, when the grand opening of the Hankyu Department Store Umeda Flagship Store isscheduled.
After the work is completed, the new Umeda
Hankyu Building will be notable for the efforts thathave been made to ensure the free movement ofpedestrians into and out of the building and between
it and surrounding facilities. These measures include
making the underground entrance to the high-quality
food floor in the department store completely barrierfree.
As a result, visitors will be able to enjoy walking
around the building and its neighbouring shopping
facilities, and the new building will help to improve
the overall image of the Umeda area. Additionally, thenew office tower is ideally located for direct access by
the several railway lines running into Umeda, and offers
superior functionality. Combined with its impressive
41 storeys above ground, the Umeda Hankyu Building
Office Tower is a new landmark in the Umeda area, andis expected to make a major contribution to the area’s
further energisation.

Part

1

Management Report Section

Rebuilding of
Umeda Hankyu
Building

Part

2

Special FeaturePart

3Core Businesses: Overview and Outlook
Part

Umeda Hankyu Building
New Building
Total floor area
(excluding parking,basement,stairways, etc.)

Department store: Approx. 140,000m2
Concourse etc.: Approx. 10,000m2
Office tower: Approx. 102,000m2

Department store: 13 floors above ground and 2 below
Office tower: Floors 15 to 41(Sky Lobby: 15th floor)

Approx. 112,600m2

12 floors above groundand 2 below

HeightApprox. 187m

Approx. 45m

Major uses

Department store and offices etc.

Department store etc.

Part

5

Financial Section and Corporate Data

Planned Investment

Old Building

Approx. 252,000m2

41 floors above ground and 2 below(Machinery rooms: 14th and 16th floors)
FloorsSocial Responsibility and Management Organisation

The Building

4

Total: Approx. ¥60 billion

Annual Report 201233

Special Feature

Osaka Station
North District(Umekita) Phase I
Development(Name: GRAND FRONT OSAKA)

This is a large-scale development project underway in the Phase I Development Area (approximately 7ha), whichis part of the larger (approximately 24ha) area immediately adjacent to Osaka Station to the north. Undertaken
by a consortium of 12 companies, including our Group company (Hankyu Corporation), the project has brought
together experts from all over the globe, who have pooled their technological expertise and other know-how withthe goal of creating a vibrant town that can take the lead in designing and popularising new businesses and newlifestyles. Based on this development concept, we are working to create a cluster of important urban functions —offices, commercial (shopping and leisure) facilities, hotels and serviced residences, and condominiums — centred
on a “knowledge capital” hub. It will become a totemic development, and a fitting gateway to Osaka.
Construction work on this project, along with tenant leasing contracts and the sale of condominiums, is currently underway, with the target of completion in March 2013. Sales of the condominium building (GRAND FRONTOSAKA Owner’s Tower) have been strong. 455 individual housing units, out of a total of 525 units, are on the market
as of August 2012, with contracts completed for over 90%.

Artist’s impression

The Building

During the works (as of August 2012)

Name
Block
FloorsPlanned Investment(Group share only)

34 Annual Report 2012

GRAND FRONT OSAKA
A Block

B Block(South Tower)
38 floors above ground,
38 floors above
3 below
ground, 3 below(North Tower)
33 floors above ground, 3
below

C Block
48 floors above ground,
1 below

Site area

Approx. 10,571m2

Approx. 22,680m2

Approx. 4,666m2

Total floor area

Approx. 187,800m2

Approx. 295,100m2

Approx. 73,800m2

Major uses

Offices, commercial
facilities

Offices, “Knowledge Capital,” commercial facilities, hotel, serviced residence, convention halls

Apartments for sale

Total: Approx. ¥51 billion*Facility investment only. Excludes investments in land and buildings for salePart 2 Special Feature

Introduction

Rebuilding of Dai
Hanshin Building
and Shin Hankyu
Building underconsideration

It has now been almost fifty years since the construction of the Dai Hanshin Building, principally occupied by the
Hanshin Department Store Umeda Main Store, and the Shin Hankyu Building just across the street. Plans for rebuilding are thus being considered.

MultifacetedManagement of
the Umeda Area

We are aiming to realise the continuous development of the Umeda area by raising its competitiveness and customer
drawing power and by enhancing the area’s overall attractiveness. For this purpose, in November 2009 the Group(Hankyu Corporation and Hanshin Electric Railway) established the “Council for Collaboration in the Management of
the Umeda Area” together with the West Japan Railway Company (JR West) — which is also pursuing a large-scale
development project in the Umeda area — and the Osaka Station North District (Umekita) Phase I Development
Area Project Town Management Organisation (General Incorporated Association, GRAND FRONT OSAKA Town
Management Organisation).
With the objective of improving the overall image of the Umeda area, the Council has adopted the following
three basic policies to be shared by its members: (1) developing the area from the station outward; (2) creating apedestrian-friendly neighbourhood; and (3) creating a neighbourhood fully in tune with the modern age.

Part

1

Management Report SectionPart

2

Special Feature

Roadmap for activities undertaken by the Council for Collaboration in the Management of the Umeda Area
Steps to be Undertaken∙ Promote coordination across the area overillegal bicycle parking∙ Inform public about prevention of crimeand fires, for safety enhancement∙ Expand user friendly facilities and coordinate participation∙ Examine ideas for traffic management toprioritise pedestrian movement∙ Make proposals forbeautification of area
∙ Operate open-air
cafes at roadsides∙ Examine proposals forgetting the most outof road space, such as
wider sidewalks

Creating a neighbourhood fullyin tune with the modern age∙ Publicise area development plans over theInternet∙ Publicise community management by
issuing brochures, etc.
∙ Organise area-specific events that will growinto neighbourhood seasonal celebrations∙ Conduct activities to create core of “Umeda
fans” (including workers, residents, andtourists) who want to participate in theCouncil’s activities∙ Promote interaction and liaison with urban
development bodies all over Japan∙ Promote eco-friendly urban development∙ Promote exchanges and collaboration withother cities in Japan and overseas∙ Design and adopt logo character to improvearea’s branding∙ Improve facilities for reception of visitorsfrom other Asian countries, and conductcampaigns encouraging visits to the area

∙ Consider conducting
experiments to test
effectiveness of abovemeasures taken todevelop the area

3

Part

4

Part

5

Financial Section and Corporate Data

Creating a pedestrianfriendly neighbourhood∙ Conduct clean-up campaigns∙ Hold events in roadside spaces for cheerfulatmosphere∙ Create lively neighbourhoods by displaying
ad banners∙ Conduct campaigns to promote use of
public transportation∙ Improve area’s ambience by installing
plants and flower pots

Part

Social Responsibility and Management Organisation∙ Strengthen joint management of community information services∙ Provide adequate
signage for pedestrians and promote
coordination

Core Businesses: Overview and Outlook

Developing the area fromthe station outward
Specific action proposals∙ Publish area map∙ Publicise information on events in the area
over the Internet∙ Hold promotional events in the plaza within
the station, and coordinate participation∙ Hold events in open spaces around thestation to help extend the liveliness ofthe station area to a wider part of theneighbourhood

Annual Report 201235

Part 3

Core Businesses:
Overview and Outlook

Core Businesses: Overview and Outlook
At a glance

Revenues from Operations (¥ billion)

Urban Transportation

P. 38% of Revenues fromOperations

Revenues fromOperations¥192.7 billion

191.5

191.9

192.9

192.7

191.1

(YoY -0.6%)

09/3

10/3

11/3

12/3

13/3
(Est.)¥176.1 billion

170.2

168.5

09/3

10/3

11/3

12/3

13/3
(Est.)

105.8

107.9

103.4

102.3

108.7

09/3

10/3

11/3

12/3

13/3
(Est.)

65.8

62.9

67.7

67.6

70.0

(YoY +24.4%)

09/3

10/3

11/3

12/3

13/3
(Est.)¥64.1 billion

66.4

65.2

64.1

66.5

11/3

12/3

13/3
(Est.)

54.0

53.9

54.6

11/3

12/3

13/3
(Est.)(YoY -0.1%)

28.9%
Real Estate

P. 42% of Revenues fromOperations

Operating Income
Margin16.8%

Segment
Assets¥738.7 billion

Revenues fromOperations

176.1

193.8

152.7

(YoY +15.3%)

24.6%
Entertainment and Communications P. 48% of Revenues fromOperations

Operating Income
Margin16.5%

Segment
Assets¥1,008.9 billion(YoY -3.5%)

Revenues fromOperations¥102.3 billion(YoY -1.1%)©Takarazuka Revue Company

Travel and International Transportation P. 51

14.6%% of Revenues fromOperations

Operating Income
Margin9.9%

Segment
Assets¥140.6 billion(YoY -0.1%)

Revenues fromOperations¥67.6 billion(YoY -0.2%)

10.4%
HotelsP. 54% of Revenues fromOperations

Operating Income
Margin4.7%

Segment
Assets¥100.5 billion

Revenues fromOperations

61.0(YoY -1.7%)

9.8%
Retailing

P. 56% of Revenues fromOperations

Operating Income
Margin—Segment
Assets¥88.1 billion

Revenues fromOperations(YoY -4.7%)

09/3¥53.9 billion

67.5

10/3

62.9

(YoY -0.3%)

8.2%

Operating Income
Margin2.5%

Segment
Assets¥17.9 billion(YoY -3.7%)

Notes: 1. Figures for segment revenues from operations as a percentage of Group totals are calculated on the basis of sales to externalcustomers (as of 31st March 2012).
2. Revenues from operations in other businesses accounted for 3.5%.

36 Annual Report 2012

09/3

10/3

* Retailing business’s sales and operating income exclude
those of the department store business (the former Hanshin
Department Store group, which was a consolidated subsidiary up to first half of the year ended 31st March 2008).

Introduction

Operating Income (¥ billion)

32.3

33.7

10/3

29.4

11/3

12/3

31.5

13/3
(Est.)

33.5

30.9

29.1
24.0

10/3

10.7

11.1

09/3

10/3

11/3

12/3

13/3
(Est.)

10.0

10.1

10.5

11/3

12/3

13/3
(Est.)

3.0

3.2

1.5
0.3
09/3

10/3

11/3

12/3

0.5
-0.6

-0.3

11/3

12/3

13/3
(Est.)

1.3

1.3

-1.7
09/3

10/3

1.4

0.4

09/3

10/3

11/3

12/3

13/3
(Est.)

Part

2

This segment offers a wide variety of live entertainment, centred on the sports business —the nationally popular and famous Hanshin Tigers professional baseball team and theirhome ground and high-school baseball mecca, Hanshin Koshien Stadium — and thestage revue business, based on the hugely popular Takarazuka Revue, which will celebrateits 100th anniversary in 2014. In addition, this segment runs wide range business such as
publishing, advertising, musical entertainment (“Billboard Live” club and restaurant chain),cable television business, and the information technology services.

Part

3

Our Travel and International Transportation business originally started as an International
Air Transport Association (IATA) agency business in 1948, when we signed Japan’s firstagency contract. In the travel business, centred on Hankyu Travel International Co., Ltd.,
we offer an original product range featuring the comprehensive and varied Trapics core
brand of travel packages, as well as business travel services. In the international transportation business, Hankyu Hanshin Express International Co., Ltd. uses a range of advanced
information and communication technologies and global networks to provide highquality logistics services efficiently combining a wide variety of transportation modes.

Part

The Hankyu-Hanshin-Daiichi Hotel Group operates 48 hotels, consisting of 18 that are
directly managed and 30 belonging to chains operated by franchise. It is one of Japan’s
leading hotel chains with 10,069 guest rooms (as of 31st July 2012). As a hotel operator
with many directly managed hotels in the Tokyo and Kansai areas, Japan’s two largest
markets, it offers a wide range of hotel formats, from general-purpose “city hotels” to newstyle hotels (with very limited function facilities). In addition to chain operations, it also
manages The Ritz-Carlton, Osaka, a venerable international luxury brand with which it hasformed an alliance.

4

This segment group comprises “Ekinaka” retail outlets operated mainly within the premisesof stations along our lines, the Lagare shop station kiosk chain, the Book 1st. bookstore chain,
the asnas convenience store chain, the COLOR FiELD cosmetics and accessories chain, the
DOUBLEDAY furniture and daily accessories chain and other sale-of-goods outlets. In addition
to our retail outlets in areas served by the Hankyu and Hanshin lines, we have also opened
Book 1st. stores in the Tokyo area, and DOUBLEDAY outlets in the Tokyo area and Fukuoka
Prefecture. Drawing on our long experience in developing businesses in our home area, weare building our competitive strength in markets beyond the Hankyu and Hanshin networks.

Annual Report 2012

Part

5

Financial Section and Corporate Data

0.7

The Real Estate segment derives its core revenue from leasing and management of commercial facilities and office buildings, and its condominium business. Its attractive business portfolio includes commercial facilities such as Hankyu Sanban Gai shopping centre,
HERBIS OSAKA, HERBIS ENT, Hankyu Nishinomiya Gardens, and the highly regarded Geo
condominium brand in the Kyoto-Osaka-Kobe area. It is also involved in large-scale developments such as Phase II of the department store section of the Umeda Hankyu Building
rebuilding project, and Osaka Station North District (Umekita) Development Area Project.

Social Responsibility and Management Organisation

0.5

13/3
(Est.)

1

Core Businesses: Overview and Outlook

4.0

Part

Special Feature

09/3

This segment comprises railway operations (with Hankyu Corporation operating theKobe, Takarazuka and Kyoto lines out of Umeda (Osaka), and Hanshin Electric Railway lines
directly linking Kobe with Osaka’s major northern and southern terminals, Umeda andNamba). Together, the Hankyu and Hanshin network, combined with other lines, and bus,
taxi and other urban transportation services, form a single large-scale network in the
Kansai area, centred on the cities of Kyoto, Osaka and Kobe.
Total length of lines operated:
Hankyu Corporation: 143.6km Hanshin Electric Railway: 48.9km (Including tier 2 railway operator)

Management Report Section

09/3

31.0

Nature of Business

32.3

37

Section 1

Urban Transportation
Major Businesses
Railway operations: Hankyu Corporation, Hanshin Electric Railway, Nosé Electric Railway, Kita-Osaka Kyuko Railway, Hokushin Kyuko Railway, Kobe Rapid Transit Railway
Automobile business (bus, taxi): Hankyu Bus, Hanshin Bus, Hankyu Kanko Bus, Osaka Airport Transport, Hankyu Denen Bus, Hankyu Taxi, Hanshin Taxi

Priority
issues(1) Provide high-value customer services• Improve the appeal of our transportation services and products• Expand our networks and catchment areas(2) Ensure low-cost operations (pooling and improving technology and know-how)(3) Provide safe, high-quality transportation services that fully justify public trust• With ongoing major projects and grade separation (track elevation) works underway, as well as barrier removal at stations, this segment is committed to providing
safe transportation services

Key facts and business environment
Population growth continues in areas served by our lines
In recent years, the population of the Kansai area has been in
decline, with a falling birth-rate and a rising proportion of elderly people. However, areas served by our lines are popular andpopulations here have maintained gradual growth momentum
since the trough of 1996, the year after the Great Hanshin (Kobe)
Earthquake (please see Figure 1).

However, there is no doubting that the operating environment for the
Urban Transportation Business has become more difficult. The official
Population Census of Japan shows that the population between theages of 15 and 64 — the working-age generations — has alreadybegun to decline, meaning a decline in people living in areas served
by our lines is inevitable (please see Figure 2). Compounding this will
be continuing competition with the private car.

Figure 1: Population trends in areas served by Hankyu and Hanshin lines (1991=100)
105
104
103

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

Great Hanshin (Kobe) Earthquake

102
101
100
99
98
97

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

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

Figure 2: Population by age group, along Hankyu and Hanshin lines (Population Census of Japan)
6 million
5 million
4 million

Young

Working age

Old

5,498,123
5,406,883
5,426,516
5,371,402
5,315,694
5,229,907
1,014,126564,789
829,343
486,155
423,032
654,455
3,802,239
3,924,390
3,652,948
3,807,524
3,805,897
3,715,180

5,557,782
1,200,690
3,636,224

3 million
2 million

1,230,823

1 million

0

1980

38 Annual Report 2012

1,113,080
1985

910,8911990

758,9091995

718,503

720,424
2000

2005

720,868
2010* Compiled by the Group, based on datafrom 2010 Population Census of Japan,
issued by the Ministry of Internal Affairs
and Communications.
* Tallies do not add up to the total at the top
for each year as age group is not known
in many cases. Unknowns account for thedifference.
* Areas served by Hankyu and Hanshin lines
are as defined in Figure 1.

Part 3 Core Businesses: Overview and Outlook

Introduction

Measures to increase the appeal of areas along our lines
expanding networks. Looking ahead, we will continue to improvestandards of convenience for customers and make our railway
lines more appealing, by expanding and improving all our generaltransportation services.

Part

1

Management Report Section

Faced with such change in the external environment, we are committed to achieving low-cost operations by pooling technology
and know-how and more efficiently deploying human resourcesof both Hankyu and Hanshin groups. We are also encouraging
greater public transport use by upgrading station facilities andImprovement of Hankyu Umeda Station facilities: Launch of modernising works at Hankyu
Umeda Station, one of Japan’s largest private railway terminals
About 40 years have passed since completion in November 1973of the relocation of the new Hankyu Umeda Station away from itssite near the current Umeda Hankyu Building.

Part

2

Special Feature

Hankyu Corporation has embarked on modernising works at
Hankyu Umeda Station, with completion scheduled for the endof fiscal 2015. The aim is to give the station a completely new,integrated, more upmarket look and make it the “face” of the
Umeda district of Osaka, where developments are underway suchas the rebuilding of the Umeda Hankyu Building and the Phase I
Development at Osaka Station North District (Umekita).

Part

The modernising works will involve creation of five spaces atHankyu Umeda Station, titled “Approach,” “Gate,” “Lobby,” “Stage,”and “Galleria,” with the use of theatre lighting to achieve a sense ofdrama. The aim is to create a distinctive theatre-like atmosphere.

3

Core Businesses: Overview and Outlook

A new gateway for Sannomiya (Kobe) and a better transportation hub role (improvement
works at Hanshin Sannomiya Station)

Part

4

Part

5

Financial Section and Corporate Data

Improvement works at Hanshin Sannomiya Station were launchedin October 2007, using subsidies for projects that enhance urban
railway convenience. The aim was to improve user convenienceand enhance its hub function ahead of the March 2009 launch of
direct Hanshin Electric Railway and Kintetsu Corporation sharedline services from Sannomiya to Nara, using the Hanshin NambaLine.

facilities and build new elevators and escalators. On 20th March
2012, the eastern wickets opened. In tandem with the station
improvement works, an underground pass was also provided
as part of the eastern wickets works, enabling easier access to
the Port Liner, JR lines, the peripheral commercial facility Kobe
Shinbun Kaikan building (M-INT Kobe) and the Santica underground shopping centre.

Social Responsibility and Management Organisation

Hanshin Sannomiya Station opened as an underground station in
1933. But because there is only one wicket on the western side,
it tends to get crowded during a rush-hour. The station also lacks
fire-prevention and barrier-free facilities and has long sufferedfrom clumsy connections between lines within the station.

In the improvement works, it was decided to build new eastern
wickets, remodel the existing western wicket, redo the wiring
throughout the structure, ensure up-to-date fire-prevention

Annual Report 201239

Section 1

Urban Transportation

Performance for the fiscal year ended March 2012
Higher earnings supported by reduced equipment disposal expenses despite negative
revenue impact of Great East Japan Earthquake
Hanshin Bus Co., Ltd. expanded a weekend-and-holiday discount,in which holders of commuter passes for certain routes of either
company could get additional discounts on certain of the othercompany’s routes, to weekdays as well. However revenues fromoperations slipped 1.2% or ¥558 million year-on-year to ¥47,483
million due partly to reduced airport bus usage following theGreat East Japan Earthquake.

In the railway business, the focus at Hankyu Corporation during
the year was improvement of customer services. New initiatives
included the launch of operation of an intercom system for calling wicket staff covering all stations, progress in installation of
information displays for delays and other matters, and installation
at major stations of ticket gates with glass-walled service countersenabling passengers to call station staff. Other network enhancement measures included the completion of improvement works
at Hanshin Mikage Station in November 2011, the opening of neweastern wickets at Hanshin Sannomiya Station in March 2012 and,at Hanshin Koshien Station, improvements aimed at reducing
crowding on professional baseball game days and making facilities barrier-free. Revenues from operations in the railway businessoverall rose 0.8% or ¥1,209 million year-on-year to ¥144,957 million, with both Hankyu and Hanshin lines increasing revenues, as
the impact of severe typhoons in the region was outweighed by
the entry into service of new retail facilities in the Umeda area andthe leap year effect.

In the other businesses segment of Urban Transportation, revenues from operations fell 6.4% year-on-year or ¥680 million to¥9,875 million, due partly to a correction following completionand delivery of major orders at rolling-stock manufacturing facilities in the previous fiscal year.
As a result of the above, revenues from operations in the Urban
Transportation Business overall declined 0.1% or ¥229 million
year-on-year to ¥192,718 million. However, operating income
increased 10.1% or ¥2,963 million to ¥32,342 million, due todecreases in property and equipment disposal and depreciation
and amortisation expenses.

In addition, measures were taken to improve customer convenience at the bus and taxi business. Hankyu Bus Co., Ltd. andHankyu Corporation and Hanshin Electric Railway: Performance in numbers
Fare revenues (¥ million) *1
2012/3

HankyuHanshin2011/3

ChangePassenger volumes (thousands) *1%

2012/3

2011/3

Change%Other tickets

60,26860,000268

0.4%

306,349

306,481

-131

-0.0%

Commuter pass

29,922

29,484437

1.5%

302,282

296,751

5,530

1.9%

2

Total *

90,191

89,485705

0.8%

608,632

603,233

5,399

0.9%

Other tickets

19,422

18,899522

2.8%

109,284

103,991

5,293

5.1%

Commuter pass

10,623

10,126497

4.9%

109,275

101,211

8,064

8.0%

Total *2

30,04529,025

1,019

3.5%

218,560

205,202

13,357

6.5%*1 Sum of tier 1 and tier 2 operators for both Hankyu and Hanshin*2 For Kobe Rapid Transit Railway Line (from Hanshin Motomachi Station and Hankyu Sannomiya Station to Nishidai Station, and from Shinkaichi Station to Minatogawa Station), we have modified our methodof recording fare revenues and passenger volumes as these sections are now co-managed by Hankyu Corporation, Hanshin Electric Railway and Kobe Electric Railway (as of October 2010). Changes in farerevenues and passenger volumes for the line for the previous fiscal year using the same method of calculation as the fiscal year under review are as follows.

(Hankyu) Total fare revenues: ¥764 million (0.9%), total passengers carried: 3,560 thousand (0.6%)(Hanshin) Total fare revenues: ¥182 million (0.6%), total passengers carried: 2,083 thousand (1.0%)

40 Annual Report 2012

Part 3 Core Businesses: Overview and Outlook

Introduction

Forecasts for fiscal 2013 onward(Estimates adjusted from 2007 Medium-Term Management Plan)

Operatingincome(¥ billion)
50.0

40.0

Operating income

Part

1

Revenues fromoperations(¥ billion)
210.0

Revenues from operations

Part

2

Special Feature

Looking ahead to the year ending 31st March 2016, we expect
revenue levels in the railway and bus and taxi businesses to be
more or less flat from the year ended 31st March 2013. We forecast
a 0.7% or ¥1.3 billion increase to ¥192.4 billion in revenues fromoperations compared with our forecast for the year ending 31st
March 2013, on the strength of an expected increase in rolling-stock manufacturing orders and other positives. However, in therailway business, we expect operating income to decline 7.9% or¥2.5 billion compared with the year ending March 2013 (forecast)to ¥29.0 billion, due largely to a one-time cost, a steep increase inproperty and equipment disposal expenses from gradation andother works near Rakusaiguchi Station on the Hankyu Kyoto Line.

Management Report Section

We forecast revenues from operations in the year ending 31st
March 2013 to edge down 0.8% or ¥1.6 billion year-on-year to¥191.1 billion, partly because of the previous fiscal year beinga leap year, and hence one day longer. We forecast operating
income to decrease 2.6% or ¥0.8 billion to ¥31.5 billion, for thereason mentioned above and because of increased power andfuel costs due to rising oil prices, which will outweigh an expected
reduction in maintenance, and depreciation and amortisation
costs, in the railway business.

191.1 191.5 191.9 192.9 192.7 191.1 192.4
32.2

32.3

31.0

29.4

30.0

32.3

31.5

29.0

180.0

20.0
150.0
10.0
Part

0

2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2016/3

3Core Businesses: Overview and Outlook(Estimate)

120.0(Plan)

Hankyu Corporation and Hanshin Electric Railway: Performance in numbers (Fiscal 2013)
Fare revenues (¥ million) *1
2013/3

2012/3

ChangePassenger volumes (thousands) *1%

2013/3

2012/3

Change%HankyuTotal

89,96990,191

-221

-0.2%

606,242

608,632-2,390-0.4%

Hanshin

Total

29,87530,045

-169

-0.6%

217,121

218,560-1,439

-0.7%

Part

4

Social Responsibility and Management Organisation*1 Sum of tier 1 and tier 2 operators for both Hankyu and Hanshin

Part

5

Financial Section and Corporate Data

Annual Report 201241

Section 2

Real Estate
Major Businesses
Real estate leasing: Extensive property-holdings, mainly along Hankyu and Hanshin lines (For details of major properties, please see page 47)
Major companies: Hankyu Corporation, Hanshin Electric Railway, Hankyu Realty
Real estate sales: Subdivision and sale of residential land lots and sale of condominiums and single-family housing, mainly along Hankyu and Hanshin lines. In recent years, also
focused on the sale of condominiums in the Tokyo area
Major companies: Hankyu Corporation, Hanshin Electric Railway, Hankyu Realty
Other real estate businesses: In addition to projects such as the rebuilding of Umeda Hankyu Building, property management, building maintenance and other building operation and management services
Major company: Hankyu Corporation, Hanshin Electric Railway, Hankyu Hanshin Building Management

Priority
issuesReal estate leasing(1) Consolidate and improve earnings capability by strengthening real estate leasing management models, cost-effectively(2) Consolidate and increase occupancy and profitability through closer tenant relationships and more effective leasing models
Subdivision business(1) Supply and market condominium buildings at the scale needed by the market, and develop projects tailored to customer needs(2) Build up condominium supply network in the Tokyo area, and establish the Geo brand(3) Market residential land-lots (Yamatedai, Nakajima and Saito), and develop communities of detached single-family town houses
Other(1) Proceed with large-scale projects like the rebuilding of Umeda Hankyu Building and the Phase I Development Area of Osaka Station North District(Umekita), aiming at early launch of stable operations(2) Raise the corporate value of Umeda and other areas served by Hankyu and Hanshin lines, through new development projects

Key facts and business environment
Recovery in the leasing market will take time
Most revenues and operating income in the Group’s Real EstateBusiness are generated by the leasing business, which contributes
to stable cash flow. The Group has one of the largest rental realestate portfolios of any private rail company, with many properties located near Hankyu and Hanshin lines (for details, pleasesee page 47). Overall rentable area operated by the Group was
approximately 1.6 million m2 (as of 31st March 2012). Of this total,
approximately one half, or 700,000m2 (60% being commercial
facilities and the rest office facilities) are concentrated in the
Umeda area, the heart of the Kansai economy, where the Group
has a large number of very competitively located rental properties(near the Umeda stations of both Hankyu and Hanshin lines aswell as JR Osaka Station (please see page 31 for detailed map of
the Umeda area).

mergers and corporate consolidations. As a result, the average
office vacancy rate for the Umeda area is showing signs ofimprovement. Nevertheless, as stated above, a number of largescale properties will be coming on the market between now and2013, and the vacancy rate is thus likely to remain high for sometime to come (see Figures 1 and 2 for average vacancy rates andaverage rent levels).

Looking at the current market for rentable office space in the
Umeda area, average vacancy rates for office buildings bottomed
out in October 2007 but are still trending at a high level. This
reflects the sluggishness of the economy’s recovery and ongoing
uncertainty about economic prospects, as well as the release onto
the market of large numbers of new buildings in the Umeda area
between 2010 and 2013. Average rent levels are also continuing
their gradual decline.

As explained above, the business environment surrounding
the real estate leasing market remains challenging. However,thanks to the very competitive locations of our major rental officebuildings close to the Hankyu and Hanshin Umeda stations incentral Umeda, we can expect relatively stable earnings on theback of steady demand and rent levels even under such difficult
conditions.

Recently we have seen a tendency toward an increase in new
rental contracts due to tenants relocating from other districts,
as well as large-scale business relocations accompanying

42 Annual Report 2012

In the field of commercial facilities, consumers are tending to prefer lower-priced products or refrain from purchasing at all, whichreflects a general decline in consumer confidence. Consequently,
the Group’s sales in this segment are projected to continue
declining for some time to come, particularly for city-centre-typecommercial facilities.

In commercial facilities, too, we likewise expect limited impact
on earnings from the decline in tenant sales, due to the factthat fixed-rent leases account for a relatively high proportion ofrental income. Tenant sales at our community-based commercial

Part 3 Core Businesses: Overview and Outlook

Introductionthat competition in the fields of office buildings and commercial facilities is likely to intensify as new properties come on themarket. However, as the market leader in the Umeda area, wewill leverage our strong relationships with tenants to improvethe vacancy rate at properties we own, and will take measures toimprove the appeal and customer-drawing power of the Umeda
area overall.

facilities (shopping centres) in areas served by the Group’s railway
stations have been holding up comparatively well. In particular,
Hankyu Nishinomiya Gardens has been enjoying favourable
growth in tenant sales since it opened in November 2008.

Part

1

Management Report Section

Looking ahead, in the Umeda area, the Group’s most importantbusiness base, ongoing large-scale development projects mean

Figure 1: Average vacancy rates at office buildings(Osaka and Tokyo business areas)
Source: Miki Shoji, Latest trends in the Office-building market
Part(%) 14

Special Feature

122

2010.10 11.94%

Osaka business areas (all)UmedaTokyo business areas (all)10862012.06 6.77%

4
Part

3

2
0

Core Businesses: Overview and Outlook

2007.10 2.55%
2005. 2005. 2005. 2006. 2006. 2006. 2007. 2007. 2007. 2008. 2008. 2008. 2009. 2009. 2009. 2010. 2010. 2010. 2011. 2011. 2011. 2012. 2012.
04
08
12
04
08
12
04
08
12
04
08
12
04
08
12
04
08
12
04
08
12
04 06

Figure 2: Average rents at office buildings(Osaka and Tokyo business areas)(¥/3.3m2) 25,000

4Social Responsibility and Management Organisation

23,000Part

Osaka business areas (all)UmedaTokyo business areas (all)21,00019,00017,0002008.04 ¥15,965

15,00013,0002012.06 ¥14,407

11,0005

Financial Section and Corporate Data

9,000

Part

2005. 2005. 2005. 2006. 2006. 2006. 2007. 2007. 2007. 2008. 2008. 2008. 2009. 2009. 2009. 2010. 2010. 2010. 2011. 2011. 2011. 2012. 2012.
04
08
12
04
08
12
04
08
12
04
08
12
04
08
12
04
08
12
04
08
12
04 06

Annual Report 201243

Section 2

Real Estate

Subdivision business continues to enjoy robust sales
The number of individual condominium units sold in 2011
amounted to 44,499 in the Tokyo area (down 0.1% year-on-year)and 20,219 in the Kansai region (down 6.9% year-on-year). In
2012 thus far, the supply of condominiums to the market during
the January-June first-half period rose in the Tokyo area by 14.0%
year-on-year, due to a rebound from the previous year’s decline
caused by the Great East Japan Earthquake. The supply also rose
11.1% in the Kansai region.

In the subdivision business, we market condominiums, single
family houses, and residential land lots. The core business is Geobranded condominiums, supplied as high value-added properties
sited in excellent locations, mainly in areas along Hankyu andHanshin lines and in the Tokyo area. With Geo-branded condominiums, the focus is on quality and functionality, and quality
management is strict. We use an integrated framework spanning
development, sales, and management. The Geo marque rates
highly in market research into condominium brands.

The number of condominium units forecast to be supplied to themarket in 2012 is 53,000 in the Tokyo area and 22,000 in the Kansai
region. Factors behind these year-on-year increases include thegovernment’s continued measures to encourage home buying,including reduced tax rates on mortgage loans. In addition, in
the Tokyo area there has been a delay in the start of construction
and sale of condominiums owing to the aftereffects of the March2011 disaster, and the number of construction starts is expected
to increase. In the Kansai region, condominiums at a number oflarge-scale development projects will be coming on the market.

New supply of condominiums(Tokyo and Kansai areas)(Unit/year)

100,000
90,00089,256

Kansai area
Tokyo area

88,516 85,429

80,00084,14883,18374,46370,00061,02160,00053,00050,00040,00030,000In the first half of 2012 the average rate of conclusion of a sales
contract in the first month after a condominium comes on themarket was 77.6% in the Tokyo area and 75.9% in the Kansai
region, both above the generally employed benchmark level of
70% for condominium sales. This indicates that the condominium
market is on the road to recovery.

43,733 44,535
44,49939,08731,857 33,064

36,673
31,25830,21936,37630,14620,00021,716
22,744

19,78422,00020,21910,00002001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
(estimate)

Looking ahead, we expect sales to remain firm in the near term
despite concerns over the impact of a higher consumption tax,
firmly underpinned by demand created by home-purchase incentives and other measures. The Group is enjoying robust sales,with customers appreciating its supply of highquality properties sited in excellent locations.
(¥10 thousand/m )Source: Based on Real Estate Economic Institute Co., Ltd.’s National Condominium
Market Trends 2011, and Condominium Market Forecasts in the Tokyo
Metropolitan and Kansai Areas in the First Half of 2012

Condominium Prices(Tokyo and Kansai areas)

2(¥10 thousand)

6,000

5,000
52.3
4,026

4,000

65.0

Kansai area (¥10 thousand/m2)
Tokyo area (¥10 thousand/m2)

Kansai area (average)
Tokyo area (average)

54.5

55.0

4,069

4,104

54.5
4,108

41.7

41.4

41.7

42.0

42.6

3,188

3,237

3,165

3,177

3,164

65.0

70

61.4
55.5
4,644

51.3
4,003

64.2

66.4

60

4,775
4,535

4,200
44.9

47.0

47.6

47.1

3,380

3,478

3,513

3,411

4,716

4,578

48.8

49.9 50

3,452

3,490

Note: The above figures are based on research by Real Estate Economic
Institute Co., Ltd. Reference was made to National Condominium
Market Trends 2011, Condominium Supply Forecasts in the Tokyo
Metropolitan and Kansai Areas 2012, and Condominium Market
Forecasts in the Tokyo Metropolitan and Kansai Areas in the First
Half of 2012.

40

3,000
30
2,000
20
1,000

0

10

(CY) 2001

44 Annual Report 2012

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0

Source: Based on Real Estate Economic Institute Co., Ltd.’s
National Condominium Market Trends 2011

Part 3 Core Businesses: Overview and Outlook

Introduction

Steady progress in large-scale development projects
In addition, the Shin-Osaka Hankyu Building opened at a site
adjacent to JR Shin-Osaka Station, a major shinkansen terminal
which is a gateway to Osaka.

Part

1

Management Report Section

At the moment, the Group is working to raise its profile in the
Umeda area. Two projects in particular are aimed at improving
the appeal of the overall area: the reconstruction of the Umeda
Hankyu Building and the Phase I Development Area Project at
Osaka Station North District (Umekita). At Umeda Hankyu Building,the grand opening of the Umeda Flagship Store of Hankyu
Department Stores is scheduled for 21st November 2012, bringing
to completion a seven-year project. Already, tenant occupancy at
the Office Tower opened in May 2010 stands at approximately 85%(as of 31st July 2012), including informal tenancy commitments.

Project overviews are as follows.
Umeda Hankyu Building
Please see page 33 (Special Feature)
Phase I Development Area Project at Osaka Station North
District (Umekita)
Please see page 34 (Special Feature)

Part

2

Special Feature

Shin-Osaka Hankyu Building
The Shin-Osaka Hankyu Building is a multipurpose structurewith 17 floors above ground, comprising a Group-operated hotelthat prioritises a good night’s sleep over other services (REMM
Shin-Osaka), offices, and retail, bus terminal and other facilities.
Convenience is the keynote. It is linked directly to JR Shin-Osaka
Station (a major shinkansen terminal which is a gateway to Osaka)
and its subway station on the Midosuji Line, which connects to
Osaka commercial hubs such as Umeda, Yodoyabashi, Honmachi,
Shinsaibashi and Namba. It also provides better access to the area

north of JR Shin-Osaka Station, which had been difficult to get at,
via the station’s newly-opened northern exit.
Following the completion of this building on 31st July 2012, we
opened retail and other facilities on the second and third floors
to coincide with the opening of the concourse on 22nd August.
On 21st September, key tenant REMM Shin-Osaka opened forbusiness.

Part

3Core Businesses: Overview and Outlook
Part

4Social Responsibility and Management Organisation

Shin-Osaka Hankyu Building

The building
Site area

Approx. 4,150m²

Total floorarea

Approx. 35,600m²

Part

5

17
floorsabove
ground

12–17

REMM Shin-Osaka(Hankyu Hanshin Hotels, 296 rooms)

3–11

Offices (floor space for rent: Approx. 15,800m²)

2–3

Retail facilities (floor space for rent: Approx. 1,000m²)

1

Bus terminal

Financial Section and Corporate Data

FloorsPlanned investment
Total: Approx. ¥10 billion

Annual Report 201245

Section 2

Real Estate

Performance for the fiscal year ended March 2012
Revenues and earnings rose on higher condominium sales and occupancy at Umeda
Hankyu Building Office Tower
In the real estate leasing business, revenues from operations
declined 2.9%, or ¥2,413 million, to ¥81,830 million. This result
reflected the impact of the economic slowdown, which overshadowed the earnings contribution of the launch of operationsin April 2011 of NU chayamachi Plus (Kita-ku, Osaka) and therecession-defying performance of Hankyu Nishinomiya Gardens,
now in its third year of operation, as well as measures to keep
occupancy rates up at retail facilities and office buildings acrossthe portfolio, backed up by management cost-cutting measures.
Condominium sales in the subdivision business included units at
Geo Grande Umeda (Kita-ku, Osaka), Geo Katsura (Nishikyo-ku, Kyoto)
and Geo Hankyu Tsukaguchi Premier (Amagasaki, Hyogo Prefecture);
and in the Tokyo area, Geo Bunkyo Otsuka Nakamachi (Bunkyo-ku,
Tokyo) and Geo Senkawa (Toshima-ku, Tokyo). In residential landlot subdivisions, we marketed residential land and single family
housing in areas where we operate, including Hankyu Takarazuka
Yamatedai (Takarazuka, Hyogo Prefecture) and Osaka Nakajima

Koen Toshi Hapia Garden Shiki-no-Machi (Nishiyodogawa-ku,
Osaka). As a result, condominium unit sales increased significantly*1,
and revenues from operations in the condominium subdivisionbusiness rose by 53.4% or ¥22,943 million, to ¥65,913 million.
In the other real estate businesses including development projects,
revenues from operations increased 7.8% or ¥3,052 million year-onyear to ¥42,297 million, due to steady increases in tenants moving
into the Office Tower of the Umeda Hankyu Building, which is now
under reconstruction; the Office Tower opened early, in May 2010.
As a result, revenues from operations in the real estate businessoverall increased 15.3% year-on-year, or ¥23,384 million, to¥176,114 million, and operating income rose 21.4%, or ¥5,136
million, to ¥29,133 million.
*1 Condominium unit sales in previous year (fiscal 2011): 680
Condominium unit sales in year under review (fiscal 2012): 1,210
Note: Number of condominiums sold (number of deliveries) includes units in shared buildings inwhich only a portion of the units are subdivisions for sale.

Forecasts for fiscal 2013 onward(Estimates adjusted from 2007 Medium-Term Management Plan)
In the year ending 31st March 2013, we expect revenues fromoperations to increase 10.0%, or ¥17.7 billion, to ¥193.8 billion,
with operating income rising 15%, or ¥4.4 billion, to ¥33.5 billion,
largely due to expected higher condominium sales*2 comparedto the previous fiscal year and increased rental income, from
improved occupancy rates at the Umeda Hankyu Building OfficeTower and the grand opening of the Umeda Flagship Store ofHankyu Department Stores (within Umeda Hankyu Building).
For the year ending 31st March 2016, we forecast revenues fromoperations to rise 4.3%, or ¥8.4 billion, to ¥202.2 billion, and operating income to increase 9.0%, or ¥3.0 billion, to ¥36.5 billion. The
higher sales and earnings projections compared with projectedlevels for the year ending 31st March 2013 assume further occupancy increases at Umeda Hankyu Building Office Tower as well
as full-year rental income contributions from Umeda FlagshipStore of Hankyu Department Stores after its grand opening, andfrom Shin-Osaka Hankyu Building (due to complete at the end of
July 2012). The estimates also factor in earnings boosts and cost-

46 Annual Report 2012

cutting from improvements to real estate leasing management
models.
*2 Condominium unit sales forecast for fiscal 2013: 1,500
Note: Number of condominiums sold (number of deliveries). includes units in shared buildings inwhich only a portion of the units are subdivisions for sale.

Operatingincome(¥ billion)
50.0

Operating income

Revenues from operations

179.8

176.1 193.8

170.2 168.5
40.0

Revenues fromoperations(¥ billion)
210.0

202.2

41.7

160.0

36.5

152.7
33.7

33.5
30.9

29.1

30.0

110.0

24.0
20.0

2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2016/3(Estimate)(Plan)

60.0

Part 3 Core Businesses: Overview and Outlook

Introduction

Major Group Facilities
Property Name
1 Umeda Hankyu Bldg.
2 Hankyu Terminal Bldg.
3 Hankyu Sanban Gai Shopping Centre
4 Shin Hankyu Bldg.
5 Kita Hankyu Bldg.
6 NU chayamashi PLUS
8 Senri Chuo multistory car park (No.1, No.2, No.3)
9 Senri Asahi Hankyu Bldg.
10 Kotocross Hankyu Kawaramachi
11 Itami Hankyu Station Bldg. (Itami Reita)
12 TX Akihabara Hankyu Bldg. (AKIBA TOLIM)
13 Kobe Hankyu Bldg.
14 Miyazu Hankyu Bldg. (Mipple)
15 Katsura Higashi Hankyu Bldg. (MEW Hankyu Katsura)Completed2009,2010*2
1972
1969
1962
1971
2011
2008
2007,2008*3
1992
2007
1998
2008
1936
1997
1993
1997

81,702Kita-ku, Osaka
Kita-ku, Osaka
Fukushima-ku, Osaka
Fukushima-ku, Osaka
Chuo-ku, Kobe
Chuo-ku, Kobe
Nishinomiya, Hyogo
Kita-ku, Osaka
Kita-ku, Osaka
Kita-ku, Osaka
Kita-ku, Osaka
Kita-ku, Osaka
Shimogyo-ku, Kyoto
Toyonaka, Osaka

2004
1963
1992
1987
1987
1933
2003
1992
1980
1998
1987
1977
1974
1980

54,787
98,57831,63021,764
7,865
13,672
10,35952,065
15,711
12,613
10,08534,92338,237
15,54218 Dai Hanshin Bldg.
19 Noda Hanshin Bldg. (WISTE)
20 Fukushima Hanshin Bldg.
21 Motomachi Hanshin Bldg.
22 Sannomiya Hanshin Bldg.
23 EBISTA Nishinomiya (Commercial facility under elevated railway tracks)
24 Hankyu Chayamachi Bldg. (Applause Tower)
25 Navio Hankyu (HEP NAVIO)
26 Hankyu Five Bldg. (HEP FIVE)
27 Umeda Center Bldg.
28 Hankyu Grand Bldg.
29 Hankyu Kawaramachi Bldg.
30 Hankyu Senri Chuo Bldg.

Property Name
Department store (Hankyu Department Stores), Offices
Offices, Commercial facilities
Commercial facilities
Offices, Commercial facilities
Offices, Commercial facilities
Commercial facilities
Department stores (Hankyu Department Stores), Commercial facilities
Car park
Offices, Commercial facilities, Multipurpose convention hallCommercial facilities
Commercial facilities
Hotels (REMM Akihabara), Commercial facilities
Commercial facilities
Commercial facilities
Commercial facilities
Commercial facilities, Multifunctional convention hall, Offices, Hotels(The Ritz-Carlton, Osaka)
Offices, Commercial facilities, Theatre (Osaka Shiki Theatre)
Department stores (Hanshin Department Stores)
Commercial facilities, Offices
Offices
Outside horse-racing ticket booth
Department stores (Takashimaya)
Commercial facilities
Offices, Commercial facilities, Hotel (Hotel Hankyu International)
Commercial facilities
Commercial facilities
Offices, Commercial facilities
Offices, Commercial facilities
Takashimaya Department Store
Offices

Part

1

Part

2

Special Feature

Kita-ku, Osaka

16 Umeda Hanshin Daiichi Bldg. (HERBIS OSAKA)
17 Umeda Hanshin Daini Bldg. (HERBIS ENT)

Leasable Area(m2)*1126,096
26,72140,80832,962
13,356
3,021
108,215—
14,3002,979
11,800
10,297
7,894
20,021
2,915

Management Report Section

7 Hankyu Nishinomiya Gardens

Location
Kita-ku, Osaka
Kita-ku, Osaka
Kita-ku, Osaka
Kita-ku, Osaka
Kita-ku, Osaka
Kita-ku, Osaka
Nishinomiya, Hyogo
Toyonaka, Osaka
Toyonaka, Osaka
Shimogyo-ku, Kyoto
Itami, Hyogo
Chiyoda-ku, Tokyo
Chuo-ku, Kobe
Miyazu, Kyoto
Nishigyo-ku, Kyoto*1 Leasable area does not include areas for public use.
*2 In Umeda Hankyu Building, the Department Store section (Phase I) was completed in 2009, and the Office Tower section in 2010.
*3 Multistory car parks No.1 and No.2 saw completion of extension works in 2007, and No.3 completed its new construction in 2008.
Part

3

Core Businesses: Overview and Outlook

Major Group Properties
10 29

Arashiyama

N

Kyoto Pref.

Kawaramachi
KatsuraHankyu Arashiyama Line

15

Kyoto

Part

Myokenguchi

4

Nissei-chuoSocial Responsibility and Management Organisation

Hankyu Kyoto Line

Osaka Pref.

Hyogo Pref.
Nosé Electric
Railway Line

Hankyu Mino-o Line
Mino-oMino-oKawanishi-noseguchi

8 9 30Kita-senri

Hankyu Itami Line

Hankyu Koyo Line

Tanigami

Nishinomiyakitaguchi

7

Shukugawa

23

Sannomiya

21

en

Part
Shin-Osaka

Mukogawa

Daimotsu

Juso

Tenjimbashisujirokuchome

Amagasaki
Mukogawadanchi-mae

19

Hanshin Main Line
Hanshin Mukogawa Line

Shinkaichi Motomachi

Hanshin Namba Line1 2 3 4 5
6 16 17 18 24

5

Nara Pref.

25 26 27 28
20

Nishidai

Osaka Bay

Awaji

Osaka-Namba

Subway Sakaisuji Line

Minatogawa

13
22

Esaka
Tsukaguchi

Imazu

Imazu

Kobe Rapid Transit Railway Line
Shin-Kobe

Hankyu Takarazuka Line

Financial Section and Corporate Datayukoshin K
Hoku lway LineRai

KoyoenHankyu Kobe Line

Hankyu Senri Linens

Kita-Osaka Kyuko
Railway Line

Itami

ka

11

in

Hankyu Imazu Line

Ishibashi Senrichuo

Sh

Osaka
International
AirportTakarazuka

Kintetsu Nara Line
To Kintetsu-Nara
To Kintetsu-Nara

Annual Report 201247

Section 3

Entertainment andCommunications©Hanshin Tigers

Major Businesses
Sports business: Professional baseball business (the Hanshin Tigers) and Hanshin Koshien Stadium, and related businesses
Stage businesses: Takarazuka Revue and related businesses, operation of Umeda Arts Theatre and promotion of stage productions
Communication and media businesses: advertising, publishing, cable television business, musical entertainment (“Billboard Live” club and restaurant chain), information technology services, etc.
Leisure businesses: Mt. Rokko and Takarazuka Garden Fields, and other leisure businesses

Priority
issues(1) Maximise the value of the Hanshin Tigers, Koshien and Takarazuka brands• Improve the appeal of live events (create superior attractions, train and acquire star talent, and increase the appeal of our live-event venues)• Broaden the fan base and improve customer retention(leverage Customer Relationship Management, strengthen promotion through external media)• Create value chain of live events and media content(enhance the appeal of established media, broaden the range of media channels, and use next-generation networks to get our message across)(2) Establish a communication and media business base
• Boost the value of media operations in areas served by our lines and engage local customers in dialogue• Develop information technology solution businesses inside and outside the Group(3) Leverage our leisure facilities (facilities on top of Mt. Rokko, Takarazuka Garden Fields, etc)
• Enhance synergies between customer-oriented facilities and enhance joint promotions

Key facts and business environment
Delivering inspiration and dreams through two attractions
According to the Ministry of Internal Affairs and Communications
Statistics Bureau’s Family Income and Expenditure Survey, recreational service expenditure of total household in 2011 (realterms) fell 3.6% year-on-year. The live entertainment industry,
traditionally seen as recession-proof, seems to have succumbedto the prolonged economic slowdown after all.
Despite these headwinds, our unique Hanshin Tigers, Hanshin
Koshien and Takarazuka Revue brands retain their popularity andpassionate fan bases all over Japan, and the games and shows
continue to draw the crowds. These two powerful brands areassets that none of our rivals can match and form a proprietary
core strength of the Group, contributing significantly to Groupbrand value.

©Hanshin Tigers

48 Annual Report 2012

Hanshin Tigers and the Hanshin Koshien Stadium
Of the professional baseball leagues in Japan, the Hanshin Tigers
have both one of the longest histories and a bedrock of fans not
only in their home area, Kansai, but also across Japan. In the pastseven years, attendances at home games in the Pennant Race
have been the largest in Japan. The Hanshin Tigers were the only
one of the 12 professional baseball teams in Japan to register total
attendances of over 3 million people in the 2005-2007, 2009 and2010 seasons.
Opened in 1924, the Hanshin Koshien Stadium is a sports venueof considerable historical value. Known as the home ground of the
Hanshin Tigers and also the home of the spring and summer highschool baseball championships, it now also hosts major events

Hanshin Koshien StadiumPart 3 Core Businesses: Overview and Outlook

Introduction

Total Attendances at Hanshin Tigers Home Games(Thousand)such as the Koshien Bowl (annual American college football final)and open-air concerts.

4,000

3,144
3,000

2,977

3,007

3,006

2,898

1,000

0

Third
2007

Second2008

Fourth2009(Central League rankings)
SecondFourth
2010
2011

Part

1

Management Report Section

2,000

In the spring of 2010 we completed a renovation of the Stadium,
which had been undertaken in three phases starting in autumn
2007. The works included seismic reinforcement, replacement of
the “silver umbrella” roof cover and floodlighting, installation of
new seating and refurbishment of food and drink outlets, resulting
in a more safe and comfortable spectator space that generates
improved earnings.

*Capacity at Hanshin Koshien Stadium declines from 2008 following
renovation programme

Part

2

Special Feature©Hanshin Tigers

in front of a total of approximately 2.4 million people during theyear, including troupe tours of venues nationwide.

Part

3

Core Businesses: Overview and Outlook

Takarazuka Revue
Performances are given all over Japan by the Takarazuka Revue,
which is based at two main venues, the Takarazuka Grand Theatre(Hyogo Prefecture, 2,550 seats) and the Tokyo Takarazuka Theatre(2,069 seats). Repertoires span a wide range of Japanese andwestern material, including overseas musicals. Takarazuka Revuehas made a name for itself for major individual musical and show
productions that are performed throughout the year. In 2011, thetroupes gave over 450 performances at both its main theatres,

Inspiration and dreams — by delivering these to our customers
through high-quality performances on the stage and sports field,
the Hanshin Tigers, Hanshin Koshien Stadium and Takarazuka
Revue brands are maximizing brand value for the Group.

Part

4

Social Responsibility and Management Organisation
Part

5

Financial Section and Corporate Data

©Takarazuka Revue Company©Takarazuka Revue Company

Annual Report 201249

Section 3

Entertainment and Communications

Performance for the fiscal year ended March 2012
Earnings in this segment rose year-on-year on the back of cost-cutting measures whichmore than offset the negative impact of the failure of the Hanshin Tigers to proceed to
the Climax Series playoff stage and a reduction in revenues following the termination of
analog broadcasting in the cable television business.
In the sports business, the failure of the Hanshin Tigers to proceed
to the Climax Series (in the previous year, two games were home
games) and other factors caused revenues from operations toslip 1.7%, or ¥412 million, year-on-year to ¥23,451 million, despite
the Tigers’ fan base and our measures to make the most of the
Hanshin Koshien Stadium by leveraging food, drink and merchandising outlets and fan-oriented services through special event
programmes.
In the stage business, the stage revue business had notable successes with productions at the Takarazuka Grand Theatre andTokyo Takarazuka Theatre of Nova Bossa Nova, the fourth revival
since it was first produced in 1971, and Meguriaiha futatabi (Myonly shinin’ star), both by the Hoshi (Star) troupe. Additionally, inthe theatre business, productions that got people talking included
an elaborate reinterpretation of the musical Roméo et Juliette: dela Haine à l’Amour, first performed in France in 2001. However,revenues from operations in the stage business declined 1.1%, or¥287 million, year-on-year to ¥25,792 million.
Communication and media and other businesses in this segment include the cable television business, where we focusedon our triple-play services, a package of multichannel cable TV,
cable internet, and Cable-Plus Phone services. Despite steadily
growing subscriber numbers, revenues from operations dipped
1.0% in these businesses, or ¥613 million, year-on-year to ¥58,341
million, due in part to a fall in the number of work orders to deal
with equipment interference problems amid the shutdown ofanalogue broadcasting in Japan.
As a result, revenues from operations in the Entertainment andCommunications Business overall dipped 1.1%, or ¥1,093 million,to ¥102,313 million. However, bold cost-cutting measures helped
raise operating income 1.5%, or ¥147 million, to ¥10,141 million.

Forecasts for fiscal 2013 onward(Estimates adjusted from 2007 Medium-Term Management Plan)
We forecast revenues from operations in the year ending 31st
March 2013, to increase 6.2%, or ¥6.4 billion, to ¥108.7 billion,
after factoring in the contribution from consolidation of Himeji
Cable Television Co., Ltd. In addition to the impact of this addition,
reduced lease expenses in the cable television business and saleof golf businesses to outside customers are likely to push operating income up 3.5%, or ¥400 million, to ¥10.5 billion.

Operatingincome(¥ billion)
18.0

50 Annual Report 2012

Revenues from operations

116.5

16.0
14.0
12.0
10.0

In the fiscal year ending 31st March 2016, revenues from operations are expected to increase 7.2%, or ¥7.8 billion, to ¥116.5
billion from our forecast for the year ending 31st March 2013,
on higher revenues and an improved operating income margin
from a pickup in advertising demand and strength in information technology services, coupled with lower depreciation andamortisation expenses in the sports business. Operating income
is expected to rise 21.0%, or ¥2.2 billion, to ¥12.7 billion, from fiscal
2013 projections.

Operating income

Revenues fromoperations(¥ billion)
120.0

99.4 105.8 107.9

10.8

10.7

108.7
103.4 102.3

11.1
10.0

10.1

100.0

12.7
10.5

80.0

8.0

60.0

6.0
4.0

2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2016/3(Estimate)(Plan)

40.0

Part 3 Core Businesses: Overview and Outlook
Section 4
Introduction

Travel and International
Transportation
Major Businesses
Travel Business: Hankyu Travel International Group (7 companies)
Total billings: ¥345.8 billion (No. 5 in the industry)• Total billings are Hankyu Travel International (nonconsolidated) figures for fiscal year ended March 2012.
International Transportation Business: Hankyu Hanshin Express Group (24 companies)
Sales: ¥77.7 billion• Sales are total of Hankyu Hanshin Express Group figures for fiscal year ended March 2012.
International Transportation Business(1) Strengthen our marketing capabilities• Strengthen global strategy, deepen involvement in the marine cargo/logistics business(2) Expand networks in promising markets• Expand networks in emerging markets(3) Improve quality standards• Strengthen ISO and compliance

Part

1

Management Report Section

Travel Business(1) Raise customer satisfaction levels• Rigorous quality and risk management(2) Improve sales capabilities• Strengthen product lineup, step up operations in Tokyo area, and expand
sales channels(3) Create fundamentals for stable earnings• Improve process efficiencies in back office/administrative departments

Priority
issuesKey facts and business environmentPart

2

Special Feature

Travel
Aim to achieve the highest customer approval ratings in the industry

The business environment in fiscal year ended March 2012
remained tough. Despite external pressures such as discouraging
economic and social trends in Japan, and the recent earthquake
disaster, a risk to which the travel business is particularly susceptible, our travel business is achieving further steady growth inboth international and domestic operations. The Group is able
to develop and bring products to market quickly, leveraging
advertising-driven sales, a particular strength of Hankyu Travel
International.
Part

3

Looking ahead, we plan to boost the added value and quality ofour travel products, and also broaden our lineup, to satisfy increasingly diverse demands, aiming ultimately to achieve the highest
customer approval ratings in the sector through a constant focus
on safety, comfort and providing inspiration and dreams. We aim
to attract still more customers by working together to provide
high-quality travel services that truly meet customer wishes.

Core Businesses: Overview and Outlook

Since the 1990s, the Group’s travel businesses have focused onusing newspapers and other media (mail-order and online sales)
to market packages, which are organised under a stable of brands
spearheaded by the mainstay Trapics marque. Billings for overseas
travel, a particular strength, were the third-highest in Japan in
fiscal 2012, and our position in the domestic travel sector is sixth.
This business is growing steadily. We now place fifth overall in
total billings in the travel sector in Japan.

Part

4

Overseas Travel Billings (2012/3)

Domestic Travel Billings (2012/3)

Rank

Company nameRank

¥ billion

Rank

1

JTB

458.3

1

JTB

870.8

370.4

2

HIS

332.6

2

Rakuten Travel

274.6

3

Hankyu Travel
International

236.5

3

Nippon Travel Agency

225.8

4

Kinki Nippon Tourist

219.8

4

JTB World Vacations

224.2

5

ANA Sales

178.3

5

Kinki Nippon Tourist

137.8
6

Hankyu Travel
International

109.1

7

JALPAK

97.2

8Club Tourism
International

86.4

9

Top Tour79.6

10 JR TOKAI TOURS

78.1

JTB

2

Nippon Travel Agency

3

Kinki Nippon Tourist

363.8

4

HIS

349.3

Company nameHankyu Travel
International

345.8

6

Rakuten Travel

292.7

6

Nippon Travel Agency

133.2

7

JTB World Vacations

224.2

7

JALPAK

63.0

8

ANA Sales

203.8

8

Nippon Express

56.0

9

JALPAK

160.2

9

55.7

10

Club Tourism
International

Club Tourism
International

142.1

10 Nissin Travel Service

40.2

5

Company name¥ billion

Part

5

Financial Section and Corporate Data

¥ billion

1,348.3

1

Social Responsibility and Management Organisation

Total Travel Billings (2012/3)* Source: Hankyu Hanshin
Holdings, based on Japan
Tourism Agency Bulletin(online): Business Volume
for Major Travel Agents(April 2011 to March 2012)
Billings are rounded
down to the nearest ¥100
million.

Annual Report 201251

Section 4

Travel and International Transportation

International Transportation
Global logistics provider utilising advanced ICT
Even compared with other Japanese freight forwarding companies, which are strong players in the global distribution sector,
the Hankyu Hanshin Group’s international transportation businesshas led rivals in marine transportation and logistics to create aframework that optimises our customers’ supply chain management. We are a total provider of logistics management systems,
capable of handling multiple transportation modes from bases
all over the world. By using advanced information technologies,
we have built up an infrastructure capable of meeting the increasingly sophisticated logistics needs of our customers. Anotherstrength of the Group is ability to offer tailored customer services.
The Bosch Group of Germany found itself in difficulty after theGreat East Japan Earthquake due to supply chain disruption to its
Japan operations. We were able to respond flexibly and quickly totheir needs, and deliver Bosch orders safely and without delay. In
recognition of this service, we were awarded one of the coveted
Bosch Supplier Awards in July 2011.

At the moment, demand for transportation services has tailed
off somewhat, amid fears of global recession due to the growing
European debt crisis. At the same time, we see little prospect of
rapid recovery in freight-forwarding demand due to the uncertain
prospects for the global economy. Despite these headwinds, theGroup will further develop its business by steadily making progress
toward priority goals. At the same time, we are aggressively setting up offices in the promising emerging markets, and aim tobecome a powerful company capable of supporting customers’
logistics strategies with high-quality services and systems. This ispart of our drive to build Group brand value on the international
stage.

Overseas network

Subsidiaries
BranchRepresentative Office

Beijing

CHINA

Overseas: 21 companies in 92 locations
Number of employees: 1,973 (as of 1st April 2012)

YantaiQingdaoNanjing Suzhou

ShenzhenKansai

Dongguan Fuzhou
XiamenShatinHongkong

NaritaNagoyaFukuoka

Wuxi
ShanghaiHangzhou Ningbo

Wuhan
Chongqing

Guangzhou

52 Annual Report 2012

TangshanDalianTianjinPart 3 Core Businesses: Overview and Outlook

Introduction

Performance for the fiscal year ended March 2012
Although the travel business was severely hit by the Great East Japan Earthquake,earnings grew on a robust performance in international transportation

1

Management Report Section

Despite this backdrop, revenues from operations in our international transportation business increased by 3.5% or ¥1,269 million
year-on-year to ¥37,763 million, on steady progress in various
marketing strategies aimed at improving performance in marinetransportation and expanding the logistics business, all of which
underpinned earnings.

Part

2

As a result of the foregoing, revenues from operations in the Traveland International Transportation Business dipped by 0.2%, or ¥139
million year-on-year, to ¥67,571 million, and operating income
rose 7.4%, or ¥219 million, to ¥3,171 million.

Special Feature

The Great East Japan Earthquake had a devastating effect on
the business environment for the tourist industry in Japan. Since
the disaster, our travel business has embarked on an aggressive
marketing drive, introducing special promotional products, andoverseas travel has grown from last year in terms of outboundtourists from Japan. Even in domestic travel operations, there has
been an upturn, centred on the southernmost island of Kyushu(which was least affected by the disaster). However, we are notyet back to pre-disaster performance levels. As a result, revenues
from operations in the travel business were down 4.7%, or ¥1,485
million, year-on-year, to ¥29,821 million.

Part

The international transportation business likewise had anotheryear of uncertainty. Japan saw some progress in recovery fromthe chaos wrought by the Great East Japan Earthquake on manufacturing output levels and supply chains, but this was offset bya slowdown in imports of consumer goods and the economic
malaise in Europe.

Part

3

Core Businesses: Overview and Outlook

Forecasts for fiscal 2013 onward(Estimates adjusted from 2007 Medium-Term Management Plan)
Operatingincome(¥ billion)
8.0

In the year ending 31st March 2016, we forecast revenues torise 6.4% or ¥4.5 billion from our projections for the year ending
31st March 2013, to ¥74.5 billion, and operating income to rise
17.5%, or ¥0.7 billion, to ¥4.7 billion. These forecasts assume anincrease in the travel business in tourist numbers particularly forpre-planned package tours, combined with ongoing growth in
the international transportation business, chiefly in the emerging
markets.

2.0

Operating income

79.5
6.0

65.8

Revenues fromoperations(¥ billion)
90.0

Revenues from operations

62.9

67.7

67.6

70.0

Part

4

Social Responsibility and Management Organisation

In the year ending 31st March 2013, we see revenues from operations growing 3.6%, or ¥2.4 billion year-on-year, to ¥70 billion, andoperating income jumping 26.1% or ¥0.8 billion, to ¥4.0 billion. In
the international transportation business, we expect a decrease inbillings due to the impact of the European economic slowdown,
but this will be more than offset by the rebound in the domestic
travel business from the Great East Japan Earthquake disaster.

74.5
4.7

60.0

4.0

4.0

3.1

3.0

3.2
30.0

1.5
0.3

0

2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2016/3

5(Plan)

Annual Report 2012

Financial Section and Corporate Data

(Estimate)

Part

0

53

Section 5

HotelsMajor Businesses
Principal directly operated hotels:
Hotel Hankyu International [Number of rooms: 168; total capacity: 316]
Hotel new Hankyu Osaka [Number of rooms: 922; total capacity: 1,304]
Dai-ichi Hotel Tokyo [Number of rooms: 277; total capacity: 554]
The Ritz-Carlton, Osaka* [Number of rooms: 292; total capacity: 584]
* The Ritz-Carlton, Osaka is operated by the Ritz-Carlton hotel chain under the management of Hanshin Hotel Systems.

Priority
issues(1) Improve profitability of established hotels• Restructure operations by screening out weaker performers• Invest appropriately in product value improvement• Improve sales capabilities and productivity through structural reforms(2) Expand chain by opening new directly managed hotels• Further develop the REMM brand• Increase profit margins by focusing more on hotels specialising in lodging services(3) Outsource more hotel operation under franchise/management contracts• Grow earnings at established hotels run under franchise, with chain headquarters providing operational services• Run more hotels through franchises, leveraging chain operational know-how and brand image

Conditions in the hotel market and our response
According to estimates by Japan Productivity Center* , Japan’s
hotel market continued to expand from 2003 through 2007 (basedon sales). However, in 2009 and 2010, room demand slumped andthe scale of the hotel market fell back to ¥976 billion, 10% below
its peak in 2007. This was due to a decline in numbers of businesspeople visiting Japan after the global economic crisis following
the collapse of Lehman Brothers in the autumn of 2008, and to
weak leisure spending owing to the H1N1 flu scare in 2009.
To respond to this challenging environment, the Group devoted
three fiscal years to a complete overhaul of its flagship Hotel new
Hankyu Osaka, refurbished the Hotel Hankyu International andundertook other measures to strengthen its competitive position
over that period.

Size of the hotel market in Japan(¥ billion)

1,200.0

1,023.0 1,041.0

1,072.0 1,093.0 1,038.0

1,000.0

976.0

2009

2010

800.0

600.0

400.0

200.0

0

2004

2005

2006

2007

* White Paper on Leisure, fiscal 2010 edition, published by Japan Productivity Center

Opening of the fourth REMM hotel,
Shin-Osaka
The first Kansai hotel under our REMM brand, which prioritises a good night’s sleep overbanquet and other function-based businesses, opened in Shin-Osaka on 21st September
2012.
This is the fourth REMM hotel following openings in Hibiya and Akihabara in Tokyo andin Kagoshima, Kyushu (October 2011). Housed in the conveniently located Shin-Osaka
Hankyu Building, which connects directly with the subway and JR lines at Shin-Osaka
Station, this new hotel is expected to serve both business and tourist demand.
REMM Shin-Osaka

54 Annual Report 2012

976.0

2008

Part 3 Core Businesses: Overview and Outlook

Introduction

Performance for the fiscal year ended March 2012
Losses narrow, thanks to cost-cutting measures, despite declining revenues due to theearthquake disaster

1

Management Report Section

In the Hotels Business, we took various measures to boost profitability, including the opening of a third REMM hotel in October
2011, in Kagoshima, and Takarazuka Hotel’s taking over of thecontract to manage the Kwansei Gakuin Kaikan convention hallfacilities of the Kwansei Gakuin educational corporation. We also
developed the franchise business, and undertook joint sales promotion measures with other Group hotels, including campaigns
to commemorate the opening of REMM Kagoshima.

Part

As a result, revenues from operations in this business declined
1.7%, or ¥1,129 million year-on-year, to ¥64,090 million. The operating loss improved by ¥370 million to ¥269 million, due partly tocost-cutting measures.

Part

2

Special Feature

However, the slump in business demand and fall in the numberof foreign visitors to Japan in the wake of the earthquake disaster
continue to take a heavy toll on this business.

Forecasts for fiscal 2013 onward(Estimates adjusted from 2007 Medium-Term Management Plan)
Operatingincome(¥ billion)
4.0

69.2
2.0

66.4

Revenues fromoperations(¥ billion)
80.0

Revenues from operations

61.0

65.2

64.1

66.5

69.6
2.0

40.0

1.6
20.0

0.5

0.5

Part

4

0

Social Responsibility and Management Organisation

-0.6

-10.0

-0.3

-1.7
-2.0

2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2016/3(Estimate)-40.0(Plan)*Food and drink businesses operated by the Retail Business segment havebeen transferred to the Hotel Business segment, as of fiscal 2011.

Part

5

Financial Section and Corporate Data

For the fiscal year ending 31st March 2016, we expect to increase
revenues compared with our forecasts for fiscal 2013, due to marketing initiatives (refurbishments) at our established hotels, andthe full-year earnings contribution of the REMM Shin-Osaka hotel.
Factoring in additionally the cost-cutting from further structuralreform, we expect revenues from operations in the year ending
31st March 2016 to increase 4.7%, or ¥3.1 billion, to ¥69.6 billion
compared with our projection for the year ending 31st March
2013, and operating income to jump 300% or ¥1.5 billion to ¥2.0
billion.

Operating income

3Core Businesses: Overview and Outlook

In the year ending 31st March 2013, we expect to grow both revenues and earnings on the back of recovery in lodging demandfollowing the earthquake disaster from business people andinward-bound tourists, as well as for banquet and other function
services. We also expect to benefit from the full-year earnings
contribution of REMM Kagoshima and reduced depreciation
and amortisation costs. We expect revenues from operations toincrease by 3.8%, or ¥2.4 billion year-on-year, to ¥66.5 billion, whilean ¥0.8 billion improvement from last year’s operating loss will
yield operating income of ¥0.5 billion.

Part

Annual Report 201255

Section 6

Retailing
Major Businesses
Retail: Hankyu Retails Corporation
Bookstore chain Book 1st., Convenience store chain asnas, Station kiosk chain Lagare shop, High-end supermarket chain Seijo Ishii*, Cosmetics chain COLOR FiELD, the furniture and daily accessories chain DOUBLEDAY, the Cleduple cosmetics and accessories store with powder rooms, the general accessory store a.d.r.e.s., etc.
* Seijo Ishii is operated under a franchise agreement with Seijo Ishii Co., Ltd.

Priority
issues(1) Strengthen the competitiveness of each retail format• Deepen the specialisation and build up the brand of each retail format• Consolidate and improve current earnings levels at established stores and expand the business through store openings and refurbishments(2) Develop formats to drive future business growth(3) Create a more efficient operating model for back-office administration

Key facts and business environment
Retailing formats located inside and near stations
The Group’s Retailing Business is mainly focused on stores inside
and near station buildings (Ekinaka, Ekichika). Outlets and operators include station kiosks such as Lagare shop, the convenience
store chain asnas, and formats run with partners. We also operate

the bookstore chain Book 1st. and the general merchandise formats COLOR FiELD and DOUBLEDAY. We are extending thesebusinesses beyond areas served by our lines and boosting theirbrand power and competitiveness.

Enhancing the appeal of our station-based retailing formats
Many of the retail formats and stores run by the Group’s Retailing
Business can expect comparatively stable sales revenues, thanks totheir location within stations and their wide range of businesses.
These have been strengths of the Group’s operations. However,
our station-based retailing operations will continue to face difficult conditions. A long-term increase in train use is unlikely amid aworsening employment situation and demographic change, withrising numbers of senior citizens and a lower birth rate. In addition, the number of in-station shops at other railway operators ison the rise, forcing our partner companies to be more rigorous insite evaluation.

Cleduple store in
Umeda Station

56 Annual Report 2012

Against this backdrop, the Group is taking measures to strengthen
the competitiveness and improve the business efficiency of eachretail format. We are also improving the appeal of our stations
and retail outlets through measures such as major renovationsof in-station stores at the Hankyu Umeda Station, to make ourstations pleasanter places for customers to frequent. Symbolising
this initiative will be the launch in September 2011 of the new
Cleduple-brand accessory and cosmetic store with powder rooms,
targeting women.

a.d.r.e.s. store in
Nishinomiya-Kitaguchi
StationPart 3 Core Businesses: Overview and Outlook

Introduction

Performance for the fiscal year ended March 2012
Expand business scale and revamp store network, and hold down costs to boost earnings
despite declining revenues

1

Management Report Section

Despite these measures, revenues from operations slipped 0.3%,
or ¥154 million year-on-year, to ¥53,853 million, due to intensifiedcompetition among established stores and store closures, resulting from the withdrawal from business operations of Sound 1st., aretailer of music software. However, operating income increased
86.7%, or ¥619 million, to ¥1,333 million, on business restructuring
and other measures to boost profitability.

Part

2

Special Feature

In store strategy, we launched measures aimed at revitalising thein-station store business at Hankyu Umeda Station, by opening a
Cleduple cosmetics store with powder room (outside the wicketon the third floor) and refurbishing the asnas convenience store(same location), and at Hankyu Nishinomiya-Kitaguchi Station,by opening our first a.d.r.e.s store, a new general accessory brand(second-floor wicket area). In addition, outside our catchment
areas, we opened the Cook Deli Gozen shop selling delicatessen
items at Abeno Q’s MALL (Abeno-ku, Osaka), and a DOUBLEDAY
furniture and daily accessories store at LakeTown OUTLET mall
(Koshigaya, Saitama Prefecture). These measures have expanded
our scale of operations and revamped the store network, strengthening competitiveness and earnings.

Part

Forecasts for fiscal 2013 onward(Estimates adjusted from 2007 Medium-Term Management Plan)

Operating income

66.3

67.5

Revenues from operations

62.9

2.0

1.3

Revenues fromoperations(¥ billion)
70.0

53.9

54.6

1.3

1.3

54.0

1.4

56.9

60.0
Part

1.4

4

50.0

Social Responsibility and Management Organisation

In the fiscal year ending 31st March 2016, we expect increased
revenues and earnings compared with our projections for theyear ending 31st March 2013, with revenue from operations rising 4.2%, or ¥2.3 billion, to ¥56.9 billion, and operating income
growing 7.7%, or ¥0.1 billion, to ¥1.4 billion. This assumes steadyprogress in store-opening and increasing revenues in the generalmerchandise business.

Operatingincome(¥ billion)
3.0

3Core Businesses: Overview and Outlook

In the year ending 31st March 2013, we expect revenues fromoperations to increase 1.4%, or ¥0.7 billion year-on-year, to ¥54.6
billion, factoring in the effect of “Ekinaka” in-station store renovations. But operating income is likely to stay flat at ¥1.3 billion, amida very challenging operating environment.

Part

1.0

0.7

40.0

0.4
0

2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2016/3(Estimate)

30.0(Plan)*From the year ended March 2011, we have factored in the transfer of(1) the food and drink businesses operated by Creative Hankyu Co., Ltd.
to the Hotels segment, and (2) Creative Hankyu’s remaining landscapegardening business under a merger arrangement into other segment.

Part

5

Financial Section and Corporate Data

Annual Report 201257

Part 4Social Responsibility andManagement Organisation

A Message from the
President

One of the primary goals of corporate management is therealisation of sustainable growth, and I believe that theoverall capabilities of a company or corporate group canonly be achieved if each single employee harnesses his or
her capabilities to this task. In other words, a company’s
enterprise value is the sum of the collective capabilities of
all its employees.
There are many different ways of looking at thecapabilities of a workforce, but in my opinion it is principally
a combination of three basic elements — skills, motivation,and teamwork. A company’s employees of course require
certain skills, and having acquired these, a system must
be created to encourage teamwork. But in addition, if all
employees are strongly motivated to perform their work
well, they will be able to display their full abilities, and thiswill enable the company to provide a service that satisfies
its customers. In our case, I believe that such conditions willlead to the growth of the Hankyu Hanshin Group, and to theenhancement of our enterprise value.
Consequently, from time to time I urge the Group’s
employees to make efforts to acquire new skills, cultivate
effective teamwork, and maintain a high level of motivation.
As one method of realising these aims, I instruct them to
employ the PDCA cycle.
Regrettably, at Hankyu Corporation, a railway
company that is one of the core companies in the Group,
since November 2011 there have been three instances inwhich train drivers failed to see a red stop signal, resulting indamage at railway points (switches). Each accident affectedrolling stock or side-tracks of station yards, and was causedby driver error.
Needless to say, we have installed ATS (Automatic
Train Stop) and other backup systems on the assumptionthat humans can misinterpret signals. However, within astation yard, it was possible for a train to enter the mainline
track for coupling additional cars onto the train if the driver
had followed the checking procedure of the ATS. AS thepresident of Hankyu Corporation, three or four times a year
I make inspection tours of all our stations, train yards, and

58 Annual Report 2012technology divisions. I used these tours to exchange opinions with staff on the front line in an effort to nip accidents inthe bud, so to speak. It was a great shock to me and I deplorethat such accidents could occur in quick succession.
All employees involved in the railway operations areworking together to prevent a recurrence of such accidents
and regain the public’s trust, having once again been forcibly reminded that everything we do is for our customers,
and that safety is of overriding importance. Once again, wemust reexamine our day-to-day operational procedures,tackle the issues concerned as a team, and devise solutions
to the problems we discover.
We will also apply this approach to all our other, nonrailway operations. From the current fiscal year, I am aiming
to direct the Company’s employees to use the PDCA cycle
approach, but in so doing, to carefully examine the current
situation as a team and ensure that all team members havea common perception of the issues involved, and, finally,
to hold brainstorming sessions so as to attack the problem
from all possible angles and make full use of the know-how
possessed by each individual member. The team as a wholemust address the issue of “what is the basic nature of the
problem, and how can we best solve it?” Through earnest
debate over such questions, effective teamwork will comeinto being, and each member will be strongly motivated. I
believe that this approach will yield improved progress.
In all the Group’s business operations — not only inthe railway business — our day-to-day activities can increase
our customers’ trust only a very little at a time. In contrast, theopposite phenomenon — loss of trust — can occur in an
instant. What is important for us is that each management
executive and each employee should recognise this afresh,and should interact with sincerity with our customers andall other stakeholders to forge strong bonds of trust. This, I
believe, will lead to the sustainable growth of the Group.
August 2012
Kazuo Sumi
President and Representative Director

Introduction

Management Organisation• Grants approval in cases where a Group company takes actions thatsignificantly affect Group management (for example, when investments rise above a certain threshold).
In this way, the Company aims to improve its supervision andoversight of all Group companies, and raise overall Group governancestandards.
In further governance measures, our Board of Directors, which
includes external directors, receives reports with regard to the above
matters, and approves management decisions. The Company has set
up a Group Management Committee including representatives ofcore businesses of the Group to undertake preliminary reviews.
In addition to these initiatives, and as part of our efforts tostrengthen the Group’s overall capabilities, the Group is also strengthening governance with regard to fund procurement. Measures
include centralising funding under the Company, and ensuring thatnecessary funds are distributed to the operating companies within
specific parameters laid down in their business plans approved by theCompany.

Corporate Governance

Our Corporate Governance System

1

Management Report SectionPart

2

Special Feature

Hankyu Hanshin Holdings, Inc. (or, the Company) is a pure holding
company, and conduct of operations is basically the responsibility ofGroup member companies. Hankyu Hanshin Holdings’ principal role issupervision and oversight of the whole Group — meaning that thesefunctions are separate from conduct of Group businesses. Under thisstructure, the Company:• Makes decisions regarding Group management policy and strategy;• Approves the medium-term and annual management plans of all
core businesses;• Requests reports on progress in management plans from time totime from the “operating companies” (that is, those that actually run
the businesses); andPart

Corporate Governance System
General Meeting of Shareholders
Appointment/
Dismissal of Directors

Appointment/
Dismissal of Corporate Auditors

Appointment/
Dismissal
Part

Board of Directors

Call/Report on
execution situation

Audit

Standing Corporate
Auditors: 2

External Corporate
Auditors: 3

ReportAssistants to
Corporate Auditors

Selection/
Dismissal/Supervision

Cooperation

Report3

Accounting Auditors(CPAs)

Core Businesses: Overview and Outlook

Full-time: 5Part-time: 9(including 2 External
Directors)

Board of Corporate Auditors

Cooperation

ReportPresidentGroup Auditing Department

Call

Group Management
Committee
Participate

Participate(as observer)

Audit

Group Companies
Directors (representative of each core business)

44

Part

The Board also received reports concerning the progress(1) Board of Directors and Directors
1. Board of Directors

being made in creating a fully functioning internal control system.

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

Meetings of the Board of Directors were held 10 times during fis-

ise improved corporate governance for the entire Group by the meanscal 2012. The rate of attendance at these meetings was 70% for thedetailed in the above section “Our Corporate Governance System.”

external directors and 87% for the external corporate auditors.

5

2. Directors

and accounts settlement, and to various management plans including a

Our Board of Directors has 14 members, and has an emphasis onrevised current Medium-Term Management Plan. In addition, the Board

strengthening the flexibility of management and supervisory func-received and examined reports on railway station improvements andtions. Nine of these are part-time directors, including two externalrenovation work, as well as changes to train timetables made by the

directors, who are independent of the Company and bring to theoperating companies, and on business restructuring within the Group.

table a wealth of experience in corporate management. Our aim

Annual Report 2012

Financial Section and Corporate Data

In fiscal 2012 the Board gave its approval to the Group’s budget

Part

59

Social Responsibility andSocialResponsibility Organisationand Management Organisation
Management

Management Organisation

Management Organisation

is to strengthen our supervisory and oversight function and raise

the Board of Corporate Auditors, as well as other activities.

the standard of decision-making. The term of office of directors is

The external directors appointed to the Board are selected

set at one year, to clarify management responsibilities following thefrom amongst persons with extensive experience in corporate man-introduction of anti-takeover measures (prevention of large-scale

agement, with the aim of strengthening the management oversightCompany share purchases).

function of the Board of Directors with respect to the Group as awhole, and also in the expectation that the external directors will

(2) Board of Corporate Auditors, Corporate Auditors, andEnsuring Effectiveness of Auditing

provide advice to the Company’s management from a broad per-The Company adopts the corporate auditor system to ensure adequate

are selected from amongst persons possessing high-level specialist

management oversight. We have five Corporate Auditors, who monitor

expertise in the fields of compliance and business administration.

spective. Similarly, the external corporate auditors whom we appoint

the business operations and financial position of the Company andWhen selecting candidate external directors and external

its subsidiaries, and audit the performance of duties by the direc-

corporate auditors for appointment, we employ the criteria laid down

tors. Three of the five Corporate Auditors are external, to provide anby the Tokyo Stock Exchange in evaluating the independence of the

independent viewpoint and ensure a high degree of professionalism

candidates. By the use of these selection criteria, we ensure that thein Group auditing. In this way, we are working to further ensure soundappointment of external directors and external corporate auditors

decision-making in the conduct of operations. We provide full backup

does not constitute a problem of any kind, and that their appointment

to Corporate Auditors, for example by involving them in the Groupposes no risk of conflict of interest with general shareholders.

Management Committee and other meetings within the Group. The
Board of Corporate Auditors meets once a month, in principle, todiscuss and pass resolutions on important matters.
In addition, as part of the auditing of the Group’s business
operations, the Corporate Auditors peruse when appropriate auditing
plans and results of audits of the Group Auditing Department, com-

Relations with External Directors

posed of internal audit staff. The Corporate Auditors also receive from

Name

Reasons for Appointment

the Group Auditing Department regular reports (and ad hoc reports
when required) on internal audits at the Company and its subsidiaries,

NoriyukiInoue

including on the state of operation of the whistle-blowing system.

(Independent
Director)

Representative Director for many years at Daikin Industries, Ltd. Also served
as vice-chairman of Kansai Economic Federation. Appointed for his wealth ofmanagement experience, perspective from top business circles, and ability toprovide independent input.

At the same time, they receive regular status reports fromthe accounting auditors (CPAs), and take part in on-site audits by theaccounting auditors including those of Group companies.
Please note that specialist staff members are appointed toassist the Corporate Auditors in the performance of their duties. To

Shosuke
Mori(Independent
Director)ensure the independence of these staff members, prior discussions

Representative Director for many years at Kansai Electric Power Co., Inc., acompany whose operations, like those of the Hankyu Hanshin Holdings Group,
are closely bound up with the public good. Also served as chairman of Kansai
Economic Federation. Appointed for his wealth of management experience,
perspective from top business circles, opinions from the viewpoint of corporatesocial responsibility, and ability to provide independent input.

are held with the corporate auditors over matters such as personnel
changes and evaluations.
Besides, the President of the Company holds regular meetings

Relations with External Auditorswith the Corporate Auditors to exchange opinions, and ratify decisions
regarding issues facing the Company, risks to which the Company
is exposed, progress in improving the environment for auditing andmajor issues encountered by the Corporate Auditors in the performance of their duties. Management must also hold preliminary discussions with the Corporate Auditors for amendment or deletion of any
regulations pertaining to the functions of the Corporate Auditors, suchas matters involving corporate ethics.

(3) External Directors and External Auditors

Name

Reasons for Appointment

Takaharu
Dohi

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

(Independent
Auditor)

Haruo
Sakaguchi(Independent
Auditor)

The Company appoints independent external directors and audi-

Junzo
Ishii

tors with the aim of further enhancing the governance of the Group(Independent
Auditor)through their contributions to meetings of the Board of Directors and

60 Annual Report 2012

Currently a lawyer. Appointed to advise on more compliance-based management and for his ability to provide independent input.
Former Professor of Business Administration within the Graduate Schoolof Kobe University, currently President of the University of Marketing andDistribution Sciences. Appointed for his ability to express useful opinions basedon his high-level specialist expertise in business administration and for his
ability to provide independent input.

Part 4 Social Responsibility and Management Organisation

Introduction

Attendance at meetings of the Board of Directors and otherimportant management meetings (figures for fiscal 2012)
External Directors

Compensation for Directors andCorporate Auditors
Our system for determining compensation for directors is designed toNameAttendance at meetings of the Board of Directors

incentivise contributions that enhance the Group’s enterprise value andNoriyuki Inoue
Shosuke Mori

Attended 9 of 10 meetings
Attended 5 of 10 meetingsbusiness performance. In this system, compensation comprises two

Part

1

External Auditors

Management Report Section

elements: a basic portion determined according to the post held by the
director, and a bonus-type element linked to business performance.

Name

Attendance at meetings of theBoard of Directors

Attendance at meetings of theBoard of Corporate Auditors

Takaharu Dohi
Haruo Sakaguchi
Junzo Ishii

Attended 8 of 10 meetings
Attended all 10 meetings
Attended 8 of 10 meetings

Attended 11 of 12 meetings
Attended all 12 meetings
Attended 10 of 12 meetings

Half of the performance-linked compensation is paid into afund used for acquisition of shares in the Company.
However, the compensation paid to part-time directors,
including external directors, and to corporate auditors, comprises only
the portion determined by post held, in light of the nature of their

Other Deliberative Bodies

duties.
The total compensation paid to directors and corporate audi-(1) Group Management Committee(President, representative directors, head of Personnel and GeneralCompany’s shareholders at the General Meeting of Shareholders.

Affairs Dept. and head of Corporate Planning Dept.) and representa-

Compensation for individual directors is determined by resolution oftives of each core business, meets to discuss resolutions of the Board

the Board of Directors, while compensation for individual corporateof Directors, Group company management strategy and business planning and systems and rules for maintenance of the holding company

Part

2

Special Feature

The Group Management Committee, comprising full-time Directors

tors is kept within the total compensation amount approved by theauditors is determined by deliberation of Corporate Auditors.
Note: The payment of retirement benefits to directors and corporate auditors was discontinued in
April 2004 in the interests of greater transparency in the compensation system.

system, and major Group management matters, such as investments
Please note that the Company does not offer stock options tobeyond set parameters and reorganisations.

its directors.
Part

However, the Board of Directors of the Company has passed a(2) Core Business Strategy Councils
the President, representative directors, the director in charge of thesation to the directors (excluding part-time directors) of its subsidiary

Corporate Planning Dept. of the Company and executives of each core

Hankyu Corporation and to the full-time directors (excluding thosebusiness. The councils deliberate future business development for

directors concurrently serving as employees) of subsidiary Hanshineach core business and discuss business plans and progress manage-

Electric Railway Co., Ltd.* This measure has been taken to ensure thatment (performance evaluation).

the directors of these two companies, which are core members of

3

Core Businesses: Overview and Outlook

Each core business has a Core Business Strategy Council, comprising

resolution to issue warrants as a form of stock option-based compen-

the Group, share equally with the shareholders both the possibility of(3) The Group Presidents’ Meeting — Initiatives to foster solidarity within the Groupgain in the event of a rise in their company’s share price and the risk of

The Hankyu Hanshin Holdings Group comprises over 150 groupbe further motivated to pursue the improvement of their company’s

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

business performance and the enhancement of its enterprise value

together presidents of those Group subsidiaries and affiliates. It isover the medium-to-long term.

4Social Responsibility and Management Organisation

designed to foster a deeper sense of solidarity within the Group andPartloss in the event that the share price falls, and that, therefore, they will

* Resolutions on the issuance of warrants were passed at meetings of the boards of directors ofHankyu Corporation held on 29th March 2012 and Hanshin Electric Railway held on 14th June 2012.

ensure that the Group philosophy and management policies permeate
the whole organisation. The Group Presidents’ Meeting aims to encourage a joint sense of commitment to the Medium-Term Management

Compensation Paid to Directors and Corporate Auditors

Plan. Awards are made to companies that boost earnings or individuals
and groups that successfully launch initiatives or make significant

Number of meetings of deliberative bodies held (figures for fiscal 2012)
Group Management Committee

13 meetings

Core Business Strategy Councils

3 meetings

The Group Presidents’ Meeting

2 meetings

Total paid out in fiscal 2012
(Millions of yen)

16
(2)
5
(3)
21
(5)

117
(16)
17
(6)
134
(22)

Part

5

Financial Section and Corporate Data

contributions at their units.

Directors(external)
Corporate Auditors(external)
Total(external)

No. of recipients*1: Recipients of compensation include two directors who retired at the conclusion of the General
Meeting of Shareholders held on 16th June 2011.
*2: In addition to the above, compensation received by external directors and corporate auditorsfrom subsidiaries of the Company for their duties as directors and corporate auditors amounted
to ¥22 million for the fiscal year ended March 2012.

Annual Report 201261

Management Organisation

Of the Company’s full-time Directors and Corporate Auditors, directors
Kazuo Sumi, Mitsuo Nozaki and Tsuneo Wakabayashi, and corpo-

Internal Control System

rate auditor Tsunenori Kawashima are also senior executives at theCompany’s subsidiary Hankyu Corporation. Representative Director
Shinya Sakai, Director Masao Shin, and corporate auditor Chikashi
Suehara, are also senior executives at the Company’s subsidiary

Overview

Hanshin Electric Railway Co., Ltd. They have received additional comRecognising the importance of ensuring that the business operations

pensation from each company.

of the Company are conducted in an appropriate manner, we haveestablished an internal control system for the entire Group, and revise

Dialogue with Shareholders and Investors

it when deemed necessary. As things stand, our internal control system
is characterised as follows.
• A Group Management Philosophy was compiled following the man-

Measures taken to enhance the effectiveness of theCompany’s General Meeting of Shareholders and to
facilitate the exercise of voting rights

agement integration of Hankyu Holdings, Inc. and Hanshin Electric
Railway Co., Ltd., along with a Group mission (our goals), statementof values (what we consider important) and a code of conduct (whatactions to take to realise them). We ensure that all employees from

Remarks

executive down understand them.

To allow shareholders sufficient time to examine the items for resolution at the shareholders’ meeting before exercising their voting rights,
we endeavor to send out the notices of convocation at the earliest
possible date. We sent out such notices on 25th May 2012, 20 days
before the General Meeting of Shareholders.

• We ensure compliance-focused management by compiling and

Avoiding the“busiest day”
for shareholder
meetings

To enable as many shareholders as possible
to attend our general meeting of shareholders, we held our 2012
General Meeting of Shareholders on 14th June, 14 days before the“busiest day” on which a large proportion of Japanese companies holdtheir general shareholders’ meetings.

• We have established the Group Auditing Department, composed

Online andelectronic voting

To enable shareholders who cannot attend our general shareholders’meetings to nevertheless exercise their voting rights, as well as tomake voting more convenient, we accept votes made via the internet,
and we also participate in the electronic voting platform operated
by ICJ Inc.

Early dispatchof notices ofconvocation

distributing a Compliance Manual, and have established a dedicatedwhistle-blowing system. (For further information on the Company’s
compliance activities, please refer to the following section.)of internal audit staff under the direct control of the President, forindependent monitoring of Groupwide business activities. It carries
out internal audits into Hankyu Hanshin Holdings Group and all its
operating companies.
• To create a structure for ensuring appropriate operations, the Groupvests corporate auditors of each Group company with authority not
only in accounting but also in operational audits, and at the sametime provides guidance to smaller Group companies on Board of

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

Other

Directors resolutions for creation of an internal control system.
• Corporate Auditors and the Group Auditing Department receive
regular reports from the Risk Management Office with regard tocreation and operation of internal controls at the Company andits subsidiaries (including implementation status for risk manage-

Investor Relations Activities
As a rule, the Company arranges results meetings for analysts andinstitutional investors in Japan after earnings announcements twicea year. Earnings results and business plans are discussed by senior
management representatives.
Our website (http://holdings.hankyu-hanshin.co.jp/ir/)
includes (mostly Japanese-language) materials necessary for investment judgements (earnings reports, securities reports, due disclosurematerials, and summaries of results meetings). The website also carries a profile of the Group and its competitive strengths, mainly for
individual investors.

62 Annual Report 2012

ment and promotion of compliance-based management measures).
Through such measures, they deepen their links with, and strengthen
the role of, internal control departments.
• With regard to systems for “Management Assessment and Audit
Concerning Internal Control Over Financial Reporting,” a section of
the Financial lnstruments and Exchange Act, the Company responds
appropriately by carrying out management evaluations on a consolidated basis, in line with in-house rules.

Part 4 Social Responsibility and Management Organisation

Introduction

Measures for Avoidance of Contact with
Antisocial Elements

Corporate Ethics Consultation Desk
(internal whistleblower procedures)
We have set up a dedicated whistleblower hotline enabling all employ-

have a basic policy of avoiding all contact with antisocial elements

ees to discuss or quickly bring to management’s notice suspected orthat pose a threat to public order and safety, such as criminal gangs

known legal violations and unethical conduct. Business partners are

and companies associated with them, and sokaiya racketeers who dis-also welcome to use this consultation and notification facility, andrupt shareholder meetings, and of never yielding to extortion. These

when necessary we will use lawyers and other outside specialists topolicies are basic policies in our internal control system and are clearly

improve its effectiveness.

Part

1

Management Report Section

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

stated in the Hankyu Hanshin Holdings Group Compliance Manual
distributed among executives and employees of Group companies.
Specific measures include routinely strengthening commu-

Corporate Ethics Consultation Desk

nications with external organisations such as lawyers and the police,
and introducing into all contracts signed by Group companies’ clauses
Corporate
Auditorthat forbid contact with antisocial elements.
Reports

Part

2

Special Feature

In addition to working to raise awareness of this issue throughCorporate
AuditorReports

information exchange and a range of employee training courses, weare aggressively involved in regional activities and gatherings aimed
at rooting out antisocial elements.
When an incident does occur, we respond as a single organisa-

Consultation
Desk

Reports

Directs

President

Consultation
Desk

Reports

Presidenttion, rallying round the department in charge, and work in partnership
Approves/Directs

with outside experts.

Reporting of investigation
progress and findings

Consultation
Desk

Part

3

Core Businesses: Overview and Outlook

Compliance

As a system to ensure compliance-focused management, the Group

Establishment of Risk Management
Committees

has set up a dedicated compliance office, and is working to raiseawareness of compliance issues among executives and employees by

In the case of identification of a major compliance issue during themeans of the measures detailed below.

course of an Ethics Consultation, a risk management committee is

Part

4

convened as soon as possible to discuss and decide on appropriate

Social Responsibility and Management Organisation

Compliance Manual andTraining Programmes

responses.
In addition, we are setting up compliance promotion offices
at major Group companies such as Hankyu Corporation, Hanshin
Electric Railway Co., Ltd., Hankyu Hanshin Express Holdings Corp. and

The Company’s Compliance Manual and Compliance Card express theCompany’s determination not to tolerate violation of laws or social

Hankyu Hanshin Hotels Co., Ltd. At other companies we are appointing“compliance leaders,” to ensure our response is on a Groupwide basis.

norms or betrayal of customer trust, by any Group employee fromexecutives down. It also aims to raise awareness by pointing out cases
where compliance errors can easily be made.

Part

5

The Company provides intensive compliance training on

Financial Section and Corporate Dataa Groupwide basis for new employees, midcareer hires and newly
appointed executives. In addition, all Group companies arrange theirown training programmes tailored to job grade and function, with theaim of further increasing compliance awareness.

Annual Report 201263

Management Organisation

For more details (in Japanese) of the Company’s basic poli-

Overview of Group Compliancet Information to Group companiest Guidance and training
for Group companiest Risk managementt Risk Management
Committee secretariat
t Corporate Ethics Consultation Desk
(internal whistle-blower procedures)
t Internal auditingcies regarding governance of joint-stock companies including thesetakeover prevention measures, please see:

[Examples]

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

http://holdings.hankyu-hanshin.co.jp/ir/topics/data/KS201206142N3.
pdf

Risk Management
Compliance leaders

Hankyu Hanshin Holdings

Hankyu Corporation

Liaise with compliancedepartments ofhigher-level companies

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

Group Company

orare managed by the Risk Management Office, while risks arising inGroup Companyorthe business operations of individual divisions are managed by riskmanagement units within the divisions themselves. In both cases,

HanshinElectric Railway

Group Company

orrisks are identified and analysed, and risk management systems areGroup Company

oroverhauled from time to time. We evaluate the likelihood of materialisation of each risk and its frequency, as well as the extent of impact inthe event of materialisation and its importance. On that basis, we draw

Group Company

Hankyu Hanshin
Express Holdings

up measures to prevent the materialisation of risk or to mitigate its

Group Company

impact (“risk mitigation measures”). These measures are documented
in the form of risk management manuals, and the results of risk analysis

Group Company

Hankyu Hanshin
Hotelsand how such a risk is being handled when a risk arises are, reported,

Group Company
Cross-Organisational Companies

as appropriate, to the Board of Directors.
or

We have also established a liaison system enabling theeffective transmission of information in the event of unforeseen
circumstances. Under this system, in the event of materialisation ofa risk, executives and employees immediately take risk-mitigation

Measures to Prevent Takeovers

measures as specified in the above-mentioned documentation andother measures to prevent the further spread of the impact. They also
submit reports to pre-appointed risk management liaison personnel.
The Company provides supervision to all companies in the

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

Group so that the same system is operated by them all, and has set

and therefore the common interests of its shareholders, we believe

up a system enabling the transmission to the Company of accuratethat it is imperative to conduct business operations from a medium- to

information in the event of an unforeseen development.

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

A particular area of importance in this regard is the Company’swith local government institutions and residents in the areas served

core railway business, which entails direct risk to people’s lives throughby our railway lines, and to place the highest management priority on

accidents. Even in the event of a minor mistakes and problems wherestrengthening cohesion and collaboration within the Group, so as tono individual responsibility arises, it is important to make every effort

enhance the Group’s comprehensive power.

to bring the number of problems and mistakes that could cause an

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

accident as close to zero as possible, by continuing to meticulously

takeover of the Company whereby, in the event of the appearance

railway business staff, and share and analyse data. Such painstaking

of a potential buyer of the Company that wishes to raise their stakeefforts to forestall even one human error are one of the foundation

above 20% or more of the Company’s outstanding shares, new sharestones on which the Company ensures safety of operations and meets

subscription rights are granted to shareholders who are, de facto,

public expectations.

shareholders other than the potential buyer, to confirm a potential
buyer’s intention. This system was approved at the General Meeting ofIn the following pages, readers will find a summary of the safety man-Shareholders held on 14th June 2012, and remains in effect for three

agement systems at Hankyu Corporation and Hanshin Electric Railway,

years.

both of which are our major private sector railway operators.

64 Annual Report 2012

Part 4 Social Responsibility and Management Organisation

Introduction

Safety Management System

Basic Safety Policy and Objectives
Hankyu Corporation and Hanshin Electric Railway put the highest priority on ensuring safe operations in our business activities. As
described below, we have formulated a basic policy on safety and are doing whatever we can to prevent accidents, based on the goal of
maintaining zero accidents for which we bear responsibility.

Part

1

Management Report Section

Hankyu Corporation Safety Policy (Code of Conduct)

Hanshin Electric Railway Safety Policy

The president and directors of the Company are required to establish
a framework that ensures all business activities place the highest
priority on safety. Utilising the Company’s civil engineering facilities,
electrical facilities, rolling stock, and the expertise of its employees,
the Company’s basic policy for ensuring safety in transport and otheroperations shall be determined in accordance with the following.

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

Part

2

Special Feature

Code of Conduct for Safe Transport Operations*• Ensure safe transport• Comply with all relevant laws and regulations• Be fully aware of operating conditions and ensure equipment is safe
• Enforce check procedures and put the highest priority on safety• Place priority on human life
• Provide information accurately and rapidly• Continue making improvements and reforms

Maximum priority on safety
The president, directors and employees shall dowhatever they can to ensure safety of operations,based on the understanding that putting the highest priority on ensuring safety is the mission of railway businesses.

Maintenance of safety management systems
The Company shall implement continuousverification procedures to ensure safety management systems are operating appropriately.

* Only titles for Code of Conduct items have been shown due to space restrictions. The full Codeof Conduct provides detailed explanations for each item.

Transport Safety Organisations

3

Organisation Chart(Hanshin)President
Directors

Core Businesses: Overview and Outlook

Organisation Chart(Hankyu)Part

President
Directors

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

Urban Transportation
Business

Railway Safety Council

Deputy Head of Urban
Transportation Business
Chief Safety Manager(Head of Urban
Transportation Business)
Manager, Urban
Transportation Planning(Head of Investment
and Financing Team)Manager,
Takarazuka Line Operations

Manager,
Technical Division(Chief Civil Engineering
Facilities Manager)

Manager,
Technical Division(Chief Electrical
Facilities Manager)

Part
Chief Train
Operations Manager(Manager,Transport Division)

Manger,Electrical Division

Manager,
Rolling Stock Division

4

Manager,Engineering Division

Manager,
Kyoto Line Operations

Deputy Operations
Deputy Operations
Deputy Operations
ManagerManagerManager(Crew Training Manager) (Crew Training Manager) (Crew Training Manager)

Position

Chief Crew
Training Manager(Head, East
Rolling Stock Yard)(Head, West
Rolling Stock Yard)

Role

Ultimate responsibility for ensuring transport safety
Part

Responsible for overseeing all activities related to ensuring transport safety

5

Responsible for managing all aspects of train operations, under the direction of the Chief
Safety Manager

Financial Section and Corporate Data

President
Chief Safety Manager(Head of Urban Transportation Business)
Chief Train Operations Manager(Manager, Transport Division*)
Chief Crew Training Manager(Hankyu: Deputy Operations Managers of each line;
Hanshin: Heads of East and West Rolling Stock Yards)
Other Safety Managers

Manager,
Technical Division(Chief Rolling StockManager)Social Responsibility and Management Organisation

Manager,
Kobe Line Operations

Manager,
Transport Division(Chief Train Operations
Manager)

Responsible for ensuring all crew are properly qualified (appropriate qualifications,knowledge and skills), under the direction of the Chief Train Operations Manager
Individuals in each division responsible for ensuring facilities under their management do
not act as an obstacle to transport safety, under the direction of the Chief Safety Manager* In the case of Hankyu Corporation, this role is filled by the Manager or Deputy Manager of the Transport Division.

Annual Report 201265

Safety Management System

Initiatives to Reinforce the Safety Management System (Using the PDCA Cycle)
By applying our safety management system (PDCA cycle) to a range of safety initiatives, we are aiming to create a virtuous cycle of improvement based on even higher safety goals.

Outline of Safety Management System

Creation of safety control plans
and systems
Formulation of annual plans, etc.
(Safety policy for each fiscal year withinitiatives targeting specific areas)

Safety management implementation and operation
1
2
3

Providing and sharing information
Education and training
Equipment initiatives and inspections

Plan

Do

Safety management
regulations
Define policies to adhere to inbusiness operations to ensure
safe transport operations, as well
as specific initiatives, management systems and methods forthe implementation of thesepolicies

Continuous improvement

Act

Check

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

Safety management and operational checks
Internal audits
Evaluation of transport safety management by MLIT

Revisions to the Railway Business Act in October 2006 required railway companies to create new safety management systems dedicatedto transport safety. Under our new safety management system, we are targeting even higher levels of safety by applying the PDCA cycle,
ensuring compliance with all related laws and regulations, conducting operations that place the highest priority on safety, and fostering
greater awareness of safety issues among employees from directors down.
From page 67 to 71, we explain in more detail points
above diagram.

66 Annual Report 2012—of “Do = safety management implementation and operation” in thePart 4 Social Responsibility and Management Organisation

Introduction

1 Providing and Sharing Information
Hankyu Corporation

Part

1

Management Report Section

Safety Management and Promotion Committee — Information Sharing System
The system shown below has been set up to ensure a range of information related to transport safety is shared by all divisions.

Companywide Safety Management
and Promotion CommitteePart

2

Safety Management andPromotion Committee OfficeGroup Safety Information Liaison Team(Rail, Bus, Taxi and Shipping)Transport Division
Safety Management andPromotion Committee

Technical Division (Civil
Engineering Facilities)
Safety Management
Promotion Committee

Technical Division(Electrical Facilities)
Safety Management andPromotion Committee

Special Feature

Head Office Safety Management and Promotion Committee
Executive Safety Meeting(Group Railway Businesses)
Technical Division(Rolling Stock)
Safety Management andPromotion Committee

Other Divisions

Front-Line Operations in Each Division

Part

3

Core Businesses: Overview and Outlook

Enhancing Information Sharing and Communication (Key Initiatives)
Opportunities to share opinions during inspections by thepresident and the heads of divisions
During inspections by the president, the head of the Urban Transportation
Business and other managers, meetings about transport safety are held to givesenior managers a better picture of the situation in front-line operations and toenhance communication with managers on the front line. This is part of wider
efforts to create a more open corporate culture.

Part

4

Social Responsibility and Management Organisation

Free discussion meetings“Free discussion meetings” are also held during visits by the president or the head of the Urban Transportation Business to provide
an opportunity to share opinions, without any predetermined topic. Such discussions are not restricted to operational issues and aredesigned to promote smooth communication regardless of employee position or business division.

Part

5

Financial Section and Corporate DataManagement area meetings
Aware that communication and cooperation between front-line personnel in divisions responsible for train operations, civil engineering
facilities, electrical facilities and rolling stock is vital to maintaining and improving transport safety in each area served by our stations, webegan holding “management area meetings” from the year ended March 2011 to improve communication and information sharing.

Annual Report 201267

Safety Management System

Hanshin Electric Railway

Create a “Safety First” Corporate Culture andRigorously Ensure Compliance
Inspections, lectures and visits by the President, Chief Safety Manager (Head of
Urban Transportation Business) and managers further improve employee safety
awareness. We are also rigorously ensuring compliance.

Information Sharing through the Railway
Safety Council
In principle, Hanshin Electric Railway holds meetings of its Railway Safety Council twice every month. The Council is chaired by the head of
the Urban Transportation Business, and its members are made up of other managers from within this business. The Council hears reports
from relevant managers regarding accidents, safety incidents, and potential accidents and near accidents, and shares information about
these reports. It analyses the causes of these accidents, safety incidents, and potential accidents and near accidents. Based on the results ofthis analysis, it formulates countermeasures to prevent reoccurrence, and issues instructions to the Railway Safety Liaison Team* and related
divisions.
* Railway Safety Liaison Team: Comprising managers from each railway business division, this team is responsible for sharing information about operations, accidents, and issues in each division, anddiscusses and reviews causes and measures to prevent recurrence.

Ensuring the Information Sharing System Continues toFunction Properly
Hanshin Electric Railway endeavours to ensure active communication with employees on a daily basis, with details fed back to the front
lines when the causes of accidents, safety incidents, and potential accidents and near accidents are identified and countermeasuresdeveloped.
For incidents that were caused by human error, each division and the Railway Safety Liaison Team assess the effectiveness ofmeasures to prevent any recurrence and report where necessary to the Railway Safety Council. This approach has given the Company agreater capability to assess the effectiveness of countermeasures.

Round-Table Sessions
As part of our training, we hold round-table sessions for new train crew employeeswith less than one year’s practical experience in transportation operations, forreview purposes. These sessions are held at preset times, for specific job categories.
In addition, we hold such meetings four times a year for each rolling stock yard
and station area, for support staff, train crew and station staff (around 160 times
altogether). Here, the aim is to foster greater safety awareness and share information
through group discussions of near-accidents and other activities.

68 Annual Report 2012

Part 4 Social Responsibility and Management Organisation

Introduction

2 Education and Training
Hankyu Corporation and Hanshin Electric Railway both conduct specific training programs in their train operation, civil engineering (workshop) facility, electrical facility, and rolling stock divisions, as well as exercises to prepare for specific emergency situations. Both networks also
hold their own independent joint drills for emergencies where cooperation across business divisions is required.

Part

1

Management Report Section

Joint Drills: Hankyu Corporation

Part

2

New simulator-based training for train crews

In 2011, Hanshin Electric Railway built the Daimotsu Training Line,
with track and signalling facilities, at the Daimotsu Training Centre,
which had been dedicated to training of staff for electric power
facilities. The Daimotsu Training Line is a general-purpose technicaltraining facility for improvement of expertise and skills in track
maintenance and signalling, and transfer of skills to subordinates.
It also enables both categories of staff to better understand all
aspects of these two closely-related operations, and work moreclosely in partnership.
Since August 2011, when track maintenance facilities werecompleted at Daimotsu Training Line, drills have included removal
and replacement of sleepers and rails. With regard to signaling
equipment in this fiscal year, we plan to carry out training drills into
replacement of automatic circuit breakers at level crossings and of
signal lights.

In August 2011, Hanshin Electric Railway introduced new training simulators for drivers and conductors, replacing the obsolete
former system.
With the new simulator, the driver sits in a cab manningthe controls, with a track displayed in front of him on an LCD
screen. The system can recreate actual operating conditions, by day
and night, spanning clear, rainy, foggy and other kinds of weather.
With computer graphics, the system can also recreate various
accident scenarios or simulate incidents and accidents that are
rare or that cannot be reproduced in actual vehicle-based training.
By repeatedly rehearsing their responses to such situations, crews
are better able to immediately and appropriately respond to actual
emergencies.

Part

3

Core Businesses: Overview and Outlook

Establishment of Daimotsu Training LineSpecial Feature*In July 2011, based on occurrence in the Great East Japan Earthquake disaster, we carried out schematic exercises for emergency manager callouts and communication, assuming simultaneous
occurrence of earthquakes along three major faultlines, the Tokai, Tonankai and Nankai. In November, we carried out practical emergency drills comprising emergency evacuation guidance forpassengers and derailment response scenarios, assuming derailments caused by something falling out of a vehicle onto a level crossing.

*Scenarios covered by the simulator include earthquakes, signal system failures, traffic about toenter a level crossing, fire in an underground tunnel and rolling stock breakdowns.

Part

4

Social Responsibility and Management Organisation

Training the driverPart

5

Financial Section and Corporate Data

Investigating the causeof a points failure, andemergency repair
training (both upperand lower)

Training the conductor

Annual Report 201269

Safety Management System

3 Equipment Initiatives and Inspections
Hankyu Corporation and Hanshin Electric Railway both take a wide range of steps to improve safety using equipment and infrastructure.
Below, we explain some of the main initiatives.

Overpass and Underground Construction Work
Both companies are pushing ahead with the construction of multiple rail overpasses to reduce
the number of level crossings and improve traffic flow near train lines. Elevated or undergroundsections now account for large portions of Hanshin Electric Railway’s Hanshin Main Line (87%)
and its Hanshin Namba Line (90%), including the new extension from Nishikujo Station to
Osaka-Namba Station. All of Kobe Rapid Transit Railway Line is in underground. This work toraise the tracks has led to a marked drop in the number of level-crossing accidents.
Grade separation (track elevation) works are currently under way on the Hankyu Kyoto
Line near Awaji and Rakusaiguchi stations, and on the Hanshin Main Line between Sumiyoshi Elevating the Hanshin Main Line between
Sumiyoshi and Ashiya, in Hyogo
and Ashiya and between Koshien and Mukogawa.

Controlling Rail Traffic with Automatic Signal, Point and Signage Systems
Both companies utilise computer-based systems to control rail traffic. Hankyu Corporation uses the Total Traffic Control (TTC) system, while
Hanshin Electric Railway uses the Programmed Traffic Control (PTC) system. The companies’ TTC and PTC centres automatically control
signals, points, and platform signs and announcements based on preprogrammed information for all trains and stations (such as departure
times, line numbers, destinations, and train types). The computers at the heart of these systems (central control systems, PTC computers)
are systemised with multiple backups and inbuilt redundancy to ensure a high level of reliability in the event of a problem.

Upgrading Automatic Train Stopping Equipment
Automatic Train Stop (ATS) equipment automatically slows down
or stops trains when drivers fail to notice or respond to, or misinterpret, signals or signaled speed limits. Hankyu Corporation andHanshin Electric Railway both use continuous speed-checking typeATS systems on all their lines*, including branch lines, ensuring ahigh level of safety.
* Between Sakuragawa and Osaka-Namba stations on the Hanshin Namba Line, Hanshin
Electric Railway relies on an onboard control-point continuous speed-checking type ATS
system that Kintetsu Corporation employs.

Under

115km/h
Under

70km/hTrain speed

Under

50km/hUnder

30km/hUnder

ProceedsignalCautionsignalControl point

StopsignalControl pointContinuous Speed-Checking Type ATS System: Hankyu
Corporation’s Continuous Speed-Checking ATS System
In an effort to further improve safety, Hankyu Corporation has been
adding a new pattern control system to its existing ATS equipment.
This new control system is aimed at preventing overrun into levelcrossings, failure to stop at designated stations, and collisions inwhich a train runs into the end block of lines. This system is alreadyin operation on the Kobe Line and the Kyoto Line and is currently
being rolled out on the Takarazuka Line.
Both companies are also working to improve safety by
installing ATS equipment on sharp curves and branches in lines toprevent derailments caused by excessive speed.

70 Annual Report 2012

20km/hObstruction signal

ATS pickup

ATS indicator in driver’s cab

Speedometer in driver’s cab

Part 4 Social Responsibility and Management Organisation

Introduction

In March 2011, Hankyu Corporation finished compilationof independent safety standards stricter than those of the Ministryof Land, Infrastructure, Transport and Tourism. In May 2011, Hanshin
Electric Railway completed installation of Automatic Train Stop
(ATS) facilities at all 28 junctions on its network.

Hankyu Corporation is planning to introduce a safetysystem enabling automatic braking of rolling stock using ATS, even
if the driver misses a ‘stop’ shunting signal in a train depot. Thismeasure is intended to avoid damage to points if a train jumps a‘stop’ light, as happened at Nishinomiya depot on the Kobe Line in
November 2011 and June 2012.

Part

1

Management Report Section

Initiatives to Improve Platform Safety
At Hankyu Corporation and Hanshin Electric Railway, the following measures prevent objects and people falling onto the track from theplatform, and forestall accidents:

Installation of emergency alert devices

To stop visually-impaired and other passengers from falling off theplatform, we have installed yellow warning-line tiles next to thetactile tiles (with bumps that can be felt through shoe soles) so thata blind passenger can tell which side of the yellow warning-line heor she is.
Both Hankyu Corporation and Hanshin Electric Railway
aim to complete the installation of yellow warning-line tiles at all of
their stations in the fiscal year ending 31st March 2013.

When somebody or something falls onto the track, the event is
detected by special mats under the platform edge, or an emergency stop button on the platform can be pressed. These set off
alarm indicators and an emergency buzzer for crews and station
staff, preventing serious accidents. On Hanshin lines, we have completed installation of emergency stop buttons at all stations.
On Hankyu lines, we have taken measures to further
improve safety through platform emergency stop buttons thatwork in tandem with ATS systems, effective fiscal 2010.

Part

2

Special Feature

Installation of yellow warning-line tiles on platform

Part

3

Core Businesses: Overview and Outlook

Platform wideningPart

At Mukogawa Station on the Hanshin Main Line, (up-line to Osaka), we have broadened the platform by about 1.5m toalleviate rush-hour crowding and enhance safety.

4Social Responsibility and Management Organisation
Part

5

Financial Section and Corporate Data

Before platform widening

After platform widening

Annual Report 201271

Corporate Social Responsibility— Social Contribution & Environmental Protection Activities

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

Basic
PolicyWe intend to promote the creation of towns and cities
in all the areas where we operate — principally in theareas served by our railway lines — in which people will
truly want to live

The Hankyu Hanshin Dreams andCommunities of the Future Project

Priority areas

Environment-friendly development
As a Group with strong local roots, we are committed to sustainable communitybuilding with environment-friendly developments that provide local residents withsecurity, peace of mind and cultural enrichment.

The emblem of“the Hankyu
Hanshin Dreams andCommunities of the
Future Project”

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

(1) Fostering social contribution activities at Group companies
The Group is involved in around 80 activities driven forward by individual member companies, all community activities that dovetailwith the Basic Policy.

[ Environment-friendly development ]Activities to create a safer, more comfortable and environmentfriendly community• Partipication in the “Stop Drunk
Driving” Project• Children’s emergency sanctuary programme in taxis, offices and stores(2) Hankyu Hanshin Dreams and Communities of the Future Fund forsupport of citizens’ activities
We support such groups by matching donations made by the
Hankyu Hanshin Dreams and Communities of the Future Fund, towhich our employees contribute. In fiscal 2012, a selection panel
awarded ¥6 million to 14 groups (the cumulative total was ¥13
million for 28 groups at the end of the fiscal year).

[ Initiative ]Support activities for Kodomo Community Care, a non-profit
foundation

Activities that safeguard the naturalenvironment and biodiversity• Tree-thinning by volunteer employees• Donations for environmental bodies based on cost-saving
through reuse of towels and seats

This organisation, which gets no publicfunding, aims to create local environments
enabling children requiring medical careto mix with other, healthy children. It operates childcare facilities where nurses are inattendance all day.

(3) Point-based social contribution activities for employees and former
employees[ Human capital development ]Cultural and artistic activities that raise moral awareness inchildren• Charity concert for parents andchildren in the Hankyu Dreams andCommunities programme

Activities that deepen children’s
understanding of regional andsocial issues

Child conducting orchestra• Giving students experience of jobs (at Hankyu Hanshin)• Railway and hotel pavilion exhibit at KidZania Koshien

72 Annual Report 2012

We grant points to employees and former employees dependingon the number of days they engage in volunteering outside working hours, and organise charity events at our offices. In addition, we
will launch a subsidy system for citizens’ groups for which employees and former employees volunteer to help out. In this way, we
have been encouraging employees and former employees to takepart in community activities.

For more detailed information, please visit this (Japaneselanguage) website:

http://www.hankyu-hanshin.co.jp/yume-machi/

Part 4 Social Responsibility and Management Organisation

Introduction

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

1

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

Management Report Section

Basic
Concepts[ Initiatives ](1) Power saving(2) Initiatives to curb global warming
1. LED lighting

At Hanshin Koshien Stadium, we arerecycling plastic beverage cups inpartnership with Teijin Fibers Ltd. In
this initiative, we collect plastic cups
used for beer and other beverages
sold at the Hanshin Koshien Stadium,and recycle them into polyester fibres.
Annual collection volume is targetedat around five tons, or some 200,000
plastic cups.

Part

2

Special Feature

Inside stations and rolling stock, and in ourcommercial facilities and administrative
offices, we have cut back on air conditioning“Setsu-1” Grand Prix logouse, reduced lighting intensity, rigorously
enforced switch-off rules and taken other measures to save power
in all areas of operations, with the understanding and cooperationof our customers. In the summer of 2012, we organised the “Setsu1” Grand Prix participatory event to encourage power-saving by
employees in their homes.

(3) Measures to reduce waste and encourage resource recycling —Recycling plastic cups

Collection cart

2. Renewable energy

3

In measures to help protect the natural environment, Hankyu Travel
International has donated environmentally-friendly toilets, which
use bacterial techniques to break down human waste, to tourist
areas of Yakushima island, Kumano-Kodo, Shiretoko and Rebun
island. Likewise, Hankyu Hanshin Express Holdings group has, inpartnership with local governments, organised ongoing forestry
thinning work, carriedout by volunteeringGroup employees atfour locations around
Japan.

Part

4

Tree thinning by employee volunteersPart

5

Financial Section and Corporate Data

Hotel New Hankyu OsakaPart

Social Responsibility and Management Organisation

We have installed solar panels capable of generating a total of
325kW at seven Group-company facilities, including the “Silver
Umbrella” roof of the Hanshin Koshien Stadium and Settsu-Shi
Station, Japan’s first zero-carbon station. In addition, we sell condominium units that contribute to the prevention of global warming:
Geo Tower Tenroku (with a solar cooling system using solar energy
for air-conditioning)and Geo Tezukayama
1-chome (with individual solar powersystems for each
unit, a first in the
Kansai region).

(4) Measures to help protect the natural environment —Donation of environmentally-friendly toilets, and forestry
protection

Core Businesses: Overview and Outlook

We are adopting LED lighting at directly operated hotels, as well as
the Takarazuka Grand Theatre, Tokyo Takarazuka Theatre, Hankyu
Sanban Gai and other leisure and retail facilities. In addition to
the completion of LED installation and other works by the endof fiscal 2013 at Hankyu Kawaramachi Station, Karasuma Station,
underground sections along Hankyu Kyoto Line, and Hanshin
Sannomiya Station, we expect to complete the LED outfitting ofHankyu Umeda Station in the three years from fiscal 2013.

Takarazuka Grand Theatre
Geo Tezukayama
1-chome(Artist’s impression)

For more detailed information, please visit this (Japaneselanguage) website:

http://holdings.hankyu-hanshin.co.jp/eco/

Annual Report 201273

Directors and Corporate Auditors(As of 15th June 2012)

Directors

Kazuo Sumi
President andRepresentative Director

1973 Joined Hankyu Corporation
2000 Director, Hankyu Corporation
2002 Managing Director, Hankyu Corporation
2003 President, Hankyu Corporation (Current position)2005 President, Hankyu Holdings
2006 President, Hankyu Hanshin Holdings (Current position)

Shinya Sakai
Representative Director

1970 Joined Hanshin Electric Railway
2002 Director, Hanshin Electric Railway
2005 Managing Director, Hanshin Electric Railway
2006 President, Hanshin Electric Railway
2006 Representative Director, Hankyu Hanshin Holdings(Current position)2008 Chairman, Hanshin Tigers Baseball Club (Current position)2011 Chairman, Hanshin Electric Railway (Current position)

Noriyuki Inoue

Shosuke Mori

Isao Matsuoka

Director (External*)

Director (External*)

Director (Part-time)1957 Joined Daikin Industries
1994 President, Daikin Industries
2002 Chairman and CEO, Daikin Industries (Current position)
2003 Director, Hankyu Corporation2005 Director, Hankyu Holdings
2006 Director, Hankyu Hanshin Holdings (Current position)

Shunichi
Sugioka

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

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

Takaoki Fujiwara

Hiroshi Ojima

Director (Part-time)

Director (Part-time)

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

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

1965 Joined Hankyu Express International
2003 President, Hankyu Express International
2004 Director, Hankyu Corporation2005 Director, Hankyu Holdings
2006 Director, Hankyu Hanshin Holdings (Current position)2008 President, Hankyu Hanshin Express Holdings
2010 Chairman, Hankyu Hanshin Express Holdings(Current position)

Corporate Auditors

Chikashi Suehara

Tsunenori Kawashima

Takaharu Dohi

Standing Corporate
AuditorStanding Corporate Auditor

Corporate Auditor(External*)

1968 Joined Hanshin Electric Railway
2000 Director, Hanshin Electric Railway
2003 Managing Director, Hanshin Electric Railway
2006 Representative and Senior Managing Director, Hanshin
Electric Railway
2007 Representative Director and Vice President, Hanshin Electric Railway
2008 Standing Corporate Auditor, Hanshin Electric Railway(Current position)2009 Standing Corporate Auditor, Hankyu Hanshin Holdings(Current position)

74 Annual Report 2012

1977 Joined Hankyu Corporation
2002 Director, Hankyu Corporation2005 Director, Hankyu Holdings
2005 Managing Director, Hankyu Corporation
2006 Representative Director, Hankyu Holdings
2006 Representative and Managing Director, Hankyu Corporation
2006 Representative Director, Hankyu Hanshin Holdings
2009 Standing Corporate Auditor, Hankyu Corporation (Current position)2012 Standing Corporate Auditor, Hankyu Hanshin Holdings(Current position)

1958 Prosecutor
1996 Prosecutor-General (until 1998)
1998 Lawyer (Current position)
2002 Corporate Auditor, Hankyu Corporation(Current position)2005 Corporate Auditor, Hankyu Holdings
2006 Corporate Auditor, Hankyu Hanshin Holdings(Current position)

Part 4 Social Responsibility and Management Organisation

Introduction

Hiroshi Desaki

Nobuo Minami

Director (Part-time)

Director (Part-time)

Koichi
Kobayashi
Director (Part-time)Part

1

1977 Joined Hanshin Electric Railway
2007 President, Hanshin Tigers Baseball Club (Current position)2008 Director, Hankyu Hanshin Holdings (Current position)2008 Director, Hanshin Electric Railway (Current position)

1982 Joined Hankyu Corporation
2004 Chairman, Takarazuka Revue Company(Current position)2005 Director, Hankyu Holdings
2006 Director, Hankyu Hanshin Holdings (Current position)

Masao Shin

Tsuneo Wakabayashi

Director

Director

Director

Head of Personnel andGeneral Affairs Dept.

Head of Corporate Planning Dept.
and Personnel
and General Affairs Dept.

Head of Corporate Planning Dept.

1981 Joined Hanshin Electric Railway
2006 Director, Hanshin Electric Railway
2006 Director, Hankyu Hanshin Holdings (Current position)2008 Managing Director, Hanshin Electric Railway(Current position)

1983 Joined Hankyu Corporation2007 Director, Hankyu Corporation2009 Managing Director, Hankyu Corporation(Current position)2011 Director, Hankyu Hanshin Holdings (Current position)

Part

2

Special Feature

Mitsuo Nozaki

1981 Joined Hankyu Corporation2005 Director, Hankyu Corporation
2006 Director, Hankyu Holdings
2006 Director, Hankyu Hanshin Holdings (Current position)2007 Managing Director, Hankyu Corporation(Current position)

Management Report Section

1980 Joined Hankyu Corporation2007 Director, Hankyu Corporation2011 Managing Director, Hankyu Corporation2012 President, Hankyu Hanshin Hotels (Current position)2012 Director, Hankyu Hanshin Holdings (Current position)

Part

3

Core Businesses: Overview and Outlook* Mr. Noriyuki Inoue and Mr. Shosuke Mori satisfy the qualificationsof external directors as provided in Article 2, Paragraph 15 of the
Corporate Law.

Part

4

Social Responsibility and Management Organisation

The Company has submitted notifications to the stock exchanges
on which its shares are listed, naming Mr. Noriyuki Inoue and Mr.
Shosuke Mori as external (independent) directors.

Haruo Sakaguchi
Corporate Auditor(External*)

Junzo Ishii
Corporate Auditor(External*)

Part

5

1986 Professor of Faculty of Commerce, Doshisha University
1989 Professor of Business Administration, Kobe University
1999 Professor of Business Administration, Graduate Schoolof Kobe University
2008 President of the University of Marketing andDistribution Sciences (Current position)2010 Corporate Auditor, Hankyu Hanshin Holdings(Current position)

Financial Section and Corporate Data

1958 Lawyer (Current position)
1989 Vice Chairman, Japan Federation of Bar Association
2006 Corporate Auditor, Hankyu Holdings
2006 Corporate Auditor, Hankyu Corporation(Current position)
2006 Corporate Auditor, Hankyu Hanshin Holdings(Current position)* Mr. Takaharu Dohi, Mr. Haruo Sakaguchi, and Mr. Junzo Ishii satisfy
the qualifications of external corporate auditors as provided in
Article 2, Paragraph 16 of the Corporate Law.
The Company has submitted notifications to the stock exchanges
on which its shares are listed, naming Mr. Takaharu Dohi, Mr. Haruo
Sakaguchi, and Mr. Junzo Ishii as external (independent) auditors.

Annual Report 201275

Part 5

Financial Section andCorporate Data

Consolidated Six-Year Summary ................................77
Consolidated Financial Review ....................................78
Business Risks ...........................................................................81
Consolidated Balance Sheets........................................84
Consolidated Statements of Income .......................86
Consolidated Statements ofComprehensive Income .................................................86
Consolidated Statements of
Changes in Net Assets .....................................................87
Consolidated Statements of Cash Flows ..............88
Notes to the Consolidated
Financial Statements ........................................................89
Major Group Companies ...............................................112
Investor Information ........................................................113

76 Annual Report 2012

Consolidated Six-Year SummaryYears ended 31st March

2008/3

2009/3

2010/3

2011/3

2012/3

2012/3Introduction

2007/3*2

1

Result of Operations (millions of yen and thousands of U.S. dollars): *¥752,300¥683,715¥653,287¥638,770¥649,703$7,923,207

87,00390,724

77,82370,12664,74373,809900,110

3

EBITDA*

146,500

145,200

135,300

133,200

127,100

133,500

1,628,049

Income before income taxes and minority interests

65,30526,09834,06433,89932,76043,419529,500

Net income

36,619627

20,55010,79318,06839,252478,683———

12,541

14,72844,992548,683

Capital expenditure

53,795

134,307

109,688

132,386

68,431

55,267

673,988

Depreciation and amortisation

43,88851,57754,79860,41859,66956,968694,732

Comprehensive income

Part

1

Management Report Section¥743,376

Operating income

Revenues from operations

Cash Flows (millions of yen and thousands of U.S. dollars):¥ 78,981¥ 74,902¥108,597¥146,955¥103,252¥124,525$1,518,598

Cash flows from investing activities(199,578)(100,058)(115,047)(132,737)(62,516)(44,295)(540,183)

Cash flows from financing activities

132,289

36,718

7,014(24,200)(39,544)(78,978)(963,146)

Increase (decrease) in cash and cash equivalents

11,791

11,403(2,174)(9,680)

474

767

9,354

Cash and cash equivalents at end of year

40,166

31,16630,69021,44022,592

23,572

287,463

Part

2

Special Feature

Cash flows from operating activities

Financial Position (millions of yen and thousands of U.S. dollars):¥2,366,694 ¥2,348,476 ¥2,307,332 ¥2,337,331 ¥2,314,669 ¥2,274,380 $27,736,341

Total assets

522,286

476,639

473,878

480,633

486,947

524,8016,400,012

1,209,382

1,271,100

1,275,620

1,282,583

1,251,665

1,183,647

14,434,720¥ 31.84¥ 0.50¥ 16.28¥ 8.55¥ 14.32¥ 31.13

$0.38

—

0.41

16.18

8.51

14.27

31.13

0.38

Net assets

405.35369.25366.96371.70377.17407.01

4.96

Dividend

5.00

5.00

5.00

5.00

5.00

5.00

0.06

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

Part

3

Core Businesses: Overview and Outlook

Ratios:

11.7

12.1

11.4

10.7

10.1

11.4

4

ROA (%)*

3.8

3.2

2.5

2.2

2.0

2.8

5

8.4

0.1

4.4

2.3

3.8

7.9

Operating income margin (%)

ROE (%)*

8

8.3*

8.8

9.4

9.6

9.8

8.9

Equity ratio (%)

21.7

19.9

20.1

20.1

20.6

22.6

6

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

2.4

2.7

2.8

2.7

2.6

2.3

Interest coverage ratio (times)*7

4.5

4.0

3.4

3.0

3.0

3.7

1,271,406

1,271,406

1,271,406

1,271,406

1,271,406

1,271,406

20,49819,89220,80520,93821,302

20,811Part

4

Social Responsibility and Management Organisation

Interest-bearing debt/EBITDA (times)

Others:Number of outstanding shares (thousands)
Number of employees*1 The U.S. dollar amounts have been translated, for convenience only, at ¥82 = $1, the prevailing exchange rate on the Tokyo Foreign Exchange Market as of 31st March 2012.
*2 From the second quarter of the fiscal year ended 31st March 2007, consolidated results of Hanshin Electric Railway Co., Ltd. are included as a result of management integration,in the scope of consolidation of the Group.
*3 EBITDA = operating income + depreciation expenses + amortisation of goodwill attendant on the management integration of Hankyu and Hanshin
EBITDA figures are rounded to the nearest ¥100 million.
Figures in 2007/3 were calculated assuming the management integration had entered effect from the beginning of the term.
4* ROA = ordinary income/total assets (average of period-start and period-end totals)
5* ROE = net income/equity (average of period-start and period-end totals)*6 D/E ratio = interest-bearing debt/equity*7 Interest coverage ratio = (operating income + interest and dividend income)/interest expense*8 EBITDA is calculated assuming the management integration at the beginning of the term.

5

Financial Section and Corporate Data

Annual Report 2012

Part

77

Consolidated Financial Review

Analysis of Operating Results for the Year Ended 31st March 2012
Revenues from operations for the year under review increasedby ¥10,933 million (1.7%) year-on-year, to ¥649,703 million. The
adverse impact of the Great East Japan Earthquake was substantial, particularly on the Travel and Hotels businesses, while in theEntertainment and Communications business, revenues wereaffected by the failure of the Hanshin Tigers baseball team toadvance to the Climax Series, as well as by a decline in revenues
from cable television operations due to a decrease in the numberof contracts for work to prevent TV reception interference (as aresult of the ending of analogue broadcasting). However, a strong
performance by our Real Estate business more than offset thesenegative factors, with condominium sales rising sharply over theprevious year.
Operating income posted a year-on-year increase of ¥9,065
million (14.0%), to ¥73,809 million, thanks to successful cost-cutting
initiatives by all the Group’s core businesses in addition to increased
sales of condominiums. For the fiscal year ended March 2012, thenegative impact of the Great East Japan Earthquake is estimated toamount to ¥7,300 million on revenues from operations and ¥2,900

million on operating income.
Ordinary income rose ¥18,899 million (40.6%) year-on-year,to ¥65,393 million. This is attributable to an increase in equity inincome of affiliates following an increase in the Company’s equity
stake in H2O Retailing Corporation (an affiliated company under theequity method).
Net income increased sharply, by ¥21,183 million (117.2%)
year-on-year, to ¥39,252 million. This is attributable to a decrease inincome taxes — deferred as a result of the reversal of a portion ofdeferred tax assets and deferred tax liabilities stemming from a revision of the taxation system including a reduction in the corporate
income tax rate. This positive factor more than offset the postingas an extraordinary loss of a loss on impairment of fixed assets
associated with the acquisition of land for large-scale development
projects.
Summary of consolidated business results: please also see Message
from the Management (The year ended 31st March 2012 in review)on page 16.

Analysis of Operating Income(¥ million)

64,743

2011/3+10,933-1,179-687
Increase in selling, general and administrative expenses
Personnel expenses-89-593
Expense
-54
Taxes
+172
Depreciation and amortisation-121
Amortisation of goodwill
Increased revenues from operations

Increase in operating expenses and cost of sales of transportation

73,809 YoY difference

2012/3+9,065

Segment Information
The following table shows business performance for each core segment. For a review of these results, please refer to the page indicated at thefoot of the table.
(Millions of yen)
Urban Transportation

Real EstateEntertainment andCommunications

Travel andInternational
Transportation

HotelsRetailing

Other

Adjustments

Consolidated

Revenues from operations
2012/3

192,718

176,114102,31367,57164,09053,85331,334-38,293649,703

2011/3

192,947

152,730

103,40767,71065,22054,00843,910-41,164

638,770

Difference-229

23,384-1,093-139-1,129-154-12,575

2,871

10,933

YoY (%)

-0.1%

15.3%

-1.1%

-0.2%

-1.7%

-0.3%

-28.6%

7.0%

1.7%

2012/332,342

29,133

10,141

3,171

-269

1,333

761

-2,80473,8092011/329,37823,996

9,994

2,952

-639

713

450

-2,10364,743Difference

2,963

5,136

147

219

370

619

310

-700

9,065

YoY (%)

10.1%

21.4%

1.5%

7.4%

—

86.7%

68.9%

-33.3%

14.0%

Reference page

P.40

P.46

P.50

P.53

P.55

P.57

*

—

—

Operating income/loss*Regarding other businesses, in our domestic logistics operations we excluded Sanyo Jidosha Unso Co., Ltd. from the scope of consolidation, making it into an affiliate under the equity method. This resulted
in decreased revenues, but this factor was more than offset by improved earnings at Hankyu Hanshin Card Co., Ltd. thanks to reduced costs.

78 Annual Report 2012

Part 5 Financial Section and Corporate Data

Introduction

Review of Financial Position
2. Cash Flows

Total assets at the end of the fiscal year under review decreased by¥40,289 million from the previous term-end, to ¥2,274,380 million.
This was the result of a decrease in land and buildings for sale, as
well as a decline in property and equipment resulting from theposting of depreciation and amortisation.
Total liabilities decreased by ¥78,143 million from theprevious term-end to ¥1,749,578 million, due partly to a reduction
in interest-bearing debt.
Net assets increased ¥37,854 million from the previous
term-end to ¥524,801 million on an increase in retained earnings.
Equity came to ¥513,292 million, for an increase of ¥37,490
over the previous fiscal year-end. This was the result of an increase
in retained earnings due to the posting of net income and otherfactors.
As a result, the equity ratio stood at 22.6% and ROE at
7.9%.

Cash and cash equivalents increased by ¥979 million from theprevious term-end, to ¥23,572 million.
Net cash provided by operating activities amounted to¥124,525 million, net cash used in investing activities amounted to¥44,295 million, and net cash used in financing activities amounted
to ¥78,978 million.
The following is an analysis of year-on-year changes ineach cash flow category.

Part

1

Management Report Section

1. Assets, Liabilities and Net Assets(1) Cash Flows from Operating Activities
Net cash provided by operating activities increased by ¥21,273
million from the previous fiscal year. This was due to an increase inoperating income and a decrease in inventories accompanying thesale of condominiums.

Part(2) Cash Flows from Investing Activities

2

Special Feature

Net cash used in investing activities declined by ¥18,221 million.
This was due to an increase in revenue as a result of the receipt ofcontributions for construction, as well as a decline in expenditure
for the purchases of property and equipment.

(3) Cash Flows from Financing Activities
Net cash used in financing activities increased by ¥39,434 million, duepartly to increased expenditures for repayment of long-term debt.
Part

3

Trends in Cash Flow Indicators
2009/3

2010/3

2011/3

2012/3Equity ratio (%)

19.9

20.1

20.1

20.6

22.6

Equity ratio (%) (market value basis)

23.2

24.4

23.4

20.9

20.0

Cash flows/interest-bearing debt ratio (times)

17.0

11.7

8.7

12.1

9.5

Interest coverage ratio (times)

4.0

3.4

3.0

3.0

3.7

Core Businesses: Overview and Outlook

2008/3Part

4

3. Fund Procurement

rebuilding of the Umeda Hankyu Building. The ratio of consolidated
interest-bearing debt divided by EBITDA (operating income before
amortisation), the benchmark we use for assessing the soundnessof our financial position, stood at 8.9 times (9.8 times in the previous fiscal year).

Part

5

Financial Section and Corporate Data

During the fiscal year under review the outstanding balance ofinterest-bearing debt (consolidated basis) declined by ¥68,017
million to ¥1,183,647 million at the end of the fiscal period. This
reflected the fact that total net cash provided by operating
activities outweighed capital expenditure outlays, including for theSocial Responsibility and Management Organisation

Notes:
Equity ratio = equity/total assets
Equity ratio (market value basis) = market capitalisation/total assets
Cash flows/interest-bearing debt ratio = interest-bearing debt/operating cash flows
Interest coverage ratio = (operating income + interest and dividend income)/interest expense* Each index has been calculated in accordance with financial indicators on a consolidated basis.
* Market capitalisation has been calculated as follows: year-end closing stock price X total shares issued at year-end (after deduction of treasury stock).

Annual Report 201279

Consolidated Financial Review

Consolidated Capital Expenditure and Depreciation and Amortisation
Capital expenditure in the fiscal year under review (consolidated basis; including intangible assets) decreased by ¥13,163 million (19.2%) year-onyear, to ¥55,267 million.
The following is a breakdown for each business segment.

2012/3YoY

Urban Transportation

20,333 (Millions of yen)

-29.5 %

Real Estate

27,363-2.7

Entertainment and Communications

4,434

-13.2

Travel and International Transportation

995

-68.3

Hotels

1,305

22.0

Retailing

724

-8.7

Other

324

-64.0

Total

55,480-18.4

Adjustments

-213

—

Consolidated

55,267-19.2< Urban Transportation >< Travel and International Transportation >With a focus on safety and service improvement, the railway business invested in elevated tracks (to allow lines to cross over roads
without the need for level crossings) and general facility improvements, works to make stations barrier-free and in rebuilding andimproving existing rolling stock. In bus and taxi businesses, vehicles
were upgraded.

In the travel and international transportation business, Hankyu
Travel International Co., Ltd. carried out interior refurbishing work inline with the relocation of its head office.

< Real Estate >In the real estate leasing business, Hankyu Corporation continued
the rebuilding works at Umeda Hankyu Building and the construction of the Shin-Osaka Hankyu Building, as well as renovation andrepair work on rental buildings operated by Hankyu Corporation,
Hanshin Electric Railway Co., Ltd., and Hankyu Realty Co., Ltd.

< Entertainment and Communications >In the communication and media business, investments targeted
acquisition of cable TV terminal equipment (Bay Communications
Inc.). In addition, in the stage revue business, Hankyu Corporation
financed improvement and renewal of the Takarazuka Grand
Theatre.

80 Annual Report 2012

< Hotels >In the hotels business, Hankyu Hanshin Hotels Co., Ltd. newly
constructed the REMM Kagoshima hotel and carried out interior
refurbishing work on other hotels.

< Retailing >In the retailing business, Hankyu Retails Corporation constructed
new directly operated outlets, including the Cleduple Umeda store
and the a.d.r.e.s. Nishinomiya-Kitaguchi store.
Depreciation and amortisation decreased by ¥2,700 million (4.5%)
from the previous year (consolidated basis) to ¥56,968 million.

Part 5 Financial Section and Corporate Data
Business Risks
Introduction

The various categories of risk to which the business performance, stock price, financial position and other aspects of operations of the Hankyu
Hanshin Holdings Group are subject are detailed below. Nevertheless, these dangers do not encompass all risks attendant on Group activities andthere are risks other than those stated below which are difficult to foresee.
Information about future events that appears in this report was determined by the Group to be current as of 31st March 2012.

Legal Risk

Interest-Bearing Debt

2

Part

3

Decline in the Market Value of Assets
Held by Members of the Hankyu
Hanshin Holdings GroupIn the case of a substantial decline in the market value of inventory
assets, property and equipment and intangible assets, investment
securities, and other assets, the recording of impairment losses orvaluation losses would likely have a negative impact on the earnings performance and financial position of the Hankyu Hanshin
Holdings Group.

Part

4

Social Responsibility and Management Organisation

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

Annual Report 2012

Part

5

Financial Section and Corporate Data

The balance of interest-bearing debt held by the Group as of theend of March 2012, on a consolidated basis, was ¥1,183,647 million.
As a result of the acquisition of shares in Hanshin Electric
Railway Co., Ltd. through a successful public tender offer (takeoverbid) on 27th June 2006, Hanshin Electric Railway has become aconsolidated subsidiary of Hankyu Holdings. This acquisition has
resulted in an increase in the balance of interest-bearing debt of
the Group. On the other hand, management integration between
the Hankyu Holdings Group and Hanshin Electric Railway Grouphas increased cash flows, so the Group is not expected to have any
significant difficulty in repaying its debts.
The Group will take measures to diversify its fund procurement methods to deal with an increase in interest-bearing debt
resulting from the integration, and will use all possible means tominimise the negative impact of interest rate movements. But inthe unlikely event that interest rates rise suddenly and in excess of
our projections, this could exert an adverse effect on the businessperformance and financial position of the Group.

PartCore Businesses: Overview and Outlook

The Group seeks to utilise its working assets more effectively tofacilitate the development of areas served by Hankyu and Hanshinlines. To raise its asset effectiveness, the Group is pursuing thefollowing initiatives: rebuilding of the Umeda Hankyu Building;development of the “Umekita” (Osaka Station North District) Phase
I Development Area Project; and further development of theInternational Culture Park “Saito” (a new town). These projects are
all seen as key to the Group’s future growth, and management
will be working to complete them as soon as possible. However,in the event of rapid and major changes in the business environment, affecting land prices or urban development plans, thebusiness performance and financial position of the Group could be
adversely affected.

1

Special Feature

Progress in Large-Scale Development
Projects

Part

In order to ensure greater convenience for users of the Hokushin
Kyuko Railway Line (run by consolidated subsidiary Hokushin
Kyuko Railway Co., Ltd.), Hankyu Corporation (a consolidated
subsidiary) has agreed to a plan transferring railway facilities heldby Hokushin Kyuko Railway to Kobe Rapid Transit Railway Co., Ltd.
(a consolidated subsidiary) and retaining railway business as atier 2 railway operator. To facilitate the plan, in fiscal 2003 Hankyu
Corporation provided Kobe Rapid Transit Railway with financing forpart of the funds necessary to purchase the facilities.
In September 2007, Kobe Electric Railway Co., Ltd. (anequity method affiliate), temporarily suspended support for the
rehabilitation of Hokushin Kyuko Railway. To uphold the rehabilitation project, additional financing was extended to Hokushin Kyuko
Railway by Hankyu Corporation.
We will continue to provide assistance to ensure that
Hokushin Kyuko Railway can conduct smooth and efficient operations as a tier 2 railway operator. However, the business performance and financial position of the Group could be affected bychanges in this plan.

Management Report Section

In accordance with the stipulations of Article 3 of the Railway
Business Law, the Group must obtain separate permissions, from
the Ministry of Land, Infrastructure, Transport and Tourism (MLIT),
for each category of railway operations on each route that it
intends to operate. Moreover, under Article 16 of the Law, a railway
operator must obtain the Ministry’s approval for the passenger
fares it intends to set and on each occasion when it wishes tochange the fares. Consequently, there is a certain risk that theGroup’s railway operations may be constrained in some way by the
Ministry’s administration of these regulations.

Affiliated Companies

81Business Risks

Other Risks and Countermeasures
The following is the Group’s perspective provided in response to questions received from our investors in relation to the risks attendant on ourbusiness. Information about future events that appears in this report was determined by the Group to be current as of 31st March 2012 and is notintended to negate the possibility of these risks impacting the business performance, financial position and other aspects of operations of the Group.

Economic Environment-related Risks

Interest Rate Fluctuations
Long-term debt and corporate bonds are comprised mainly of
long-term financing needed for capital expenditure programs,
while short-term borrowings and commercial paper are comprised
mainly of financing that is associated with short-term operating
capital. Some floating exchange rate borrowings and corporate
bonds are exposed to interest rate fluctuation risk (market risk);
however, we lock in interest rates by concluding interest rate swap
and option contracts to avoid the risks attendant upon interest rate
fluctuations.
Nevertheless, in the unlikely event that interest rates wereto rise dramatically, the business performance and financial position of the Group could be adversely affected.

Changes in the Financing Environment
Cash-flow management plans are made in a timely manner for the
purpose of appropriately managing funds. By doing so, we avoid
liquidity risks which could render the Group incapable of meeting
payment deadlines. Additionally, the centralisation of Group funds
through the use of cash pool systems and other mechanisms
facilitates the consolidation and efficient usage of surplus funds byGroup companies, while the establishment of back-up lines suchas commitment lines enables the Group to obtain finance fromfinancial institutions at a moment’s notice. We also disperse ourtransaction partners over several financial institutions to maintainan appropriate balance of direct and indirect financing. Thus, weensure liquidity by diversifying the methods we use for obtaining
finance.

Business-related Risks

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

Safety Management
In the Group’s core railway business, our passengers would suffer
greatly if an accident were to occur. We are keenly aware of the
responsibility entrusted to us for our passengers’ lives. Therefore,
the cornerstone of our business is ensuring that accidents do notoccur due to negligence on our part.
Accordingly, the Group has upgraded all aspects of its
safety capabilities in the conviction that putting passengers firstand prioritising safety come above all else. We are engaged ina wide variety of endeavours for ensuring that we go one stepfurther to offer our passengers even safer transportation.
(For safety measures in our Urban Transportation business, pleaserefer to Page 65.)

Natural Disasters and Acts of Terrorism
Foreign Currency Market Fluctuations
Foreign exchange rate contracts, currency swap contracts and currency option contracts are employed to avoid the exchange rate
fluctuation risks attendant on some foreign currency-denominatedassets and liabilities. Although these derivative transactions involvesome credit risk, such as the risk of being no longer able to enjoy
the fruits of ongoing trading due to a transaction partner failingto meet its obligations under the terms and conditions of thecontract or going bankrupt, we avoid such risk by engaging intransactions only with highly rated institutions.
The Group’s overseas sales constitute less than 10% of its
consolidated operating revenues.

82 Annual Report 2012

The Group’s businesses and transportation network infrastructure
could be significantly damaged by natural disasters such as earthquakes, typhoons and floods or acts of terrorism.
Hankyu Corporation and Hanshin Electric Railway Co.,
Ltd. have installed rain, wind and river water gauges in the areas
along our railway lines for collecting observation data. We also use
real-time information provided by meteorological observatories
to ensure the safe operation of our trains. If an earthquake of
JMA seismic intensity 4 or above is detected by a seismographor predicted by an earthquake early warning system, all trainsthat operate in the zone in question will immediately preparePart 5 Financial Section and Corporate Data

Introduction

Other Risks

Changes to Accounting Standards
In line with ongoing revisions to accounting standards in Japanto achieve convergence with International Financial ReportingStandards (IFRS), the government of Japan is considering requiring listed companies to apply IFRS in their consolidated financial
statements*.
In the future, changes to accounting standards and application of IFRS could adversely affect the Group’s financial positionand earnings performance. This is due to new accounting rules
regarding retirement benefits, which are now subject to revision,and the shift from amortisation to impairment of goodwill.
Currently, we are working closely with our independent
auditor KPMG AZSA LLC to deal with future issues that may arise
from adopting the new accounting standards and IFRS.
Furthermore, due to the revision of the accounting
standards for retirement benefits, effective from the fiscal year
ending March 2014, it will be mandatory for unrecognised items(unrecognised actuarial differences and unrecognised prior service
costs) to be recognised immediately on the consolidated balance
sheets. However, since the total amount of unrecognised items
as of the end of the fiscal year under review was ¥7,701 million,
any impact of immediate recognition on net assets would beconsidered immaterial.

Part

2

Special Feature

Infectious Disease Outbreaks and Epidemics

Part

3

Core Businesses: Overview and Outlook

Group businesses could be significantly affected if economic activities were restricted or customers refrained from going out due toan outbreak or epidemic of an infectious disease such as SARS
(Severe Acute Respiratory System) or H1N1 flu. In fact, the Groupwas significantly impacted by customers refraining from goingout during the fiscal 2010 H1N1 flu epidemic. The main businesses
affected at this time were Urban Transportation, Travel and Hotels.
In response to the spread of infectious diseases such as
H1N1 flu, the Group has developed a Business Continuity Plan
(BCP) for each division, under the direction of core companies.
During the H1N1 outbreak in 2009 and 2010, ongoing surveys into
infection rates among employees and their families in each division gave us a good idea of the scale of risk, minimising the impactof H1N1 on our business. Also, in the railway business, which is aparticularly important part of the social infrastructure, we drew upplans in advance to minimise the impact of any explosive spread ofthe disease, including multiple schedules assuming a shortage ofrailway staff.

1

Management Report Section

for emergency stopping. For possible acts of terrorism, or wheresuspicious items or persons are identified or damage has occurred,
we have risk-graded management response systems.
We have also developed emergency response systems forminimising the social impact in the unlikely event of an incident
which causes long-term disruption to transit services or results in agreat number of casualties.

Part* In its interim report on the handling of international accounting standards in Japan madepublic in June 2009, the Financial Services Agency said it planned to make a decision byaround 2012 on whether adoption of International Financial Reporting Standards (IFRS)
should be mandatory in Japan, effective from 2015 or 2016. However, the former Ministerfor Finance Services Shozaburo Jimi on 21st June 2011 expressed doubt that IFRS could be
enforced by the year ending March 2015, and added that if the standards were made mandatory, a changeover period of about 5-7 years after the announcement would be needed.

Part

4

Social Responsibility and Management Organisation
Part

5

Financial Section and Corporate Data

Annual Report 201283

Consolidated Balance Sheets

As of 31st March 2011 and 2012

Millions of yen
2011
2012

Thousands of
U.S. dollars
2012

Assets:Current assets:
Cash and deposits [4. NOTES (1) ③] ..........................................................................................................................

¥

23,947¥24,280$296,098

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

71,281

73,404895,171

Land and buildings for sale .............................................................................................................................................

131,782

118,415

1,444,085

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

7,949

7,219

88,037Work in progress ......................................................................................................................................................................

4,668

4,288

52,293

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

3,949

3,858

47,049Deferred tax assets .................................................................................................................................................................

13,1607,625

92,988Other ...............................................................................................................................................................................................

29,42236,445444,451

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

(322)

(251)

(3,061)

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

285,837

275,286

3,357,146

Buildings and structures—net [4. NOTES (1) ③] .......................................................................................

602,710

578,925

7,060,061

Machinery, equipment and vehicles—net [4. NOTES (1) ③].............................................................

53,24247,404

578,098

Land [4. NOTES (1) ③ and ⑤] ...............................................................................................................................

896,085

892,356

10,882,390

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

132,243

131,434

1,602,854

Other—net [4. NOTES (1) ③] .................................................................................................................................

15,93918,246

222,512

Total property and equipment [4. NOTES (1) ① and ②].....................................................................

1,700,220

1,668,366

20,345,927

Goodwill................................................................................................................................................................................

41,24838,437468,744

Other [4. NOTES (1) ② and ③] .............................................................................................................................

17,671

17,157

209,232

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

58,91955,594

677,976

Investment securities [4. NOTES (1) ③ and ④]..........................................................................................

221,004

227,417

2,773,378

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

4,170

4,002

48,805

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

45,84844,321

540,500

Noncurrent assets:
Property and equipment:

Intangible assets:

Investments and other assets:

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

(1,332)(608)(7,415)

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

269,691

275,133

3,355,280

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

2,028,832

1,999,093

24,379,183

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

2,314,669

2,274,380

27,736,341

84 Annual Report 2012

Part 5 Financial Section and Corporate Data

Introduction

Thousands of
U.S. dollars
2012

Millions of yen
2011
2012
Liabilities:
Current liabilities:
Trade payables ..........................................................................................................................................................................

¥

40,404¥

43,410$529,390

297,464

316,545

3,860,305

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

40,00035,000426,829

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

3,865

4,170

50,854

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

18,90821,275

259,451

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

3,960

3,702

45,146

Other [4. NOTES (1) ③].......................................................................................................................................................

142,621

142,937

1,743,134

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

547,227

567,043

6,915,159

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

127,000

102,000

1,243,902

Long-term debt [4. NOTES (1) ③] ...............................................................................................................................

780,908

720,782

8,790,024

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

157,577

147,840

1,802,927

Part

1Management Report Section

Short-term borrowings [4. NOTES (1) ③] ...............................................................................................................

Long-term liabilities:

6,667

5,493

66,988Provision for retirement benefits...................................................................................................................................

58,77059,194

721,878

Provision for directors’ retirement benefits ............................................................................................................

767

875

10,671Long-term deferred contribution for construction ...........................................................................................

15,862

21,555

262,866

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

132,939

124,792

1,521,854

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

1,280,495

1,182,535

14,421,159

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

1,827,722

1,749,578

21,336,317

Part

2

Special Feature

Deferred tax liabilities related to land revaluation [4. NOTES (1) ⑤] .....................................................

Net assets:
Shareholders’ equity:
99,474

99,474

1,213,098

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

150,027

150,027

1,829,598

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

243,264

276,059

3,366,573

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

(4,036)(4,140)(50,488)

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

488,729

521,421

6,358,793

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

(11,936)(8,044)(98,098)

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

(232)

(131)

(1,598)

Revaluation reserve for land [4. NOTES (1) ⑤] ....................................................................................................

1,706

2,972

36,244Foreign currency translation adjustments ..............................................................................................................

(2,464)(2,924)(35,659)

Total accumulated other comprehensive income ............................................................................................

(12,927)(8,128)(99,122)

Subscription rights to shares ................................................................................................................................................

—

32

390

Part

3

Core Businesses: Overview and Outlook

Common stock .........................................................................................................................................................................

Accumulated other comprehensive income:

11,144

11,476

139,951

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

486,947

524,8016,400,012

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

2,314,669

2,274,380

27,736,341

4Social Responsibility and Management Organisation

Minority interests [4. NOTES (1) ⑤] ..................................................................................................................................

Part

Part

5

Financial Section and Corporate Data

Annual Report 201285

Consolidated Statements of Income

Years ended 31st March 2011 and 2012

Millions of yen
2011
2012

Thousands of
U.S. dollars
2012

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

¥638,770¥649,703$7,923,207

Costs of revenues from operations:Operating expenses and cost of sales of transportation .....................................................................................................
Selling, general and administrative expenses [4. NOTES (2) ①]....................................................................................
Total costs of revenues from operations [4. NOTES (2) ②]...............................................................................................
Operating income ...............................................................................................................................................................................................

541,473
32,552574,026
64,743542,653
33,240575,894
73,8096,617,720
405,366
7,023,098
900,110Non-operating income:Interest income ..............................................................................................................................................................................................
Dividends income ........................................................................................................................................................................................
Equity in income of affiliates..................................................................................................................................................................
Miscellaneous income ...............................................................................................................................................................................
Total non-operating income .................................................................................................................................................................

92
1,082
3,309
2,487
6,972

94
1,184
10,0243,501
14,805

1,146
14,439122,244
42,695
180,549

Non-operating expenses:
Interest expenses ..........................................................................................................................................................................................
Miscellaneous expenses ...........................................................................................................................................................................
Total non-operating expenses .............................................................................................................................................................
Ordinary income ..................................................................................................................................................................................................

22,222
2,999
25,222
46,494

20,5582,662
23,221
65,393

250,70732,463
283,183
797,476

Extraordinary income:Gain on sales of noncurrent assets [4. NOTES (2) ③] ...........................................................................................................
Gain on contributions for construction ..........................................................................................................................................
Other.....................................................................................................................................................................................................................
Total extraordinary income ....................................................................................................................................................................

354
12,0891,059
13,504619
10,957
1,487
13,064

7,549
133,622
18,134
159,317Extraordinary loss:
Loss on sales of noncurrent assets [4. NOTES (2) ④]............................................................................................................
Loss on reduction of noncurrent assets .........................................................................................................................................
Loss on retirement of noncurrent assets [4. NOTES (2) ⑤] ..............................................................................................
Loss on impairment of fixed assets [4. NOTES (2) ⑥] ..........................................................................................................
Non-recurring depreciation on noncurrent assets [4. NOTES (2) ⑦] .........................................................................
Special allowance for doubtful receivables .................................................................................................................................
Special reserve for investment loss ...................................................................................................................................................
Other.....................................................................................................................................................................................................................
Total extraordinary loss .............................................................................................................................................................................
Income before income taxes and minority interests .................................................................................................................
Income taxes—current....................................................................................................................................................................................
Income taxes—deferred.................................................................................................................................................................................
Total income taxes..............................................................................................................................................................................................
Income before minority interests ............................................................................................................................................................
Minority interests in income........................................................................................................................................................................
Net income ...............................................................................................................................................................................................................

502
11,175
1,232
4,261
3,083
16
78
6,887
27,23732,7606,054
7,975
14,03018,730661
18,06858
10,962499
20,212—43
63,255
35,03843,4196,074(2,855)
3,219
40,200947
39,252707
133,683
6,085
246,488—524
73
39,695427,293
529,500
74,073(34,817)
39,256490,244
11,549478,683

Consolidated Statements of Comprehensive Income

Years ended 31st March 2011 and 2012

Millions of yen
2011
2012
Income before minority interests ............................................................................................................................................................
Other comprehensive income:
Valuation difference on available-for-sale securities ..............................................................................................................
Deferred gains or losses on hedges ..................................................................................................................................................
Revaluation reserve for land ..................................................................................................................................................................
Foreign currency translation adjustments ....................................................................................................................................
Share of other comprehensive income of associates accounted for using equity method .........................
Total other comprehensive income [4. NOTES (3) ①]......................................................................................................
Comprehensive income..................................................................................................................................................................................
(Details)
Comprehensive income attributable to owners of the parent .......................................................................................
Comprehensive income attributable to minority interests ...............................................................................................

86 Annual Report 2012

Thousands of
U.S. dollars
2012¥18,730¥40,200$490,244(2,455)611—(721)(1,435)(4,002)
14,728

2,756
96
1,136
(504)
1,306
4,792
44,992

33,6101,171
13,854(6,146)15,92758,439548,683

14,092635

44,108884

537,902
10,780Part 5 Financial Section and Corporate Data
Consolidated Statements of Changes in Net Assets

Shareholders’ equity:
Common stock:
Balance at beginning of year .............................
Changes of items during the period:
Total changes of items during
the period ...............................................................
Balance at end of year ............................................

Less treasury stock, at cost:
Balance at beginning of year .............................
Changes of items during the period:
Purchase of treasury stock ..............................
Disposal of treasury stock ................................
Changes in equity in affiliates accounted
for by equity method-treasury stock .....
Total changes of items during
the period ...............................................................
Balance at end of year ............................................

—
99,474—
99,474—
1,213,098

150,027

150,027

1,829,598—
150,027—
150,027—
1,829,598

232,135

243,264

2,966,634(6,337)18,068(6,334)
39,252(77,244)478,683

250
(13)
(838)

53
(9)
(166)

646
(110)
(2,024)

11,129243,264

32,795
276,059

399,939
3,366,573(3,808)(4,036)(49,220)

(270)
41

(40)
21

(488)
256

—

(84)

(1,024)(228)(4,036)(103)(4,140)(1,256)(50,488)477,829488,729

5,960,110(6,337)18,068(6,334)
39,252(77,244)478,683

250
(270)
28
(838)

53
(40)
12
(166)

646
(488)
146
(2,024)—(84)(1,024)

10,900488,729

32,692
521,421398,683
6,358,793(8,075)(11,936)(145,561)(3,860)3,891

47,451(3,860)(11,936)

3,891(8,044)47,451(98,098)

Revaluation reserve for land:
Balance at beginning of year .............................
Changes of items during the period:
Net changes of items other thanshareholders’ equity .........................................
Total changes of items during
the period ...............................................................
Balance at end of year ............................................
Foreign currency translation
adjustments:
Balance at beginning of year .............................
Changes of items during the period:
Net changes of items other thanshareholders’ equity .........................................
Total changes of items during
the period ...............................................................
Balance at end of year ............................................
Total accumulated othercomprehensive income:Balance at beginning of year .............................
Changes of items during the period:
Net changes of items other thanshareholders’ equity .........................................
Total changes of items during
the period ...............................................................
Balance at end of year ............................................
Subscription rights to shares:
Balance at beginning of year ..................................
Changes of items during the period:
Net changes of items other thanshareholders’ equity ..............................................
Total changes of items during
the period ....................................................................
Balance at end of year .................................................
Minority interests:
Balance at beginning of year ..................................
Changes of items during the period:
Net changes of items other thanshareholders’ equity ..............................................
Total changes of items during
the period ....................................................................
Balance at end of year .................................................

(845) ¥

(232)$

(2,829)

612

101

1,232

612
(232)

101
(131)

1,232
(1,598)

1,956

1,706

20,805

(250)

1,265

15,427

(250)
1,706

1,265
2,972

15,42736,244(1,736)(2,464)(30,049)

(727)

(459)

(5,598)(727)(2,464)(459)(2,924)(5,598)(35,659)(8,700)(12,927)(157,646)(4,226)

4,798

58,512(4,226)(12,927)

4,798(8,128)58,512(99,122)

—

—

—

—

32

390

—
—

32
32

390
390

11,505

11,144

135,902

(360)

331

4,037

(360)
11,144331
11,476

4,037
139,951

480,633

486,947

5,938,378(6,337)18,068(6,334)
39,252(77,244)478,683

250
(270)
28
(838)

53
(40)
12
(166)

646
(488)
146
(2,024)—(84)(1,024)(4,586)

5,162

62,951

6,313
486,947

37,854
524,801

461,634
6,400,012

Part

1

Part

2

Part

Annual Report 2012

3

Part

4

Part

5

Financial Section and Corporate Data

Total net assets:
Balance at beginning of year ..................................
Changes of items during the period:
Dividends from surplus ..........................................
Net income ....................................................................
Reversal of revaluation reserve
for land...........................................................................
Purchase of treasury stock ...................................
Disposal of treasury stock .....................................
Change in scope of consolidation ..................
Change in equity in affiliates accounted
for by equity method-treasury stock ..........
Net changes of items other thanshareholders’ equity ..............................................
Total changes of items during
the period ....................................................................
Balance at end of year .................................................

¥

Social Responsibility and Management Organisation

Accumulated other comprehensive income:
Valuation difference on available-forsale securities:
Balance at beginning of year .............................
Changes of items during the period:
Net changes of items other thanshareholders’ equity .........................................
Total changes of items during
the period ...............................................................
Balance at end of year ............................................

$1,213,098

Core Businesses: Overview and Outlook

Total shareholders’ equity:
Balance at beginning of year .............................
Changes of items during the period:
Dividends from surplus .....................................
Net income ...............................................................
Reversal of revaluation reserve forland .............................................................................
Purchase of treasury stock ..............................
Disposal of treasury stock ................................
Change in scope of consolidation .............
Changes in equity in affiliates accounted
for by equity method-treasury stock .....
Total changes of items during
the period ...............................................................
Balance at end of year ............................................

¥ 99,474

Deferred gains or losses on hedges:
Balance at beginning of year .............................
Changes of items during the period:
Net changes of items other thanshareholders’ equity .........................................
Total changes of items during
the period ...............................................................
Balance at end of year ............................................

Thousands of
U.S. dollars
2012

Special Feature

Retained earnings:
Balance at beginning of year .............................
Changes of items during the period:
Dividends from surplus .....................................
Net income ...............................................................
Reversal of revaluation reserve forland .............................................................................
Disposal of treasury stock ................................
Change in scope of consolidation .............
Total changes of items during
the period ...............................................................
Balance at end of year ............................................

¥ 99,474

Millions of yen
2011
2012

Management Report Section

Capital surplus:
Balance at beginning of year .............................
Changes of items during the period:
Total changes of items during
the period ...............................................................
Balance at end of year ............................................

Thousands of
U.S. dollars
2012

Introduction

Millions of yen
2011
2012

Years ended 31st March 2011 and 201287

Consolidated Statements of Cash Flows

Years ended 31st March 2011 and 2012

Millions of yen
2012
2011
Cash flows from operating activities:
Income before income taxes and minority interests .............................................................................................................
Depreciation and amortisation ............................................................................................................................................................
Loss on impairment of fixed assets ...................................................................................................................................................
Non-recurring depreciation on noncurrent assets..................................................................................................................
Amortisation of goodwill .........................................................................................................................................................................
Equity in (income) losses of affiliates ................................................................................................................................................
Increase (decrease) in provision for retirement benefits .....................................................................................................
Increase (decrease) in allowance for doubtful receivables ................................................................................................
Increase (decrease) in reserve for investment loss ..................................................................................................................
Interest and dividend income ..............................................................................................................................................................
Interest expense ............................................................................................................................................................................................
Loss (gain) on sales of noncurrent assets ......................................................................................................................................
Loss on reduction of noncurrent assets .........................................................................................................................................
Loss on retirement of noncurrent assets .......................................................................................................................................
Gain on contributions for construction ..........................................................................................................................................
Decrease (increase) in trade receivables ........................................................................................................................................
Decrease (increase) in inventories .....................................................................................................................................................
Increase (decrease) in trade payables ..............................................................................................................................................
Increase (decrease) in other liabilities ..............................................................................................................................................
Other.....................................................................................................................................................................................................................
Subtotal ..............................................................................................................................................................................................................
Interest and dividends received ..........................................................................................................................................................
Interest paid .....................................................................................................................................................................................................
Income taxes (paid) refunded...............................................................................................................................................................
Net cash provided by operating activities ....................................................................................................................................
Cash flows from investing activities:
Purchases of noncurrent assets ...........................................................................................................................................................
Proceeds from sales of noncurrent assets.....................................................................................................................................
Purchases of investment securities ...................................................................................................................................................
Proceeds from sale of investment securities ...............................................................................................................................
Proceeds from sales of investments in subsidiaries resulting in change in scope of consolidation ........
Net decrease (increase) in short-term loans receivable .......................................................................................................
Long-term loans advanced ....................................................................................................................................................................
Proceeds from collection of long-term loans receivable ....................................................................................................
Receipt of contributions for construction .....................................................................................................................................
Other.....................................................................................................................................................................................................................
Net cash used in investing activities.................................................................................................................................................
Cash flows from financing activities:
Net increase (decrease) in short-term borrowings ..................................................................................................................
Proceeds from long-term debt ............................................................................................................................................................
Repayment of long-term debt .............................................................................................................................................................
Proceeds from new bonds issued......................................................................................................................................................
Redemption of bonds................................................................................................................................................................................
Dividends paid ...............................................................................................................................................................................................
Dividends paid to minority shareholders of consolidated subsidiaries......................................................................
Other.....................................................................................................................................................................................................................
Net cash used in financing activities ................................................................................................................................................
Effect of exchange rate changes on cash and cash equivalents .......................................................................................
Increase (decrease) in cash and cash equivalents........................................................................................................................
Cash and cash equivalents at beginning of year ..........................................................................................................................
Increase in cash and cash equivalents from newly consolidated subsidiary ...........................................................
Cash and cash equivalents at end of year..........................................................................................................................................

88 Annual Report 2012

Thousands of
U.S. dollars
2012¥ 32,760
59,669
4,261
3,083
2,684
(3,309)1,021(1,667)(435)(1,174)22,222
147
11,175
1,232(12,089)
9,460(3,242)(6,511)(3,522)
12,403
128,170
2,578(22,446)(5,051)
103,252¥ 43,419
56,96820,212—2,806(10,024)
329
(635)
(352)
(1,278)20,558(567)
10,962499(10,957)(5,153)
15,316
3,184(4,328)5,418
146,380
2,678(20,815)(3,717)
124,525$ 529,500
694,732
246,488—
34,220(122,244)
4,012(7,744)(4,293)(15,585)
250,707(6,915)
133,683
6,085(133,622)(62,841)
186,780
38,829(52,780)
66,073
1,785,122
32,659(253,841)(45,329)
1,518,598(79,398)
4,578(4,749)
331
—
29
(127)
81
17,220(482)(62,516)(76,901)
6,291(3,185)2,597(937,817)
76,720(38,841)
31,671

602

7,341

184
(340)
1,291
20,5304,634(44,295)

2,244(4,146)
15,744
250,366
56,512(540,183)(9,016)76,731(106,059)
31,795(25,000)(6,337)(319)(1,337)(39,544)(715)
474
21,440677
22,592

4,153
79,960(124,695)
9,941(40,000)(6,334)(314)(1,689)(78,978)(483)
767
22,592
212
23,57250,646975,122(1,520,671)
121,232(487,805)(77,244)(3,829)(20,598)(963,146)(5,890)9,354
275,5122,585
287,463

Part 5 Financial Section and Corporate Data
Notes to the Consolidated Financial Statements
Introduction

1. FRAMEWORK FOR PREPARING CONSOLIDATED FINANCIAL STATEMENTS(1) Method of preparation for consolidated financial statements
The Company’s consolidated financial statements were prepared inaccordance with the “Regulations Concerning the Terminology, Forms
and Preparation Method of Consolidated Financial Statements” (Finance
Ministry Ordinance No. 28 of 1976).

(3) Special measures to ensure the appropriateness of consolidated
financial statements and other reports
The Company makes special efforts to ensure the appropriateness of its

Part

1

Management Report Section(2) Audit verification
The Company’s consolidated financial statements for the fiscal year underreview (1st April 2011 to 31st March 2012) were audited by KPMG AZSA
LLC, as per Article 193-2 (1) of the Financial Instruments and Exchange Act.

consolidated financial statements and other reports. In addition to subscribing to related publications, it has joined the Financial AccountingStandards Foundation and participates in seminars and other events heldby the Foundation, audit firms and other relevant organisations to establish a system for understanding the accounting standards in detail andresponding suitably to changes made to them. The Company also compiles
and provides common manuals for preparing the consolidated financial
information on a group basis, and arranges training courses for accounting
staff at affiliates.
(4) Translation into U.S. dollars
The U.S. dollar amounts have been translated, for convenience only, at¥82 = $1, the prevailing exchange rate on the Tokyo Foreign Exchange
Market as of 31st March 2012.

2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
cost method, rather than the equity method because the total amounts of
their net income or loss, retained earnings and other figures are limited, andthe effect on the consolidated financial statements as a whole is negligible.

햳 Names of major nonconsolidated subsidiaries
Hankyu Mediax Co., Ltd.
Nonconsolidated subsidiaries have been excluded from the scope of
consolidation because the total amounts of their entire assets, sales, net
income or loss, retained earnings, and other figures are limited, and theeffect on the consolidated financial statements as a whole is negligible.

(4) Items related to accounting treatment and standards
햲 Valuation standards and method for major assets(a) Securities
Available-for-sale securities
Available-for-sale securities with fair market values:
The market value method is applied based on the market price etc. at the
fiscal year end. (Related valuation differences are directly included under
net assets and the cost of securities sold is determined by the moving average method.)
Available-for-sale securities without fair market values:
The moving average cost method is mainly applied.
For investments in limited liability investment partnerships and similar
investments, however, the Company’s share of assets held by such partnerships is recorded.

Part

3

Part

4

(b) Derivatives
The market value method is applied.
(c) Inventories
Land and buildings for sale:
The identified cost method is applied. (Balance sheet values are calculated
by writing down book values based on decreased profitability.)
Finished products and merchandise, work in progress, and materials andsupplies:
The moving average cost method is mainly applied. (Balance sheet
values are calculated by writing down book values based on decreased
profitability.)

Annual Report 2012

Part

5

Financial Section and Corporate Data햳 Names of nonconsolidated subsidiaries and affiliates for which equity
method is not applied
The nonconsolidated subsidiaries to which the equity method does not
apply (Hankyu Mediax Co., Ltd., etc.) and affiliates (OS Co., Ltd., etc.) use the(3) Items related to fiscal year-ends, etc. for consolidated subsidiaries
The account closing date for Hankyu Hanshin Express (Netherlands) B.V.,
Hankyu Hanshin Express (Deutschland) GmbH and 20 other consolidated
subsidiaries is 31st December. The consolidated financial statements havebeen prepared using the financial statements based on the closing date ofeach company, and major transactions conducted between the individualclosing dates and the consolidated closing date have been adjusted for asnecessary for the consolidation.

Social Responsibility and Management Organisation(2) Items related to application of equity-method accounting
햲 Number and names of affiliates for which equity method is applied
Number of affiliates for which equity method is applied—10.
Names of major equity-method affiliates
H2O Retailing Corporation, Kobe Electric Railway Co., Ltd., Toho Co., Ltd.,Tokyo Rakutenchi Co., Ltd.
Sanyo Jidosha Unso Co., Ltd, which had been a consolidated subsidiary,
became a new equity-method affiliate in the fiscal year under review due totransfer of a portion of its shares.

2

Core Businesses: Overview and Outlook

햴 Special purpose entities subject to disclosure
An overview of special purpose entities subject to disclosure, an overview
of transactions using special purpose entities subject to disclosure, and themonetary values and other details of transactions with special purpose entities subject to disclosure are presented in “4. Notes” “(17) Special purpose
entities.”

Part

Special Feature(1) Scope of consolidation
햲 Number and names of consolidated subsidiaries
Number of consolidated subsidiaries—101.
Names of primary consolidated subsidiaries are listed on Page 112.
Hankyu Hanshin Express (Vietnam) Co., Ltd. and 3 other companies,
due to their increased significance, have been included in the scope of
consolidation.
Meanwhile, Chayamachi Kikaku Co., Ltd. and 1 other company, because
they were extinguished for a merger, Sanyo Jidosha Unso Co., Ltd., due
to transfer of a portion of its shares, and Hanshin Freight International(Thailand) Co., Ltd. and 2 other companies as their liquidation was completed, have been excluded from the scope of consolidation.

89

Notes to the Consolidated Financial Statements햳 Depreciation methods for major depreciable assets(a) Property and equipment (excluding leased assets)
While property and equipment (excluding leased assets) are depreciatedfor the most part using the declining balance method, there is also someuse of the straight-line method.
Depreciation of buildings acquired after 1st April 1998 (excluding facilities attached to buildings) is calculated using the straight-line method.
(b) Intangible assets (excluding leased assets)
Intangible assets (excluding leased assets) are amortised using the straightline method.
Software (used by the Company), however, is amortised by the straightline method over the internal available life (3 to 6 years).
(c) Lease assets related to finance leases other than those that transfer
ownership of the lease assets
Lease assets related to finance leases other than those that transfer ownership of the lease assets are depreciated using the straight-line method withthe lease term as the useful life, and the residual value is zero.
Finance leases that commenced prior to 31st March 2008 are
accounted for similar method applied to operating lease transactions.
햴 Accounting for contributions for construction
Some consolidated subsidiaries of the Company accept contributions forconstruction from local governments and other organisations as part of thecost of construction when carrying out railroad elevations such as continuous grade separations and crossing-widening work.
The assets acquired using the contributions are recorded in noncurrent
assets at the acquisition cost, after deducting the amounts corresponding
to the contributions.
The amounts received for construction including such contributions are recorded in extraordinary income as a gain on contributions forconstruction in the consolidated statements of income, and the amountdirectly deducted from the acquisition cost is recorded in extraordinary loss
as a loss on reduction of noncurrent assets in the consolidated statements
of income.
햵 Accounting standards for significant transactions(a) Allowance for doubtful receivables
Allowance for doubtful receivables is provided based on the ratio of pastloan loss experience for general accounts and individually estimated uncollectible amounts for certain individual accounts.
(b) Provision for bonuses
Provision for bonuses is recorded in the amount expected to be paid bysome consolidated subsidiaries as bonuses during the fiscal year.
(c) Provision for retirement benefits
Provision for retirement benefits is provided based on the estimatedamount of projected benefit obligation and the fair value of plan assets in
preparation for retirement benefits to be paid to employees at the end of
the fiscal year.
Prior service costs are recorded in expenses in equal amounts using thestraight-line method over a certain number of years (3 to 15 years), which iswithin the average remaining years of service of the employees at the time
when these costs are incurred, commencing, in general, in the fiscal year inwhich they arise.
Actuarial differences are recorded in expenses using the straight-line
method over a certain number of years (4 to 15 years), which is within the
average remaining years of service of the employees at the time whenthese costs are incurred, commencing in the fiscal year following the year inwhich they arise.

90 Annual Report 2012(d) Provision for directors’ retirement benefits
Provision for directors’ retirement benefits is provided in an amount basedon the internal rules of some of the consolidated subsidiaries for the payment of retirement benefits to their directors.
햶 Basis for converting significant assets and liabilities in foreign currency into Japanese yen
The assets, liabilities, income and expenses of overseas subsidiaries areconverted to yen based on the spot exchange rate on the balance sheet
date. Differences in conversion are included in foreign currency translation
adjustments and minority interests in the net assets section.
햷 Significant hedge accounting methods(a) Method of hedge accounting
Deferred hedge accounting is applied.
Exceptional accounting applies to interest rate swaps that satisfy therequirements for exceptional accounting for interest rate swaps.
Designation accounting applies to foreign currency denominatedassets and liabilities with foreign exchange forward contracts.
(b) Hedging instruments and hedged items
Hedging instruments

Hedged items

Foreign exchange contracts
Currency swap contracts
Currency option contracts

Foreign currency tradereceivables and trade payables
and future foreign currencytransactions

Interest rate swap contracts
Interest rate option contracts

Interest on bonds and loans
payable(c) Hedging policy
The Group is exposed to the risk of foreign exchange and interest rate
fluctuations and uses derivatives as a means of hedging these risks.
(d) Method for evaluating the effectiveness of hedges
Other than when the effectiveness of hedges is obvious, hedge effectiveness is evaluated semiannually using the comparison and analysis method.
(e) Other risk management methods concerning hedge accounting
Internal rules regarding the segregation of duties, maximum transaction
amounts, etc. have been established for the use of derivative transactions,based on which derivative transactions are used. The implementation andmanagement of derivative transactions are carried out by the accounting department with the approval of the decision makers in each Group
company. An internal control system has been developed to ensure thatthe contract signing and termination comply with the internal rules.
햸 Method and period of amortisation of goodwill
Goodwill is amortised, in general, in equal amounts over five years. The
goodwill resulting from the management integration with Hanshin Electric
Railway Co., Ltd. in the fiscal year ended 31st March 2007 is being amortisedin equal amounts over 20 years.
햹 Scope of cash included in consolidated statements of cash flows
In preparing the consolidated statements of cash flows, cash on hand, readily
available deposits and short-term highly liquid investments without material
risk of changing their value and with maturities not exceeding three months
at the time of purchase are considered to be cash and cash equivalents.
햺 Other significant matters for preparing consolidated financial
statements(a) Accounting for consumption tax
Accounting for consumption tax is based on the tax exclusion method.

Part 5 Financial Section and Corporate Data

Introduction

The non-deductible amount of the consumption tax on assets that are
not tax deductible is included in “Other” in investments and other assets on
the consolidated balance sheets as long-term prepaid consumption tax andis amortised in equal amounts based on provisions of Corporation Tax Law.

(b) Adoption of consolidated tax payment system
A consolidated tax payment system has been adopted.

3. ADDITIONAL INFORMATION
Changes and Error Corrections” (ASBJ Guidance No. 24, issued on December
4, 2009) for accounting changes and corrections of prior period errors which
are made form the fiscal year beginning on April 1, 2012.

Part

1

Management Report Section

The Company and its consolidated domestic subsidiaries are applying“Accounting Standard for Accounting Changes and Error Corrections”(Accounting Standards Board of Japan (“ASBJ”) Statement No. 24 issued on
December 4, 2009) and “Guidance on Accounting Standard for Accounting

4. NOTES햳 Accumulated contributions for construction directly deducted fromthe acquisition cost of noncurrent assets(1) Consolidated Balance Sheets햲 Accumulated depreciation of property and equipment
Millions of yen

Thousands of U.S. dollars

Millions of yen

Thousands of U.S. dollars

2011

2012

2012

2011

2012

2012

¥964,847¥994,173$12,124,061¥359,050¥368,264$4,491,024

Part

2

Special Feature

햴 Pledged assets and secured liabilities
The following table shows the assets pledged as collateral.
Millions of yen

Thousands of U.S. dollars

2011

¥

140

[¥

—]

¥

—

2012

[¥

—]

$

—

[$

—]

225,327[219,992]

219,391[215,405]

2,675,500[2,626,890]

41,808
268,730
2,669[41,808][255,562][2,669]37,374
266,0112,997[37,374][255,486][2,997]455,780
3,244,037
36,549[455,780][3,115,683][36,549]

129

[129]

129

[129]

1,573

[1,573]

14,953553,759[—][520,162]

14,536
540,441[—][511,392]

177,268
6,590,744[—][6,236,488]

Part

3

Core Businesses: Overview and Outlook

Current assets:
Cash and deposits................................................
Property and equipment:
Buildings and structures ..................................
Machinery, equipment andvehicles.....................................................................
Land ..............................................................................
Other ............................................................................
Intangible assets:
Other ............................................................................
Investment and other assets:
Investment securities .........................................
Total .......................................................................

2012

The following table shows the secured liabilities.
Millions of yen

Part

4

2012

¥ 10,469
55[¥ 9,317][—]¥ 12,283
178[¥ 9,650][—]$ 149,793
2,171[$ 117,683][—]

100,700
111,225[85,560][94,878]

101,182
113,644[88,244][97,895]

1,233,927
1,385,902[1,076,146][1,193,841]

Social Responsibility and Management Organisation

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

Thousands of U.S. dollars
2012

2011

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

햵 The following table shows the securities of nonconsolidated subsidiaries and affiliates.

Investment securities(stocks) .................................................

2011

2012

2012

¥152,106¥163,970$1,999,634

Annual Report 2012

Part

5

Financial Section and Corporate Data

Millions of yen

Thousands of
U.S. dollars

햶 Two consolidated subsidiaries and an equity-method affiliate revaluated land for business use based on the Law Concerning Revaluationsof Land (Law No. 34, promulgated on 31st March 1998) and the Law toPartially Modify the Law Concerning Revaluations of Land (Law No. 19,
promulgated on 31st March 2001). Of the valuation differences identified
as a result of this, the consolidated subsidiaries recorded the amountcorresponding to the taxes on the valuation difference in the liability
section as “Deferred tax liabilities related to land revaluation” and theamount belonging to minority shareholders as “Minority interests.” The91

Notes to the Consolidated Financial Statements

amount remaining after subtracting these was recorded in the net assets
section as “Revaluation reserve for land.” The equity-method affiliates
recorded the amount corresponding to its equity in the valuation difference (after subtracting taxes) in the net assets section as “Revaluation
reserve for land.”
Revaluation method
The revaluation amounts were determined based on the revaluated value of
noncurrent assets provided for in Article 2, Paragraph 3 of the Enforcement
Ordinance for the law Concerning Land Revaluation (Ordinance No. 119,
promulgated on 31st March 1998).
Date of revaluation: 31st March 2002.
The difference between the market value of the land and book value after
revaluation at the end of previous fiscal year and fiscal year under review
are as follows:
Millions of yen

햳 The amounts of allowance and provision included in the costs ofrevenues from operations are shown below.
Thousands of
U.S. dollars

Millions of yen

Special allowance for
doubtful receivables ..................
Provision for bonuses ...................
Retirement benefit
expenses.............................................
Provision for directors’
retirement benefits ......................

2011

2012

2012

¥ 125
4,260

¥ 101
3,750

9,440

8,614

105,049

139

182

2,220

$

1,232
45,732햴 The gain on sales of noncurrent assets resulted from the transfer ofland and other property.

Thousands of U.S. dollars

2011

2012

2012

¥(5,602)¥(5,857)$(71,427)햵 The breakdown of the loss on sales of noncurrent assets is shown
below.
Fiscal year ended 31st March 2011
Millions of yen

햷 Contingent liabilities
The Company and its subsidiaries provide a liability guarantee for loans of
the Companies, etc. listed below.
Fiscal year ended 31st March 2011Land .......................................................................................
Construction in progress, etc. ...............................
Fiscal year ended 31st March 2012

Millions of yen

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

¥24,135

Land, etc. ............................................................................

6,339
79
30,554

Millions of yen

Thousands of
U.S. dollars

¥58

$707

햶 The breakdown of the loss on retirement of noncurrent assets isshown below.
Fiscal year ended 31st March 2011

Fiscal year ended 31st March 2012

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

¥287
214

Millions of yen

Thousands of
U.S. dollars¥23,348$284,732

6,112
32
29,49374,537
390359,671

Millions of yen

Book value upon removal .......................................
(Breakdown)
Buildings and structures.......................................
Intangible assets, etc. ..........................................
Cost of removal work ..................................................

¥482
325
157
750

Fiscal year ended 31st March 2012

Note: Major partner companies included in above are the Company’s affiliates.

(2) Consolidated Statements of Income
햲 The breakdown of selling, general and administrative expenses isshown below.
Millions of yen

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

92 Annual Report 2012

Thousands of
U.S. dollars

2011

2012

2012

¥16,254
11,471
706¥16,344
12,065761$199,317
147,134
9,280

1,434
2,684
32,552

1,262
2,806
33,24015,39034,220405,366

Book value upon removal .......................................
(Breakdown)
Buildings and structures.......................................
Tools, furniture and fixtures, etc. ...................
Cost of removal work ..................................................

Millions of yen

Thousands of
U.S. dollars¥348$4,244

255
92
151

3,110
1,122
1,841

Part 5 Financial Section and Corporate Data

Osaka
Tokyo
Hyogo,
etc.

Use

Type of assets

Property for rent, etc. Buildings andTotal: 14
structures, etc.
Hotel, etc.
Total: 3

Buildings andstructures, etc.

Idle assets, etc.
Total: 13

Land, etc.

Millions of yen

Thousands of
U.S. dollars

Land for development, etc. Construction in
Total: 17
progress, etc.

¥17,860$217,805

945

Golf business facilities, etc. Buildings andHyogo
Total: 11
structures, etc.

1,257

15,329245

Kyoto, Idle assets, etc.
etc.
Total: 17

1,094

13,341Millions of yen

Region¥3,071Osaka

The following table shows a breakdown of the loss on impairment of fixed
assets in each region.
Type of assets
Buildings and structures
Machinery, equipment and vehicles
Osaka

Land
Other
Intangible assets
Buildings and structures

Tokyo

Machinery, equipment and vehicles
Other
Intangible assets
Machinery, equipment and vehicles

Hyogo, etc.

Land
Construction in progress
Other
Intangible assets¥2,924
13
103
24
4
816
3
116
8
43
2
136
55
4
3

Land, etc.

The following table shows a breakdown of the loss on impairment of fixed
assets in each region.
RegionType of assets
Buildings and structures
Machinery, equipment and vehicles

Osaka

Land
Construction in progress
Other
Intangible assets
Buildings and structures
Machinery, equipment and vehicles
Land

Hyogo

Construction in progress
Other
Intangible assets
Investment and other assets
Buildings and structures
Machinery, equipment and vehicles

Kyoto, etc.

Land
Other
Intangible assets

Part

2

Thousands ofMillions of yen U.S. dollars

¥

322
2
1,116
16,413
3
2
731
40
392
78
8
0
5
291
10
763
28
1

$

3,927
24
13,610200,159
37
24
8,915
488
4,780
951
98
0
61
3,549
122
9,305
341
12

Part

3

Part

4

The recoverable value of this asset group has been calculated based on the
net sale value or value in use.
The net sale value is determined by rationally adjusting the expectedsale prices, appraised values based on the Japanese Real Estate Appraisal
Standards, and/or fixed asset tax assessment values. When the value in use
is used for the calculation, the future cash flow is discounted by 4.0%.

Social Responsibility and Management Organisation

The recoverable value of this asset group has been calculated based on the
net sale value or value in use.
The net sale value is determined by rationally adjusting the expectedsale prices, appraised values based on the Japanese Real Estate Appraisal
Standards, and/or fixed asset tax assessment values. When the value in use
is used for the calculation, the future cash flow is discounted by 4.0%.

Type of assets

1

Core Businesses: Overview and Outlook

Buildings and structures

Millions of yen

Use

Part

Special Feature

RegionFiscal year ended 31st March 2012
The loss on impairment of fixed assets was calculated by grouping the assets
based on the minimum unit that generates a cash flow that is generally
independent of the cash flow of other assets or asset groups. As a result,the book values of a total of 45 fixed assets groups, the market values ofwhich have been declining sharply from their book values due to a continuous decrease in land value, and those that have continuously resulted inoperating losses and whose profitability is unlikely to recover in the future,
were reduced to the recoverable amount, and the amount of the reduction
has been recorded as a loss on impairment of fixed assets (¥20,212 million($246,488 thousand)) under extraordinary loss.

Management Report Section

RegionIntroduction

햷 Loss on impairment of fixed assets
Fiscal year ended 31st March 2011
The loss on impairment of fixed assets was calculated by grouping the assets
based on the minimum unit that generates a cash flow that is generally
independent of the cash flow of other assets or asset groups. As a result, thebook values of a total of 30 fixed assets groups, the market values of whichhave been declining sharply from their book values due to a continuous
decrease in land value, and those that have continuously resulted in operating losses and whose profitability is unlikely to recover in the future, werereduced to the recoverable amount, and the amount of the reduction has
been recorded as a loss on impairment of fixed assets (¥4,261 million) under
extraordinary loss.

햸 Non-recurring depreciation on noncurrent assets arises mainly
from changes to the number of years of useful life for certain rental
properties.

Part

5

Financial Section and Corporate Data

Annual Report 201293

Notes to the Consolidated Financial Statements(3) Consolidated Statements of Comprehensive Income
Fiscal year ended 31st March 2012햲 Reclassification adjustments and tax effects relating to other comprehensive income

Valuation difference on available-for-salesecurities:
Increase (decrease) during the year .................
Reclassification adjustments ...........................
Subtotal, before tax.......................................
Tax (expense) or benefit ............................
Valuation difference on
available-for-sale securities....................
Deferred gains or losses on hedges:
Increase (decrease) during the year .................
Reclassification adjustments ...........................
Subtotal, before tax.......................................
Tax (expense) or benefit ............................
Deferred gains or losses on hedges ...
Revaluation reserve for land:
Increase (decrease) during the year .................
Reclassification adjustments ...........................
Subtotal, before tax.......................................
Tax (expense) or benefit ............................
Revaluation reserve for land ....................
Foreign currency translation adjustments:
Increase (decrease) during the year .................
Reclassification adjustments ...........................
Subtotal, before tax.......................................
Tax (expense) or benefit ............................
Foreign currency translation
adjustments ....................................................
Share of other comprehensive income ofassociates accounted for using equity
method:Increase (decrease) during the year .................
Reclassification adjustments ...........................
Share of other comprehensive
income of associates accounted forusing equity method.................................
Total other comprehensive
income .......................................................

Millions of yen

Thousands of
U.S. dollars

¥ 326
892
1,218
1,538

$ 3,976
10,87814,85418,7562,756

33,610

(144)
326
181
(84)
96

(1,756)3,976
2,207(1,024)
1,171

—
—
—
1,136
1,136

—
—
—
13,854
13,854

(504)
—
(504)
—

(6,146)—(6,146)—(504)(6,146)

1,476
(169)

18,000(2,061)

1,306

15,927

4,792

58,439(4) Consolidated Statements of Changes in Net Assets
햲 Items related to types and total number of shares issued and types and number of treasury stock sharesFiscal year ended 31st March 2011
No. of shares as of 1st April 2010

(Thousands of shares)

Increase in number of shares

Decrease in number of shares

No. of shares as of 31st March 2011

1,271,406——

1,271,406

1,271,406——

1,271,406

No. of shares issued
Common stock
Total
Treasury stock, at cost
Common stock (Notes 1 and 2)
Total

9,278

690

71

9,897

9,278

690

71

9,897

(Overview of reasons for fluctuations)
Notes:
1. The increase of 690 thousand shares of treasury stock includes an increase of 470 thousand shares purchased from owners of unknown whereabouts, and an increase of 220
thousand shares due to the purchase of odd lot shares.
2. The decrease of 71 thousand shares of treasury stock is due to the sale of odd lot shares.

94 Annual Report 2012

Part 5 Financial Section and Corporate Data

Introduction

Fiscal year ended 31st March 2012

(Thousands of shares)
No. of shares as of 1st April 2011

Increase in number of shares

Decrease in number of shares

No. of shares as of 31st March 2012

1,271,406——

1,271,406

1,271,406——

1,271,406

9,897

420

39

10,279

9,897

420

39

10,279No. of shares issued
Common stock
Total
Treasury stock, at cost
Common stock (Notes 1 and 2)
Total(Overview of reasons for fluctuations)
Notes:
1. The increase of 420 thousand shares of treasury stock includes an increase of 296 thousand shares due to the change of interest for equity-method affiliates, and an increase of
124 thousand shares due to the purchase of odd lot shares.
2. The decrease of 39 thousand shares of treasury stock is due to the sale of odd lot shares.

Part

1

Management Report Section

햳 Items related to subscription rights to shares and treasury subscription rights
Fiscal year ended 31st March 2012
Number of shares subject to share subscription rights
Balance as of 31st March 2012
(Thousands of
As of 31st March
As of 1st April(Millions of yen)
Increase
Decrease
U.S. dollars)
2012
2011

Classification

Breakdown of new sharesubscription rights

Type of sharessubject to sharesubscription rights

The Company(parent company)

Subscription rights as
stock options

—

—

—

—

—

¥32

$390

—

—

—

—

—

32

390

Part

Total

2

Special Feature햴 Items related to dividends
Fiscal year ended 31st March 2011(a) Dividends paid
(Resolution)

Type of shares

16th June 2010
General meeting ofshareholders

Common stock

Dividends paid
(Millions of yen)

Dividend per share(Yen)¥6,337¥5

Record date

Effective date

31st March 2010

17th June 2010
Part

3

Core Businesses: Overview and Outlook(b) Dividends whose effective date falls in the fiscal year following the fiscal year of the record date
(Resolution)

Type of shares

16th June 2011
General meeting ofshareholders

Common stock

Dividends paid
(Millions of yen)
¥6,334

Source of dividends

Dividend per share(Yen)

Retained earnings¥5

Record date

Effective date

31st March 2011

17th June 2011

Fiscal year ended 31st March 2012(a) Dividends paid
Dividends paid
Type of shares

16th June 2011
General meeting ofshareholders

Common stock¥6,334$77,244Part

Dividend per share(Yen)(U.S. dollars)

¥5

$0.06

Record date

Effective date

31st March 2011

17th June 20114

Social Responsibility and Management Organisation(Resolution)(Thousands(Millions ofof U.S.
yen)
dollars)(b) Dividends whose effective date falls in the fiscal year following the fiscal year of the record date
Dividends paid
(Resolution)

Common stock(Thousands(Millions ofof U.S.
yen)
dollars)¥6,334$77,244

Dividend per share
Source of dividends(Yen)(U.S. dollars)

Record date

Effective datePart

5Retained earnings

¥5

$0.06

31st March 2012

Financial Section and Corporate Data

14th June 2012
General meeting ofshareholders

Type of shares

15th June 2012

Annual Report 201295

Notes to the Consolidated Financial Statements(5) Consolidated Statements of Cash Flows햲 Relationship between cash and cash equivalents at fiscal year-end
and amounts shown on consolidated balance sheets
Thousands of
U.S. dollars

Millions of yen

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

2011

2012

2012

¥23,947¥24,280$296,098(1,354)(707)(8,622)

22,592

23,572

287,463

햳 Major items of assets and liabilities of a company that has been
excluded from the scope of consolidation due to the transfer of a portion of its shares during the fiscal year under review
Sanyo Jidosha Unso Co., Ltd.
Millions of yen
Current assets ..................................................................
¥2,272
Noncurrent assets ........................................................
2,721
Current liabilities ...........................................................
2,006
Long-term liabilities .....................................................
1,711

Thousands of
U.S. dollars$27,707
33,18324,463
20,866(6) Lease Transactions<As lessee>햲 Finance lease transactions that do not transfer ownership of the lease asset, prior to the initial year for commencement of the accounting standards
for lease transactions(a) Amount equivalent to acquisition cost, accumulated depreciation and net leased property at fiscal year-end
Millions of yen

Buildings and structures ......................................
Machinery, equipment and vehicles...............
Other ................................................................................
Total ...........................................................................

Thousands of U.S. dollars

2011

2012

2012

Acquisition Accumulated Net leased
cost
depreciation property

Acquisition Accumulated Net leased
cost
depreciation property

Acquisition Accumulated Net leased
cost
depreciation property

¥

$

¥
7
4,139
3,070
7,217

¥
7
2,815
2,526
5,348

¥
0
1,324
544
1,868

—
2,822
1,091
3,913

¥

—
1,840
972
2,812

¥

—
981
119
1,100

—
34,415
13,30547,720$—22,43911,85434,293$—
11,963
1,451
13,415

Note: Acquisition cost includes interest paid due to a low percentage of future lease payments in the year-end balance of property and equipment.

(b) Amount equivalent to future lease payments
Thousands of
U.S. dollars

Millions of yen

Due within one year ......................
Due after one year ..........................
Total ..................................................

2011

2012

2012

¥ 768
1,100
1,868

¥ 319
781
1,100

$ 3,890
9,524
13,415

Note: The future lease payments include interest paid due to a low percentage of
future lease payments in the year-end balance of property and equipment.

<As lessor>
햲 Operating lease transactions
Millions of yen

Future lease payments
receivables
Due within one year ...............
Due after one year ...................
Total ..................................................

Thousands of
U.S. dollars

2011

2012

2012

¥ 381
4,972
5,354

¥ 381
4,591
4,972

$ 4,646
55,98860,634(c) Lease payments and amount equivalent to depreciation expenses
Thousands of
U.S. dollars

Millions of yen

Lease payments................................
Amount equivalent todepreciation expenses .............

2011

2012

2012

¥1,161¥759$9,256

1,161

759

9,256

(d) Method for calculating the amount equivalent to depreciation expense
The amount equivalent to depreciation expense is calculated using thestraight-line method with the lease term as the useful life, and the residual
value is zero.
햳 Operating lease transactions
Millions of yen

Future lease payments
Due within one year .........
Due after one year .............
Total ............................................

96 Annual Report 2012

Thousands of
U.S. dollars

2011

2012

2012

¥ 2,634
10,60813,242¥ 2,398
12,225
14,623$ 29,244
149,085
178,329(7) Financial Instruments
햲 Matters regarding the conditions of financial instruments(a) Policy on financial instruments
It is the Group’s policy to limit the investment of its funds to short-term
deposits, which are highly secure, and the Group raises funds mainly
through loans from financial institutions, bonds and commercial paper.
Derivative transactions are used to avoid risk, as discussed later, and it is ourpolicy to refrain from speculative transactions.
(b) Details of the financial instruments used, the risk involved, and the risk
management system
Marketable and investment securities consist mainly of stocks and bonds,
and are exposed to market price fluctuation risk. However, fair values andthe financial condition of the issuers are checked periodically, and the risk
management system is confirmed.
Trade receivables, namely note receivables and trade accountreceivables, are exposed to the credit risk of customers. The Group limits
its exposure to this credit risk by controlling the due date and balance bycustomer, and by making periodical checks of the credit conditions ofmajor customers pursuant to the internal regulations of each company.
Almost all trade payables, namely note payables and trade accountPart 5 Financial Section and Corporate Data

Introduction

Regarding the use of derivative transactions, internal regulations prescribe the division of duties and transaction limits. With respect to derivative transactions, the main purpose of interest rate swap transactions is tohedge the interest rate fluctuation risk involved in certain loans and bonds.
Forward exchange contracts are used mainly to avoid exchange rate fluctuation risk involved in a portion of foreign currency denominated assets
and liabilities. These derivative transactions involve credit risk because, if
the other party to a transaction defaults on debts based on contracted conditions, or becomes bankrupt, the benefit that would have been obtainedin the future if the transaction had continued will not be enjoyed. However,credit risk is limited by carrying out transactions only with financial institutions with high ratings.
More information regarding the means and objectives of hedging,hedging policy, and the method of evaluating the effectiveness of hedges
related to hedge accounting for derivative transactions, is described in“(4) Items related to accounting treatment and standards” “햷 Significant
hedge accounting methods” outlined in “2. BASIS OF PREPARATION OF
CONSOLIDATED FINANCIAL STATEMENTS.”

Part

1

Management Report Section

payables, have a payment date that falls within one year.
Some assets and liabilities denominated by foreign currency are
exposed to exchange rate fluctuation risk (market risk), which was hedged
through forward exchange contracts.
Long-term debt and bonds are used mainly to raise the long-term
funds necessary for capital investment plans, and short-term borrowingsand commercial paper are used mainly to raise short-term funds for working capital. Some floating-rate debt and floating-rate bonds are exposed tointerest rate fluctuation risk (market risk). Exposure to interest rate fluctuation risk is limited by fixing interest rates through interest rate swap transactions. In addition, there is liquidity risk that payment will not be made by
the due date. Liquidity risk is limited by the timely preparation of financing
plans and proper fund management. In addition, surplus funds of the Group
companies are concentrated and used effectively through centralisation ofGroup funds by using the cash pool system, etc. Immediate fund raisingfrom financial institutions became possible through the establishment of
backup financing such as commitment lines. In addition, the Company
maintained a proper balance between direct financing and indirect financing, and advanced the diversification of raising funds means by using manyfinancial institutions, thus securing liquidity.

Part

2

Millions of yen
Book value

Fair value

Difference¥¥

23,94771,281
41,132
136,361
40,404
172,478
169,552
916,367
1,298,804(18,335)

—
—
0
0
—
—
2,552
10,47313,025—

Book value¥

Fair value

24,280 ¥ 24,280
73,40473,40438,99738,997
136,682
136,682
43,41043,410176,652
176,652
137,000
139,981860,675
873,8141,217,738 1,233,859—(15,442)2012
Difference

¥

—
—
0
0
—
—
2,981
13,13916,120—Book value

Fair value

Difference$

296,098 $ 296,098 $—
895,171895,171—475,573475,573
0
1,666,854 1,666,854
0
529,390529,390—
2,154,293 2,154,293—
1,670,732 1,707,085
36,354
10,496,037 10,656,268
160,232
14,850,463 15,047,061
196,585—(188,317)
—

Part

3

Core Businesses: Overview and Outlook(a) Cash and deposits ........................... ¥ 23,947(b) Trade receivables..............................
71,281(c) Securities ...............................................
41,132
Total assets ...........................................
136,361(d) Trade payables ...................................
40,404(e) Short-term borrowings (*1) .......
172,478(f) Bonds (*2)..............................................
167,000(g) Long-term debt (*1) .......................
905,894
Total liabilities ..................................... 1,285,778(h) Derivative transactions .................
—

Thousands of U.S. dollars
2012

2011

Special Feature햳 Matters regarding fair values of financial instruments
Book value, fair value and the differences between them as of the end of the previous fiscal year and fiscal year under review are as shown below.

(*1) Current portion of long-term debt is included in (g) Long-term debt.
(*2) Current portion of bonds is included.
(Note 1) Method for calculating the fair values of financial instruments and matters regarding securities and derivative transactions(a) Cash and deposits, (b) Trade receivables
The fair values of these are almost equal to their book values because they will be settled within a short period of time. As a result, their fair values are based on their book values.
(c) Securities
The fair values of stocks are based on prices quoted by stock exchanges, and the fair values of bonds are based on prices quoted by stock exchanges or prices presented bytrading financial institutions. Securities categorised by the purpose for which they are held are described in “(8) Securities.”(d) Trade payables, (e) Short-term borrowings
The fair values of these are almost equal to their book values because they will be settled within a short period of time. As a result, their fair values are based on their book values.
(f) Bonds
The fair values of fixed-rate bonds issued by the Company and some of its consolidated subsidiaries are based on market prices. The fair values of floating-rate bonds are based on
their book values because the fair values of floating-rate bonds reflect market interest rates within a short period of time, and closely approximate their book values.
(g) Long-term debt
The fair values of fixed-rate long-term debts are based on a method of calculation whereby the total principal and interest is discounted at an interest rate that is assumed forthe introduction of similar new debt. The fair values of floating-rate long-term debt are based on their book values because the fair values of floating-rate long-term debts reflectmarket interest rates within a short period of time and closely approximate their book values.
(h) Derivative transactions
Described in “(9) Derivatives.”

Part

4

Social Responsibility and Management Organisation
Part

5

Financial Section and Corporate Data

Annual Report 201297

Notes to the Consolidated Financial Statements(Note 2) The book value of financial instruments whose fair value is extremely difficult to ascertain
Thousands of
U.S. dollars

Millions of yen
Classification

2011

2012

2012

¥ 5,028¥ 4,984$ 60,780

Available-for-sale securities:
Non-listed equity securities.......................................
Investments in limited liability
investment partnerships andsimilar investments.....................................................

7,845

5,064

61,756

Negotiable certificates ofdeposit ...............................................................................

14,896

14,416

175,805

Total...............................................................................

27,77024,465

298,354

It is extremely difficult to ascertain the fair values of these because market prices are not available and future cash flows cannot be estimated. As a result, they are not included in(c) Securities.
(Note 3) The securities of nonconsolidated subsidiaries and affiliated companies are not included in (c) Securities.
(Note 4) Supplementary explanation regarding fair values of financial instruments
The fair values of financial instruments include values based on market prices. If market prices are not available, the fair values of financial instruments include values that have beenreasonably calculated. Certain assumptions are used to calculate the above values. As a result, if different assumptions are used, the values may differ. For derivative contracts, theamount of the contract which is indicated in “(9) Derivatives” does not indicate the market risk involved in derivative transactions themselves.
(Note 5) Redemption and repayment schedule of monetary claims and securities with maturities

Fiscal year ended 31st March 2011
Millions of yen
Due within
one year

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

Due after
ten years

Cash and deposits.............................................................

¥23,947

¥—

¥ —

¥—

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

71,281

—

—

—

5

9

—

—

Securities:
Held-to-maturity debt securities(government bonds, etc.) ..................................
Available-for-sale securities withmaturities (government bonds) ....................

—

18

231

—

Total..........................................................................

95,23428

231—

Fiscal year ended 31st March 2012
Millions of yen
Due within
one yearThousands of U.S. dollars

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

Due after
ten years

Due within
one year

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

Due after
ten years

Cash and deposits.............................................................

¥24,280

¥—

¥ —

¥—

$ 296,098

$ —

—

$—

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

73,404———895,171

—

—

—

61

110

—

—

Securities:
Held-to-maturity debt securities(government bonds, etc.) ..................................

5

9

—

—

Available-for-sale securities withmaturities (government bonds) ....................

10

18

305

—

122

220

3,720

—

Total..........................................................................

97,69928

305—

1,191,451

341

3,720

—

98 Annual Report 2012

Part 5 Financial Section and Corporate Data

Introduction(Note 6) Amount of planned redemption and repayment of bonds and long-term debt after the consolidated closing dateFiscal year ended 31st March 2011
Millions of yen
Due after one Due after five
year through years throughfive years
ten years

Due within
one year

Due after
ten years

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

¥ 40,000¥ 65,000¥ 55,000

Long-term debt ..................................................................

124,986

556,163

175,285¥ 7,000
49,459Total ...................................................................................

164,986

621,163

230,285

56,459Part

Fiscal year ended 31st March 2012
Due after one Due after five
year through years throughfive years
ten years

Due within
one year1

Thousands of U.S. dollars
Due after
ten years

Due within
one year

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

Management Report Section

Millions of yen

Due after
ten years

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

¥ 35,000¥ 60,000¥ 35,000¥ 7,000$ 426,829$ 731,707$ 426,829

Long-term debt ..................................................................

139,893

486,438

154,969

79,374

1,706,012

5,932,171

1,889,866

967,976

Total ...................................................................................

174,893546,438

189,969

86,3742,132,841

6,663,878

2,316,695

1,053,341$

85,366(8) Securities햲 Held-to-maturity debt securities
Millions of yen
Classification

Securities with fair value
exceeding book value.......................
Securities with fair value notexceeding book value.......................
Total .........................................................

2

2012

Book value

Fair value

DifferenceBook value

Fair value

DifferenceBook value

Fair value

Difference

¥ 9

¥ 9

¥ 0

¥ 9

¥ 9

¥ 0

$110

$110

$ 0

5
14

5
14

—
0

5
14

5
14

—
0

61
171

61
171

—
0

Special Feature

2012

2011

Part

Thousands of U.S. dollars

햳 Available-for-sale securities
Millions of yen

2012Book value Acquisition cost DifferenceBook value Acquisition cost DifferenceBook value Acquisition cost Difference¥16,579249
3
16,832¥ 8,570
244
3
8,817

¥ 8,0094
0
8,014¥12,330263
312,598¥ 6,461
253
3
6,718

¥ 5,86910
05,880$150,366
3,207
37153,634$ 78,793
3,085
37
81,927$ 71,573
122
071,70724,2810
224,284
41,11747,7650
247,76856,586(23,483)(0)(0)(23,483)(15,468)

26,31170
226,38338,982

46,51770
246,58953,307(20,206)(0)(0)(20,206)(14,325)

320,866854
24
321,744475,390567,280854
24568,159
650,085(246,415)(0)(0)(246,415)(174,695)

Part

4

Social Responsibility and Management Organisation

Securities with book value
exceeding acquisition cost:(a) Equity securities................................
(b) Bonds ......................................................
(c) Other .......................................................
Subtotal .................................................
Securities with book value notexceeding acquisition cost:(a) Equity securities................................
(b) Bonds ......................................................
(c) Other .......................................................
Subtotal .................................................
Total .................................................

Part

3

2012

Core Businesses: Overview and Outlook

Classification

Thousands of U.S. dollars

2011햴 Available-for-sale securities sold during previous fiscal year and fiscal year under review
Millions of yen
2011Classification

Amount soldTotal gains
on saleEquity securities.......................................

¥7¥0

Thousands of U.S. dollars
2012

Total losses
on sale¥0

2012

Amount soldTotal gains
on saleTotal losses
on sale¥2,597¥306¥1,116

Amount soldTotal gains
on saleTotal losses
on sale$31,671$3,732$13,610

Part

5

Financial Section and Corporate Data

Annual Report 201299

Notes to the Consolidated Financial Statements(9) Derivatives
햲 Derivative transactions for which hedge accounting has not been applied
No items
햳 Derivative transactions for which hedge accounting has been applied(a) Currency
Fiscal year ended 31st March 2011
Millions of yen

Classification

Type

Forward exchange contracts
Buy contract
Euro
U.S. dollar
Pound sterling
Designation
Swiss francof forward
Canadian dollar
exchange
New Zealand dollar
contracts, etc.
Australian dollar
Hong Kong dollar
Singapore dollar
Thai baht
Japanese yen
Total

Portion ofcontract amount
Main hedged
exceedingitems
Contract amount
one year

Fair value(Note)¥10,190
5,001
17
920
848
97
244
261
14
41
667
18,304

¥460
56
0
67
41
3
20
3
0
0
14
668

Trade
payables

¥—
—
—
—
—
—
—
—
—
—
—
—

Fiscal year ended 31st March 2012
Millions of yen

Classification

Type

Forward exchange contracts
Buy contract
Euro
U.S. dollar
Pound sterling
Designation
Swiss francof forward
Canadian dollar
exchange
New Zealand dollar
contracts, etc.
Australian dollar
Hong Kong dollar
Singapore dollar
Thai baht
Japanese yen
Total

Thousands of U.S. dollars

Portion ofcontract amount
Main hedged
exceedingitems
Contract amount
one year

Fair value(Note)¥ 8,341
5,235
21
1,318
521
129
262
167
14
101
670
16,783

¥193
289
0
74
40
8
15
(1)
(0)
(1)
6
625

Trade
payables

¥—
—
—
—
—
—
—
—
—
—
—
—

Note: Fair value calculation
Fair value is determined based mainly on prices quoted from counterparty financial institutions.

(b) Interest rate
Fiscal year ended 31st March 2011
Millions of yen

Classification

TypeInterest rate swap
Deferral hedge
contracts
accounting andexceptional
Payable fixed rate/accounting ofReceivable floatinginterest rate swaps
rate
Total

100 Annual Report 2012

Portion ofcontract amount
Main hedged
exceedingitems
Contract amount
one year

Fair value

Long-term
debt andbonds¥599,445¥557,158¥(19,003)

599,445557,158(19,003)

Portion ofcontract amountexceedingContract amount
one year$101,720
63,841
256
16,073
6,354
1,573
3,195
2,037
171
1,232
8,171
204,671

$—
—
—
—
—
—
—
—
—
—
—
—

Fair value(Note)$2,354
3,524
0
902
488
98
183
(12)
(0)
(12)
73
7,622

Part 5 Financial Section and Corporate Data

Introduction

Fiscal year ended 31st March 2012
Millions of yen

Classification

Portion ofcontract amount
Main hedged
exceedingitems
Contract amount
one year

TypeInterest rate swap
Deferral hedge
contracts
accounting andexceptional
Payable fixed rate/accounting ofReceivable floatinginterest rate swaps
rate
Total

Long-term
debt

Thousands of U.S. dollars

Fair value(Note)

Portion ofcontract amountexceedingContract amount
one year

Fair value(Note)¥524,964¥489,520¥(16,067)$6,402,000$5,969,756$(195,939)

524,964

489,520(16,067)

6,402,000

5,969,756(195,939)

Part

1Management Report Section

Note: Fair value calculation
Fair value is determined based mainly on prices quoted from counterparty financial institutions.

(10) Retirement Benefits
햲 Overview of retirement benefit plan
Some consolidated subsidiaries of the Company provide two types ofdefined benefit plans, defined benefit pension plans and unfunded lumpsum payment plans. Hankyu Corporation has also established a retirement
benefits trust.

Millions of yen
2011

2012

¥(123,821) ¥(125,333)
61,69060,8862012$(1,528,451)
742,512(62,131)(64,447)(785,939)

5,020

9,099

110,963262(56,848)
1,922(1,397)(56,745)2,448(17,037)(692,012)
29,854(58,770)(59,194)(721,878)

Part

Note: Certain consolidated subsidiaries use simplified methods for calculating retirement benefit obligations.

3(11) Stock Options, etc.
Fiscal year ended 31st March 2012
햲 Cost amount and account associated with stock options
Operating expenses and cost of sales of transportation and cost of sales:¥32 million ($390 thousand)햳 Details and size of stock options and changes therein(a) Details of stock options

햴 Items related to retirement benefit expenses

Resolution date: 16th June 2011

Millions of yen

Thousands of
U.S. dollars

Classification and number of
eligible personnel
Class and number of shares(Note)
Grant date
Vesting conditions
Service period
Exercise period

10 directors of subsidiaries
Part

2011

2012

2012

¥6,334¥6,127$74,720

2,590

2,284

27,854(1,132)(916)(11,171)

1,561

1,431

17,451

Note: Indicated in the equivalent number of shares.

87

(292)

(3,561)

9,440

8,635

105,305(b) Size of stock options and changes therein
The covered stock options are those which existed during the consolidated
fiscal year under review and the number is indicated in the equivalent
number of shares.

25th July 2011
Not definedNot defined
From 26th July 2011 to 25th July 2041

Annual Report 2012

Part

5

Financial Section and Corporate Data

Notes:
1. Retirement benefit expenses of consolidated subsidiaries that use a simplified
method are recorded in 1) Service cost.
2. In addition to the retirement benefit expenses shown above, the Company madeextra retirement payments of ¥31 million as operating expenses in the fiscal year
ended 31st 2011, and ¥52 million ($634 thousand) mainly recorded as extraordinary
loss in the fiscal year under review.

4

104,000 shares of common stockSocial Responsibility and Management Organisation

1) Service cost (Note 1) ................
2) Interest cost on projected
benefit obligation ..................
3) Expected return on plan
assets ..............................................
4) Amortisation of actuarial
differences ..................................
5) Amortisation of priorservice costs...............................
6) Retirement benefit
expenses (1+2+3+4+5).........

2

Core Businesses: Overview and Outlook

1) Projected benefit obligation ....
2) Plan assets ......................................
3) Unfunded projected
benefit obligation (1+2).......
4) Unrecognised actuarial
differences ..................................
5) Unrecognised priorservice costs...............................
6) Book value (net) (3+4+5).........
7) Prepaid pension costs .............
8) Provision for retirement
benefits (6-7) .............................

Thousands of
U.S. dollars

Part

Special Feature햳 Items related to retirement benefit obligations

햵 Items related to basis for calculating retirement benefit obligations, etc.
(a) Periodic distribution method for estimated amount of retirement
benefits
Allocated equally to each service year using the estimated number of total
service years(b) Discount rate
Mainly 2.0%(c) Expected rate of return on plan assets
Fiscal year ended 31st March 2011: mainly 2.5%
Fiscal year ended 31st March 2012: mainly 2.0%(d) Number of years over which prior service costs are written off
3 to 15 years (amortised using the straight-line method over a period notexceeding the average remaining service period of active employees)(e) Number of years over which actuarial differences are written off
4 to 15 years (amortised using the straight-line method over a period notexceeding the average remaining service period of active employees andrecognised in expenses starting from the following fiscal year)101Notes to the Consolidated Financial Statements(i) Number of stock options
Resolution date: 16th June 2011

Before vested (shares)
At the end of the previous fiscal year
GrantedExpired
VestedUnvested
After vested (shares)
At the end of the previous fiscal year
VestedExercised
Expired
Unexercised—
104,000—
104,000——
104,000——
104,000(ii) Unit price information
Resolution date: 16th June 2011

Exercise price
Average stock price at exercise
Fair value unit price at the grant date

¥ 1 (US$0.01)¥ — (US$ —)¥311 (US$3.79)

햴 Estimation method for fair value unit price of stock options
The following method was applied to fairly valuate the unit price of stock
options granted during the fiscal year under review.
(a) Valuation method used: Black–Scholes model(b) Major basic data and estimation method
Resolution date: 16th June 2011

Volatility of stock price (Note 1)
Expected life (Note 2)
Expected dividends (Note 3)
Risk-free interest rate (Note 4)

19.53%
2.036 years¥5 [US$0.06] / share
0.162%

Notes:
1. Volatility of stock price is calculated based on the closing prices in regular transactions for the Company’s common stock on individual transaction dates during theperiod of 2.036 years (11th July 2009 through 25th July 2011).
2. Expected life is calculated based on the actual length of service of eligible directors of subsidiaries who had resigned in the past, as well as on the actual length ofservice of eligible personnel as of the grant date.
3. Expected dividends are based on the actual dividends paid for the fiscal year ended
March 2011.
4. Risk-free interest rate is the yield of government bonds for the period corresponding
to the expected life.

햵 Estimation method for the number of vested stock options
Since the stock options were vested on the grant date, vested and granted
stock options are the same in number.

(12) Deferred Tax
햲 Significant components of the Company’s deferred tax assets andliabilities
Thousands of
U.S. dollars

Millions of yen

Deferred tax assets:
Loss on impairment of
fixed assets ........................................
Loss on revaluation ofreal estate for sale .........................
Provision for retirement
benefits................................................
Tax loss carryforwards...................
Loss on adjustment oftransferred profit and loss.........
Losses on revaluation of
investment securities .................
Unrealised profit from assets.........
Loss on valuation ofproperties of businessreorganisation .................................
Provision for bonuses ...................
Allowance for doubtfulreceivables ........................................
Enterprise taxes andbusiness office taxes ...................
Depreciation andamortisation .....................................
Provision for directors’
retirement benefits ......................
Revaluation of assets on
consolidation ...................................
Other .......................................................
Subtotal of deferred tax
assets .............................................
Valuation allowance ......................
Less amounts offset against
deferred tax liabilities .................
Total deferred tax assets.........
Deferred tax liabilities:
Gain on reversal ofdifference from land
revaluation ........................................
Revaluation of assets on
consolidation ...................................
Net unrealised holding gains
on securities .....................................
Gain on valuation ofproperties of businessreorganisation .................................
Other .......................................................
Subtotal of deferred tax
liabilities .......................................
Less amounts offset against
deferred tax assets........................
Total deferred tax liabilities.........
Net deferred tax liabilities.........

2011

2012

2012

¥ 32,853¥39,509$481,817

36,03130,879376,573

23,517
26,61821,075
19,135

257,012233,354

7,026

8,022

97,829

8,504
6,195

7,589
5,683

92,54969,305

4,756
1,950

3,578
1,708

43,634
20,8291,006

898

10,951

729

775

9,451

373

343

4,183

319

320

3,902

7,397
21,929—15,466—
188,610

179,210(54,740)

154,988(49,355)

1,890,098(601,890)(107,139)
17,331(94,005)
11,627(1,146,402)
141,793(139,291)(127,399)(1,553,646)(102,435)(95,135)(1,160,183)(16,717)(14,087)(171,793)(2,908)(3,367)(2,496)(2,756)(30,439)(33,610)(264,720)(241,874)(2,949,683)

107,139(157,580)(140,249)

94,005(147,869)(136,241)

1,146,402(1,803,280)(1,661,476)

Note: The Company reversed the “Surplus from land revaluation” when, as a result ofa (physical) absorption-type corporate split on 1st April 2005, it handed over
all of its land to Hankyu Corporation (which changed its name from Hankyu
Corporation Spin-Off Preparation Inc. to Hankyu Corporation on the sameday). As a result, “Deferred tax liabilities relating to land revaluation” have beenrecorded as deferred tax liabilities starting from the fiscal year ending 31st March
2006.

102 Annual Report 2012

Part 5 Financial Section and Corporate Data1(14) Rental Property
Some consolidated subsidiaries own rental property such as office buildings for lease and commercial facilities for lease in the Kita Ward of Osakaand other areas. Rental income relating to such rental property in the fiscal
year ended 31st March 2011 is ¥26,892 million (significant rental revenues
are recorded in revenues from operations and significant rental expenditures are recorded in costs of revenues from operations). Impairment
losses totalling ¥2,699 million were recorded as extraordinary loss, as was
non-recurring depreciation on noncurrent assets totalling ¥3,069 million.
(recorded as an extraordinary loss). Rental income related to such rental
properties in the consolidated fiscal year under review is ¥25,674 million($313,098 thousand) (significant rental revenues are recorded in revenues
from operations and significant rental expenditures are recorded in costsof revenues from operations). Impairment losses totalling ¥1,280 million($15,610 thousand) were recorded as an extraordinary loss.
Book value, increase/decrease and fair value are as follows:

2

Part

3

Thousands of
U.S. dollars

Millions of yen
2011

2012

2012

¥570,329¥566,424$6,907,610(3,904)566,424(3,746)562,677(45,683)
6,861,915

620,263

610,764

7,448,341

Part

4Social Responsibility and Management Organisation

Book value (Note 1):
Balance at the beginningof year ...........................................
Increase/Decrease(Note 2).........................................
Balance at the end of year ...
Fair value at the end of year
(Note 3)................................................

Part

Core Businesses: Overview and Outlook

Notes:
1. Book value is acquisition cost less accumulated depreciation and loss on impairmentof fixed assets.
2. The increase/decrease for the fiscal year ended March 31st 2011 mainly reflects anincrease due to acquisitions of real estate totalling ¥12,635 million and a decrease
due to depreciation and amortisation of ¥11,851 million, impairment losses totalling ¥2,699 million and non-recurring depreciation on noncurrent assets of ¥3,069
million. The main increases in the fiscal year ended 31st March 2012 are acquisitionsof real estate of ¥2,130 million ($25,976 thousand), the turning of some properties
into external rentals due to change in the scope of consolidation of ¥4,612 million($56,244 thousand), and completion of development properties of ¥1,786 million($21,780 thousand). The main decreases were depreciation of ¥11,421 million($139,280 thousand) and impairment losses of ¥1,280 million ($15,610 thousand).

Annual Report 2012

Part

5

Financial Section and Corporate Data

(13) Asset Retirement Obligations
햲 Asset Retirement Obligations recorded in the consolidated balance
sheetsNone of the Group’s asset retirement obligations are recorded in the consolidated balance sheets.
For certain consolidated subsidiaries, instead of recording asset
retirement obligations as liability, a reasonable estimate of the amount ofdeposits from rental properties that cannot be finally recovered is made,and the portion for that fiscal year is recorded as expenses.

Part

Special Feature햴 Adjustment of deferred tax assets and liabilities for enacted changes
in tax laws and rates
The “Act for Partial Revision of the Income Tax Act, etc. for the Purposeof Creating Taxation System Responding to Changes in Economic andSocial Structures” (Act No. 114 of 2011) and the “Act on Special Measuresfor Securing Financial Resources Necessary to Implement Measures for
Reconstruction from the Great East Japan Earthquake” (Act No. 117 of 2011)were promulgated on 2nd December 2011, and led to a reduction in thecorporate income tax rate and the imposition of the special corporate tax
for reconstruction with respect to the consolidated fiscal years starting on
or after 1st April 2012. Accordingly, the effective statutory tax rate used forthe calculation of deferred tax assets and liabilities is changed from thecurrent rate of 40.6% to the following percentages depending on the time
when the temporary difference or the like is resolved.
From the consolidated fiscal year starting on 1st April 2012 to theconsolidated fiscal year starting on 1st April 2014: 38.0%
Consolidated Fiscal year starting on 1st April 2015 and thereafter:
35.6%This tax rate change reduced deferred tax liabilities (after deducting
deferred tax assets) by ¥24,967 million ($304,476 thousand), income taxesdeferred by ¥23,131 million ($282,085 thousand) and deferred losses onhedges by ¥10 million ($122 thousand), and increased valuation difference
on available-for-sale securities by ¥1,846 million ($22,512 thousand).
In addition, deferred tax liabilities related to land revaluation decreasedby ¥759 million ($9,256 thousand) while the revaluation reserve for land
increased by the same amount.

햳 Asset retirement obligations not recorded in the consolidated balance sheets(a) Asset retirement obligations related to the restoration of certain rental
assets to their original state
For certain consolidated subsidiaries, obligations arise in connection
with the restoration of offices, etc., to their original state at the end oftenancies based on the rental contract. However, the period of the rental
assets involved is not stated with certainty, and there is currently no plans
to transfer, etc. Accordingly, no reasonable estimate can be made of thecorresponding asset retirement obligations. As a result, asset retirement
obligations corresponding to these liabilities are not recorded.
(b) Retirement obligations related to structures containing asbestos
Certain consolidated subsidiaries own structures containing asbestos.
However, they have mechanisms in place to prevent airborne dispersalof asbestos, and there are currently no plans to demolish the structuresin question. With both the timing and method of any demolition as yet
undecided, it is not possible to reasonably estimate such asset retirement
obligations. As a result, asset retirement obligations corresponding to theseliabilities are not recorded.

Management Report Section

Note: Information for the fiscal year ended 31st March 2011 is omitted as the difference between the normal effective statutory tax rate and the effective tax rate
reflected in the accompanying consolidated statements income is less than 5%of the normal effective statutory tax rate.

Introduction

햳 A reconciliation of the significant differences between the normal
effective statutory tax rate and the effective tax rate reflected in theaccompanying consolidated statements of income
Fiscal year ended 31st March 2012
The normal effective statutory tax rate......
40.6%(Adjustment)
Valuation allowance ..............................................
22.4
Elimination of dividends fromconsolidated subsidiaries.................................
11.4
Amortisation of goodwill....................................
2.6
Per capita amount of inhabitants tax..........
1.1
Nondeductible expenses ...................................
0.8
Non taxable income ..............................................
(11.0)
Equity in (income) losses of affiliates...........
(9.4)
Downward adjustment of deferred tax
assets (liabilities) at the end of the year
due to change in tax rate.................................
(53.3)
Other ...............................................................................
2.2
The effective tax rate .............................................
7.4

103

Notes to the Consolidated Financial Statements

3. Fair value as of end of the fiscal year is the appraisal value according to an outside
real estate appraiser based on Japanese Real Estate Appraisal Standards in the caseof key properties and the fair value based on indicators such as the assessed value of
noncurrent assets and road tax rating in the case of other properties.

4. Property under development is not included in the above table, as it is still in thedevelopment stage, making it difficult to determine fair value. The amounts ofproperties under development indicated in the consolidated balance sheets for the
consolidated fiscal years ended 31st March 2011 and 2012 are ¥141,609 million and¥143,444 million ($1,749,317 thousand), respectively.

(15) Segment Information
햲 Segment information(a) Summary of reportable segment
The Company's reportable segments are regularly reviewed, using the segment specific financial information available to enable the Board of Directors todetermine the allocation of management resources and evaluate business results.
The Group comprises six core businesses: “Urban Transportation,” “Real Estate,” “Entertainment and Communications,” “Travel and International
Transportation,” “Hotels” and “Retailing.” The businesses are operated by four core companies: Hankyu Corporation, Hanshin Electric Railway Co., Ltd., Hankyu
Hanshin Express Holdings Corporation and Hankyu Hanshin Hotels Co., Ltd., under the leadership of the Company, which manages the Group.
The nature of business in each reportable segment is as follows:
Urban Transportation: railways, and automobile business
Real Estate: the renting of real estate, and sale of real estateEntertainment and Communications: sports related businesses, stages, communication and media and leisure and other businesses
Travel and International Transportation: travel and international cargo services
Hotels: hotel ownership and management businesses
Retailing: retail business(b) Method for calculating revenues from operations, income (loss), assets and other items for each reportable segment
The accounting treatment for each reportable business segment is based on the methods detailed in “2. BASIS OF PREPARATION OF CONSOLIDATEDFINANCIAL STATEMENTS.” Internal transactions (land and structure lease and rental transactions, etc.) calculated by management accounting at companies
with businesses spanning multiple segments are also recorded.
Income (loss) for each reportable segment refers to operating income (loss).
Intersegment revenues from operations and transfers are based on similar arms length third-party transaction data. Where no such data exist, calculations
follow certain in-house rules.
(c) Information regarding totals for revenues from operations, income (loss), assets and other items by reportable segment
Fiscal year ended 31st March 2011
Millions of yen
Reportable segment

Revenues fromoperations:(i) Customers .....................
(ii) Intersegment ...............
Total ..................................
Segment income(loss) ......................................
Segment assets .................
Other items
Depreciation andamortisation ..............
Increase in property
and equipment
and intangible
assets .................................

Travel &Entertainment & International
Urban
Transportation Real Estate Communications Transportation

HotelsRetailing

Subtotal

Other(Note)

Total¥188,002
4,945
192,947¥ 135,011
17,718
152,730¥ 94,727
8,679
103,407¥67,565
145
67,710¥64,613606
65,220¥53,326682
54,008¥ 603,246
32,778636,025¥35,094
8,815
43,910¥ 638,341
41,593679,935

29,378742,889

23,996
1,045,557

9,994
140,730

2,952
80,808(639)
92,469713
18,563

66,396
2,121,018

450
48,815

29,11017,610

7,222

1,398

3,061

917

59,322

28,82328,126

5,110

3,139

1,069

793

67,063429(41,593)(41,164)¥ 638,770—
638,770

66,8472,169,833(2,103)
144,835

64,7432,314,669

867

60,190(520)

59,669902

67,966464

68,431

Note: The “Other” category comprises business such as construction and domestic logistics services not included in reportable segments.

104 Annual Report 2012

Amounts
appearing in the
consolidated
financial
Adjustment statements¥

Part 5 Financial Section and Corporate Data

Introduction

Fiscal year ended 31st March 2012
Millions of yen
Amounts
appearing in the
consolidated
financial
Adjustment statements

Reportable segment

HotelsRetailing

Subtotal

Other(Note)¥187,586
5,131
192,718¥ 159,736
16,378176,114¥ 94,753
7,560
102,313¥ 67,541
29
67,571¥63,454635
64,090¥53,166687
53,853¥ 626,239
30,423656,662¥22,889
8,444
31,334¥ 649,128 ¥574
38,868(38,868)
687,997(38,293)¥ 649,703—
649,703

32,342738,681

29,133
1,008,850

10,141
140,578

3,171
100,497(269)
88,144

1,333
17,87075,852
2,094,623

761
37,866

76,613
2,132,489(2,804)
141,890

73,8092,274,380

28,018

16,768

7,524

1,477

2,526

821

57,137362

57,499(530)

56,96820,33327,363

4,434

995

1,305

724

55,156324

55,480(213)

55,267

Total

Part

1

Management Report Section

Revenues fromoperations:(i) Customers .....................
(ii) Intersegment ...............
Total ..................................
Segment income(loss) ......................................
Segment assets .................
Other items
Depreciation andamortisation ..............
Increase in property
and equipment
and intangible
assets .................................

Travel &Entertainment & International
Urban
Transportation Real Estate Communications Transportation

Part

Thousands of U.S. dollars

Retailing

Subtotal

Other(Note)$ 773,829
7,744
781,585$648,366
8,378
656,744$ 7,637,061
371,0128,008,073$279,134
102,976
382,122$ 7,916,195 $7,000 $ 7,923,207
474,000(474,000)—
8,390,207(466,988) 7,923,207(3,280)1,074,927

16,256217,927

925,024
25,544,183

9,280
461,780

934,305
26,005,963

30,805

10,012696,793

4,415

701,207(6,463)

694,732

15,915

8,829

672,634

3,951

676,585(2,598)673,988

Total(34,195)
900,110
1,730,366 27,736,341

Part

3

Core Businesses: Overview and Outlook

Revenues fromoperations:(i) Customers ..................... $2,287,634 $ 1,948,000 $1,155,524 $ 823,671(ii) Intersegment ...............
62,573
199,732
92,195354
Total .................................. 2,350,220
2,147,732 1,247,720
824,037
Segment income(loss) ......................................
394,415355,280
123,671
38,671
Segment assets ................. 9,008,305 12,303,049 1,714,366 1,225,573
Other items
Depreciation and341,683
204,488
91,75618,012amortisation ..............
Increase in property
and equipment
and intangible
assets .................................
247,963
333,695
54,073
12,134

HotelsSpecial Feature

Reportable segment
Travel &Entertainment & International
Urban
Transportation Real Estate Communications Transportation

2

Amounts
appearing in the
consolidated
financial
Adjustment statements

Note: The “Other” category comprises business such as construction service not included in reportable segments.

Thousands of
U.S. dollars

Millions of yen
Revenues from operations:

2012

2012

¥636,025¥656,662$8,008,073

43,91031,334382,122

429

574

7,000

(41,593)(38,868)(474,000)

638,770649,703

7,923,207

IncomeTotal reportable segment
income (loss) ....................................
Income (loss) classified
under “Other” ..................................
Amortisation of goodwill(Note)....................................................
Other .......................................................
Operating income in the
consolidated financial
statements ........................................

Part

4

2011

2012

2012

¥66,396¥75,852$925,024

450

761

9,280

(2,684)581(2,806)2(34,220)24

64,74373,809900,110Part

5

Note: Refers mainly to the amortisation of goodwill arising from the management
integration with Hanshin Electric Railway Co., Ltd. in the fiscal year ended 31st
March 2007.

Annual Report 2012

Financial Section and Corporate Data

Total reportable segment
revenues .............................................
Revenues from operationsclassified under “Other”.............
Revenues from operations
from external customers
classified as “Adjustment”.........
Revenues from operations
from intersegment
transactions and transfers.........
Revenues from operationsin the consolidated
financial statements ....................

2011

Thousands of
U.S. dollars

Millions of yen

Social Responsibility and Management Organisation(d) Reconciliation of differences between total amounts for reportable segments and amounts appearing in the consolidated financial statements(adjustment of difference)

105Notes to the Consolidated Financial Statements

Millions of yen
Assets2011

2012

Total reportable segment
assets .................................................... ¥2,121,018 ¥2,094,623
Assets classified under“Other” .................................................
48,81537,866
Balance of unamortised
goodwill (Note 1) ..........................
41,17238,388Other (Note 2)....................................
103,663
103,502
Total assets in the
consolidated financial
statements ........................................ 2,314,669 2,274,380

Notes:
1. Refers mainly to the balance of unamortised goodwilll arising from the management integration with Hanshin Electric Railway Co., Ltd. in the fiscal year ended 31st
March 2007.
2. Consists mainly of surplus working capital (cash and deposits), unallocated assets
such as long-term investment funds (investment securities) and land, etc., andintersegment eliminations at the Company, Hankyu Corporation and Hanshin
Electric Railway Co., Ltd.

Thousands of
U.S. dollars
2012$25,544,183
461,780
468,146
1,262,220

27,736,341

Fiscal year ended 31st March 2011
Millions of yen

Other items

Depreciation and amortisation.......................
Increase in property andequipment and in intangible assets .......

Total
reportablesegment

Other

Adjustment

Amounts
appearing in
the consolidated financial
statements¥59,322¥867¥(520)¥59,669

67,063902

464

68,431

Fiscal year ended 31st March 2012
Millions of yen

Other items

Depreciation and amortisation.........
Increase in property andequipment and in intangible assets .......

Thousands of U.S. dollars

Total
reportablesegment

Other

Adjustment

Amounts
appearing in
the consolidated financial
statements

Other

Adjustment

Amounts
appearing in
the consolidated financial
statements¥57,137¥362¥(530)¥56,968$696,793$4,415$(6,463)$694,732

55,156324(213)

55,267

672,634

3,951(2,598)673,988

Total
reportablesegment

햳 Related information(a) Information about product and service categories
Information about product and service categories is the same as that described in “햲 Segment information” “(c) Information regarding totals for revenues
from operations, income (loss), assets and other items by reportable segment.”(b) Information by region(i) Revenues from operations
Since over 90% of revenues from operations in the consolidated statements of income are revenues from external customers in Japan, a description ofregional breakdown is omitted.
(ii) Property and equipment
Since over 90% of the total value of property and equipment in the consolidated balance sheets relates to property and equipment in Japan, a breakdown by
region is omitted.
(c) Information about important customers
No single external customer accounts for more than 10% of the revenues from operations reported in the consolidated income statements.

106 Annual Report 2012

Part 5 Financial Section and Corporate Data

Introduction

햴 Information regarding loss on impairment of fixed assets, by reportable segment
Fiscal year ended 31st March 2011
Millions of yen
Reportable segment
Travel &Entertainment & International
Urban
Transportation Real Estate Communications Transportation

Loss on impairment of
fixed assets ...................................

¥13¥2,699¥—HotelsRetailing

Subtotal

Other

Total

¥697

¥508

¥3,955¥117¥4,072¥36

Amounts
appearing in the
consolidated
Adjustment
financial(Note)
statements¥189¥4,261Part

Fiscal year ended 31st March 2012

1

Reportable segment
Travel &Entertainment & International
Urban
Transportation Real Estate Communications Transportation

Loss on impairment of
fixed assets ...................................

¥12¥17,139¥762

HotelsRetailing

Subtotal

Other

Total

¥349

¥84

¥18,402¥—¥18,402¥54

Management Report Section

Millions of yen
Amounts
appearing in the
consolidated
Adjustment
financial(Note)
statements¥1,810¥20,212

Thousands of U.S. dollars
Reportable segment

Loss on impairment of
fixed assets ...................................

$146$209,012$9,293$659

HotelsRetailing

Subtotal

Other

Total

$4,256$1,024$224,415$—$224,415$22,073

Part

2

Special Feature

Travel &Entertainment & International
Urban
Transportation Real Estate Communications Transportation

Amounts
appearing in the
consolidated
Adjustment
financial(Note)
statements$246,488

Note: The amounts under “Adjustment” are the amounts for land etc. not allocated to business segments.

햵 Information regarding amortisation of goodwill and the balance of unamortised goodwill, by reportable segment
Omitted as the significance is negligible.
햶 Information regarding gains from negative goodwill, by reportable segment
Omitted as the significance is negligible.

Part

3

Core Businesses: Overview and Outlook(16) Related Party Transactions
햲 Related party transactions(a) Transactions between the company submitting the consolidated financial statements and related parties
No items(b) Transactions between consolidated subsidiaries of the company submitting the consolidated financial statements and related parties
Directors and principal shareholders (only individual shareholders) of the company submitting the consolidated financial statements
Fiscal year ended 31st March 2011
Type

Name ofrelated party

Address¥100

Business

Real estatebusiness

Voting interest

Relationshipwithrelated party

Details oftransaction

Transaction
amounts(Millions of yen)

Item

Balance as of
31st March 2011
(Millions of yen)

Rental income¥16

Deposit

¥30

Part

4

Social Responsibility and Management Organisation

Company inwhich director
or close family Tateishi Sangyo Ikeda City,
thereof holds
Co., Ltd.
Osaka
majority ofvoting rights

Amount ofcapital(Millions of yen)

Lease of realestateNone
Concurrent
post (director)

Notes:
1. The transaction amount and the balance at the end of the fiscal year do not include consumption tax, etc.
2. Transaction terms and conditions, and method of determining transaction terms and conditions, etc.
Director of the Company, Koichi Kobayashi, and his close family own 58% of the voting rights in Tateishi Sangyo Co., Ltd.
The terms and conditions of the property lease are determined with reference to similar transactions in the neighbouring area.

Part

5

Financial Section and Corporate Data

Annual Report 2012107

Notes to the Consolidated Financial Statements

Fiscal year ended 31st March 2012
Amount of capital
Type

Director

Name ofrelated party

Address

Haruo
Sakaguchi—

Business(Millions of (Thousands ofyen)
U.S. dollars)¥ —Company inwhich director
or close family Tateishi Sangyo Ikeda City,
thereof holds
Co., Ltd.
Osaka
majority ofvoting rights

$

100

—

1,220

Relationship
Voting interest
withrelated party

Auditor of theCompany

Real estatebusiness

Transaction
amounts

Details oftransaction

Balance as of 31st
March 2012
Item

(Millions of (Thousands ofyen)
U.S. dollars)(Millions of (Thousands ofyen)
U.S. dollars)

Directly
0.0%

Lease of realestateRent income¥42$512 Deposit

¥33

$402

None

Operation andmanagement Operation andof real estate management
fee for realestateConcurrent
post (director)

50

610

Accounts
receivable224

Notes:
1. The transaction amount and the balance at the end of the fiscal year do not include consumption tax, etc.
2. Transaction terms and conditions, and method of determining transaction terms and conditions, etc.
(1) The terms and conditions of the property lease are determined with reference to similar transactions in the neighbouring area.
(2) Director of the Company, Koichi Kobayashi, and his close family own 77% of the voting rights in Tateishi Sangyo Co., Ltd.
Any decisions on operation and management of real estate are made by reference to neighborhood transactions.

햳 Notes about parent company and major affiliated companies
No items(17) Special Purpose Entities
햲 Overview of special purpose entities subject to disclosure and overview of transactions using special purpose entities subject to disclosure
Some consolidated subsidiaries invested in special purpose entities (in theform of special limited liability companies, joint ventures, etc.) aimed atdevelopment and increase in value of assets. The special purpose entities
use nonrecourse loans, etc. from financial institutions to acquire real estate(trust beneficiary rights), which they plan to sell to investors upon development, leasing, etc. The consolidated subsidiaries are expected to recover
their investments in an appropriate manner upon completion of the business, and even in cases in which losses arise, the cost to the consolidated
subsidiaries is limited to the amount invested. Moreover, the consolidated
subsidiaries do not own equity with voting rights in any of the special
purpose entities nor do they dispatch directors or employees to them.
Thousands of
U.S. dollars

Millions of yen
2011
Number of special purpose
entities ...........................................................
Total assets as of the mostrecent closing date
(simple aggregate).................................
Total liabilities as of the mostrecent closing date
(simple aggregate).................................

2012

2012

햳 Amount of transactions with special purpose entities subject todisclosures and others
Fiscal year ended 31st March 2011
Millions of yen
Significant transaction amounts orbalance as of 31st Significant income and expenditure
March 2011
Item
AmountReal estate purchased ...........
Investments in silent
partnerships(Notes 1 and 2) .......................
Receivable amount ofdividends (Note 4) ................
Management business..........

7,819

Distributed income(Note 3)812

Distributed loss
(Note 5)

47—

Management fees
(Note 6)

409

¥320

Fiscal year ended 31st March 2012
Millions of yen

8

6¥71,118¥55,266

46,78735,115Significant transaction amounts orbalance as of 31st Significant income and expenditure
March 2012
Item
Amount$673,976

428,232

Investments in silent
partnerships(Note 2)........................................
Receivable amount ofdividends (Note 4) ................
Management business..........

108 Annual Report 2012

¥9,527¥5,043Distributed income(Note 3)

¥689

347

Distributed loss
(Note 5)42—

Management fees
(Note 6)416

Part 5 Financial Section and Corporate Data

Significant transaction amounts orbalance as of 31st Significant income and expenditure
March 2012
Item
AmountInvestments in silent
partnerships(Note 2)........................................
Receivable amount ofdividends (Note 4) ................

$61,500

Distributed income(Note 3)

$8,402

4,232

Distributed loss
(Note 5)512—Management fees
(Note 6)

5,073

Management business..........

Introduction

Thousands of U.S. dollars

Notes:
1. Accrued future loss from valuation of investments in the aggregate amount of¥1,878 million for the fiscal year ended 31st March 2011 was recorded.
2. Investments in silent partnerships are recorded as investment securities in the
consolidated balance sheets.
3. Distributed income is recorded in revenues from operations in the consolidated
statements of income.
4. The receivable amount of dividends is equal to the suspended payments ofdividends.
5. Distributed loss is presented in costs of revenues from operations in the consolidated statements of income.
6. Management fees are presented in revenues from operations in the consolidated
statements of income.

Part

1

Management Report Section(18) Per Share Information
The following tables show net assets per share, net income per share, diluted net income per share, and the basis for their respective calculations.
Item
2012
2011
햲 Net assets per share (Yen / U.S. dollars)

2012¥377.17¥407.01$4.96

Total net assets (Millions of yen / Thousands of U.S. dollars)¥486,947¥524,801$6,400,012

Amount to be deducted from total net assets (Millions of yen / Thousands of U.S. dollars)¥11,144¥11,508$140,341

¥[—]

¥[32]

$[390]¥[11,144]¥[11,476]$[139,951]

Net assets at the end of the fiscal year related to common shares(Millions of yen / Thousands of U.S. dollars)¥475,802¥513,292$6,259,659

Common shares issued (Thousands of shares)(Basis for the calculation)(Of the amount, subscription rights to shares)(Of the amount, minority interests)

1,271,406

4,448

4,533

Common shares held by consolidated subsidiaries and equity-method affiliates (Thousands of shares)

5,449

5,745

1,261,509

1,261,127

2011

2012

¥14.32¥31.13$0.38¥18,068¥39,252$478,683

¥—

¥—

$—
$478,683

Common shares used to calculate net assets per share (Thousands of shares)
Item햳 Net income per share (Yen / U.S. dollars)

2

Special Feature

1,271,406

Treasury stock shares (Thousands of shares)

Part

2012

(Basis for the calculation)
Net income (Millions of yen / Thousands of U.S. dollars)
Net income related to common shares (Millions of yen / Thousands of U.S. dollars)¥18,068¥39,252

Average number of common shares during term (Thousands of shares)

1,261,993

1,260,836¥14.27¥31.13

햴 Net income per share—diluted (Yen / U.S. dollars)

3Core Businesses: Overview and Outlook

Amount not belonging to common stockholders (Millions of yen / Thousands of U.S. dollars)

Part

$0.38

(Basis for the calculation)
Adjustment to net income (Millions of yen / Thousands of U.S. dollars)(Equity in income of affiliates)
Increase in number of common shares (Thousands of shares)(Of the amount, subscription rights to shares)
Summary of potential shares that were not included in the calculation of diluted income per sharebecause their effect was not dilutive

¥(61)

¥—

$—

¥[(61)]

¥[—]

$[—]

—

70

[—]

[70]

—

—

Part

4

Social Responsibility and Management Organisation
Part

5

Financial Section and Corporate Data

Annual Report 2012109

Notes to the Consolidated Financial Statements

5. CONSOLIDATED SUPPLEMENTARY STATEMENTS(1) Corporate Bond Statements
Thousands of
U.S. dollars

Millions of yen

Company

Name

Series 28 unsecured
corporate bonds
Series 33 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 34 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 35 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 36 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 37 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 38 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 39 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 40 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 41 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 42 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 43 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 12 unsecured
Hanshin Electric Railway Co., Ltd.
corporate bonds
Series 14 unsecured
Hanshin Electric Railway Co., Ltd.
corporate bonds
Hankyu Hanshin Holdings, Inc.

Total

—

Issue date

28th June
2001
18th July
2007
14th Nov.
2007
14th Nov.
2007
30th July
2008
23rd Oct.
2009
23rd Oct.
2009
28th Jan.
2010
22nd Sept.
2010
22nd Sept.
2010
17th Mar.
2011
9th Sept.
2011
25th June
1997
23rd June
2004

Balance as of
1st April 2011

Balance as of
31st March2012

Balance as of
31st March2012¥ 10,000¥$—

Notes:
1. The amount in parenthesis in the “Balance as of 31st March 2012” column is thecurrent portion of the total amount and is recorded in current liabilities on the
consolidated balance sheets.
2. (1) From the day after 28th June 2001 to 28th June 2004
1.30% annualised(2) From the day after 28th June 2004
The interest rate is the 20-year swap rate minus the 2-year swap rate plus 0.15%.
(If the result of this calculation was below 0, the rate would be 0%)

110 Annual Report 2012—

Interest rate

Security—(Note 2)

None

1.85%

None

20,00020,000[20,000]

243,902[243,902]

10,000

—

—

1.39

None

10,00010,000121,951

1.66

None

20,000

—

—

1.46

None

10,00010,000121,951

1.10

None

10,00010,000121,951

1.87

None

20,00020,000243,902

1.25

None

15,00015,000182,927

1.43

None

7,000

7,000

85,366

1.72

None

10,00010,000121,951

1.54

None

—

10,000121,951

0.55

None

15,00015,000[15,000]

182,927[182,927]

3.525

None

10,00010,000121,951

2.22

None

167,000

137,000[35,000]

1,670,732[426,829]——

Redemption
date

28th June2011
18th July
2012
14th Nov.
2011
14th Nov.
2013
29th July
2011
23rd Oct.
2014
23rd Oct.
2019
27th Jan.
2017
18th Sept.
2020
22nd Sept.
2022
17th Mar.
2021
9th Sept.
2016
25th June
2012
23rd June2014—

3. Redemption schedule of bonds for five years subsequent to 31st March 2012
Millions of yen

Thousands of
U.S. dollars

Due within one year ...................................................................

¥35,000$426,829

Due after one year through two years ............................

10,000121,951

Due after two years through three years ......................

20,000243,902

Due after three years through four years ......................

——

Due after four years through five years ..........................

30,000365,854

Part 5 Financial Section and Corporate Data

Introduction(2) Statements of Loans Payable
Thousands of
U.S. dollars

Millions of yen
Balance as of
1st April 2011

Balance as of
31st March 2012

Balance as of
31st March 2012

Average interest
rate

Repayment deadline

Short-term borrowings ..........................................................................
Current portion of long-term debt.................................................
Current portion of lease obligations .............................................
Long-term debt (excluding current portion) ...........................
Lease obligations (excluding current portion)........................
Other interest-bearing debt ...............................................................
Total ............................................................................................................

¥ 172,478
124,986
1,380
780,908
4,911—
1,084,665¥ 176,652
139,893
1,774
720,782
7,544—
1,046,647$ 2,154,293
1,706,012
21,6348,790,024
92,000—12,763,988

0.824%
1.130
—
1.230
—
—
—

—
—
—
2013 – 2032
2013 – 2025——

Notes:
1. The balances are expressed after the elimination of transactions with companies in
the consolidation group.
2. The “Average interest rate” of loans payable is the weighted average interest rate foroutstanding loans payable as of end of the fiscal year under review.
3. The “Average Interest rate” is not shown for lease obligations because the Company
mainly adopts the method of including the amounts equal to interest in total
capital lease obligations and the method of spreading the total amount equal tointerest equally over each fiscal year of the lease period.
4. Repayment schedule of long-term debt and lease obligations (excluding current
portion) for five years subsequent to 31st March 2012.

Thousands of
U.S. dollars

Due after one year through two years ............................

¥185,687$2,264,476

Due after two years through three years ......................

156,128

1,904,000

Due after three years through four years ......................

78,036

951,659

Due after four years through five years ..........................

66,586

812,024

Millions of yen

Thousands of
U.S. dollars

Due after one year through two years ............................

¥1,493$18,207

Due after two years through three years ......................

1,172

14,293Due after three years through four years ......................

855

10,427

Due after four years through five years ..........................

620

7,561

Lease obligations

1

Part

2

Special Feature

Millions of yen

Long-term debt

Part

Management Report Section

Item(3) Schedule of Asset Retirement Obligations
Items to be reported in the schedule of asset retirement obligations are omitted since they are recorded in the notes to Article 15-23 of Consolidated Financial
Statement Regulations.

Part

6. OTHERS

3Core Businesses: Overview and Outlook

Quarterly financial information in fiscal year ended 31st March 2012
Cumulative period

Revenues from operations (Millions of yen)
Income before income taxes and minority interests(Millions of yen)
Net income (Millions of yen)
Net income per share (Yen)
Cumulative period

Accounting period

Net income per share (Yen)
Accounting period

Net income per share (U.S. dollars)

2nd Quarter

3rd Quarter

4th Quarter¥150,901¥318,614¥479,871¥649,703

22,25915,101
11.97

36,487
21,28316.88

56,43649,89439.57

43,41939,25231.13

1st Quarter

2nd Quarter

3rd Quarter$1,840,256$3,885,537$5,852,085$7,923,207

271,451
184,1590.15

444,963259,549
0.21

688,244
608,4630.48

529,500
478,683
0.38

1st Quarter¥11.97
1st Quarter$0.15

2nd Quarter¥4.90
2nd Quarter$0.06

3rd Quarter¥22.70
3rd Quarter

$0.28

Part

4th Quarter

4

Social Responsibility and Management Organisation

Revenues from operations (Thousands of U.S. dollars)
Income before income taxes and minority interests(Thousands of U.S. dollars)
Net income (Thousands of U.S. dollars)
Net income per share (U.S. dollars)

1st Quarter

4th Quarter¥(8.44)4th Quarter

Part

5

$(0.10)Financial Section and Corporate Data

Annual Report 2012111

Major Group Companies(As of 31st March 2012)

Consolidated Subsidiaries■ Urban Transportation■ Entertainment and Communications

Name of Company

Name of Company

Hanshin Electric Railway Co., Ltd.

Hankyu Corporation
Hanshin Electric Railway Co., Ltd.

Railway Operations

SportsWellness Hanshin Inc.

Kita-Osaka Kyuko Railway Co., Ltd.

Hankyu Corporation

Hokushin Kyuko Railway Co., Ltd.
Kobe Rapid Transit Railway Co., Ltd.

Takarazuka Creative Arts Co., Ltd.
Stage

Takarazuka Stage Co., Ltd.

Hankyu Hanshin Railway Technology Co., Ltd.

Umeda Arts Theater Co., Ltd.

Hankyu Hanshin Electric System

Hankyu Advertising Agency Inc.
Hanshin Contents Link Corporation

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

Communication andMedia

Hankyu Kanko Bus Co., Ltd.
Hankyu Denen Bus Co., Ltd.

Itec Hankyu Hanshin Co., Ltd.
Hankyu Communications Co., Ltd.
Bay Communications Inc.

Osaka Airport Transport Co., Ltd.
Automobile

Hanshin Tigers Baseball Club, Ltd.

Nosé Electric Railway Co., Ltd.

Leisure, etc.

Hanshin Electric Railway Co., Ltd.

Hankyu Taxi Inc.
Hanshin Taxi Co., Ltd.

■ Travel and International Transportation

Hankyu Hanshin Motor Technology Co., Ltd.

Name of Company

Hankyu Travel International Co., Ltd.

Nippon Rent-A-Car Hankyu Inc.
Other

Alna Sharyo Co., Ltd.

Travel Agency

Hankyu Hanshin Business Travel Co., Ltd.
Hankyu Travel Support Co., Ltd.

■ Real Estate
Name of Company

International
Transportation

Hankyu Hanshin Express Co., Ltd.

Other

Hankyu Hanshin Express Holdings Corporation

Hankyu Corporation
Hanshin Electric Railway Co., Ltd.
Real Estate Leasing

Hankyu Realty Co., Ltd.

■ HotelsName of Company

Osaka Diamond Chikagai Co., Ltd.

Hankyu Hanshin Hotels Co., Ltd.

Hanshin Real Estate Co., Ltd.

Hanshin Hotel Systems Co., Ltd.

Hankyu Corporation
Real Estate Sales

Hanshin Electric Railway Co., Ltd.

Hotel Management

Hankyu Realty Co., Ltd.

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

Hankyu Hanshin Building Management Co., Ltd.

Arima View Hotel Co., Ltd.

Hankyu Hanshin Security Service Co., Ltd.
Other

Hankyu Hanshin Techno Service Co., Ltd.
Hankyu Hanshin Clean Service Co., Ltd.

■ Retailing
Name of Company

High Security System Co., Ltd.
Hankyu REIT Asset Management, Inc.

Hankyu Corporation
Retailing

Hankyu Retails Corporation
Iina Dining Co., Ltd.

■ OtherName of Company

Construction

Equity-method Affiliates
Main Business

Department Store

Name of Company

H2O Retailing Corporation[Securities code: 8242]
Nishi-Osaka Railway Co., Ltd.

Railway Operations

Motion Picture Business
Commercial Broadcasting

112 Annual Report 2012

Kobe Electric Railway Co., Ltd.
[Securities code: 9046]
Tokyo Rakutenchi Co., Ltd. [Securities code: 8842]
Toho Co., Ltd. [Securities code: 9602]
Kansai Telecasting Corporation

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

Group FinanceHankyu Hanshin Financial Support Co., Ltd.

Outsourcing Services
for Personnel andAccounting Services

Hankyu Hanshin Business Associate Co., Ltd.

Part 5 Financial Section and Corporate Data
Investor Information(As of 31st March 2012)

Introduction

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

Paid-in Capital:¥99,474 million
Fiscal Year-End:
31st March
Number of Employees: 20,811 (consolidated basis)
Authorised Shares:
3,200,000,000
Issued Shares:
1,271,406,928
Number of Shareholders: 98,992
Unit of Trading:
1,000 shares
Stock Exchange Listing: Tokyo, Osaka
Transfer Agent:
Mitsubishi UFJ Trust and Banking
Corporation

Principal Shareholders:

Part

1

Management Report Section

Tokyo Office (Personnel and General Affairs Dept.):
Toho Twin Tower Bldg.,
1-5-2, Yurakucho, Chiyoda-ku, Tokyo 100-0006, Japan
Phone: +81-3-3503-1568
Fax:+81-3-3508-0249

Ownership Breakdown:
Number of shares Percentage(thousands)
(%)

Name
Japan Trustee Services Bank, Ltd. (Trust account)
Nippon Life Insurance Company
Sumitomo Mitsui Banking Corporation
H2O Retailing Corporation
Japan Trustee Services Bank, Ltd.
(The Sumitomo Trust & Banking Co., Ltd. Retirement Benefit Trust Account)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Japan Trustee Services Bank, Ltd. (Trust account 1)
Japan Trustee Services Bank, Ltd. (Trust account 4)
Japan Trustee Services Bank, Ltd. (Trust account 6)

5.44
3.33
2.68
2.43
1.60

13,665

1.07

11,190
10,541
10,13910,097

0.88
0.82
0.79
0.79

0.00%

53.60%

Financial
institutions

Part

2

28.60%

Special Feature

The Master Trust Bank of Japan, Ltd. (Trust account)

69,27942,40334,14430,947
20,418National government andlocal public organisations

Individuals
and others

Securities
companies

0.81%
Other
corporations

9.84%
Foreign corporations
and individuals

7.15%
Part

3

Core Businesses: Overview and Outlook

Stock Price Range and Trading Volume (Tokyo Stock Exchange):
600000Stock Price (¥)

Nikkei Average (¥)

500

21,000400

Stock Price (left scale)

Nikkei Average (right scale)

14,000
Part

7,000

200
200,00004Social Responsibility and Management Organisation

300

100,000
Trading Volume 0(thousand shares) 0

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
Part

Fiscal year ended March 2011

Fiscal year ended March 2012

High

485

452

385

Low

381

316

297

At year-end

433

384

361

5

Financial Section and Corporate Data

Fiscal year ended March 2010

Annual Report 2012113

Hankyu Hanshin Holdings, Inc.
1-16-1, Shibata, Kita-ku, Osaka 530-0012, Japan
Phone: +81-6-6373-5001 Fax: +81-6-6373-5042
http://www.hankyu-hanshin.co.jp/english/

Hankyu Hanshin Toho Group

Printed in Japan