Hankyu Hanshin Holdings
Securities code: 9042

ANNUAL REPORT2017

Responding to Change
Committing to Action

ANNUAL REPORT 2017

Contents

Key Facts

	  62

Principal Risks and Countermeasures	   1Group Management Philosophy

	  64

Safety Initiatives in the Railway Business	   3

Corporate Social Responsibility (CSR)	   4

At a Glance	   6

Location of Our Business Base	   8

Performance Highlights (Consolidated)	  12

ESG Highlights

Financial Section and Corporate Data
	  68

Consolidated Six-Year Summary	  69

Consolidated Financial Review

	  73

Business Risks

	  74

Consolidated Balance Sheets

Business Policies and Strategies

	  76	Consolidated Statements of Income /To Our Stakeholders
	  20	Special Feature:
Long-Term Management Vision for 2025

	  77

Consolidated Statements of Changes in Net Assets

	  79

Consolidated Statements of Cash Flows		

20	From Management Integration to the Present Day	  80

Notes to the Consolidated Financial Statements

		

22

106

Major Rental Properties / Major Sales Properties		23	Strategies under Long-Term Management Vision for 2025

107

Major Group Companies

		

26

108

Group History		26	Organisational Improvements Aimed at Realising the109

Investor Information

Consolidated Statements of Comprehensive Income

	  14Long-Term Vision Summary
Management Indicators
Long-Term Vision		27	Medium-Term Management Plan (Fiscal 2016–Fiscal 2019)	  29	From Enhancing the Value of Line-Side Areas to Enhancing
Corporate Value	  30

CSR and Corporate Value Enhancement

Core Businesses: Overview and Outlook	  34

Business Environment

	  36

Urban Transportation

	  38

Real Estate	  40

Entertainment and Communications

	  42

Travel	  44

International Transportation

	  46

HotelsManagement Organisation
	  48

Directors and Audit & Supervisory Board Members

	  50

A Message from an External Director

	  52Management Organisation	  61

Initiatives Aimed at Reducing the Group’s Risk

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

Search Index

Group Overview
1–13, 106–109
2017 Financial and Business Performances
8–11, 15, 68–72
Forecasts for Fiscal 2018 and Onward
Urban Transportation: 37
Real Estate: 39Entertainment and Communications: 41
Travel: 43
International Transportation: 45
Hotels: 47
Long-Term Management Vision for 2025 /Medium-Term Management Plan
16–28
Corporate Governance
15, 48–61
Safety Initiatives in the Railway Business
64–67
Financial Policy and Shareholder Returns
11, 15

Forward-Looking Statements
The reader is advised that this annual 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.
About the Compilation of this Annual Report and the Auditing Company Used
The financial section of this annual report includes a digest of information including consolidated financial statements in the Company’s Securities Report for the 179th period,
audited by KPMG AZSA LLC and presented in a somewhat modified 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.
Definition“Fiscal 2017” refers to the fiscal year ended 31st March 2017. Other fiscal years are referred toin a corresponding manner in this annual report. Figures are basically rounded off. Sums
expressed in units of ¥100 million are rounded to the nearest ¥100 million.

Group Management Philosophy

MissionWhat we try to achieve
By delivering “Safety and Comfort” and “Dreams and Excitement,”
we create satisfaction among our customers and contribute to society.

Hankyu Hanshin Holdings • Annual Report 20171

Group Management Philosophy

ValuesWhat is important to us

Customers First

Sincerity

Everything we do is for the customer.
That’s where it all starts.

Gain customers’ confidenceby always being sincere.

Foresight & Creativity
With our pioneer spirit
and flexible thinking,we create a new value.

2

Hankyu Hanshin Holdings • Annual Report 2017

Respect for People
Everyone is absolutely
invaluable to the Group.

Corporate Social Responsibility (CSR)

We believe that contributing to local communities and preserving the environment are social responsibilities that are incumbent upon us to fulfill and which are essential for our medium-to-long-term development. Therefore, the two pillars of our
CSR activities are social contribution activities, which develop towns and cities in partnership with local communities, andenvironmental preservation activities promoting environment-friendly business activities.

Basic Policy
Social Contribution Activities

We intend to promote the creation of towns
and cities along our railway lines thatpeople will truly want to live in.

Basic Concept
Environmental
Preservation Activities

Mindful that global environmental preservation isa 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.

Hankyu Hanshin Holdings • Annual Report 20173

At a Glance

Major Operating Companies*

Urban Transportation
Hankyu Corporation

阪神電気鉄道Fiscal 2017 Results

Revenues fromOperations¥

Operating Income¥

Segment Assets¥

Revenues fromOperations¥

Operating Income¥

Segment Assets¥

Revenues fromOperations¥

Operating Income¥

Segment Assets¥

Revenues fromOperations¥

Operating Income¥

Segment Assets¥

Revenues fromOperations¥

Operating Income¥

Segment Assets¥

Revenues fromOperations¥

Operating Income¥

Segment Assets¥

237.1 billion (YoY –1.0%)
42.2 billion (YoY +2.3%)
802.2 billion (YoY +1.0%)

Hanshin Electric Railway

Real EstateEntertainment andCommunications

215.7 billion (YoY –2.4%)
42.0 billion (YoY –15.8%)
1,056.7 billion (YoY +3.3%)
115.2 billion (YoY +2.4%)
15.7 billion (YoY +2.3%)
147.3 billion (YoY +3.2%)©Takarazuka Revue Company

TravelHankyu Travel International

International Transportation
Hankyu Hanshin Express

HotelsHankyu Hanshin Hotels* For Major Group Companies, please see page 107.

4

Hankyu Hanshin Holdings • Annual Report 201729.9 billion (YoY –1.8%)
0.6 billion (YoY –6.4%)
73.9 billion (YoY +13.3%)
71.7 billion (YoY –5.8%)
1.6 billion (YoY –11.2%)
38.7 billion (YoY –3.1%)
65.6 billion (YoY –3.5%)
2.8 billion (YoY –15.2%)
82.6 billion (YoY –0.2%)

At a Glance% of Revenues from Operations,Operating Income, and Segment Assets

30.5

39.8

35.9

Nature of Business
Railway operations: These operations form a network in the Kansai area that centres on the railway lines of Hankyu
Corporation and Hanshin Electric Railway. Hankyu Corporation’s railway lines link Osaka-Umeda with Kobe, Takarazuka,
and Kyoto. Meanwhile, Hanshin Electric Railway is the only private (non-JR) railway operator with railway lines that directly link Kobe with Osaka’s major northern and southern terminals, which are Osaka-Umeda and Namba, respectively.
The operating kilometres of Hankyu Corporation and Hanshin Electric Railway are 143.6 km* and 48.9 km*, respectively.
* Including tier 2 railway operators

Automobile business (bus, taxi): This business manages and operates bus and taxi services, which coordinate withrailway services to increase convenience in line-side areas.
Retailing business: This business manages and operates convenience stores and other shops mainly inside railway
stations on the Hankyu and Hanshin lines.
Advertising business: This business provides advertising media that are based on digital signage inside railway stations
and space inside trains.
Real estate leasing business: This business owns numerous office buildings and facilities, mainly in Osaka-Umeda andthe line-side areas of the Hankyu and Hanshin lines. In recent years, the business has been actively pursuing development of real estate in the Tokyo metropolitan area. (For a list of principal rental properties, please see page 106.)
Real estate sales and other business: This business markets condominiums, residential land lots, and detachedhouses, mainly in the line-side areas of the Hankyu and Hanshin lines and the Tokyo metropolitan area. In recent years
the business has entered the ASEAN region. The business is engaged in property management, building maintenance,and other building operation and management services as well as real estate fund management, including private
placement funds and J-REIT businesses.

27.7

47.3
39.5

Sports business: This business manages the Hanshin Tigers professional baseball team, which has a history of morethan 80 years, as well as the team’s home ground and high-school baseball mecca Hanshin Koshien Stadium and manages related businesses. The business also operates a music business (Billboard Live).
Stage business: This business manages the performances of the Takarazuka Revue—an organisation which has morethan a century of history—sells related products, and manages and operates related businesses engaged in video andmusic distribution. Further, the business operates Umeda Arts Theatre and promotes stage productions.
Communication and media business: This business operates a broadcast and communications business, which provides cable television services (including multichannel broadcasts, Internet, and fixed telephone line services), and an
information services business, which provides a variety of services based on system development and other IT.

Travel business: This business plans, markets, arranges, and supports travel for Japanese people in Japan and overseas
and for non-Japanese visitors in Japan.

14.8International transportation business: This business operates air freight, sea freight, and logistics businesses as well as
a comprehensive portfolio of businesses that are ancillary or related to these operations. The business has 46 bases inJapan and 119 bases overseas as of 1st July 2017.

3.8
9.2
14.7
6.6
Hotels business: This business operates a wide range of hotel formats, from “city hotels” through to business hotels
mainly comprising guest rooms for overnight stays. The business operated 48 hotels, consisting of 19 directly managed
hotels and 29 franchise hotels, with 10,693 guest rooms as of 1st April 2017. In addition to the above hotels, the business
manages The Ritz-Carlton, Osaka, based on an alliance with the Ritz-Carlton chain of international luxury hotels.

8.4
3.3
5.5

0.6
1.5
2.6

1.7
3.7

1.3

1.5

Note: Figures for percentage of revenues from operations and operating income are calculated based on the simple aggregate amount (including intersegment transactions) of each segment.

Hankyu Hanshin Holdings • Annual Report 20175

Location of Our Business Base

Survey of prospective condominium
purchasers regarding their preferredKansai residential area, conducted infiscal 2017
Ranking

Station1

Nishinomiya-kitaguchi

2

Shukugawa3

Okamoto

4

Umeda

5

Takarazuka

6

Ashiyagawa

7

Mikage8

Senri-chuo

product of Thailand and Singapore.

9

Toyonaka* Cabinet Office, Report on Prefectural Accounts for the Fiscal Year Ended 31st March 201510

AshiyaThe Hankyu Hanshin Holdings Group’s business base is the Kansaiarea, which has a population of approximately 20 million. This issecond only to the Tokyo metropolitan area. Further, the Kansai area
is one of Asia’s economic powerhouses. According to a Cabinet
Office survey*, in fiscal 2015 the Kansai area’s gross production
reached US$734.5 billion, surpassing the combined gross domestic

Source: A survey of prospective condominium
purchasers regarding their preferred residentialarea, conducted by seven major real estate developers (Sumitomo Realty & Development Co.,
Ltd., Daikyo Incorporated, Tokyu Land Corporation, Tokyo Tatemono Co., Ltd., Nomura Real
Estate Development Co., Ltd., Mitsui Fudosan
Residential Co., Ltd., and Mitsubishi Jisho Residence Co., Ltd.) and included in a press release
dated 29th September 2016
Note:  indicates the locations of the above
railway stations

Tokyo

TanigamikyunK
shi Lineku
Ho ilwayRa

Hankyu Kobe Line

Kyoto
Kyoto
City

Hyogo

Shiga

o

Kobe City
Osaka City
Osaka
Nara
Areas of high population densities

Kobe Rapid Transit
Railway Line
Shin-Kobe
Kobe
Sannomiya
Minatogawa
Shinkaichi
NishidaiMotomachi

Wakayama

Kobe Airport

Osaka Bay

With a railway network linking the Kansai area’s major cities—OsakaUmeda, Kobe, and Kyoto—the Group has established an unshakable
presence in the Kansai area. Since the earliest days of its railway operations, the Group has developed housing, entertainment facilities, andcommercial facilities in the areas served by its lines. Further, thanks toefforts to attract universities, almost 50 universities and colleges arelocated in the areas served by our lines. Easy access to the Kansai area’s
major cities and plentiful infrastructure for everyday life make our lineside areas some of the most popular places to live in the region. A surveyof prospective condominium purchasers regarding their preferred Kansai
residential area conducted in fiscal 2017 reflects this popularity. The

Kansai International
AirportThe largest airport in western Japan,
this is the Kansai area’s gateway to
the world.

survey revealed that areas centred on the Group’s railway stations
accounted for all of the most popular areas. The above factors have led tohigh population densities in our line-side areas, which enable highly
efficient transportation.

6

Hankyu Hanshin Holdings • Annual Report 2017

Kansai International
AirportK

N

Arashiyama

N

Arashiyama

KyotoKyoto
Prefecture
Prefecture
Katsura

Kawaramachi Kawaramachi
KatsuraKyoto

Hankyu Hankyu
ArashiyamaArashiyama
Line
Line

Kyoto

Kyoto
Japan’s iconic tourism destination,
Kyoto welcomes 50 million visitorsfrom other parts of Japan andfrom overseas every year.
Hankyu Kyoto
HankyuLine Kyoto Line

Myokenguchi Myokenguchi
Nissei-chuo

Nissei-chuo

OsakaOsaka
Prefecture
Prefecture

Nosé Electric
Railway Line

Nosé Electric
Railway Line

HyogoHyogo
Prefecture
Prefecture

HankyuHankyu Mino-o
LineMino-o Line
Mino-oMino-oKawanishi-noseguchi
Kawanishi-noseguchi

KoyoenShukuShukugawa
gawaTsukaguchi
NishinomiyaNishinomiya- Tsukaguchi
kitaguchi
kitaguchi
Imazu

Imazu
Imazu
Imazu
Mukogawa
Mukogawa
Daimotsu

Hanshin Hanshin
Main Line Main Line

Amagasaki

Esaka

Esaka

ShinOsaka

ShinAwaji
Osaka

Daimotsu
Juso

Amagasaki

Umeda

Juso

Sh

ink

an

se
n
an
ink

Kita-Osaka Kyuko

Kita-Osaka Kyuko

KoyoenHankyu
Senri
Line

se
n

Kita-senriSh

Kita-senri

Osaka
Osaka
Senri-chuo
Senri-chuoInternational
International
Ishibashi
Ishibashi
Takarazuka Takarazuka
Airport
AirportHankyu Hankyu
HankyuImazu Line Imazu Line
Senri
Line
Itami
Itami
Hankyu Hankyu
Hankyu Hankyu
Itami Line Itami Line Hankyu Hankyu
Koyo Line Koyo Line
TakarazukaTakarazuka
Line
Line

Awaji

TenjimbashisujiTenjimbashisuji
6-chome6-chome

Umeda

Kintetsu-Nara Kintetsu-Nara

Mukogawadanchi-mae
Mukogawadanchi-mae

SubwaySakaisuji Line

SubwaySakaisuji Line

Hanshin Hanshin
MukogawaMukogawa
Line
Line

Hanshin Namba
LineNamba Line Osaka-Namba Osaka-Namba
HanshinNara Prefecture
Nara Prefecture

Kintetsu Nara Line
Kintetsu Nara LineUmeda
The Group’s most important base, theUmeda area, is the Kansai economic bloc’s
hub and one of Japan’s most popular
shopping and entertainment districts.

Hankyu Railway Network 143.6 km
Kobe Line
46.9 km(Kobe Line, Imazu Line, Itami Line, Koyo Line)
Takarazuka Line
(Takarazuka Line, Mino-o Line)

Average number of passengers per day using stations ofprivate (non-JR) railway operators in fiscal 2017

Kyoto Line
65.4 km
(Kyoto Line, Senri Line, Arashiyama Line)(Thousands of people)
1,149

Tokyu Shibuya Station

Kobe Rapid Transit Railway Line

2.8 km770

Keio Shinjuku Station
Hankyu Umeda Station

505

Odakyu Shinjuku Station

500

Seibu Ikebukuro Station

485

Hanshin Umeda Station

28.5 km164

Hanshin Electric Railway Network 48.9 km
Hanshin Line
43.9 km(Hanshin Main Line, Hanshin Namba Line,
Mukogawa Line)
Kobe Rapid Transit Railway Line

5.0 km

5 km

Source: Prepared by the Group based on documents
released by respective companies
Hankyu Hanshin Holdings • Annual Report 20177

Performance Highlights (Consolidated)

Key Financial Indicators(Millions of yen)
FY

2008

2009

2010

2011

2012

2013

2014

¥   679,157

Result of Operations:
Revenues from operations¥   752,300¥   683,715¥   653,287¥   638,770¥   649,703¥   682,439

Operating income

90,724

77,82370,12664,74373,80987,921

91,828

EBITDA1

145,200

135,300

133,200

127,100

133,500

145,100

149,200

Ordinary income

74,88257,44550,40946,49465,39374,914

81,191

Income before income taxes

26,09834,06433,89932,76043,41962,192

83,542

Net income attributable toowners of the parent

627

20,55010,79318,06839,25239,702

46,352Comprehensive income——

12,541

14,72844,99254,081

55,941

Capital expenditure

134,307

109,688

132,386

68,431

55,26759,51280,722

Depreciation and amortisation

51,57754,79860,41859,66956,96854,54054,474

Cash flows from operating activities¥   74,902¥   108,597¥   146,955¥   103,252¥   124,525¥   127,655¥   146,991

Cash flows from investing activities(100,058)(115,047)(132,737)(62,516)(44,295)(58,923)(45,517)

Free cash flow2(25,155)(6,449)14,21740,73580,23068,732

101,474

Cash flows from financing activities

36,718

7,014(24,200)(39,544)(78,978)(69,195)(105,079)¥2,286,928

Cash Flows:

Financial Position:
Total assets¥2,348,476¥2,307,332¥2,337,331¥2,314,669¥2,274,380¥2,281,007

Total net assets

476,639

473,878

480,633

486,947

524,801

573,154

617,598

Interest-bearing debt

1,271,100

1,275,620

1,282,583

1,251,665

1,183,647

1,126,633

1,032,307¥     0.50¥    16.28¥     8.55

¥    14.32¥    31.13¥    31.48¥    36.76

0.41

16.18

8.51

14.27

31.13

31.47

36.75

Net assets

369.25366.96371.70377.17407.01443.63477.69Dividend

5.00

5.00

5.00

5.00

5.00

5.00

6.00

Operating income margin (%)

12.1

11.4

10.7

10.1

11.4

12.9

13.5

ROA (%)3

3.2

2.5

2.2

2.0

2.8

3.3

3.6

ROE (%)4

0.1

4.4

2.3

3.8

7.9

7.4

8.0

Interest-bearing debt/EBITDA (Times)

8.8

9.4

9.6

9.8

8.9

7.8

6.9

Equity ratio (%)

19.9

20.1

20.1

20.6

22.6

24.5

26.3

Debt/equity (D/E) ratio (Times)5

2.7

2.8

2.7

2.6

2.3

2.0

1.7

Per Share Data (Yen):
Net income attributable toowners of the parent

Basic
DilutedRatios:Stock Price Index:
Stock price at the end of fiscal year (Yen)¥      431¥      447¥      433¥      384¥      361¥      569¥      562

Market capitalisation (¥ billion)

5,480

5,683

5,505

4,882

4,590

7,234

7,145

PER (Times)

862.0

27.5

50.6

26.8

11.6

18.1

15.3

PBR (Times)

1.2

1.2

1.2

1.0

0.9

1.3

1.2

Hankyu Railway (Thousand)6

618,373618,585

605,963

603,233

608,632

615,324

629,125

Hanshin Electric Railway (Thousand)6

180,906

182,997

193,620

205,202

218,560

221,133

226,004

Average vacancy rates of rental officebuildings (Umeda area, Osaka; %)7

3.08

5.88

8.90

11.22

7.29

11.50

9.22

Business Data:

1. EBITDA = operating income + depreciation expenses + amortisation of goodwill
EBITDA figures are rounded to the nearest ¥100 million.
2. Free cash flow = cash flows from operating activities + cash flows from investing activities
3. ROA = ordinary income / total assets (average of period-start and period-end totals)
4. ROE = net income attributable to owners of the parent / equity (average of period-start and period-end totals)
5. D/E ratio = interest-bearing debt / equity
6. Annual number of passengers carried
7. Average vacancy rate figures are overall rates for the Umeda city centre area at the end of March for major rental office buildings (including properties not owned by the Group) with a
total floor area of at least 3,300 m2 and are based on “Latest Trends in the Office-Building Market in Osaka,” Miki Shoji, “Office Data.”
8. Regarding transactions related to such items as the export of mixed cargo of the International Transportation Business, the Company has changed the recognition of revenues fromoperations from net presentation to gross presentation as of fiscal 2017. As a result of this change, the amount of revenues from operations for fiscal 2016 is the amount after retrospective application (gross presentation).
Further, the Company consolidated shares at the ratio of 5 shares to 1 share with an effective date of 1st August 2016. Net income per share, diluted net income attributable to ownersof the parent per share, net assets per share, and dividend per share have been calculated based on the assumption that the said reverse stock split was executed on 1st April 2015.

8

Hankyu Hanshin Holdings • Annual Report 2017

Performance Highlights (Consolidated)

Revenues from operations8: ¥736.8 billion(down 1.3%, or ¥10.0 billion, from the previous fiscal year)
Operating income: ¥104.1 billion(down 5.7%, or ¥6.2 billion, from the previous fiscal year)

2017

2015

20168

¥   685,906¥  746,792¥ 736,763

94,026110,293

104,058

150,100

166,500

159,300

85,590104,479

100,60777,62096,087

100,805

54,201

69,971

71,302

71,034

63,842

79,288

68,11566,63986,21253,14353,70152,800

The Group recorded year-on-year declines of 1.3%, or ¥10.0 billion, in revenues fromoperations, to ¥736.8 billion, and 5.7%, or ¥6.2 billion, in operating income, to ¥104.1
billion, due to the sale of land for facilities in the Real Estate Business in the previous fiscal
year and the lower yen-equivalent value of revenues and earnings in the International
Transportation Business.
Operating income: Factor analysis (YoY change)(¥ million)

110,293

FY2016

Urban Transportation¥  131,881¥  124,838¥  115,633(52,529)(78,843)(84,845)

79,35245,99530,788(81,746)(47,278)(30,595)

Entertainment and Communications

+967
+354

Travel –43
International Transportation–200

Hotels–502

Real Estate–7,881

Other

+372

Adjustment+698¥2,279,638¥2,282,180¥2,349,831

679,482

724,237

804,659

955,828

916,570

899,523¥    42.98¥  277.88¥   285.11

42.95

277.67284.86525.562,815.96

3,150.67

6.00

35.00

35.00

13.7

14.8

14.1

3.7

4.6

4.3

8.6

10.3

9.4

6.4

5.5

5.6

29.1

31.0

33.5

1.4

1.3

1.1

¥      743¥        718¥      3,620

9,447

9,129

9,205

Net income attributable to owners of the parent: Factor analysis (YoY change)

17.3

12.9

12.7

Improvement in total extraordinary income net of total extraordinary loss +¥8.6 billion

1.4

1.3

1.1

627,536

644,563

647,369

227,203234,226

236,766

7.84

5.54

3.20

FY2017104,058

Net income attributable to owners of the parent: ¥71.3 billion(up 1.9%, or ¥1.3 billion, from the previous fiscal year)
Net non-operating loss (total non-operating expenses net of total non-operating income)declined ¥2.4 billion, year on year, to ¥3.5 billion, due to an increase in equity in income ofaffiliates. Total extraordinary income net of total extraordinary loss was ¥0.2 billion, an
improvement compared with the previous fiscal year’s loss of ¥8.6 billion. This
improvement reflected decreases in losses on revaluation of investment securities and in
impairment loss.
Due to the above, net income attributable to owners of the parent increased 1.9%, or¥1.3 billion, year on year, to ¥71.3 billion.

Increase in equity in income of affiliates+¥2.9 billion

Increase in total income taxes–¥3.4 billion

Decrease in operating income–¥6.2 billion

Interest-bearing debt: ¥899.5 billion(down 1.9%, or ¥17.0 billion, from the previous fiscal year-end)
The outstanding balance of interest-bearing debt at the end of the fiscal year underreview amounted to ¥899.5 billion, a decrease of 1.9%, or ¥17.0 billion, from the previous
fiscal year-end. This was because free cash flow was used to repay interest-bearing debt.

Note: Billions of yen figures are rounded to one decimal place.

Hankyu Hanshin Holdings • Annual Report 20179

Performance Highlights (Consolidated)

Key Financial Indicators (Graphs)
Revenues from operations

Revenues from operations decreased 1.3%, or ¥10.0
billion, year on year, to ¥736.8 billion, due to the saleof land for facilities in the Real Estate Business in theprevious fiscal year and the lower yen-equivalentvalue of revenues and earnings in the International
Transportation Business.

(¥ billion)
900

752.3

683.7

600

653.3

638.8

649.7

10

11

12

682.4

679.2

685.9

13

14

15

746.8

736.8

16

17(FY)

300

0

08

09

Operating income and operating income margin(¥ billion)

(%)

120

21

110.3
90.7

80

12.1

87.9

77.8
11.4

70.1

64.7

73.8

104.1

14.8

14.1

14

13.7

13.5

12.9

11.4

10.1

10.7

40

94.0

91.8

Operating income was down 5.7%, or ¥6.2 billion,
year on year, to ¥104.1 billion, due to the above­
mentioned decrease in revenues from operations
and lower revenues from the accommodation andbanquet areas in the Hotels Business.

7

0

0

08

09

Operating income

10

11

12

13

14

15

17(FY)

16

Operating income margin (right axis)

EBITDA

Operating income decreased 5.7%, or ¥6.2 billion,
year on year, to ¥104.1 billion; depreciation and amortisation declined 1.7%, or ¥0.9 billion, to ¥52.8 billion; and amortisation of goodwill declined 1.8%, to¥2.4 billion. As a result, EBITDA was ¥159.3 billion.

(¥ billion)
180

145.2

135.3

133.2

09

10

120

127.1

133.5

145.1

149.2

150.1

13

14

15

166.5

159.3

16

17

60

0

08

11

12

(FY)

Net income attributable to owners of the parent and ROE(¥ billion)

(%)

80

16

70.0
60

39.3
20.6

20

0

0.6
08

4.4

10.3

46.4

39.7

7.9

8.0

7.4

9.4

8.6

18.1
3.8

10.8

09

10

8

4

2.3

0.1

0

11

Net income attributable to owners of the parent

10

12

54.2

40

71.3

Hankyu Hanshin Holdings • Annual Report 201712

13

ROE (right axis)

14

15

16

17

(FY)

Total income taxes were up from the previous fiscal
year, but higher income before income taxes
caused net income attributable to owners of theparent to increase 1.9%, or ¥1.3 billion, year on year,to ¥71.3 billion, breaking the previous record forthe sixth consecutive year. Due to higher equity,
ROE decreased 0.9 percentage point, to 9.4%.

Performance Highlights (Consolidated)

Total assets and ROA(¥ trillion)

(%)
6

3

2.35

2.34

2.31

2.31

2.27

2.29

2.28

2

3.2
2.5

2.28

4.6

2.35
4.3

2.0

2.2

1

3.6

3.3

2.8

2.28
3.7

4

2

0

0

08

09

Total assets

10

11

12

13

14

15

17(FY)

16

ROA (right axis)

Interest-bearing debt, D/E ratio, and interest-bearing debt/EBITDA(¥ trillion)

(Times)
15

1.5

1.27
1.0

1.28

1.28

1.18

9.8

9.6

9.4

8.8

1.25

1.13

8.9

1.03
7.8

0.96
6.9

0.92
6.4

2.8

2.7

2.7

2.6

2.3

2.0

1.7

1.4

5.6

1.3

09

Interest-bearing debt

10

11

D/E ratio (right axis)

12

13

14

15

5

1.1

0

08

10

0.90

5.5

0.5

0

17(FY)

16

Interest-bearing debt/EBITDA (right axis)

Cash flows
147.0

150

108.6

103.3

74.9

80.2

50

14.2

0
–50

–25.2

–150

–100.1

147.0
101.5

68.7

131.9

124.8

115.6

79.4
46.0

30.8

–62.5

–44.3

–58.9

–45.5

13

14

–52.5
–78.8

–84.8

16

17(FY)–132.7

–200

08

40.7

127.7

–6.4
–115.0

–10

124.5

09

10

11

Net cash provided by operating activities
Free cash flow

1215

Net cash used in investing activities

Returns to shareholders(Yen)(%)
1,000.0

1,000

50.00

58.5

40.00

60

35.00

35.00

45

30.00

34.9
30

20.00

30.7

10.00

The outstanding balance of interest-bearing debt at
the end of the fiscal year under review amounted to¥899.5 billion, a decrease of 1.9%, or ¥17.0 billion,
from the previous fiscal year-end. As a result, theGroup reduced interest-bearing debt to less than¥900 billion ahead of the previous medium-term
management plan’s schedule, which envisaged
achieving this by the end of fiscal 2019. Consequently, the D/E ratio decreased to 1.1 times. Further,
the interest-bearing debt/EBITDA ratio was 5.6
times, remaining below 6 times for the second consecutive fiscal year.

Net cash provided by operating activities was ¥115.6
billion, reflecting income before income taxes, depreciation and amortisation, and income taxes paid.
Net cash used in investing activities was ¥84.8 billion
due to purchases of noncurrent assets. Net cashused in financing activities was ¥30.6 billion as aresult of redemption of bonds.

(¥ billion)

100

Total assets rose ¥67.7 billion from the previous fiscal
year-end, to ¥2,349.8 billion, due to an increase inconstruction in progress. ROA edged down 0.3 percentage point, to 4.3%, reflecting lower ordinary
income.

16.1

15.9

5.00

5.00

5.00

5.00

5.00

5.00

08

09

10

11

12

13

16.3

14.0
6.00

0

14

25.0

25.0

15

6.00
15

0

16

17(FY)The Company’s basic policy is to pay stable annual
dividends and acquire treasury stock with a total
payout ratio (the total of purchases of treasury stockand the total annual dividend as a percentage of net
income attributable to owners of the parent) of 25%
as a target. Regarding dividend payments fromprofits in fiscal 2017, the Company paid a dividendof ¥35 per share, which was the same as the dividend paid in the previous fiscal year. The Company
purchased treasury stock (amounting to ¥9.1 billion)
based on the target of a total payout ratio of 25%.

Dividend per share
Total payout ratio (right axis)
Notes: The total payout ratio for fiscal 2017 includes purchase of treasury stock (amounting to ¥9.1 billion).
The Company conducted a 1-for-5 reverse stock split with an effective date of 1st August 2016. The figures
for dividend per share above are after the reverse stock split.
Hankyu Hanshin Holdings • Annual Report 201711

ESG Highlights

Environmental Factors
CO2 emissions volumes and energy consumption on crude oil-conversion basis(t-CO2)(kl)800,000

800,000

658,607648,955

602,586

600,000

642,366
600,000

476,265
400,000

400,000

327,014

320,753

200,000

302,303309,143

317,491

200,000

0

0

2012

2013

Urban Transportation
Entertainment and Communications
International Transportation
Other

2014

2015

2016

(FY)

Real Estate
TravelHotelsEnergy consumption on crude oil-conversion basis (right axis)

Electricity consumption during summer months (July–September)

The Group has been endeavouring to lower its electricity consumption over the peak usage months
from July to September. As a result, total electricity
consumption from July to September 2016 was
261,738 kWh, down 0.2% year on year (a decrease of
approximately 15% from the equivalent period in
2010, before the Great East Japan Earthquake).

(Thousand kWh)
300,000

285,000

281,759
277,219
268,581270,000

In fiscal 2016, overall emissions were down 1.0% year
on year, to 642,366 t-CO2. While CO2 emissions
jumped in fiscal 2013, this rise was the result of anincrease in the portion of electricity supplied fromthermal power generation after the halt in operations of nuclear power plants following the March2011 Great East Japan Earthquake.
Further, energy consumption on a crude oilconversion basis decreased for the fifth consecutive
year as a result of efforts by Group companies toreduce energy consumption. These efforts included
measures by Hankyu Corporation and Hanshin Electric Railway to switch to light-emitting diode (LED)lighting in railway stations and other facilities and to
introduce more new rolling stock with better energy
efficiency than existing rolling stock.

262,261

261,738

2016

2017

255,000

0

2013

2014

2015

(FY)

Note: Figures above are for Hankyu Hanshin Holdings, Inc., and its domestic consolidated subsidiaries, but exclude
certain business sites for which electricity consumption is difficult to track.

Social Factors
Capital investment in railway operations

As a railway operator, the Group provides a formof public infrastructure. We therefore make giving
priority to the safety of our customers a fundamental policy of management, and conduct ongoingsafety-related capital investments in our railway
operations accordingly. In fiscal 2017, such investments totalled ¥12.7 billion at Hankyu Corporationand ¥3.7 billion at Hanshin Electric Railway. These
investments were primarily used to conduct station upgrades, including track elevation, seismic reinforcement of elevated tracks, expansion of platforms, andmeasures for making stations barrier-free.

(¥ billion)
25

20

3.3
15

1.8

2.8

2.9

3.3

10

5

0

16.1

13.7

11.4

1.5

12.7
0.6

4.9

0.9

4.0

4.4

3.7

Hankyu Hanshin
2014

Hankyu Hanshin
2015

Hankyu Hanshin
2016

Hankyu Hanshin
2017

3.8
Hankyu Hanshin
2013

13.0
1.1

1.2

(FY)

Safety-related capital investment
Other capital investment
Note: The total length of lines operated is 143.6 km for Hankyu Corporation and 48.9 km for Hanshin Electric Railway.

12

Hankyu Hanshin Holdings • Annual Report 2017

Note: Please see “Safety Initiatives in the Railway
Business” on pages 64–67 of this report.

ESG Highlights

Number of programmes and participants of the Hankyu Hanshin Dreams andCommunities Challenge Troop(Programmes)(Participants)
50

3,000

45

43
39

36

45
2,628

2,602

2,501
2,024

27

25

1,500

1,200

17
13
600
404

0

2011

Programmes

445
0

2012

2012

2014

2015

2016

2017

2018

(FY)

Invited participants (right axis)

The Group conducts a variety of activities focusedon its line-side areas in accordance with a basic
policy of creating towns and cities that people will
truly want to live in. Particularly popular among local
residents are programmes that take advantage ofthe unique business expertise of Group companies
to provide primary school students with opportunities to experience a diverse range of workplaces.
Since we began this initiative in 2010, we have invited 12,404 students to participate in programmes
from an aggregate total of roughly 92,000 applications. In fiscal 2017, these activities received a special
commendation from the judges of an award recognising companies that offer experiential activities foryoung people, organised by the Ministry of Education, Culture, Sports, Science and Technology.
Note: Please see “CSR and Corporate Value Enhancement”
on pages 30–33 of this report.

Governance Factors
Membership of the Board of Directors

The General Meeting of Shareholders held in June2017 approved a reduction in the number of directors from 14 to nine, thereby increasing the proportion of external directors. Five directors of theCompany concurrently serve as directors of Group
companies to ensure that business management
reflects viewpoints from the Group’s operations. In
addition, two of the Company’s part-time directors
have been appointed from H2O Retailing Corporation and Toho Co., Ltd., with the aim of strengthening coordination with other companies in the
Hankyu Hanshin Toho Group.

(People)
15

2

2

2

2

6

6

10

7

6

2
3

5

5

5

5

2013

2014

2015

6
4

0

Directors with operational execution responsibilities
Internal directors without operational execution responsibilities
Independent external directors

2016

2017

(As of the conclusion of the General Meetingof Shareholders for each fiscal year)

Rate of attendance of external directors and external Audit & Supervisory Board members
at meetings of the Audit & Supervisory Board and the Board of Directors
(%)
100

96.3

97.2

97.2
80

83.3

96.7

96.7

97.2

97.2
90.0

85.0

60

96.7

100.0
97.2
85.0

65.0

40

20

0

2013

2014

2015

2016

External directors, Board of Directors’ meetings
External Audit & Supervisory Board members, Board of Directors’ meetings
External Audit & Supervisory Board members, Audit & Supervisory Board meetings

2017

(FY)

To support external directors and external Audit& Supervisory Board members, the Company has
established secretariats for the Board of Directors
and the Audit & Supervisory Board. In particular, theCompany has appointed to the secretariat of the
Audit & Supervisory Board dedicated personnel who
provide information to Board members and liaise
with relevant in-house departments and divisions.
The Company provides external directors and external Audit & Supervisory Board members with information about the Company’s businesses, financial
position, and organisations mainly at meetings of
the Corporate Governance Committee. Also, thesecretariat of the Board of Directors sends Board
members documents detailing agenda items for
submission to the Board of Directors, in principle,
seven days prior to the dates of meetings.

Hankyu Hanshin Holdings • Annual Report 201713

To Our Stakeholders

Aiming to be a corporate group that continues growing
amid social change, we recently established Long-Term
Management Vision for 2025. We will steadily advancevarious measures to realise this vision, thereby enhancing
corporate value continually.

14

Kazuo Sumi

Takehiro Sugiyama

In June 2017, appointed Chairman and
Representative Director, Group Chief Executive Officer

In June 2017, appointed President andRepresentative Director

Hankyu Hanshin Holdings • Annual Report 2017

To Our Stakeholders

Fiscal 2017 Business Results In fiscal 2017, the year ended 31st March 2017, although weachieved our earnings targets, revenues from operations, operating income, and ordinary income declined year on year. These
declines resulted from the sale of land for facilities in the Real
Estate Business in the previous fiscal year as well as the lower
yen-equivalent value of revenues and earnings of overseas subsidiaries in the International Transportation Business, whichaccompanied exchange rate fluctuations. However, reflecting an

improvement in total extraordinary income net of total extra­ordinary
loss, net income attributable to owners of the parent reached arecord high for the sixth consecutive fiscal year. Further, despite
steady investment for growth, we reduced interest-bearing debt
to less than ¥900 billion ahead of the previous medium-term
management plan’s schedule, which envisaged achieving this by
the end of fiscal 2019. As a result, the interest-bearing debt/
EBITDA ratio was below 6 times for the second fiscal year in a row.

Fiscal 2017 business results overview
(Billions of yen)

FY2017 results

FY2016 results

YoY
Increase / Decrease(%)

Revenues from operations

736.8

746.8

–10.0

–1.3

Operating income

104.1

110.3

–6.2

–5.7

Ordinary income

100.6

104.5

–3.9

–3.7

Net income attributable to owners of the parent

71.3

70.0

1.3

1.9

Interest-bearing debt

899.5

916.6

–17.0

–1.9

5.6

5.5

0.1 ptInterest-bearing debt/EBITDA ratio (Times)

Returns to Shareholders In fiscal 2017, in accordance with the Group’s policy, annual dividend payments from profits were ¥35 per share, representing
total annual dividend payments of approximately ¥8.8 billion. In
addition, based on a target of 25% for the total payout ratio, totaltreasury stock purchases amounted to roughly ¥9.1 billion.
In light of stable performance trends recently and steady
improvement in our financial position, we intend to enhance
returns to shareholders even further. In fiscal 2018, the year
ending 31st March 2018, we plan to increase annual dividend
payments from profits from ¥35 per share to ¥40 per share and toraise our target total payout ratio from 25% to 30%.

Returns to shareholders(¥ billion)

(Yen)

21

14

7

45

40

35*

35

8.7

9.1

30

7.6

8.8

8.8

15

2015

2016

2017

30*

30*

7.6

2014

0

0

Total dividend

Acquisition of treasury stock

2018 (Est.)(FY)

Dividend per share (right axis)*	Shares were consolidated at the ratio of 5 shares to 1 share with 1st August 2016 as
the effective date.
	Annual dividends for fiscal 2016 and earlier are converted based on this shareconsolidation.

Corporate Governance With a view to increasing the transparency of the Board of Directors, we increased the proportion of external directors by reducing
the number of directors from 14 to nine while continuing toappoint two external directors. Meanwhile, we introduced an
executive officer system to enhance the execution of duties.
Further, external Audit & Supervisory Board members continue toaccount for three of our five Audit & Supervisory Board members.

As a result, five of the 14 directors and Audit & Supervisory Board
members that attend meetings of the Board of Directors are
external directors or external Audit & Supervisory Board members who are independent of the Company.
Also, given that we currently do not have senior advisors,
we took the opportunity that this presents to abolish the senioradvisor system, which was stipulated in the articles of incorporation.

Note: Billions of yen figures are rounded to one decimal place.

Hankyu Hanshin Holdings • Annual Report 201715

To Our Stakeholders

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

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

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

FY2017
Operating income

104.1 billion¥

Umeda andline-side areas+Flowbusinesses

Businesses in Umeda
and line-side areas
generate

90% of operating income.

Umeda and line-side areas+
Stock businesses

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

16

Hankyu Hanshin Holdings • Annual Report 2017

To Our Stakeholders

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

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

(%)

18.3

80

18.0

17.5
15.4

15

60.0

58.7

60

53.5

58.5

10

40

36.7

0

2015

30.8

29.8

27.6

5

2020

20

2025

0

2040

(CY)

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

Overseas visitors to Japan(Millions of people)

80

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

60.0

60

40.0

40

20

0

13.4
10.4
4.8
3.5
2013

2014

19.7
7.9
2015

24.0
10.2
2016

18.0
2020
Target2030
Target(CY)

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

Hankyu Hanshin Holdings • Annual Report 201717

To Our Stakeholders

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

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

(Millions of people)

40

1.6

35.9

35.7

35.2

30

1.0

20

1.1

1.2

32.3
1.2

0.8

10

0

1.2

0.4

2015

2020

2025

2040

0

(CY)

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

Population of the ASEAN region(Millions of people)
800

600

633.4

667.6

698.9

2020

2025

768.7

400

200

0

2015

2040
(As of 1st July of each year)

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

18

Hankyu Hanshin Holdings • Annual Report 2017

To Our Stakeholders

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

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

September 2017

Kazuo Sumi

Takehiro Sugiyama

Chairman and
Representative Director,
Group Chief Executive Officer

President andRepresentative Director

Hankyu Hanshin Holdings • Annual Report 201719

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

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

Second Phase

1,400

Interest-bearing debt
(left axis)

1,275.6

1,282.6

1,271.1

1,251.7

145.2
1,100

135.3

133.2
127.1

EBITDA (right axis)

800

2008

2009

2010

2011

Realised numerous integration benefits andadvanced large projects

Advancing large projects for growth

Improving financial position steadily(fiscal 2012–fiscal 2015)

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

9.8 times
9.6 times

8.8 times

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

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

Interest-bearing debt/
EBITDA ratio
9.4 times

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

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

Capital investment

Approx. ¥320 billion*
Approx. ¥130 billion

Approx. ¥190 billion

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

3/20083/20093/20103/2011

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

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

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

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

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

20

Hankyu Hanshin Holdings • Annual Report 2017

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

Target¥200.0 billion

8.9 times

180

7.8 times

166.5
159.3

1,183.6
145.1
133.5

2012

1,126.6

2013

149.2

150.1

6.9 times

6.4 times

1,032.3

955.8

2014

157.0

152.0

140

6.0 times

5.9 times

916.6

5.6 times

5.5 times

899.5

910.0

920.0

2016

2017

2018

2019

2015

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

TargetBetween5 and 6 times
2026

100

(FY)

Established long-term vision

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

Steady improvement
in financial standing

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

Approx. ¥240 billion*
Approx. ¥60 billion

Approx. ¥180 billion

Approx. ¥220 billion

FY2012 – FY2015

3/20123/20133/2014

Investment for growthInvestment in maintenance and renewal

Investment in maintenanceand renewal of existing
infrastructure, etc.

FY2016 – FY2019

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

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

Umeda 1-1 Project (around spring 2022)

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

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

Hankyu Hanshin Holdings • Annual Report 201721

Special Feature: Long-Term Management Vision for 2025

Long-Term Vision Summary

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

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

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

Enhance daily life (customer) value

Enhance social value

Strategy 1

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

22

Enhance economic value

Strategy 2

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

Strategy 3

Strategy 4

Flow businesses

Groupwide initiatives and new business fields

Strengthen competitiveness by thoroughly pursuing
brand optimisation and differentiation.

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

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

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

Hankyu Hanshin Holdings • Annual Report 2017

Special Feature: Long-Term Management Vision for 2025

Strategies under Long-Term Management Vision for 2025

Strategy 1 Umeda and line-side areas + Stock businesses

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

Project summary
Location

1-1 Umeda, Kita-ku, Osaka

Site area

Approx. 12,200 square metres*

Total floor space

Approx. 260,000 square metresSize

38 floors above ground and 3 below groundPurpose

Department store, offices, halls, etc.

Planned total investment¥89.7 billion

Construction completion

Around spring 2022

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

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

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

A rendering of the Umeda 1-1 Project uponcompletion

Hankyu Hanshin Holdings • Annual Report 201723

Special Feature: Long-Term Management Vision for 2025

Strategies under Long-Term Management Vision for 2025

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

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

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

Strategy 2 Tokyo metropolitan area and overseas markets + Stock businesses

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

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

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

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

24

Hankyu Hanshin Holdings • Annual Report 2017

Special Feature: Long-Term Management Vision for 2025

Strategy 3 Flow businesses

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

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

Strategy 4 Groupwide initiatives and new business fields

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

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

Hankyu Hanshin Holdings • Annual Report 201725

Special Feature: Long-Term Management Vision for 2025

Management Indicators

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

Profitability

Financial soundness

Operating income¥

EBITDA¥

120
200

billionInterest-bearing debt/EBITDA ratio

billionBetween

5 6
and

times

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

26

Hankyu Hanshin Holdings • Annual Report 2017

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

Special Feature: Long-Term Management Vision for 2025

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

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

Strategy 1

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

Strategy 2

Accumulate stock in the Tokyo metropolitan area and overseas markets

Strategy 3

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

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

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

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

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

Maintaining financial soundness

Returns to shareholders

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

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

Hankyu Hanshin Holdings • Annual Report 201727

Special Feature: Long-Term Management Vision for 2025

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

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

Approx.
¥350 billion

Approx.
¥130 billion

Approx.
¥220 billion

Approx.
¥ 390 billion

Approx.
¥170 billion

Tokyo metropolitan area
and overseas markets

Approx.

Umeda andline-side areas40%

Approx.

60%

Approx.
¥220 billion

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

Current plan

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

FY2018 forecasts

FY2019 forecasts

Operating income¥96.0 billion¥98.0 billion

EBITDA¥152.0 billion¥157.0 billion

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

7.5%

7.2%

¥910.0 billion¥920.0 billion

Financial soundness Interest-bearing debt/EBITDA ratio

6.0 times

5.9 times

D/E ratio

1.1 times

1.1 times

Profitability

Capital efficiency

ROE
Interest-bearing debt

28

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

Hankyu Hanshin Holdings • Annual Report 2017

From Enhancing the Value of Line-Side Areas to Enhancing Corporate Value
Developing towns that people want to live in long term orvisit frequently is the Hankyu Hanshin Holdings Group’s
unchanging mission. These efforts are the Group’s mostimportant strategy, as they promote a virtuous cycle. Specifically, heightening the appeal of line-side areas increases
resident and non-resident populations, thereby creating
stable cash flows and strengthening brand power. In turn,these benefits enable further investment for growth,which enhances corporate value.
The Group has enhanced the value of line-side areas
through a range of businesses in the fields of urban transportation, real estate, and entertainment. For example, atestament to the strong support that the Group has
earned from local residents is the fact that the Japan

Productivity Center’s survey of customer satisfactionlevels* has ranked Hankyu Corporation first in the urban
rail transportation category for eight consecutive years
and ranked Takarazuka Revue Company first in the entertainment industry category.
Given that population decline is unavoidable, enhancing the value of line-side areas further is paramount. LongTerm Management Vision for 2025 calls on us to make ourrailway the absolute best among the Kansai networks.
Accordingly, the Group will continue taking on the challenge of enhancing the value of line-side areas tirelessly.
* Research by SPRING (Service Productivity & Innovation for Growth) for the fiscal year
ended 31st March 2017

Increase in resident
population

Increase in non-resident
population

Enhancement of thevalue of line-side areas• People want to live in areas long term
• People want to visit areas frequently

Real estate sales businessCondominiums and detached houses

Real estate leasing business
Offices and commercial facilities

Entertainment businessNew businesses in thelifestyle support field

Hanshin Tigers

Takarazuka Revue

Hotels Business

Urban Transportation Business(railways, buses, taxis)

Expansion of earnings baseStrengthening of the Hankyu Hanshin brandCorporate value enhancement

Hankyu Hanshin Holdings • Annual Report 201729

CSR and Corporate Value Enhancement

Line-side areas are the foundations of the Hankyu Hanshin Holdings Group’s businesses. We view heightening the value ofthese areas as a social responsibility and a source of growth. Our CSR activities come under two categories: social contribution and environmental preservation. In these two categories, the Group will advance CSR activities in tandem with businessactivities to enhance the value of line-side areas even further.

Creating Communities People Will Truly Want to Live in“Enhancing the value of line-side areas is indispensable for theGroup’s medium-to-long-term growth. Therefore, even though
our social contribution activities may not seem to immediately
benefit short-term business results, they build the value of ourline-side areas and brand,” explains Yukiko Sagara of Hankyu Hanshin Holdings. Ms. Sagara has been responsible for the Hankyu
Hanshin Dreams and Communities Project since its launch.
Regarding social contribution activities, our basic policy is topromote the creation of towns and cities that people will truly
want to live in. Moreover, the Group conducts activities in collaboration with Group companies, citizens’ groups, employees,
and other stakeholders.

Increasing Effectiveness through Collaboration
We collaborate with stakeholders so that our social contribution
activities produce even greater benefits. To give an example ofcollaborative efforts, Ms. Sagara describes the Hankyu Hanshin
Dreams and Communities Challenge Troop, which invites primaryschool students from line-side areas to participate in interactive
educational programmes free of charge. “Acting as instructors,
employees conduct programmes at Group work sites. Every year,
we receive more than 20,000 applications and increase thenumber of programmes. In 2017, we hosted 45 programmes. So,
offering more programmes allows us to invite more children, but
we could not provide such a range of programmes without theparticipation of Group companies.”

The Hankyu Hanshin Dreams and Communities Challenge Troop

30

Hankyu Hanshin Holdings • Annual Report 2017

Ms. Sagara adds that the Group conducts one-time classes atschools to complement the national government’s recent focus
on career education for children. “At classes held in primaryschools, Hankyu Corporation employees explain their jobs tostudents. By drawing attention to the wide variety of jobs in local
communities, these classes aim to help children in our line-side
areas cultivate ideas about future careers. Also, aiming to provide
equal access to education, we conduct classes in collaboration
with citizens’ groups that support disadvantaged children. We
are focusing on this area because at schools with many suchchildren teachers are often too busy providing lifestyle guidanceand carrying out other duties to even accommodate our classes.
However, it is particularly important for these children to receive
career education that broadens their view of future possibilities. I
feel this is a good example of how collaboration can bring tolight social problems and increase the effectiveness of social
contribution activities.”

Enhancing Brand Value Even Further
Every three years, the Group conducts an Internet survey of 1,000
line-side area residents about the project. The results show thatas awareness of the project heightens, favourable opinions of theGroup increase, and respondents’ desire to live in its line-side
areas strengthens. Thus, our social contribution activities aregradually having a positive effect on the value of our brand andline-side areas.

The Dreams and Communities Exciting Work ProgramCSR and Corporate Value Enhancement

The Long-Term Management Vision for 2025
calls on us to make our railway the absolute best
among the Kansai networks. To this end, we will
steadily extend social contribution activities.
Yukiko Sagara
Manager, General Affairs Dept. (in charge of social contribution),
Personnel and General Affairs Div.

“Our activities for children are aimed at fostering important
human resources for town development. In other words, wewant to help the growth of children who will form the basis of
local communities. Moreover, the survey results confirmed that
our activities have the added benefit of making the families ofthese children fans of the Hankyu Hanshin Holdings Group.”
Ms. Sagara’s hope is to proactively pursue collaborations withcustomers as well as with Group companies, citizens’ groups, andemployees. “Our social contributions are based on the needs ofcommunities. We believe that by identifying the problems andneeds of those who live in or spend time in towns, we can makeour activities even more effective.” As of this summer, we havebeen encouraging customers to participate in large numbers byadvancing activities centred on railway stations and commercial
facilities in collaboration with citizens’ groups. Through thesesocial contribution activities, we will continue to promote thecreation of towns and cities that people will truly want to live in.

Business activities
CSR activities

Enhancementof brand value
Enhancement of
the value ofline-side areas

Corporate valueenhancement

Earnings growth

Our reputation

Respondents who want to live in our line-side areas

(%)

(%)
100

100

81.7

80

60

40

73.4
65.8
46.8
42.9

46.4

80

40

20

62.0

60

48.2

44.2

34.2

26.3

28.3

17.9

19.9

All respondents(1,000)

Respondents familiar
with the Group (830)

20

22.9

27.0

34.9

0

0

All respondents(1,000)

Positive opinion of the Group

Respondents familiar
with the Group (830)Respondents familiar
with the Dreams andCommunities Project (284)

Fairly positive opinion of the Group

Want to live in them

27.8
Respondents familiar
with the Dreams andCommunities Project (284)May want to live in them

Hankyu Hanshin Holdings • Annual Report 201731

CSR and Corporate Value Enhancement

Social Contribution Activities 
Under the Hankyu Hanshin Dreams and Communities Project, the Group aims to develop communities centredon line-side areas. Accordingly, we are moving forward with various social contribution activities in partnershipwith such stakeholders as customers, citizens’ groups, Group companies, and employees.

Basic Policy

We intend to promote the creation of towns and cities along our line-side areas that people will truly want to live in.

Priority Areas
Our social contribution activities focus on two priority areas: environment-friendly development, which improves the environment in towns andcities, and human capital development, aimed at fostering the generation that will be responsible for the future of communities.
Environment-Friendly Development

Human Capital Development

As a Group with strong local roots, we are com-

We are creating opportunities for the healthy

mitted to sustainable community building with

development of ambitious children, upon whoseenvironment-friendly developments that provide

shoulders the task of building the communities

local residents with security, peace of mind, andof the future rests.

cultural enrichment.

Example Initiative

Issuing a Magazine for the Dreams and Communities Project

The Dreams and Communities Project has a dedicated quarterly
magazine entitled Dreams and Communities of the Future, which targets Group employees. We believe that it is important to update
employees and other stakeholders about social contribution activities as we implement them. For this reason, we also include themagazine on our website.
Featuring articles about citizens’ groups that receive grants fromthe Hankyu Hanshin Dreams and Communities of the Future Fund,the magazine also reports on Group employees’ volunteer activities
and other events.
The Hankyu Hanshin Dreams and Communities of the Future
Fund comprises donations from Group employees and matchingamounts from Hankyu Hanshin Holdings. We receive applications

Dreams and Communities of the Future magazine covers

from citizens’ groups located in line-side areas, select those engagedin activities that coincide with the policies of the project, and provide
these groups with grants and public relations support. Over eight
years, we have provided grants totalling ¥49.5 million to 97 groups.

The Hankyu Hanshin Holdings Group conducts a wide range of other social contribution activities. For details about these activities, please visit the Group’s website.
http://www.hankyu-hanshin.co.jp/yume-machi/top.html(Available only in Japanese)External Evaluations
In fiscal 2017, one of our initiatives, the Hankyu Hanshin Dreams and Communities Challenge Troop interactive educational programmes,
received a special commendation from the judges of an award recognising companies that offer experiential activities for young people,
organised by the Ministry of Education, Culture, Sports, Science and Technology. Also, the Dreams and Communities Exciting Work Program
classes, which Hankyu Corporation conducts at schools, have received a favourable evaluation from The Japanese Society for the Study ofCareer Education and been presented as a case study in Tokyo and South Korea.

32

Hankyu Hanshin Holdings • Annual Report 2017

CSR and Corporate Value Enhancement

Environmental Preservation Activities 
The Group has established a Basic Environmental Philosophy and Basic Environmental Policies, which guide environmental preservation activities. Further, to advance such activities, the Group has established the Environment Committee, chaired by the president of Hankyu Hanshin
Holdings, which exercises control over all environmental preservation activities that Group companies implement within each core business.
We conduct a variety of activities, including efforts to reduce environmental burden through business activities and the dissemination of information about environmental preservation.

Mindful that global environmental preservation is a task facing all mankind, the Hankyu Hanshin Holdings Group works

Basic Concept

for a sustainable society through environmental activities aimed at handing down a sounder global and human environment to the next generation.

Example Initiative

Reducing Environmental Burden through Business Activities

As part of climate change countermeasures, the Hankyu Hanshin

Theatre performances, we use the J-Credit Scheme, a certification

Holdings Group saves energy in its business activities. For example,

system administered by the national government. Thus, the three

we are introducing new energy-saving rolling stock and using LED

initiatives above are carbon neutral.

lighting at our facilities. Moreover, we use carbon offsetting* continuously for some of the CO2 emissions from energy use in businessactivities. In fiscal 2017, we used carbon offsetting for the operations* The national government certifies as “credit” the respective reduction or absorption of
CO2 and other greenhouse gas emissions that results from introducing energy-saving
equipment or from establishing carbon sinks through forestry management.

of Hankyu Settsu-shi Station, an initiative that we began in 2010; forthe administration of the General Meeting of Shareholders, a measure that dates back to 2011; and for our Takarazuka Grand Theatre
Carbon Offset Shows, which comprised 46 performances. For theoperations of Settsu-shi Station and the administration of the General Meeting of Shareholders, we use offset credits earned under theJapan Verified Emission Reduction (J-VER) Scheme by preserving
forests in Shiso, Hyogo Prefecture. As for the Takarazuka Grand

Example Initiative

Hankyu Settsu-shi Station

General Meeting of Shareholders

Disseminating Information to Raise Environmental AwarenessWe actively disseminate information with a view to heightening theHighlighting such topics as the use of solar energy, forest thinning,

environmental awareness of employees and informing customers

and recycling, the posters showcase Group companies’ initiatives. In

and local communities about our environmental preservation activi-

addition, at LOHAS FESTA 2017 we opened a display booth thatties. One way in which we do this is by displaying environment-

highlighted the importance of environmental initiatives and publi-

themed posters inside the trains of Hankyu Corporation, Hanshin

cised our activities in this regard.

Electric Railway, Nosé Electric Railway, and Kita-Osaka Kyuko Railway.

Environment-themed posters

LOHAS FESTA 2017

The Hankyu Hanshin Holdings Group conducts a wide range of other environmental
preservation activities. For details about these activities, please visit the Group’s website.
http://www.hankyu-hanshin.co.jp/csr/eco/(Available only in Japanese)

Hankyu Hanshin Holdings • Annual Report 201733

Business Environment

Population of areas served by the Hankyu and Hanshin lines (1991 = 100)

Reflecting the decline in Japan’s population since its
peak in 2008, the population of the Kansai area isdecreasing gradually. Meanwhile, areas served by
the Hankyu and Hanshin lines are highly popularand regularly monopolise the top 10 areas in surveys
of prospective condominium purchasers regarding
their preferred Kansai residential area. In our lineside areas, the population has been trending
upward since bottoming in 1996, the year after theGreat Hanshin Earthquake.

106

103

100

97

(CY)
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Areas served by the Hankyu and Hanshin lines
Kansai area
Sources: Prepared by the Company based on data from “Local Economy Directory,” published by Toyo Keizai, Inc., and“Basic Resident Register,” published by the Ministry of Internal Affairs and Communications.
Note: Definition of the areas served by the Hankyu and Hanshin lines is presented on the Contents page.

Average vacancy rates at office buildings

Although the outlook for corporate performance remains uncertain, demand for office consolidation or
expansion aimed at improving workplace environments remains steady. In the Umeda area, the vacancy rate on 30th April 2017 was down more than
2.7 percentage points from a year earlier, dipping
below 3% for the first time since November 2007.

(%)
15

10

5

0

08

09

Osaka business areas (all)1011

Umeda area
Source: Miki Shoji, “Office Data”

12

13

14

15

16

17

Tokyo business areas (all)(Comparison of average rents in April of respective years)

New supply of condominiums

In 2016, the number of new condominiums supplied in the Tokyo metropolitan area as a whole wasdown significantly year on year. Tokyo itself saw aparticularly sharp year-on-year decrease in supply of
more than 21%, while in the areas surrounding
Tokyo supply declined more than 11% year on year.
In the Kansai area, meanwhile, the year-on-year decline in the number of new condominiums supplied
was only 1.3%, while within Osaka itself supply wassteady, rising more than 7% year on year.

(Units)100,000
80,00060,00061,021

56,47843,73340,00030,21920,00036,37644,53522,744

19,784

21,7160809

10

44,49945,602

20,21923,266

24,69111

12

13

44,91340,44935,772

18,814

18,93018,676

14

15

0

07

16 (CY)Tokyo metropolitan area
Kansai area
Source: Real Estate Economic Institute Co., Ltd., “National Condominium Market Trends”

Condominium prices / Unit sales prices (Tokyo metropolitan and Kansai areas)(¥ million)

(¥ thousand/m2)

80

1,000

60

750

40

500

20

250

0

0

07

08

09

10

11

12

13

14

Tokyo metropolitan area (average)
Kansai area (average)
Tokyo metropolitan area (right axis)
Kansai area (right axis)
Source: Real Estate Economic Institute Co., Ltd., “National Condominium Market Trends”

34

Hankyu Hanshin Holdings • Annual Report 201715

16 (CY)

Despite the continuing high level of such construction costs as building material and labour costs, theaverage condominium price fell for the first time infour years in 2016. Meanwhile, the average condominium price per square meter continued to rise,reaching its highest level since 1991.

Business Environment

Sports-spectating and theatre markets(¥ billion)
180

139

135

120

118

127

145
140

139

148

156

132

136

141

109

104

102

102

104

11

12

13

14

15

160

133
112

60

In 2016, interest in sports increased as the Tokyo
2020 Olympic and Paralympic Games attracted
more attention. Conditions in the sports-spectating
market were favourable. For example, baseballgame attendances rose for the fourth consecutive
year. The live entertainment market, including theatre productions and musicals, is expanding, while
the customer base of this market is broadening.

0

07

08

09

10

16 (CY)Sports-spectating
TheatreSource: Japan Productivity Center, “White Paper on Leisure Industry 2017”

Volume of maritime container cargo movement worldwide(Millions of TEUs)
150

100

101.9

105.5

07

08

110.5

117.9

119.7

122.4

11

12

13

127.6

129.0

132.3

14

15

16 (CY)

95.1

50

Economies worldwide are trending toward modest
recovery. In the United States, domestic demand isincreasing steadily as the employment market improves. As for China, although the economic growthrate is softening, growth is continuing. An indicatorof handling volume in the international logistics
market, container transportation volume was steadyin 2016. The international logistics market is expected to continue expanding centred on Asia.

0

09

10

Source: Japan Maritime Center, “Volume of Container Cargo Movement Worldwide”

Overseas visitors to Japan and Japanese travellers going overseas(Millions of people)
24.0

25
20

17.3

16.0

15

15.4

16.6

17.0

19.7

18.5

17.5

16.2

17.1

15

16 (CY)

13.4

10
5

16.9

8.3

8.4

07

08

6.8

8.6
6.2

10.4

8.4

0

09

10

11

12

13

14

Overseas visitors to Japan
Japanese travellers going overseas
Source: Japan National Tourism Organization (JNTO), “Visitor Arrivals, Japanese Overseas Travellers”

Hotel market(¥ billion)
1,500

1,093
1,000

1,038

976

976

949

979

08

09

10

11

12

1,082

1,201

1,284

1,316

15

16 (CY)500

In 2016, the number of overseas visitors to Japanrose for the fifth consecutive year, increasing 21.8%
year on year, to more than 24 million. Based on asurvey of the consumption behaviour of overseas
visitors to Japan, a breakdown of travel spending byexpense item shows that while spending on shopping accounted for a smaller percentage of consumption year on year, spending on accommodation,
food and drink, and transportation increased year on
year. Thus, these visitors are not only interested in
shopping but increasingly are interested in experiencing Japan’s lifestyle and culture. Further, in 2016
the number of Japanese travellers going overseas
rose for the first time in four years, increasing 5.6%,
year on year, to 17 million.

Driven by steady demand for domestic travel and anincrease in overseas visitors to Japan, hotel revenues
continued to grow, rising 2.5% year on year in 2016.
Anticipating market growth in the run up to the Tokyo
2020 Olympic and Paralympic Games, the supply of
new guest rooms is trending upward mainly in large
cities. For the time being, however, a shortage ofguest rooms is likely to continue given such factors astight supply and demand in certain cities.

0

07

13

14

Source: Japan Productivity Center, “White Paper on Leisure Industry 2017”

Hankyu Hanshin Holdings • Annual Report 201735

Urban Transportation

Business Strategies

Basic Policies

The Urban Transportation Business will achieve

1 	Provide quality urban transportation

medium-to-long-term growth by cementing

services and other related services

Enhance security

operational foundations, thereby enablingDevelop personnel

the provision of services that realise greater

Strengthen Group collaboration

safety, reliability, and comfort. At the same

Enhance services and convenience4 	Expand feeder services and extend

time, in an environmentally and sociallyEnhance value of line-side areas and­responsible manner, we will improve urban

publicise themcatchment areas of railway lines andstationstransportation services even further. Specif­

Enhance appeal of railway stations

dination with connecting transportation
services and feeder services. We will also
improve the services and information that

Develop rolling stockAdvance sales measures in the bus
business

ically, we will strengthen and extend coor2 	Increase convenience and reliabilityof existing infrastructure and expand
railway network

Enhance bicycle parking areas at railway
stations and bicycle rental services
Collaborate with line-side area municipal

railway stations provide. Such efforts will

Develop railway stations and lines

authorities, chambers of commerce andincrease the Group’s business opportunities

Expand and strengthen railway network

industry, and companies

in line-side areas, attract outside companies
to the areas, strengthen lifestyle services
and economic functions, and heighten lineside value.

363 	Ensure reliable transportation

Hankyu Hanshin Holdings • Annual Report 2017

Urban Transportation

Fiscal 2017 Review of Operations
In the Urban Transportation Business, railway operation revenue

services for customers. For example, we began offering downloads

increased due to such factors as favourable performances by­of the TOKK App for smartphones, which provides notifications

the Hankyu and Hanshin lines, reflecting increases in line-side area

about the train services and line-side areas of Hankyu lines. In addition,

populations and overseas visitors to Japan. However, as a result

we launched parcel-receiving services based on “open-type” deliveryof ready-cooked meal provider Iina Dining Co., Ltd., changing from alockers that are shared by multiple delivery service providers in orconsolidated subsidiary to an equity-method affiliate, the businessnear the station concourses of certain railway stations on the Hankyu

segment’s revenues from operations decreased 1.0%, or ¥2,407 million,and Hanshin lines.

year on year, to ¥237,136 million. Nonetheless, thanks to lower power

The automobile business took various steps to increase passenger

costs in the railway business and other factors, operating income

convenience. These included introducing bus location services andwas up 2.3%, or ¥967 million, year on year, to ¥42,237 million.

enabling customers to use smartphones to check bus service status and

The railway business installed new ticket gates on the east side

expected arrival times for routes managed by the operating bases ofof Hankyu Saiin Station, enhanced the convenience of transfers toHankyu Bus Co., Ltd., in Hyogo Prefecture as well as for all Hanshin

Keifuku Electric Railroad Co., Ltd., services, and installed new eleva-

Bus Co., Ltd., routes. Also, in March 2016 Hanshin Bus extended its

tors to establish a barrier-free area. Also, in a project for continuous

route network to all areas of Amagasaki by assuming all municipal

grade separation on the Hanshin Main Line within Nishinomiya Citybus routes of the Amagasaki Municipal Transportation Bureau.

(between Koshien and Mukogawa stations), we elevated the railway

The retailing business heightened railway stations’ appeal throughtrack of the inbound line, thereby completing the track elevation ofsuch initiatives as opening Nescafe Stands in certain railway stations

outbound and inbound lines and increasing the safety of train op-

on Hankyu lines under a new business format established jointly

erations even further. Meanwhile, we enhanced the convenience ofwith Nestlé Japan Limited.

Hankyu Corporation and Hanshin Electric Railway: Performance results
Fare revenues (Millions of yen)*
FY2016

Change%FY2017FY2016

Change%62,72062,920

(199)

(0.3)

318,064

319,023

(958)

(0.3)

Other tickets

HankyuHanshin

Passenger volumes (Thousands)*

FY2017
Commuter pass

32,62832,272355

1.1

329,305

325,540

3,764

1.2

Total

95,34895,192156

0.2

647,369

644,563

2,805

0.4
0.5

Other tickets

21,136

21,035101

0.5

116,998

116,440

557

Commuter pass

11,563

11,372190

1.7

119,768

117,786

1,982

1.7

Total

32,69932,407291

0.9

236,766

234,226

2,540

1.1

* Sum of tier 1 and tier 2 railway operators for both Hankyu and Hanshin

Fiscal 2018 Outlook
Revenues from operations are expected to decrease 1.1%, or ¥2.6

and amortisation in the railway business and higher fuel costs in thebillion, year on year, to ¥234.5 billion, due to such factors as Iina

automobile business will result in a 6.2%, or ¥2.6 billion, year-on-year

Dining Co., Ltd., changing from a consolidated subsidiary to an

decline in operating income, to ¥39.6 billion.

equity-method affiliate. We expect that an increase in depreciation
Hankyu Corporation and Hanshin Electric Railway:
Performance forecasts (Fiscal 2018)

Outlook for revenues from operations and operating income margin(¥ billion)
250

Fare revenues (Millions of yen)*
FY2018FY2017
Change%Hankyu95,6490.3

Hanshin

32,707FY201895,34832,699300
7Passenger volumes (Thousands)*
FY2017
Change0.0%

Hankyu650,112647,369

2,742

0.4

Hanshin

237,616

236,766849

0.4* Sum of tier 1 and tier 2 railway operators for both Hankyu and Hanshin

(%)
234.6

239.5

233.4

200

16.5

16.4

17.2

237.1

234.5

25

20

17.8

16.9

150

15

100

10

50

5

0

0

2014

2015

Revenues from operations

2016

2017

2018
(Est.)(FY)

Operating income margin (right axis)

Hankyu Hanshin Holdings • Annual Report 201737

Real EstateBusiness Strategies
The Real Estate Business will strengthen its

Basic Policies
1

management and operation of the real dvance Umeda 1-1 Project (Dai HanA
shin Building and Shin Hankyu Building
rebuilding project) and other development projects steadily
Step up efforts to foster intangible assetsthat heighten the Umeda area’s appeal
Enhance value of the Umeda area andother areas served by the Hankyu andHanshin lines by planning and advancing new development projects andimplementing plans for renewal ofcommercial facilities

estate leasing business and maintain or
improve the profitability of owned properties with a focus on areas served by the
Hankyu and Hanshin lines and the Umeda
area, which are important business basesof the Hankyu Hanshin Holdings Group. In
par­ticular, we will step up efforts to foster
intan­gible assets that heighten the entire
Umeda area’s appeal and ability to attract
customers. Further, through the real estate
sales business we will heighten the value ofline-side areas.
Also, we will take maximum advantageof expertise and human resources developed in Umeda and line-side areas to steadily
develop a presence in such new markets
as the Tokyo metropolitan area and overseas markets.

38

Hankyu Hanshin Holdings • Annual Report 20172

E nsure stable revenues from the realestate sales business by increasing
efforts focused on medium-to-longterm projects

E nhance appeal of and revitalise Umeda
area and other areas served by our lines

 aintain and heighten earnings level ofM
the real estate sales business lan and develop condominiums
Pmatching customer needs and advancebusiness and sales in anticipation ofchanges in market conditions
Develop detached houses in towns
while marketing residential land lots
steadily (Yamatedai and Saito)
Develop supply network and acquirebusiness opportunities in the Tokyo
metropolitan area

3S trengthen and grow real estate funds
and REIT businesses
 ursue external growth of the RealP
Estate Business through linkage with
Hankyu REIT Asset Management
Increase fee-based revenues from asset
and property management

4Strengthen business in the Tokyo metropolitan area and develop businesses
overseasE xpand business over the mediumto-long term by acquiring revenuegenerating properties and participatingin redevelopment projects in the Tokyo
metropolitan area
Develop and own logistics warehouses
and participate in condominium businesses overseas to accumulate businessexpertise and gather information with aview to further business expansion

Real Estate

Fiscal 2017 Review of Operations
The Real Estate Business recorded year-on-year declines of 2.4%, or¥5,213 million, in revenues from operations, to ¥215,709 million, and15.8%, or ¥7,881 million, in operating income, to ¥41,970 million, due
to a non-recurring gain on sale of land for facilities in the central areaof Saito (Ibaraki, Osaka Prefecture) in the previous fiscal year.
The real estate leasing business took a range of measures toincrease the competitiveness of commercial facilities and officebuildings and to maintain and raise their occupancy rates. These
measures included refurbishing the restaurant floor of HERBIS PLAZA(Kita-ku, Osaka), which celebrated its 20th anniversary.
Further, we began new construction for the Nishinomiya Kitaguchi
Hankyu Building (provisional name) (Nishinomiya, Hyogo Prefecture)and in the Yotsuya Station District Redevelopment Project (Shinjuku-

HERBIS PLAZAku, Tokyo), which is a joint initiative that we are advancing with business partners. In addition, we undertook demolition of existingbuildings in the Kobe Hankyu Building, East Building Rebuilding
Project (Chuo-ku, Kobe) and in the 2-6 Kyobashi Redevelopment
Project (Chuo-ku, Tokyo). As for the Umeda 1-1 Project (Dai Hanshin
Building and Shin Hankyu Building rebuilding project) (Kita-ku,
Osaka), which is a large-scale development project, we are advancing the new construction work of phase I in earnest with a view to

Geo Senri Chuo The Residencecompleting all construction around spring 2022.
In the real estate sales business, sales of condominiums included Geo
Senri Chuo The Residence (Toyonaka, Osaka Prefecture), Geo Takatsuki
Muse Resis (Takatsuki, Osaka Prefecture), Geo Gyoen Naitomachi(Shinjuku-ku, Tokyo), Geo Kyodo (Setagaya-ku, Tokyo), and the completely renovated Brod Takatsuki (Takatsuki, Osaka Prefecture). As forsales of residential land lots and detached houses, we sold Hankyu
Saito Garden Front (Minoh, Osaka Prefecture), Hankyu Takarazuka

Hankyu Saito Garden Front

Yamatedai Skyle (Takarazuka, Hyogo Prefecture), and Osaka Nakajima
Koen Toshi Hapia Garden Shiki no Machi (Nishi-Yodogawa-ku, Osaka).

Fiscal 2018 Outlook
We expect revenues from operations to grow 4.5%, or ¥9.8 billion,

Outlook for revenues from operations and operating income margin

year on year, to ¥225.5 billion, as a result of higher condominium unit(¥ billion)

sales. However, we expect such factors as higher sales expenses arisingfrom the condominium projects will lead to a 9.3%, or ¥3.9 billion,
year-on-year decrease in operating income, to ¥38.1 billion.

(%)

250

200

150

220.9
208.6

206.4

25

22.6

215.7
19.5

225.5
20

16.9

18.0

18.2

15

100

10

50

5

0

0

2014

2015

Revenues from operations

2016

2017

2018
(Est.)(FY)

Operating income margin (right axis)

Hankyu Hanshin Holdings • Annual Report 201739

Entertainment and Communications

Business Strategies
The Entertainment and Communications

Basic Policies
1 	Maximise value of the Hanshin Tigers

3 	Sustain growth of the communication

Business is a unique advantage of the Hankyu

and Koshien brands

and media businesses

Hanshin Holdings Group that other companies	Form a team that can contend for thechampionships and attract more customers and increase profitability
	Maintain and expand the Hanshin
Koshien Stadium business	Grow earnings in the information services business continuously by increasing earnings in target growth markets,
developing businesses outside theGroup with focus on the Kanto andChubu areas, and catering to new
IT markets
	Achieve stable earnings in the broadcast and communications business by
expanding and improving regionallybased products and services, acquiring
customers mainly through communications services, and retaining customers
through the introduction and development of lifestyle services

in the industry do not possess. With loyal
fans and fame not only in the Kansai area but
also nationwide, the Hanshin Tigers, Hanshin
Koshien Stadium, and Takarazuka Revuecontribute significantly to the enhancement of the Group’s brand value. By continuing to develop powerful brands andhigh-quality performances that inspire andexcite customers, we will enhance customer loyalty and maximise brand value.
Further, the communication and media

2

Maximise value of the Takarazuka brand	Maintain high capacity utilisation of
Takarazuka Revue performances	Increase overseas business	Develop content business actively

businesses will grow earnings in the information services business, which is likely to
see market growth.

4 	Advance growth of other sports busi-

nesses and the leisure business	Increase scale of the music business,businesses peripheral to sports, andthe leisure business

40

Hankyu Hanshin Holdings • Annual Report 2017

©Takarazuka Revue Company

Entertainment and Communications

Fiscal 2017 Review of Operations
The Entertainment and Communications Business posted a 2.4%, orIn the communication and media businesses, the information¥2,703 million, year-on-year increase in revenues from operations, toservices business performed favourably in the areas of systems de-¥115,193 million, thanks to the robust results of the communication

velopment outsourcing and e-commerce website construction andand media businesses. As a consequence of the sports business be-

maintenance. Also, the broadcast and communications businessginning live distribution through a sports broadcasting website fromsought to increase cable television subscriber numbers. In addition,

the 2016 season and the favourable results of performances in thethe business saw a steady rise in subscriber numbers for consumer

stage business, operating income rose 2.3%, or ¥354 million, year on

Internet services based on local broadband wireless access services.

year, to ¥15,655 million.
In the sports business, the Hanshin Tigers competed in the Pennant Race under the “Fighting Spirit” team slogan and enjoyed vocal

In the Mt. Rokko area, we attracted more customers throughevents and promotions integrating diverse content with the natural
beauty of Mt. Rokko.

support from numerous fans. Further, merchandise concessions’player-related products and limited edition products proved popularat Hanshin Koshien Stadium. In addition, we enhanced the appealof the stadium by improving and expanding the menus of foodconcessions.
As for the stage business, all performances of the stage revue

Total attendance at Hanshin Tigers home games(Thousands of people)
4,000

business were well-received, such as the Cosmos Troupe’s per­formance of Elisabeth: The Rondo of Love & Death and the Snow

3,000

2,728

2,772

2,690

2012

2013

2014

Troupe’s performance of Caleb Hunt, Private Eye / Greatest HITS!
Meanwhile, the theatre business produced a range of performancesthat attracted strong public interest. For example, we marked the20th anniversary of the Takarazuka Revue’s first performance with the
Elisabeth TAKARAZUKA 20th Anniversary Special Gala Concert and

2,878

2,911

2015

2016

2,000

1,000

0

produced Biohazard–Voice of Gaia, a musical based on a popular game.

(CY)

Fiscal 2018 Outlook
In light of an expected rise in cable television subscriber numbers in

Outlook for revenues from operations and operating income margin

the communication and media businesses, the Entertainment and(¥ billion)

Communications Business is projected to record a 0.1%, or ¥0.1 billion, year-on-year increase in revenues from operations, to ¥115.3
billion. However, due to expectations of a decline in the high capacity
utilisation of Takarazuka Revue performances as well as lower sales of

(%)

160

16

13.6

13.3

12.9

13.6

12.6

120

12

112.5

112.6

110.4

115.3

115.2

80

8

40

4

related products in the stage business, operating income is forecast
to decrease 7.6%, or ¥1.2 billion, year on year, to ¥14.5 billion.

0

0

2014

2015

Revenues from operations

2016

2017

2018
(Est.)(FY)

Operating income margin (right axis)

Hankyu Hanshin Holdings • Annual Report 201741

TravelBusiness Strategies

Basic Policies

The mainstay products of the Travel Busi-

To ensure a certain level of earnings

ness have been travel packages, including

even in such conditions, we will increase

packages

products under the flagship brand Trapics.

the competitiveness of our travel packages.

However, current instability throughout theAt the same time, the Travel Business will

world, natural disasters, and other changes

tackle structural reform to establish a secondin outside conditions affect the businesspillar of the business as soon as possible.

	Strengthen areas outside Europe
	Strengthen specialised products
	Expand customer base among new
demographics
	Revise cost structure for advertisingexpenses, etc.

1 	Strengthen competitiveness of travel

significantly. Moreover, competition is expected to intensify in the travel industry.
2

Establish a second pillar
	Strengthen initiatives for non-Japanese
tourists	Expand group and business travel­services and create stable sourceof revenues

42

Hankyu Hanshin Holdings • Annual Report 2017

TravelFiscal 2017 Review of Operations
Due to the significant effect of lower revenues from overseas andAs for domestic travel products, demand for travel to Shikoku wasdomestic travel products, the Travel Business recorded year-on-year

brisk thanks to the interest that the reverse-order Shikoku Pilgrim-decreases of 1.8%, or ¥563 million, in revenues from operations, toage* generated. However, due to the major earthquakes that hit¥29,938 million, and 6.4%, or ¥43 million, in operating income, toKumamoto in April 2016, demand for travel to Kyushu decreased.
Meanwhile, we tapped into growing overseas demand by proac-¥637 million.
Regarding overseas travel products, although demand for travel
to Oceania and East Asia was favourable, demand for travel to Europe
declined as the international situation worsened.

Total travel billings (Fiscal 2017)
Rank

Company nametively marketing travel products for visitors to Japan. In particular, we
enjoyed strong demand from European visitors.
* Performing the Shikoku Pilgrimage in reverse order in leap years is considered auspicious.

Overseas travel billings (Fiscal 2017)¥ billion

Rank

Company nameDomestic travel billings (Fiscal 2017)¥ billion

Rank

Company name¥ billion

1JTB

1,477.1

1

JTB

413.9

1

JTB

977.2

2

Rakuten

556.8

2

HIS

355.2

2

Rakuten

514.1

3

KNT-CT Holdings

483.0

3

JTB World Vacations

204.7

3

KNT-CT Holdings

323.5

4

HIS

438.8

4

Hankyu Travel International*

186.9

4

Nippon Travel Agency

274.3

5

Nippon Travel Agency

426.7

5

KNT-CT Holdings

139.5

5

ANA Sales

174.0

6

Hankyu Travel International*

318.7

6

Nippon Travel Agency

116.6

6

Hankyu Travel International*

129.0

7

JTB World Vacations

204.7

7

JTB Business Travel Solutions

61.1

7

JALPAK

125.7

8

ANA Sales

195.8

8

JALPAK

53.9

8

Tobu Top Tours

101.7

9

JALPAK

179.6

9

DeNA Travel

48.9

9

JR TOKAI TOURS

93.4

10

Tobu Top Tours

139.0

10

Nissin Travel Service

44.1

10

Meitetsu World Travel

76.3

Source: Japan Tourism Agency Bulletin, “Business Volume for Major Travel Agents (April 2016 to March 2017)”
Note: Billings are rounded down to the nearest ¥100 million.
* The total of Hankyu Travel International Co., Ltd., Hankyu Hanshin Business Travel Co., Ltd., and Hanshin Travel International Co., Ltd.

Fiscal 2018 Outlook
We expect that higher demand for overseas and domestic travel

Outlook for revenues from operations and operating income margin

products will produce an 8.0%, or ¥2.4 billion, year-on-year increase(¥ billion)

(%)

50

5

in revenues from operations, to ¥32.3 billion. Operating income is
projected to decline 16.7%, or ¥0.1 billion, year on year, to ¥0.5 billion,
due to higher expenses arising from forward-looking structuralreform of the business.

40

30

3.8

3.6

4

30.5

33.0

32.0

2.3

20

29.9

32.3

3

2.0

2

1.5
10

1

0

0

2014

2015

Revenues from operations

2016

2017

2018
(Est.)(FY)

Operating income margin (right axis)

Hankyu Hanshin Holdings • Annual Report 201743

International Transportation

Business Strategies
Air freight, sea freight, and logistics services

Basic Policies
1

are the mainstay businesses of the Interna-Strengthen air freight, sea freight, andlogistics services businesses globally	
Invest management resources in growing markets

tional Transportation Business, which has	established a global network comprising
165 bases in 27 countries and regions.
We aim to transition towards a balanced
portfolio. To this end, the business segment
will further strengthen sea freight and logistics services businesses while focusing
on expanding the businesses of overseas
subsidiaries in Asia, which promises growth.
In addition, as the Group develops businesses overseas, the business segment will
make available the management resourcesin its networks and the expertise that it has
cultivated to promote synergy benefits
within the Group and to help the Group’s
development.

44

Hankyu Hanshin Holdings • Annual Report 2017

 eform to establish a balanced businessR
portfolio

2 evelop and implement optimal meaDsures for profit growth
Strengthen sales capabilities globally
Increase handling volume

	
	

3

Ensure robust global governance
Optimise business management capabilities by enhancing risk management
and compliance awareness	International Transportation

Fiscal 2017 Review of Operations
Due to a decline in the yen-equivalent value of overseas subsidiaries’

businesses in the Americas and Europe was sluggish. Also, subsidiar-revenues and earnings that accompanied exchange rate fluctua-

ies in Japan saw steady sea freight exports but continued to facetions, the business segment recorded year-on-year decreases ofchallenging conditions for air freight imports.

5.8%, or ¥4,422 million, in revenues from operations, to ¥71,670 million,

In response to the above conditions, we expanded businesses inand 11.2%, or ¥200 million, in operating income, to ¥1,587 million.

the ASEAN region, which is likely to continue growing. Specifically,
we opened logistics centres in Indonesia in March 2016 and in Singa-

In East Asia and the ASEAN region, air freight and sea freight busi-

pore in May 2017.

nesses performed steadily. Meanwhile, the performance of air freight
Network of bases: 119 overseas bases (as of 1st July 2017)
Expansion of the logistics business in the United States

Construction of new logistics centres in the ASEAN region

Aiming to expand operations as demand for logistics centres increases in the
Chicago area, we added to our existing logistics centre in the area by openinga facility near Chicago O’Hare International Airport in February 2017.

Following on from the 2016 opening of a logistics centre in Indonesia, in May 2017 the Group opened
its largest logistics centre in Singapore, which has major advantages as an international logistics hub.
The new logistics centre conducts high-value-added operations, handling electronic components,
medical equipment, pharmaceuticals, and other products of Singapore’s priority industrial fields.

SeattleSan Francisco
Los Angeles

ChicagoBajio

DetroitToronto
New York
BostonCincinnati
Atlanta
Dallas
McAllenMexico City

Local subsidiary
BranchRepresentative office

Sao Paulo

Rotterdam
Brussels

LondonParis
Dusseldorf
PragueAmsterdam
Frankfurt

Hong Kong

Moscow

Milan

Delhi

Strengthening of business development in East Africa
In June 2017, the Group sent an employee
to an affiliated agency in Nairobi, Kenya. In
coordination with the personnel of ourrepresentative office in Johannesburg,
South Africa, these employees will step up
business development in East Africa—aregion into which growing numbers ofJapanese companies are making forays.

Dubai

Nairobi

Bawal
Chiang Mai
MumbaiPune
ChennaiBangalore
PenangIncheonBucheonBeijing
Guangzhou
Hanoi
Bangkok
Yangon

Seoul
Busan

ShanghaiTaipeiHai PhongPasir Gudang
Butterworth

Kaohsiung
Taichung
Cebu
Laem Chabang
Dong Nai
Ho Chi Minh City
Binh Duong
Phnom Penh

ManilaKuala Lumpur
Port Klang
Johor Bharu

Jakarta
Singapore

Johannesburg

Establishment of new base in India
In July 2017, we opened a sales base in the Neemrana /Bawal area, for which we used to conduct sales activities from our headquarters in Delhi. By strengthening our sales network, we aim to develop new
business in the area, which has the highest concentration of Japanese companies in northern India.

Fiscal 2018 Outlook
We expect that higher handling volume will result in year-on-year

Outlook for revenues from operations and operating income margin­in­creases of 2.0%, or ¥1.4 billion, in revenues from operations, to(¥ billion)

(%)¥73.1 billion, and 6.3%, or ¥0.1 billion, in operating income, to ¥1.7 billion.

100

10
7.9

80

60

5.6

40

37.7

76.1

73.1

71.7

6
4

39.4
2.3

20

2.2

2.3

0

2014

8

2015

2016

2017

2018
(Est.)

20(FY)

Revenues from operations
Operating income margin (right axis)
Note: As of fiscal 2016, revenues from operations will be presented on a gross basis
rather than a net basis (total transactions net of freight costs).

Hankyu Hanshin Holdings • Annual Report 201745

Hotels

Business Strategies

Basic Policies

In the Hotels Business, Hankyu Hanshin

and developing high-value-added products.

Hotels Co., Ltd., directly manages 19 hotels

In addition, we will grow earnings by ex-with 4,933 guest rooms mainly in the Kinki

ploiting opportunities that the increase inregion and the Tokyo metropolitan area. To

visitors to Japan presents. Specifically, weheighten the profitability of these hotels,

will select locations carefully and focus on

we will take a range of measures, such as

opening REMM hotels, which mainly com-refurbishing guest rooms and restaurants

prise guest rooms for overnight stays.

1

Improve profitability of existing hotels
	Maintain and enhance product value
through appropriate investment

2

Expand network by opening new hotels
	Implement plan to open new REMM
hotels, which mainly comprise guest
rooms for overnight stays

Hotel network of the Hankyu-Hanshin-Daiichi Hotel Group
HotelsGuest rooms

Directly managed hotels (Hankyu Hanshin Hotels)

19

4,933

Other (franchises, etc.)

29

5,760

48

10,693

Total

Kyoto, Osaka, Kobe
× 11
×1
Tokyo metropolitan area

×7
×4

46

Hankyu Hanshin Holdings • Annual Report 2017

Hotels
ホテル事業

Fiscal 2017 Review of Operations
Withdrawal from the management of certain non-hotel restaurants

Moreover, we opened REMM Roppongi as our fifth hotel that mainly

and a year-on-year decrease in revenues from the accommodation

comprises guest rooms for overnight stays. Further, we advanced

and banquet areas resulted in the Hotels Business posting year-on-

sales activities energetically. For example, we held various types ofyear declines of 3.5%, or ¥2,401 million, in revenues from operations,marketing campaigns to mark the 35th anniversary of Hotel new

to ¥65,640 million, and 15.2%, or ¥502 million, in operating income,Hankyu Kyoto and the 90th anniversary of the Takarazuka Hotel. We

to ¥2,795 million.

also opened our inaugural overseas sales office in Singapore with

In fiscal 2017, we stepped-up efforts to capture accommodation
demand by refurbishing facilities steadily. As part of these efforts, we

our sights set on capturing the anticipated growth in demand as
more tourists from the ASEAN region visit Japan.

increased the number of guest rooms of Hotel new Hankyu Osaka.

Average daily rates (ADR) and occupancy rates of Hankyu Hanshin
Hotels in the Tokyo metropolitan area and Kansai area

Non-Japanese guests as a percentage of overnight-stay guests(Yen)(%)
20,000

93.9

92.2
88.6

15,00090.5

17,221

15,853

100

94.3

38.6

40

90.8

31.4

16,665

14,619

75

30

50

20

14,140
16.4
13.1

5,000

25

10

0

0

0

2015

2016

38.1

36.9

37.0

2016

2017

22.7

11,616

10,000

(%)

2017

12.7

2011

(FY)

10.0
2012

Tokyo metropolitan area

Tokyo metropolitan area ADR
Kansai area ADR
Tokyo metropolitan area occupancy rate (right axis)
Kansai area occupancy rate (right axis)

25.0

14.9
17.3
12.3

2013

2014

2015

(FY)

Kansai area

Fiscal 2018 Outlook
The recent opening of REMM Roppongi and other factors are likely

opening and refurbishment of hotels are expected to lead to a 7.1%, or

to enable a 3.5%, or ¥2.3 billion, year-on-year increase in revenues¥0.2 billion, year-on-year decline in operating income, to ¥2.6 billion.

from operations, to ¥67.9 billion. Higher costs accompanying the

Visitors to Japan(Millions of people)

(%)

25

24.0

20

15

10

5

42.6

19.7
40.0

13.4

2012

4.8

2013

10

42

80

60

8

63.7

68.0

63.0

2014

36

40

33

20

0

0

67.9

65.6

6

4.3

2015

2016

Nationwide
Kansai area
Percentage visiting Kansai area (right axis)
Source: “Consumption Trend Survey for Foreigners Visiting Japan,” Japan National
Tourism Organization (JNTO), Japan Tourism Agency

(CY)

4

3.8

7.9

3.5

2.7

0

(%)

100

39

10.2
35.7

33.3
32.6

(¥ billion)

45

4.9

10.4
8.4

Outlook for revenues from operations and operating income margin

2

1.9
1.3
2014

0

2015

Revenues from operations

2016

2017

2018
(Est.)(FY)

Operating income margin (right axis)

Hankyu Hanshin Holdings • Annual Report 201747

Directors and Audit & Supervisory Board Members(As of 13th June 2017)

Directors

Kazuo Sumi

Takehiro Sugiyama

Masao Shin

Chairman and Representative Director,
Group Chief Executive Officer

President and Representative Director

Executive Vice President and Representative Director

1982
2005
2006
2006
2007
2016
2016
2016
2016
2016
2017
2017

1981 Joined Hanshin Electric Railway
2006 Director, Hanshin Electric Railway
2006 Director, Hankyu Hanshin Holdings
2008 Managing Director, Hanshin Electric Railway
2014 Senior Managing Director, Hanshin Electric Railway
2016 Director, Hankyu Corporation (Current position)2017 President, Hanshin Electric Railway (Current position)2017	Executive Vice President, Hankyu Hanshin Holdings (Current position)

1973
2000
2002
2003
2005
2006
2008
2014
2017

48

Joined Hankyu Corporation
Director, Hankyu Corporation
Managing Director, Hankyu Corporation
President, Hankyu Corporation
President, Hankyu Holdings
President, Hankyu Hanshin Holdings
Director, Hankyu Hanshin Hotels (Current position)
Chairman, Hankyu Corporation (Current position)
Chairman, Hankyu Hanshin Holdings (Current position)

Joined Hankyu Corporation
Director, Hankyu Corporation
Director, Hankyu Holdings
Director, Hankyu Hanshin Holdings
Managing Director, Hankyu Corporation
Executive Vice President, Hankyu Corporation
Executive Vice President, Hankyu Hanshin Holdings
Director, Hanshin Electric Railway (Current position)
Director, Hankyu Travel International (Current position)
Director, Hankyu Hanshin Express (Current position)
President, Hankyu Corporation (Current position)
President, Hankyu Hanshin Holdings (Current position)

Takaoki Fujiwara

Noriyuki Inoue

Shosuke Mori

Representative Director

Director (External*1)

Director (External*1)

1975
2005
2007
2011
2011
2015
2017
2017

1957 Joined Daikin Industries
1994 President, Daikin Industries
2002 Chairman and CEO, Daikin Industries
2003 Director, Hankyu Corporation2005 Director, Hankyu Holdings
2006 Director, Hankyu Hanshin Holdings (Current position)2014	Chairman of Daikin Industries and Chief Global Group Officer(Current position)

1963
2005
2010
2010
2016

Yoshishige Shimatani

Naoya Araki

Yoshihiro Nakagawa

Director (Part-time)

Director (Part-time)

Director (Part-time)

1975
2011
2015

1981 Joined Hankyu Department Store
2012	President, Hankyu Hanshin Department Stores (Current position)2012 Representative Director, H2O Retailing (Current position)2017 Director, Hankyu Hanshin Holdings (Current position)

1976 Joined Hankyu Corporation2005 Director, Hankyu Corporation2007 Managing Director, Hankyu Corporation2013	Representative and Senior Managing Director, Hankyu Corporation2014 President, Hankyu Corporation (Current position)2014 Director, Hankyu Hanshin Holdings (Current position)2017 Chairman, Hankyu Hanshin Hotels (Current position)

Joined Hanshin Electric Railway
Director, Hanshin Electric Railway
Managing Director, Hanshin Electric Railway
President, Hanshin Electric Railway
Director, Hankyu Hanshin Holdings
Chairman, Hanshin Hotel Systems (Current position)
Chairman, Hanshin Electric Railway (Current position)
Director, Hankyu Hanshin Holdings (Current position)

Joined Toho
President, Toho (Current position)
Director, Hankyu Hanshin Holdings (Current position)

Hankyu Hanshin Holdings • Annual Report 2017

Joined Kansai Electric Power
President, Kansai Electric Power
Director, Hankyu Hanshin Holdings (Current position)
Chairman, Kansai Electric Power
Senior Advisor, Kansai Electric Power (Current position)

Directors and Audit & Supervisory Board Members

Audit & Supervisory Board Members

Masayoshi Ishibashi

Koichi Kobayashi

Standing Audit & Supervisory Board Member

Standing Audit & Supervisory Board Member

Haruo Sakaguchi
Audit & Supervisory Board Member (External*2)

1979 Joined Hanshin Electric Railway
2013	Standing Audit & Supervisory Board Member, Hanshin Electric Railway(Current position)2013	Standing Audit & Supervisory Board Member, Hankyu Hanshin Holdings(Current position)

1982 Joined Hankyu Corporation2005 Director, Hankyu Holdings
2006 Director, Hankyu Hanshin Holdings
2013 Director, Hankyu Corporation
2015 Managing Director, Hankyu Corporation
2016	Standing Audit & Supervisory Board Member, Hankyu Corporation(Current position)2016	Standing Audit & Supervisory Board Member, Hankyu Hanshin Holdings(Current position)

1958 Lawyer (Current position)
1989 Vice Chairman, Japan Federation of Bar Associations
2006 Audit & Supervisory Board Member, Hankyu Holdings
2006	Audit & Supervisory Board Member, Hankyu Corporation(Current position)
2006	Audit & Supervisory Board Member, Hankyu Hanshin Holdings(Current position)2013	Audit & Supervisory Board Member, Hankyu Hanshin Hotels(Current position)

Junzo Ishii

Michiari Komiyama

Audit & Supervisory Board Member (External*2)

Audit & Supervisory Board Member (External*2)

1986 Professor of Faculty of Commerce, Doshisha University
1989 Professor of Faculty of Business Administration, Kobe University
1999	Professor of Faculty of Business Administration, Graduate School of
Kobe University
2008	President of the University of Marketing and Distribution Sciences
2010	Audit & Supervisory Board Member, Hankyu Hanshin Holdings(Current position)2010	Audit & Supervisory Board Member, Hanshin Electric Railway(Current position)2016 Director, Distribution Science Research Center (Current position)

1971 Prosecutor
1999 Prosecutor, Supreme Public Prosecutor’s Office
1999 Chief Prosecutor, Saga District Public Prosecutor’s Office
2002 Chief Prosecutor, Kobe District Public Prosecutor’s Office
2003 Notary, Osaka Legal Affairs Bureau
2013 Lawyer (Current position)2017	Audit & Supervisory Board Member, Hankyu Hanshin Holdings(Current position)2017	Audit & Supervisory Board Member, Hankyu Corporation(Current position)*1	Mr. N oriyuki Inoue and Mr. Shosuke Mori satisfy the qualifications of external directors as provided in Article 2, Paragraph 15 of the Corporate Law.
The Company has submitted notifications to the stock exchanges on which its shares are listed, naming Mr. Inoue and Mr. Mori as external (independent) directors.
*2	Mr. Haruo Sakaguchi, Mr. Junzo Ishii, and Mr. Michiari Komiyama satisfy the qualifications of external Audit & Supervisory Board members 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. Sakaguchi, Mr. Ishii, and Mr. Komiyama as external (independent) Audit &Supervisory Board members.

Hankyu Hanshin Holdings • Annual Report 201749

A Message from an External Director

From Management Integration to the Present Day
I think the Group has done well to overcome a range of difficulties and realise a highly successful management integration.
Since becoming an external director of the Hankyu Corporation instrengths while reinforcing areas of weaknesses. At the same time,

2003, I have seen many different phases of business management,

the Group steadily advanced large-scale projects, which haveincluding the management integration of Hankyu Holdings andbecome an important part of the Group’s earnings foundations.

Hanshin Electric Railway.

Thanks to the cumulative effect of the above efforts, businessAt the time of my appointment, Hankyu Corporation and the Group

results have seen a V-shaped turnaround over the past several years.

it subsequently became part of were in a phase of balanced contrac-

Moreover, the Group has paved the way for improvement of its finan-tion. Consequently, many of the agenda items submitted to meet-cial position, which was an issue. As a result, returns to shareholders

ings of the Board of Directors concerned business reorganisation or

have been rising steadily, and shareholders’ evaluation of the Group

disposal of the Group’s negative legacy. However, this process was

has become increasingly positive. Thinking back to the time of theessential to ensure the Group’s sustainability and growth potential.

Group’s inception, I believe the decision to pursue management

In my view, correct decisions that the management team made in thisintegration was bold and far-sighted.

period to dispose of nonperforming assets and withdraw from unprofitable businesses enabled the current recovery in performance.

Recently, agenda items related to business expansion in the Tokyo
metropolitan area and overseas forays are more prevalent at meet-

In addition, the 2006 management integration became a major driverings of the Board of Directors. This change in topics underscoresof the significant advances that the Group subsequently made. Sincebusiness management’s entry into a new phase and suggests fur-management integration, both companies have respected eachther growth going forward.

other’s values while increasing integration and heightening employees’ sense of belonging to the Group. Further, the management
team reorganised similar businesses to build a structure that shared

Current Corporate Governance
The Group is seeking approaches to corporate governance that will continuously enhance corporate value.
In 2016, the Group established the Corporate Governance Committee,

principle, Group companies under the management of the Company

which comprises the president and representative director, external

are responsible for operational implementation, while the Company

directors, standing Audit & Supervisory Board members, and exter-

monitors and supervises the Group as a whole. In this way, oversightnal Audit & Supervisory Board members. In addition to providing

and execution are separated. The above system enables prompt,

consultation in relation to the appointment and compensation of

appropriate operational implementation, and as such I think it isexecutives, the committee enables external directors to coordinate

effective for the Group, which encompasses a wide variety of busi-

and share information. Further, the Group’s steady bolstering ofnesses. Meanwhile, the Group’s Board of Directors receives the infor-­corporate governance to make it more visible to outsiders is com-mation about businesses that it needs, enabling it to reach importantmendable. As part of these efforts, in 2017 the Group reduced the

management decisions without impediment.

number of directors to increase the ratio of external directors to
directors and abolished its senior advisor system.

functions. I think another important role entails using my expertise

However, companies cannot achieve truly effective corporate

to help raise the level of the Group’s business management. I intend

governance just by satisfying formal requirements. Therefore, I

to fulfill this role by encouraging decision making that enhances

believe that it is important for companies to establish their own

corporate value.

unique approaches to governance that will contribute to continuous enhancement of corporate value. For example, Hankyu Hanshin
Holdings, Inc., is a pure holding company, which means that, in

50

As an external director, naturally I perform monitoring and oversightHankyu Hanshin Holdings • Annual Report 2017

A Message from an External Director

I will reflect the viewpoints of stakeholders,
particularly those of shareholders, in conducting
monitoring and supervising of business
management. At the same time, by making
proposals based on my corporate management
experience, I intend to support the Group
as it takes on challenges to sustain growth.
Noriyuki Inoue
External Director

Toward Realisation of the Long-Term Vision
I will support the Group as it takes on challenges to sustain growth.
Since its establishment, the Hankyu Hanshin Holdings Group has

If I may digress slightly, at Daikin Industries, Ltd., where I serve as

built a firm position based on the business model established bychairman, we believe that the potential of each person is limitlessHankyu Corporation’s founder, Ichizo Kobayashi. Specifically, theand that companies only prosper when individual employees grow.

Group is centred on the Urban Transportation Business, develops

Accordingly, we have pursued employee-oriented business man-real estate in Umeda and line-side areas, and heightens the value ofagement. Our overseas sales have grown significantly and now

line-side areas and brand power through the leisure business, theaccount for 75% of net sales. I think we have achieved this because

Hotels Business, and other operations. Looking ahead, however,in countries worldwide we have proactively developed and utilised

there is no doubt that society will become increasingly aged. This

personnel, and their realisation of diverse capabilities has benefitedmeans that the Group’s existing business model, premised on popu-

the company. At present, the Hankyu Hanshin Holdings Group haslation growth, is at a crossroads. Against this backdrop, I think thatmoved into a phase of actively pursuing overseas development.

the management team’s decisions based on the Long-Term

Therefore, its development and promotion of critical personnel has

Management Vision for 2025 are appropriate. In other words, I

just begun. With this in mind, I expect that there will be opportuni-

endorse the Group’s efforts to enhance the stability of earnings foun-ties for me to offer advice about personnel and other matters based

dations and heighten the value of line-side areas while developing

on my experience.

businesses in the Tokyo metropolitan area and overseas with a viewto the future.

The slogan of the recently announced long-term vision is “enhancing line-side areas and expanding fields,” which I think clearly states

The Group’s entry into new business fields is of course accompa-

the direction in which the Group is traveling. The Group will takenied by corresponding amounts of risk. Conversely, without risk

maximum advantage of the collective strength and brand power it

there are no opportunities. Also, risk has the added benefit of

has accumulated through diverse businesses to rigorously pursue its

increasing companies’ resilience. In addition, given the dizzying

eternal mission of enhancing the value of line-side areas. In addition,

speed of change in business conditions that technological innova-

the Group will discover new geographical areas and business fields

tion has spurred in recent years, there is no guarantee thatfor its activities. Each employee should be made fully aware thatapproaches that have succeeded in the past will continue to do so.

these are the two overriding strategies through which the Group

Companies whose decisions are not timely can lose growth oppor-

aims to sustain growth. I am confident that all employees will drive

tunities. Therefore, I feel that the ability to objectively weigh thethe Group toward realisation of the long-term vision by leveraging­significance and profit potential of projects against their attendant

their collective strength and demonstrating commitment to andrisks and arrive at bold decisions promptly will be more importantpride in the Group’s future.

than ever in business management going forward. As an external
director, I also want to incorporate this sense of urgency and support
the Group as it takes on challenges to sustain growth.

Hankyu Hanshin Holdings • Annual Report 201751

Management Organisation

Corporate Governance System
Principles 4-1

Corporate Governance
X-X Figures in boxes correspond to the principles of Japan’s Corporate

Governance Code.

Basic Approach to Corporate GovernancePrinciples 2-1

2-2

3-1

Based on the Group mission and values set out in its GroupManagement Philosophy, the Company aims to remain a company
that customers and other stakeholders trust. To this end, theCompany is strengthening and increasing corporate governance byheightening the transparency and soundness of business management and ensuring appropriate, timely disclosure.
Reflecting this basic approach, the Company has established thepolicies below with a view to sustaining growth and enhancing corporate value over the medium-to-long term.
We shall respect shareholders’ rights and ensure equality.
We shall take into consideration the interests of shareholders andother stakeholders and cooperate with stakeholders appropriately.
We shall disclose corporate information appropriately andensure transparency.
We shall ensure that the Board of Directors performs its rolesand duties appropriately and ensure advanced oversight anddecision making.
We shall have constructive dialogue with shareholders with aview to sustaining our growth and enhancing corporate value
over the medium-to-long term.

4-10

Hankyu Hanshin Holdings, Inc. (the Company), is a pure holding
company, and the conduct of operations is basically the respon­
sibility of Group member companies. Hankyu Hanshin Holdings’
principal role is supervision and oversight of the entire Group—
meaning that these functions are separate from the conduct ofGroup businesses.
Through this system, the Company realises supervision and oversight and enhances the overall governance of the Group by:
Making decisions regarding the Group’s management policies
and strategies,
Deciding on the approval of the medium-term or annual management plans of all core businesses,
Requiring timely submission of progress reports by operatingcompanies, andHaving Group companies obtain approval before taking actions
that affect the Group’s management significantly (for example,
investments above a certain threshold).
With regard to the above matters, the Board of Directors, which
includes external directors, makes approval decisions and receives
reports. Moreover, to undertake preliminary reviews the Company
has established a Group Management Committee, which includes
representatives of the Group’s core businesses.
Further, to ensure transparency in the appointment and compensation of the Company’s directors and to facilitate coordination
among external directors, the Group has established the Corporate
Governance Committee, which comprises external directors andexternal Audit & Supervisory Board members who are independentof the Company, the president and representative director, andstanding Audit & Supervisory Board members.
In addition, as part of efforts to strengthen its overall capabilities,
the Company is strengthening the governance of funding. Measures
include centralising funding under the Company and distributing
funds to operating companies within the limits set out in businessplans that the Company has approved.

Corporate Governance System
General Meeting of Shareholders
Appointment / Dismissal

Appointment / Dismissal

Accounting audit

Appointment / Dismissal

Board of Directors
Part-time: 5(including 2
External Directors)

Full-time: 4
Consultation(nomination,compensation)

Call / Report on
execution situation

Corporate GovernanceCommittee

Audit

Audit & Supervisory Board
Standing Audit & Supervisory External Audit & Supervisory
Board Members: 2
Board Members: 3

Selection / Dismissal /Supervision

Chairman & President

ReportReportCall

Group Auditing Division
Participate (as observer)Group Management Committee
Participate

Group Companies
Directors (representative of each core business)

52

Cooperation

Hankyu Hanshin Holdings • Annual Report 2017

Audit

ReportCooperation

Staff of Audit &Supervisory Board
Members

Accounting Auditors(CPAs)

Management Organisation

System reflecting the business management viewpoints of operating companies in the holding Company’s governanceHankyu Hanshin Holdings

Board ofDirectors

Audit &
Supervisory
Board

Core companies

Name

Position

Name of company

Position

Kazuo Sumi

Chairman and Representative Director,
Group CEOHankyu Corporation
Hankyu Hanshin Hotels

Chairman
Director (Part-time)

Takehiro Sugiyama

President and Representative Director

Hankyu Corporation
Hanshin Electric Railway
Hankyu Travel International
Hankyu Hanshin Express

President
Director (Part-time)
Director (Part-time)
Director (Part-time)

Masao Shin

Executive Vice President andRepresentative Director

Hankyu Corporation
Hanshin Electric Railway

Director (Part-time)
President

Hanshin Electric Railway

ChairmanTakaoki Fujiwara

Representative Director

Noriyuki Inoue

Director (External)

Shosuke Mori

Director (External)

Yoshishige
Shimatani

Director (Part-time)

Naoya Araki

Director (Part-time)

Yoshihiro Nakagawa Director (Part-time)

Hankyu Hanshin Hotels

Chairman

Masayoshi Ishibashi Standing Audit & Supervisory Board
MemberHanshin Electric Railway

Standing Audit & Supervisory Board Member

Koichi Kobayashi

Standing Audit & Supervisory Board
MemberHankyu Corporation

Standing Audit & Supervisory Board Member

Haruo Sakaguchi

Audit & Supervisory Board Member(External)

Hankyu Corporation
Hankyu Hanshin Hotels

Audit & Supervisory Board Member
Audit & Supervisory Board Member

Junzo Ishii

Audit & Supervisory Board Member(External)

Hanshin Electric Railway

Audit & Supervisory Board Member

Michiari Komiyama

Audit & Supervisory Board Member(External)

Hankyu Corporation

Audit & Supervisory Board Member

Management Organisation(1) Board of Directors and Directors(2) Audit & Supervisory Board and Audit & Supervisory Board
Members

Principles 4-1

Principle 4-4

4-2

4-6

4-11

The Board of Directors enhances governance of the entire Groupand oversight of respective companies by deciding on matters­pursuant to statutory laws and regulations and the articles of incorporation based on regulations and standards that the Board of
Directors has established, by deciding on the approval of management policies and strategies of the Company and the Group as wellas the management plans of core businesses, and by requiring
timely reporting from operating companies about Group companies’
significant investments.
Aiming to strengthen the management oversight of the Board of
Directors and ensure the transparency of business management by
increasing the proportion of external directors, the Company
reduced the number of directors from 14 to nine at the General
Meeting of Shareholders held in June 2017. Under the new system,
the Company is strengthening monitoring and oversight and raising
the standard of decision making by appointing five of its nine directors as part-time directors, including two external directors who are
independent of the Company and have abundant experience incorporate management.
Notes:
1. Number of members of the Board of Directors
	The articles of incorporation of the Company stipulate that the number of members of
the Company’s Board of Directors shall be three or more.
2. Requirements for the election of directors
	The articles of incorporation of the Company stipulate that the approval of resolutions
for the election of directors shall require the attendance of shareholders that have atleast one-third of the voting rights of shareholders for which voting rights can be exercised and shall require a majority of these voting rights. Further, the articles of incorporation stipulate that such resolutions shall not be approved through cumulative voting.

The Company has adopted the Audit & Supervisory Board system toensure adequate management oversight. We have five Audit &Supervisory Board members, who monitor the business operations
and financial position of the Company and its subsidiaries, and audit
the performance of duties by the directors. Three of the five Audit &Supervisory Board members are external, to provide an independent
viewpoint and ensure a high degree of professionalism in Groupauditing. In this way, we are working to further ensure sound decision making in the conduct of operations. We provide full backup to
Audit & Supervisory Board members, for example by involving themin the Group Management Committee and other meetings within
the Group. The Audit & Supervisory Board meets once a month, inprinciple, to discuss and pass resolutions on important matters.
In addition, as part of the auditing of the Group’s business operations, the Audit & Supervisory Board members peruse when appropriate auditing plans and results of audits of the Group Auditing
Division, composed of internal audit staff. The Audit & Supervisory
Board members also receive from the Group Auditing Division­regular reports (and ad hoc reports when required) on internal audits
at the Company and its subsidiaries, including on the state of operation of the whistle-blowing system.
At the same time, the Audit & Supervisory Board members receive
regular status reports from the accounting auditors (CPAs) and takepart in on-site audits by the accounting auditors including those ofGroup companies.

Hankyu Hanshin Holdings • Annual Report 201753

Management Organisation(3) Roles and Functions of External Directors and External Audit& Supervisory Board Members
Principles 4-7

4-9

The Company appoints independent external directors and Audit &Supervisory Board members with the aim of further enhancing thegovernance of the Group through their contributions to meetings ofthe Board of Directors and the Audit & Supervisory Board, as well asother activities.
The external directors appointed to the Board are selected fromamongst persons with extensive experience in corporate management, with the aim of strengthening the management oversightfunction of the Board of Directors with respect to the Group as awhole, and also in the expectation that the external directors will
provide advice to the Company’s management from a broad perspective. Similarly, the external Audit & Supervisory Board members
whom we appoint are selected from amongst persons possessing
high-level specialist expertise in the fields of compliance and business administration.
Further, to ensure that it assesses the independence of external
directors and external Audit & Supervisory Board members objectively,in light of the Tokyo Stock Exchange’s independence requirements,
the Company has established the Independence Criteria below.
Independence Criteria
To be deemed independent, external directors and external Audit &Supervisory Board members must not belong to any of the following
categories.
1.	Executing persons*1 of the Company’s major shareholders (shareholders owning 10% or more of the Company’s total voting rights)
2.	Executing persons of entities for which the Company is a major
business partner*2 or executing persons of the Company’s major
business partners
3.	Consultants, accounting experts, or legal experts receiving significant amounts of money or property*3 from the Company that areother than executive compensation (or if a company, union, orother organisation receives the said property, this refers to persons belonging to the said organisation)
4.	Persons*4 who have recently belonged to any of the categories (a)through (d) below(a) Persons stated in 1, 2, or 3 above(b) Executing persons of the Company’s parent company or directors of the Company’s parent company who are not executing
persons(c) Audit & Supervisory Board members of the Company’s parent
company (This item applies when external Audit & Supervisory
Board members are to be appointed as independent external
Audit & Supervisory Board members.)(d) Executing persons of the Company’s fellow subsidiaries
5. 	Close relatives (within the second degree of kinship) of any of thepersons stated in (a) through (h) below (excluding persons who
are not significant)(a) Persons stated in 1, 2, 3, or 4 above(b) Accounting advisors of the Company (This includes employees conducting required duties if the said accounting advisor
is a company. Same hereinafter.) (This item applies when54

Hankyu Hanshin Holdings • Annual Report 2017

external Audit & Supervisory Board members are to be appointed
as independent external Audit & Supervisory Board members.)(c) Executing persons of the Company’s subsidiaries(d) Accounting advisors of the Company’s subsidiaries or directorsof the Company’s subsidiaries who are not executing persons(This item applies when external Audit & Supervisory Board
members are to be appointed as independent external Audit& Supervisory Board members.)(e) Executing persons of the Company’s parent company or directors of the Company’s parent company who are not executing
persons(f ) Audit & Supervisory Board members of the Company’s parent
company (This item applies when external Audit & Supervisory
Board members are to be appointed as independent external
Audit & Supervisory Board members.)(g) Executing persons of the Company’s fellow subsidiaries(h) Persons who have recently belonged to the categories (b)through (d) above or who have been executing persons of theCompany (This includes directors who are not executing persons when external Audit & Supervisory Board members are tobe appointed as independent external Audit & Supervisory
Board members.)
6. Executing persons of the Hankyu Hanshin Toho Group*1. Executing persons refers to executive directors, executive officers, corporate officers,
managers, and other employees.
*2. 
Major business partners refers to entities belonging to any of the following
categories.
(1) Entities that in their most recent fiscal year have received payments equivalent to
2% or more of total annual consolidated sales from the Company or its core companies (Hankyu Corporation, Hanshin Electric Railway, Hankyu Travel International,
Hankyu Hanshin Express, and Hankyu Hanshin Hotels)(2) Entities that in the Company’s most recent fiscal year have made payments to theCompany or its core companies equivalent to 2% or more of total annual consolidated sales(3) Regardless of (1) and (2) above, entities that, in relation to financial institutions fromwhich the Company borrows funds, are indispensable in fund-raising of theCompany and upon which it is reliant to the extent that there are no substitutes forthe said entities*3. Significant amounts of money or property refers to money or property equivalent toan average of ¥10 million or more per year over the previous three fiscal years.
*4. “Persons who have recently belonged to any of the categories (a) through (d) below”
refers to persons who can be deemed equivalent to persons who at present materiallybelong to any of the categories (a) through (d). For example, this includes persons who
belong to any of the categories (a) through (d) when the General Meeting of
Shareholders approves resolutions appointing the said independent Board members
as external directors or external Audit & Supervisory Board members.

(4) Policies and Procedures for the Appointment of Directors
and Audit & Supervisory Board Members
Principle 3-1

Policy for the Appointment of Directors
The Company appoints personnel who are well acquainted with thebusinesses of the Hankyu Hanshin Holdings Group as directors aswell as appointing personnel from H2O Retailing Corporation andToho Co., Ltd., as directors to strengthen collaborative relationships
with the Hankyu Hanshin Toho Group.
In addition, to raise the standard of decision making andstrengthen oversight, the Company appoints independent external
directors who have abundant experience and expertise.

Management Organisation

Policy for the Appointment of Audit & Supervisory Board Members
To ensure Audit & Supervisory Board members conduct audits­effectively and efficiently, the Company has established the Audit& Supervisory Board and appoints internal standing Audit &Supervisory Board members and external Audit & Supervisory Board
members. The Company appoints internal Audit & Supervisory Board
members who have appropriate expertise in finance, accounting,or law and abundant experience in business fields. Also, theCompany appoints external Audit & Supervisory Board members
who are independent of the Company and have abundant experience and expertise.
Appointment Procedure
Following consultation with the Corporate Governance Committee,
the Board of Directors decides on the appointment of candidates forthe positions of Audit & Supervisory Board member and director
based on the abovementioned appointment policies.
Positions Held Concurrently by Audit & Supervisory Board Members
and Directors
Principle 4-11
Name

Kazuo Sumi
TakaokiFujiwara

Positions held concurrently at other listed companies

Director, H2O Retailing Corporation
External director (Audit & Supervisory Board
member, etc.), Toho Co., Ltd.
External director, Tokyo Rakutenchi Co., Ltd.
External director, Sanyo Electric Railway Co., Ltd.

Noriyuki
Inoue

Chairman and Chief Global Group Officer,Daikin Industries, Ltd.
External director, Kansai Electric Power Co., Inc.

Shosuke Mori

Senior advisor, Kansai Electric Power Co., Inc.
External director, ANA HOLDINGS INC.
External director, The Royal Hotel, Ltd.

Yoshishige
Shimatani

President and representative director, Toho Co., Ltd.
External director, Tokyo Rakutenchi Co., Ltd.
External director, Fuji Media Holdings, Inc.

Naoya Araki

Representative Director, H2O Retailing Corporation

Junzo Ishii

External Audit & Supervisory Board member, 
Rengo Co., Ltd.

Relations with External Directors
Principle 3-1
Name

Noriyuki
Inoue(Independent
Director)

Shosuke Mori
(Independent
Director)

Reasons for appointment

Representative director for many years at Daikin
Industries, Ltd. Also served as vice-chairman of
Kansai Economic Federation. Appointed for his
wealth of management experience, perspectivefrom top business circles, and ability to provide
independent input.

Relations with External Audit & Supervisory Board Members
Principle 3-1
Name

Reasons for appointment

Haruo
Sakaguchi

Currently a lawyer. Appointed to advise on more
compliance-based management and for his ability
to provide independent input.

(Independent
Board Member)

Junzo Ishii(Independent
Board Member)Michiari
Komiyama(Independent
Board Member)

Former Professor of Faculty of Business Administration within the Graduate School of Kobe University
and former President of the University of Marketingand Distribution Sciences. Appointed for his ability
to express useful opinions based on his high-levelspecialist expertise in business administration andfor his ability to provide independent input.
A member of the legal profession who has servedin important positions, including chief prosecutorof the Kobe District Public Prosecutor’s Office, and
who is currently active as a lawyer. Appointed
because, given his experience, he is expected toprovide valuable opinions, particularly about ensuring compliance in business management.

Other Deliberative Bodies(1) Corporate Governance Committee
With a view to ensuring the transparency of executive appointments
and compensation and enabling coordination among external
directors and external Audit & Supervisory Board members, theCompany has established the Corporate Governance Committee,
which comprises four representative directors, two external directors,
two standing Audit & Supervisory Board members, and three external Audit & Supervisory Board members. The committee acts in an­advisory capacity with respect to the appointment of candidates tothe position of director and the details of the compensation systemfor directors. Also, the committee provides external directors withinformation in relation to the Group’s businesses, financial status,and organisation.
(2) Group Management Committee
The members of the Group Management Committee include fulltime directors, specifically the chairman and representative director,
the president and representative director, the executive vice president and representative director, and the representative director;
executive officers; and representatives of each of the Group’s corebusinesses. The committee convenes to deliberate and decide on
the approval of resolutions of the Board of Directors; the management strategies and business plans of Group companies; systems
and rules for maintenance of the holding company system; and significant Group management matters, such as investments above acertain threshold and reorganisation.

Representative director for many years at Kansai
Electric Power Co., Inc., a company whose operations, like those of the Hankyu Hanshin HoldingsGroup, are closely bound up with the public good.
Also served as chairman of Kansai Economic Feder­
ation for many years. Appointed for his wealth ofmanagement experience, perspective from top
business circles, opinions from the viewpoint of
CSR, and ability to provide independent input.

Hankyu Hanshin Holdings • Annual Report 201755

Management Organisation(3) Core Business Strategy Councils
Each core business has a Core Business Strategy Council, comprising
the Company’s chairman and representative director, president andrepresentative director, executive vice president and representative
director, representative director, the executive officer in chargeof the Group Planning Division, and representatives of each corebusiness. In relation to respective core businesses, the councils deliberate significant matters concerning future business development
as well as the preparation and progress management (performance
evaluation) of business plans.
(4) The Group Presidents’ Meeting—Initiatives to Foster Solidarity
within the GroupThe Hankyu Hanshin Holdings Group comprises over 150 Group
companies. The Group Presidents’ Meeting, held twice a year, brings
together presidents of those Group subsidiaries and affiliates. It is
designed to foster a deeper sense of solidarity within the Group andensure that the Group philosophy and management policies permeate the entire organisation. The Group Presidents’ Meeting aims
to encourage a joint sense of commitment to the Medium-Term
Management Plan. Awards are given to companies that boost earnings or individuals and groups that successfully launch initiatives ormake significant contributions at their units.

Compensation of Directors
Principle 3-1(1) Policy
The Company’s compensation system for directors motivates themto enhance the Company’s enterprise value and business performance. Compensation comprises two elements: basic monetarycompensation paid according to position and compensation linked
to business performance.
However, the compensation of external directors and other parttime directors only comprises monetary compensation paid basedon the type of duties positions entail.
Note: The payment of retirement benefits to directors was discontinued in April 2004 toheighten transparency of the compensation system.

Further, stock-based compensation is paid through a trust to
directors who concurrently serve as directors of Hankyu Corporationand Hanshin Electric Railway as part of compensation from theCompany. Thus, as with other shareholders, directors who concurrently serve as directors of these two core companies of the Groupbenefit if share prices rise but incur losses if they decline. The intention of the system is to motivate directors to improve companies’
business performances and thereby enhance the enterprise value ofthe entire Group over the medium-to-long term.
(2) Procedure
Following consultation with the Corporate Governance Committeewith respect to the compensation system and content of compensation, the Board of Directors decides on compensation based on theabovementioned policy.

56

Hankyu Hanshin Holdings • Annual Report 2017

Shares Held for Strategic Reasons
Principle 1-4

The Company acquires shares held for strategic reasons with a view
to building relationships of trust with various stakeholders andenhancing corporate value over the medium-to-long term by maintaining business relationships or strengthening collaborations withpartner companies and maintaining relationships with regional
companies. In exercising voting rights associated with the shares,
the Company’s criterion is whether proposals will contribute to theenhancement of the investee’s corporate value over the medium-tolong term. Further, the Board of Directors verifies the economic
rationality and aims of owning shares held for strategic reasons.

Introduction of Measures to Prevent Takeovers
Principle 1-5

The Company aims to secure and further enhance its enterprisevalue and the common interests of its shareholders. To this end, conducting business operations from a medium-to-long-term perspective, building and maintaining a relationship of trust with local
government institutions and residents in the areas served by theCompany’s railway lines, and conducting business managementthat is focused on strengthening cohesion and collaboration within
the Group to enhance its collective strength are indispensable. For
this reason, we have introduced measures to prevent a takeover of
the Company. In the event of the appearance of a potential buyer of
the Company that wishes to raise their stake to 20% or more of theCompany’s outstanding shares, to confirm the potential buyer’s
intention, new share subscription rights will be granted to shareholders who are de facto shareholders other than the potential
buyer. The General Meeting of Shareholders held on 16th June 2015
approved this system, which will remain in effect for three years.
For more details about the Company’s basic policies regarding
governance of joint-stock companies, which include the abovementioned measures to prevent takeovers, please see: 
http://www.hankyu-hanshin.co.jp/ir/library/others/data/bouei.pdf(Available only in Japanese).

Abolition of Senior Advisors System
To strengthen corporate governance and heighten the transparencyof business management and given that it has not elected senioradvisors at present, the Company received approval from theGeneral Meeting of Shareholders held on 13th June 2017 to abolisha provision of the articles of incorporation concerning the election ofsenior advisors.

Management Organisation

Dialogue with Shareholders and Investors

Investor Relations (IR) Activities
Principle 5-1

Measures to Enhance the Effectiveness of the Company’s
General Meeting of Shareholders and Facilitate the Exercise of
Voting Rights
Principle 1-2
Remarks

Early dispatchof notices ofconvocation

To allow shareholders sufficient time to examine the items for resolution at the shareholders’ meeting before exercising their voting
rights, the Company sends out notices ofconvocation at the earliest possible date. For
the General Meeting of Shareholders heldin June 2017, the Company sent out noticesof convocation on 23rd May 2017, 21 days
before the meeting.

Avoidance of the“busiest day” forshareholder
meetings

To enable as many shareholders as possible
to attend its General Meeting of Shareholders,the Company held its 2016 General Meetingof Shareholders on 13th June 2017, 15 days
before the “busiest day” on which a large proportion of Japanese companies hold theirgeneral shareholders’ meetings.

Online andelectronic voting

To enable shareholders who cannot attend
the Company’s General Meeting of Share­
holders to exercise their voting rights and to
make voting more convenient, the Company
accepts votes exercised via the Internet.
Also, the Company participates in the electronic voting platform operated by ICJ Inc.

Other

On its website, the Company posts noticesof convocation of the General Meeting of
Shareholders and notices of resolutions
passed at the meeting in Japanese andEnglish.

The executive officer in charge of the Group Planning Division is
responsible for and exercises overall control of general IR activities.
The Group Planning Division has an IR manager and promotes cohesive IR activities by sharing information regularly with divisions
responsible for finance and accounting, general and legal affairs, andpublic relations.
As a rule, twice a year in Japan the Company holds briefings on
earnings results for analysts and institutional investors, in which thepresident explains earnings results and business plans.
The Company is increasing and improving disclosure via its website (http://www.hankyu-hanshin.co.jp/en/ir/) by posting a range of
documents that aid investment decisions, such as earnings results,
securities reports, timely disclosure documents, and documentsfrom briefings on earnings results. (Most of these documents are in
Japanese.) Also, for individual investors the website includes an overview of the Group and its competitive advantages.
In addition, as required, the Company organises interviews withshareholders and institutional investors that are primarily themed on
the enhancement of corporate value over the medium-to-longterm. In principle, the IR manager participates in these interviews.
However, in light of the number of shares that shareholders own
or their areas of interest, executive officers responsible for otherareas of the Company participate as required. Further, the IR manager prepares reports, as required, that are based on feedback fromthe interviews, including opinions stated or summaries of questions
and answers, and submits them to the senior management team.
Number of interviews in fiscal 2017: 147

Activities in Fiscal 2017

13 directors, 5 Audit &Supervisory Board members

Fiscal year

April 2015

9 directors, 5 Audit &Supervisory Board members

14 directors, 5 Audit & Supervisory Board members

June 2017
General Meeting of
Shareholders

June 2016
General Meeting of
Shareholders

June 2015
General Meeting of
Shareholders

6 directors retired
1 director appointed
1 Audit & Supervisory Board
member retired
1 Audit & Supervisory Board
member appointed

1 director appointed
1 Audit & Supervisory Board
member retired
1 Audit & Supervisory
Board member appointed

Recent General Meetings of Shareholders and Fiscal Years

FY2016FY2017

April 2016

FY2018

April 2017

Hankyu Hanshin Holdings • Annual Report 201757

Management Organisation

Attendance at Meetings of the Board of Directors andthe Audit & Supervisory Board

offers directors and Audit & Supervisory Board members training
opportunities by introducing and paying for various types of training
and seminars. Also, such committees as the Corporate GovernanceCommittee give external directors and external Audit & Supervisory
Board members information about the Group’s businesses, financial
position, and organisation. Further, in fiscal 2017 the Company conducted briefings about the management tasks and initiatives ofeach core business at meetings of the Board of Directors held in
November and December.

External Directors
Attendance at meetings of the Board

Name

of Directors

Noriyuki Inoue

Attended 8 of 10 meetings

Shosuke Mori

Attended 9 of 10 meetings

External Audit & Supervisory Board Members
Attendance at meetings of the

Attendance at meetings of theBoard of Directors

Audit & Supervisory Board

Takaharu
Dohi

Attended all 10
meetings

Attended all 12
meetings

Haruo
Sakaguchi

Attended all 10
meetings

Attended all 12
meetings

Junzo Ishii

Attended all 10
meetings

Attended 11 of 12
meetings

Name

Compensation Paid to Directors and Audit & Supervisory Board
Members
Total paid out in fiscal 2017

Category

No. of recipients

Directors(External)

14
(2)

127
(19)

Audit & Supervisory
Board members

6
(3)

17
(6)

20
(5)

144
(25)

Total

Notes
1.	Recipients of compensation in fiscal 2017 include one Audit & Supervisory Board
member who retired at the conclusion of the General Meeting of Shareholders held on
14th June 2016.
2.	In addition to the above, compensation received by external directors and external
Audit & Supervisory Board members from subsidiaries of the Company for their duties
as directors and Audit & Supervisory Board members amounted to ¥27 million for fiscal
2017.
3.	Of the Company’s full-time directors with terms of office lasting until the conclusion of
the General Meeting of Shareholders held on 13th June 2017, Kazuo Sumi, Takehiro
Sugiyama, Mitsuo Nozaki, Naohisa Nogami, and Masao Shin concurrently served as
directors of the Company and as senior officers of the Company’s subsidiary Hankyu
Corporation. Of the Company’s Audit & Supervisory Board members with terms ofoffice lasting until the conclusion of the General Meeting of Shareholders held on 13th
June 2017, Koichi Kobayashi concurrently served as a standing Audit & Supervisory
Board member of the Company and as a standing Audit & Supervisory Board memberof the Company’s subsidiary Hankyu Corporation. Further, Shinya Sakai, Takehiro
Sugiyama, and Masao Shin concurrently served as directors of the Company and assenior officers of the Company’s subsidiary Hanshin Electric Railway. Also, Masayoshi
Ishibashi concurrently served as an Audit & Supervisory Board member of the Company
and as a senior officer of Hanshin Electric Railway. The abovementioned persons
received additional compensation from the abovementioned companies.

Support for Directors and Audit & Supervisory Board Members

With the exception of external directors and external Audit &Supervisory Board members, the Company provides directors andAudit & Supervisory Board members with the training that theyrequire to fulfill their roles appropriately. In addition, the Company

58

Hankyu Hanshin Holdings • Annual Report 2017

A summary of the process, items, and results of an evaluation of theeffectiveness of the Board of Directors conducted in fiscal 2018 is asshown below.
1. Evaluation Process
At a meeting of the Board of Directors held on April 2017, all directors were interviewed with respect to the administration of theBoard of Directors in fiscal 2017.
2. Evaluation Items(Millions of yen)

(External)(External)

Evaluation of the Board of Directors’ EffectivenessAccountability
Appropriateness ofconduct ofmeetings
Other

Content of handouts, content and methodof explanations at meetings of the Board of
Directors, etc.
Duration, questions and answers, etc.

Other points about overall administration of
the Board of Directors

3. Evaluation Results
The results of investigative interviews indicated that conduct ofmeetings of the Board of Directors was adequate, explanations of
the status of business management were appropriate, and the Boardof Directors was effective and generally administered appropriately
in fiscal 2017.
Further, evaluation results for fiscal 2016 included requests formore information about the management tasks of each core business. In response, the Company conducted briefings about the
management tasks and initiatives of each core business at meetingsof the Board of Directors held in November and December 2016.
Number of Meetings of Deliberative Bodies Held
Corporate Governance Committee

1 meetingGroup Management Committee

15 meetings

Core Business Strategy Councils

2 meetings

The Group Presidents’ Meeting

2 meetings

Management Organisation

Internal Control System

Principles 2-1

2-2

4-3

Recognising the importance of ensuring that the business operations of the Company are conducted in an appropriate manner, wehave established an internal control system for the entire Group, andrevise it when deemed necessary. As things stand, our internal control system is characterised as follows:A Group Management Philosophy was compiled following themanagement integration of Hankyu Holdings and Hanshin Electric
Railway, along with a Group mission (what we try to achieve), a
statement of values (what is important to us), and a code of conduct (what actions to take to realise them). We ensure that all
employees from executive down understand them.
We ensure compliance-focused management by compilingand distributing a Compliance Manual, and have establisheda dedicated whistle-blowing system. (For further informationon the Company’s compliance activities, please refer to the following section.)We have established the Group Auditing Division, composed ofinternal audit staff under the direct control of the president, forindependent monitoring of Groupwide business activities. It carries out internal audits into the Hankyu Hanshin Holdings Groupand all its operating companies.
To create a structure for ensuring appropriate operations, theGroup vests Audit & Supervisory Board members of each Group
company with authority not only in accounting but also in operational audits, and at the same time provides guidance to smaller
Group companies on Board of Directors’ resolutions for the creation of an internal control system.
Audit & Supervisory Board members and the Group Auditing
Division receive regular reports from the Risk Management Officewith regard to creation and operation of internal controls at theCompany and its subsidiaries (including implementation status forrisk management and promotion of compliance-based management measures). Through such measures, they deepen their links
with, and strengthen the role of, internal control divisions.
With regard to systems for “Management Assessment and Audit
Concerning Internal Control Over Financial Reporting,” a section of
the Financial Instruments and Exchange Act, the Company
responds appropriately by carrying out management evaluations
on a consolidated basis, in line with in-house rules.

Compliance

As a system to ensure compliance-focused management, the Group
has set up a dedicated compliance office, and is working to raiseawareness of compliance issues among executives and employees
by means of the measures detailed below.

Compliance Manual and Training Programmes
The Company’s Compliance Manual and Compliance Card express
the determination of the Company not to tolerate violation of laws
or social norms or betrayal of customer trust by any of its Group
companies’ approximately 22,000 officers and employees. It also
aims to raise awareness by pointing out cases where complianceerrors can easily be made. The Company provides intensive compliance training on a Groupwide basis for new employees, midcareerhires, and newly appointed executives. In addition, all Group companies arrange their own training programmes tailored to job gradeand function, with the aim of further increasing complianceawareness.

Corporate Ethics Consultation Desk (Internal Whistle-Blower Procedures)
Principle 2-5

We have set up a dedicated whistle-blower hotline enabling all
employees to discuss or quickly bring to management’s attention
suspected or known legal violations and unethical conduct. Business
partners are also welcome to use this consultation and notification
facility, and when necessary we will use lawyers and other outside
specialists to improve its effectiveness.
Corporate Ethics Consultation Desk

Reports

Consultation
Desk

Audit &
Supervisory
Board
memberReports

Reports

Directs
President

Consultation
Desk

Audit &
Supervisory
Board
memberReports
President

Approves /Directs
Reporting of investigation progress and findings
Consultation
Desk

Hankyu Hanshin Holdings • Annual Report 201759

Management Organisation

Establishment of Risk Management Committees
In the case of identification of a major compliance issue during thecourse of an Ethics Consultation, a risk management committee isconvened as soon as possible to discuss and decide on appropriate
responses.
In addition, we are setting up compliance promotion offices atmajor Group companies such as Hankyu Corporation, Hanshin
Electric Railway, Hankyu Travel International, Hankyu Hanshin
Express, and Hankyu Hanshin Hotels. At other companies we areappointing “compliance leaders,” to ensure our response is on aGroupwide basis.

Overview of Group Compliance[Symbols]

Information to Group companies
 uidance and training for GroupG
companies

Compliance promotion officeRisk management
Risk Management Committee secretariat
 orporate Ethics Consultation DeskC(­internal whistle-blower procedures)

Internal whistle-blowing, responsible for planning and organisingseminars and other awarenessraising activities

Internal auditing
Compliance leaders

Hankyu Hanshin Holdings

Hankyu Corporation

Hanshin Electric Railway

Hankyu Travel
International

Hankyu Hanshin Express

Hankyu Hanshin Hotels

Liaise with compliance departmentsof higher-level companies

Group Company

orGroup Company

orGroup Company

orGroup Company

orGroup Company
Group Company
Group Company
Group Company
Group Company
Group Company
Cross-Organisational Companies

or

Risk Management

Principle 4-3

At the Company, risks to which many different divisions are exposed
are managed by the Risk Management Office, while risks arising in
the business operations of individual divisions are managed by risk
management units within the divisions themselves. In both cases,
risks are identified and analysed, and risk management systems areoverhauled 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, wedraw up measures to prevent the materialisation of risk or to mitigate
its impact (“risk mitigation measures”). These measures are documented in the form of risk management manuals, and the results ofrisk analysis and how such a risk is being handled when a risk arises
are reported, as appropriate, to the Board of Directors.
We have also established a liaison system enabling the effective
transmission of information in the event of unforeseen circumstances.
Under this system, in the event of materialisation of a risk, executives
and employees immediately take risk mitigation measures as specified in the abovementioned documentation and other measures toprevent the further spread of the impact. They also submit reports topre-appointed risk management liaison personnel.
The Company provides supervision to all companies in the Groupso that the same system is operated by them all, and has set up asystem enabling transmission to the Company of accurate information in the event of an unforeseen development.
A particular area of importance in this regard is the Company’s
core railway business, which entails direct risk to people’s lives
through accidents. Even in the event of minor mistakes and problems
where no individual responsibility arises, it is important to make every
effort to bring the number of problems and mistakes that could
cause an accident as close to zero as possible, by continuing to
meticulously train railway business staff, and share and analyse data.
Such painstaking efforts to forestall even one human error are one of
the building blocks on which the Company ensures safety of operations and meets public expectations.
Pages 64–67 explain measures to ensure the safety of the railway business ofHankyu Corporation and Hanshin Electric Railway.

60

Hankyu Hanshin Holdings • Annual Report 2017

Management Organisation

Initiatives Aimed at Reducing
the Group’s Risk
Mitsuo Nozaki

Our Current Risk Management Framework
Based on six core businesses, the Hankyu Hanshin Holdings Group
conducts diverse business activities. Consequently, in a wide range

Executive Officer,
In charge of Personnel andGeneral Affairs Div.,
Hankyu Hanshin Holdingsof areas the Group incurs risks meriting attention. Therefore, eachfiscal year the Company and its operating subsidiaries coordinate to
identify and assess business risks. Specifically, from among generalrisk items, which the Company prepares in advance based on aGroupwide management viewpoint, operating subsidiaries selectrisks that should be addressed as a priority. In selecting these priority
risks, the operating subsidiaries use as criteria the likelihood of risk
manifestation and the effect this would have on operations. Next,
the operating subsidiaries establish risk reduction measures targetingthe selected priority risks, discuss the countermeasures at meetingsof their boards of directors and other meetings, and then report conclusions to Hankyu Hanshin Holdings as the holding company. The
Company regularly collates and reports information about the progress of operating subsidiaries’ risk management measures to theBoard of Directors.
As for the monitoring of risk management measures, operating
subsidiaries must submit progress reports to the Company periodically. In addition, as the officer responsible for risk management, I andother risk managers conduct face-to-face interviews with membersof subsidiaries’ senior management teams at least once a year,
checking the progress of their measures for priority risks through aplan–do–check–act (PDCA) cycle. Interviews at operating subsidiaries
not only help me understand changes in the status of risks but also
give me an opportunity to share management know-how aboutsuch issues as best practices within the Group.

Initiatives Going Forward
Looking to the future, a pressing task is to strengthen the management of risk associated with overseas businesses, which aim to
expand in accordance with the Long-Term Management Vision for2025. While leveraging the expertise and information of theInternational Transportation Business—which has a strong trackrecord in overseas business development—we will address this task
by establishing a management system aimed at selecting andreducing priority risks. Further, I believe we need to heighten oursensitivity to risk related to the environment, society, and governance (ESG). In particular, four years ago we began a Groupwide initiative to rigorously introduce appropriate management of working
hours. As part of this ongoing initiative, we are advancing efforts to
identify and address issues arising from characteristics of each operating subsidiary’s business.
The Hankyu Hanshin Holdings Group’s risk management haschanged significantly since the Company stepped up its involvement with operating subsidiaries following a compliance incident
several years ago. The Company will continue to increase risk management awareness across the Group, prevent the occurrence ofrisk-related events, and heighten its ability to respond to risks.

Risk Management Framework
The Board of Directors of Hankyu Hanshin Holdings
Collating and reporting

Hankyu Hanshin Holdings
Providing risk items from a Groupwide
management viewpoint

ReportingInterviewing and advising

ReportingOperatingsubsidiaries
Assessing and identifying
Effect level
Manifestation likelihood

Selecting priority risks

Establishing countermeasures
Risk reduction measures
Schedules

Implementing
countermeasures

Assessing

Reporting

ReportingBoards of Directors’ and other meetings

Hankyu Hanshin Holdings • Annual Report 201761

Principal Risks and Countermeasures

The Hankyu Hanshin Holdings Group’s approaches to risks related to businesses and other risks that may be of concern toinvestors are stated below.
Further, forward-looking statements in this report reflect the Group’s assessments as of 31st March 2017. Moreover, thesestatements do not negate the possibility of the said risks affecting the Group’s business results or financial position.

Principal risks

The Group’s countermeasures

Risks related to economic conditions
 orrowing rates could increase due to changes in financial markets orBfund-raising from markets could become difficult.
Sudden changes in financial markets could affect the Group’s businessresults or financial position.

T he Group limits exposure to the risk of interest rate increases by giving
priority to the undertaking of long-term loans with fixed interest rates.
The Group secures financing by establishing backup lines of credit
based on commitment lines set up with correspondent financial
institutions.

Changes in the economic climate could cause exchange rate volatility.

T he Group uses forward exchange contracts, currency swap contracts,
and currency option contracts to mitigate exchange rate fluctuation
risk associated with certain foreign currency-denominated monetary
payables and receivables.
	  Further, the Group’s overseas sales were less than 10% of consolidated revenues from operations as of 31st March 2017.

 reater-than-expected volatility could affect the Group’s businessG
results or financial position.

Risks related to businesses
The further aging of society is expected to increase capital invest­
ment for safety countermeasures and construction to make facilities
barrier-free.
Due to population decline resulting from lower birth rates, the Group’s
railways, buses, and taxis could see demand for passenger transportation decrease. Also, demand could decrease in other businesses.

An accident in the railway business could cause customers great
suffering.

T hrough continuous initiatives to heighten the value of the Umeda
area and other areas served by the Hankyu and Hanshin lines, theGroup creates line-side areas in which people want to live in long term
or visit frequently.
The Group will develop such new markets as the Tokyo metropolitan
area and overseas markets.
The Group has established the Long-Term Management Vision for 2025
and will take various measures to become the company we hope to be.
The four elements of this target corporate profile are stated below.
1. Make our railway the absolute best among the Kansai networks.
2. Construct a stable revenue base in the Tokyo metropolitan area andoverseas markets. (Diversify the portfolio, which is currently concentrated in Umeda and line-side areas.)
3. Strengthen competitiveness by thoroughly pursuing brand optimisation and differentiation.
4. Make greater use of the Group’s collective strength and develop new
business fields.

T he Group is keenly aware that being entrusted with passengers’
lives is a serious responsibility. Therefore, placing first priority on
ensuring the safety of customers is the basis of its business
management.
B ased on its strong commitment to putting customers first and giving
the highest priority to safety, the Group is implementing a wide rangeof measures to upgrade tangible and intangible infrastructure andprovide customers with improved safety.
For details about safety measures in the Urban Transportation Business, please see pages
64–67.

62

Hankyu Hanshin Holdings • Annual Report 2017

Principal Risks and Countermeasures

Principal risks

The Group’s countermeasures

Higher electric utility rates could increase power and other costs.

T he Group is steadily introducing energy-saving equipment to curb
power consumption as much as possible.
The Group takes rigorous measures to ensure employees are aware of
the importance of cost reductions.

 loss of trust in the quality and safety of products and services that theA
Group sells and offers or in the information it provides about them
could lower revenues and lead to a deterioration in business results.

T he Group ensures the quality and safety of its products and services
and the appropriateness of the information it provides about them byconfirming compliance with relevant laws and regulations and checking quality and hygiene management and food labelling.

 atural disasters, such as earthquakes, typhoons, or floods, or acts ofNterrorism could significantly damage the Group’s businesses or transportation network infrastructure.

In the areas alongside their railway lines, Hankyu Corporation andHanshin Electric Railway have installed water meters for rivers and rain
and wind gauges for collecting observation data. Also, they use realtime information from meteorological observatories to ensure safe
train operations.
If seismographs detect an earthquake with a seismic intensity of fouror above, or if earthquake early warning systems forecast an earthquake of the same seismic intensity, the Group immediately begins
procedures for the emergency suspension of the operations of all
trains on line segments in earthquake zones.
If the Group recognises that continued vigilance is required with respect
to acts of terrorism or other acts, or if suspicious items or persons are
discovered or damage is incurred, it conducts crisis management
appropriate to the threat level.
The Group has established emergency response systems for minimizing the effect on society in the unlikely event of an incident that causes
a long disruption to transportation services or results in a large numberof casualties.

For further information on risks related to businesses and other risks, please see page 73.

Hankyu Hanshin Holdings • Annual Report 201763

Safety Initiatives in the Railway Business

The shared mission of Hankyu Corporation and Hanshin Electric Railway is to ensure the absolutesafety of railway transportation. All day-to-day safety enhancement measures as well as measures
to ensure safety in emergencies reflect the safety policy and safety objective below.

Safety Policy and
Safety Objective
Hankyu Corporation 
Safety Objective• Maintaining the elimination of accidents for which we bear responsibility
For the fiscal years from fiscal 2017 onward, we again set elimination of accidents for which we bear responsibility as our safety objective. This has
been our safety objective since 2006, and we will continue to do our utmost to achieve it.
Safety Policy and Safety Priority Measures
Provide safe, high-quality transportation services that fully justify public trust—Hankyu Corporation: Safety and comfort
1. Promote accident reoccurrence prevention and accident prevention
measuresa. 
Ensure rigorous accident reoccurrence prevention by steadily
implementing countermeasuresb. Prevent accidents by using accident precursor information andaccident examples
c. Upgrade and introduce equipment and facilities to realise even safer
railways
2. Strengthen responses when disasters occura. Identify risks that threaten business continuity and prepare andimplement countermeasures

Positions and Roles

Safety Management System
President
Directors
Head of Urban Transportation Business(Chief Safety Manager: Director)
Deputy Head of
Urban Transportation Business
Manager, Urban
Manager,
Transport Division
Transportation(Chief Train
Planning
Operations(Head of Investment
Manager)and Financing Team)Manager,
Technical Division(Chief Civil
Engineering
Facilities Manager)

Manager,
Kobe LineOperations

Manager,
Takarazuka LineOperations

Manager,
Kyoto LineOperations

Deputy Operations
Manager (CrewTraining Manager)

Deputy Operations
Manager (CrewTraining Manager)

Deputy Operations
Manager (CrewTraining Manager)

Manager,
Technical Division(Chief Electrical
Facilities Manager)

Manager,
Technical Division(Chief Rolling
Stock Manager)

Group Safety Management
Promotion Committee

64Technical Division (civilengineering facilities)
Safety Management
Promotion Committee

Investigative Committee for
Measures to Prevent Accidents
Technical Division(electrical facilities)
Safety Management
Promotion Committee

Hankyu Hanshin Holdings • Annual Report 2017

Chief Safety Manager
In order to prioritise securing the safety of railway facilities and rolling stockand the handling of operations, and to control and manage transportation
operations in each division, the Chief Safety Manager works to disseminate
safety management regulations and to ensure compliance with related laws
and regulations; to increase awareness of safety as the Group’s most important priority; to confirm the implementation of transportation operations,management conditions, and the progress made in implementing the safety
improvement measures stipulated in the Medium-Term Management Plan;
and to implement improvement measures.

Chief Crew Training Manager
Based on the instructions and orders of the Chief Train Operations Manager,
the Chief Crew Training Manager maintains and manages the capabilities oftrain crews and periodically confirms and submits reports on the progress
being made in improving their capabilities.

Business Division Safety
Management Promotion Committee
Investigative Committee to Improve
the Safety and Security of Operations

President
The President determines the implementation, management organisation,and rules of the railway business. In addition, when formulating the MediumTerm Management Plan, which includes facilities and transportation,­personnel, investment, and budget, the President verifies and ascertains thesituation from the perspectives of safety and feasibility and instructs on
improvements.

Chief Train Operations Manager
The Chief Train Operations Manager manages operations-related duties,
including utilising the employees involved in operations, railway facilities, androlling stock; setting and revising the operations plan; managing train crews,
the operations of rolling stock, and train operations; and providing training fortrain crews and maintaining their capabilities.

Safety Management Promotion Committees

Transport Division
Safety Management
Promotion Committeeb. Conduct highly effective training to realise rapid, reliable emergency measures
3. Enhance employees’ safety awareness and increase communicationa. Conduct training to heighten employees’ safety awareness evenfurtherb. Continue training aimed at ensuring personnel development andthe passing on of skills
c. Establish workplaces with an open atmosphereTechnical Division(rolling stock)
Safety Management
Promotion Committee

Other Managers and Responsible Persons
In each division, other managers and responsible persons maintain andmanage the facilities they are responsible for in order to ensure there are no
obstacles to realising safe transportation.
Safety Management Promotion Committees
Safety Management Promotion Committees discuss, investigate, and reporton a variety of proposals for transportation safety. These committees include
the Group Safety Management Promotion Committee, on which the President
serves as chairperson; the Business Division Safety Management Promotion
Committee, on which the Chief Safety Manager serves as chairperson; and thedivisional safety management promotion committees.

Safety Initiatives in the Railway Business

Hanshin Electric Railway 
Safety Objective•M aintaining the elimination of accidents for which we bear responsibility
We have maintained elimination of accidents for which we bear responsibility as our safety objective since April 1985.
Safety Policy

Maximum priority on safety

Compliance with laws and regulations

The President, directors, and employees
shall do everything possible to ensure safetyof operations, based on the understandingthat putting the highest priority on ensuringsafety is the mission of railway businesses.

T he Company shall comply with all laws andregulations related to safety and apply themrigorously and sincerely in its operations.

President
The President has the ultimate responsibility for ensuring transport safety.

President
The Railway Safety Council has been established
as an organisation that specialises in promoting
safety management.

Directors
Urban Transportation
Business
Railway Safety Council

Chief Safety Manager(Head of Urban
Transportation Business)
Deputy Head of Urban
Transportation Business

Manager,
Electrical Division

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

The Company shall implement continuous verification procedures to ensure thatsafety management systems are operating
appropriately.

Positions and Roles

Safety Management System

Chief Train
Operations Manager(Manager,Transportation
Division)

Maintenance of safety management
systems

Manager,
Rolling Stock
DivisionManager,Engineering
Division

Chief Safety Manager (Head of Urban Transportation Business)
The Chief Safety Manager is responsible for overseeing all activities related toensuring transport safety.
Chief Train Operations Manager (Transportation Division Manager)
Under the direction of the Chief Safety Manager, the Chief Train Operations
Manager is responsible for operations including train operations, maintaining
the capabilities of train crews, and other related operations.
 hief Crew Training Managers (the Heads of the East Rolling Stock YardC
and the West Rolling Stock Yard)
Under the direction of the Chief Train Operations Manager, the Chief Crew
Training Managers are responsible for ensuring all crew are properly
qualified.
Electrical Division Manager
Under the direction of the Chief Safety Manager, the Electrical Division
Manager has overall control of items relating to electrical facilities.
Rolling Stock Division Manager
Under the direction of the Chief Safety Manager, the Rolling Stock Division
Manager has overall control of items relating to rolling stock.
Engineering Division Manager
Under the direction of the Chief Safety Manager, the Engineering Division
Manager has overall control of items relating to track, civil engineering, andconstruction facilities.

Hankyu Hanshin Holdings • Annual Report 201765

Safety Initiatives in the Railway BusinessInitiatives to Reinforce the Safety
Management System (Using the
PDCA Cycle)

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

Revisions to the Railway Business Law in October 2006 required railway companies to create new safety management systems dedicated to transport safety. Under our new safety management system,
we are realising even higher levels of safety by applying theplan–do–check–act (PDCA) cycle, ensuring compliance with all
related laws and regulations, conducting operations that place thehighest priority on safety, and fostering greater awareness of safetyissues among employees from directors on down.

DO
Safety management
implementationand operation

PLAN
Creation of safetycontrol plans
and systems

Continuous
improvement

CHECK
Safety management
and operational checks

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

Use of Safety-Related Suggestion Boxes to Reduce Potential Risks
With a view to preventing accidents, Hanshin Electric Railway­collects and uses risk information about the potential causesof accidents and near misses. As an additional initiative to reduce
potential risks, the company began a safety-related suggestion
box system in 2014. The suggestion boxes allow employees
engaged in railway operations to anonymously submit comments
about instances when they have felt situations were dangerous

or about things they have realised in the course of day-to-day
duties, regardless of whether these comments concern an operational area for which they are responsible. Without fail, railway
operations’ safety-related committees check these suggestions
and take the necessary countermeasures. Moreover, by sharing
examples of improvements, we heighten each employee’s sensitivity to danger and thereby encourage further improvements.

Before improvement

After improvement

Suggestion
received

66

There is an area in the west part of Kusugawa Station that
does not have an intrusion prevention fence. Train photographers and small children putting out their hands gave
me a fright.

Hankyu Hanshin Holdings • Annual Report 2017

Countermeasure

By installing a new intrusion prevention fence,
we ensured safe train operations.

Safety Initiatives in the Railway Business

Safety Enhancement
Initiatives

To ensure the safety of customers, we are proactively taking personnel-related measures toenhance education and training as well as infrastructure-related measures to improveequipment and facilities.

1. Training and Education 
At government-designated in-house training centres, Hankyu
Corporation and Hanshin Electric Railway foster train drivers andtrain conductors. During the training period, trainees receive education on academic subjects and practical skills in accordance with anational curriculum. Also, experienced drivers and train conductors

act as instructors and provide rigorous one-on-one, on-site training.
Even after personnel have passed certification exams, we maintainand heighten the skills, awareness, and qualifications of drivers, conductors, and operations personnel by holding safety workshops andseminars and by conducting training based on a range of scenarios.

2. Initiatives for Natural Disasters 
1. Responding to rain storms
During rain storms, we direct trains to reduce speed or suspend
operations based on information obtained from the rain gauges, windgauges, and water meters installed alongside our railway lines andmeteorological information from the Japan Meteorological Agency.
2. Responding to earthquakes
If earthquake early warning systems forecast an earthquake with aseismic intensity of four or above, or if seismographs that we haveinstalled alongside our railway lines detect an earthquake of thesame seismic intensity, we immediately begin procedures for the
emergency suspension of operations of trains on line segments inearthquake zones.

3. Responding to actions of third parties, such asacts of terrorism
If there is a warning that the actions of third parties, such as acts ofterrorism, could cause serious incidents with extremely significant
effects on society, or if such a warning calls for continued vigilance,
or if suspicious items or persons are discovered or damage isincurred, we take measures appropriate to the threat level.
Further, we are advancing the installation of security cameras on
station platforms and in station concourses to prevent crime.

3. Maintenance Work: Indispensable for Safe, Comfortable Operations 
1. Inspecting electrical equipment
We have many different types of electrical equipment, including signal safety equipment, secure communications equipment, railway crossing
safety equipment, power equipment, railway track equipment, and substation equipment, which we inspect regularly based on prescribed­inspection schedules.
2. Inspecting railway tracks
We regularly inspect railway tracks, rails, ties, and other components to ensure the safe operation of trains.
3. Inspecting structures
We inspect elevated tracks, bridges, tunnels, and other railway civil engineering structures regularly.
4. Inspecting rolling stock
We conduct inspections at our plants and train depots to maintain the safety of rolling stock. Regular inspections include train inspections, status
and function inspections, main component inspections, and overall inspections. In addition, we conduct unscheduled inspections as required.

Hankyu Hanshin Holdings • Annual Report 201767

Consolidated Six-Year Summary

2012

FY

2013

2014

2015

2016 620172017$ 6,578,241

Result of Operations (Millions of yen and thousands of U.S. dollars) :1¥  649,703¥  682,439¥  679,157¥  685,906¥  746,792¥  736,763

Operating income

73,80987,921

91,82894,026110,293

104,058

929,089

EBITDA2

133,500

145,100

149,200

150,100

166,500

159,300

1,422,321

Ordinary income

65,39374,914

81,191

85,590104,479

100,607898,277

Income before income taxes

43,41962,192

83,542

77,62096,087

100,805

900,045

Net income attributable to owners of the parent

39,25239,702

46,352

54,201

69,971

71,302636,625

Comprehensive income

44,99254,081

55,941

71,034

63,842

79,288707,929

Capital expenditure

55,26759,51280,722

68,11566,63986,212769,750

Depreciation and amortisation

56,96854,54054,474

53,14353,70152,800471,429

Revenues from operations

Cash Flows (Millions of yen and thousands of U.S. dollars):
Cash flows from operating activities¥  124,525¥  127,655¥  146,991¥  131,881¥  124,838¥  115,633$ 1,032,438

Cash flows from investing activities(44,295)(58,923)(45,517)(52,529)(78,843)(84,845)(757,545)

Cash flows from financing activities(78,978)(69,195)(105,079)(81,746)(47,278)(30,595)(273,170)

767

817

(1,840)(1,125)(1,978)(480)(4,286)23,57225,581

24,49723,49722,363

22,530201,161¥2,281,007¥2,286,928¥2,279,638¥2,282,180¥2,349,831$20,980,634

Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at end of year

Financial Position (Millions of yen and thousands of U.S. dollars):
Total assets¥2,274,380

Total net assets

524,801

573,154

617,598

679,482

724,237

804,659

7,184,455

Interest-bearing debt

1,183,647

1,126,633

1,032,307

955,828

916,570

899,523

8,031,455¥    31.13¥    31.48¥    36.76¥    42.98¥   277.88¥   285.11$       2.55

31.13

31.47

36.75

42.95

277.67284.86

2.54

Net assets

407.01443.63477.69525.562,815.96

3,150.67

28.13

Dividend

5.00

5.00

6.00

6.00

35.00

35.00

0.31

Operating income margin (%)

11.4

12.9

13.5

13.7

14.8

14.1

—

ROA (%)

2.8

3.3

3.6

3.7

4.6

4.3

—

Per Share Data (Yen and U.S. dollars):
Net income attributable toowners of the parent

Basic
DilutedRatios:3

ROE (%)

7.9

7.4

8.0

8.6

10.3

9.4

—

Interest-bearing debt/EBITDA (Times)

8.9

7.8

6.9

6.4

5.5

5.6

—

Equity ratio (%)

22.6

24.5

26.3

29.1

31.0

33.5

—

Debt/equity (D/E) ratio (Times)5

2.3

2.0

1.7

1.4

1.3

1.1

—

1,271,406

1,271,406

1,271,406

1,271,406

254,281254,281—

20,811

20,751

20,913

21,037

21,607

21,860—4

Others:Number of outstanding shares (Thousands)
Number of employees

1. The U.S. dollar amounts have been translated, for convenience only, at ¥112 = US$1, the prevailing exchange rate on the Tokyo Foreign Exchange Market as of 31st March 2017.
2. EBITDA = operating income + depreciation expenses + amortisation of goodwill
EBITDA figures are rounded to the nearest ¥100 million.
3. ROA = ordinary income / total assets (average of period-start and period-end totals)
4. ROE = net income attributable to owners of the parent / equity (average of period-start and period-end totals)
5. D/E ratio = interest-bearing debt / equity
6. Regarding transactions related to such items as the export of mixed cargo of the International Transportation Business, the Company has changed the recognition of revenues
from operations from net presentation to gross presentation as of fiscal 2017. As a result of this change, the amount of revenues from operations for fiscal 2016 is the amountafter retrospective application (gross presentation).
	Further, the Company consolidated shares at the ratio of 5 shares to 1 share with an effective date of 1st August 2016. Net income per share, diluted net income attributableto owners of the parent per share, net assets per share, dividend per share, and number of outstanding shares have been calculated based on the assumption that the said
reverse stock split was executed on 1st April 2015.

68

Hankyu Hanshin Holdings • Annual Report 2017

Consolidated Financial Review

Analysis of Operating Results for Fiscal 2017 (Year ended 31st March 2017)
Although the Group was able to achieve its profit targets, revenues
from operations declined 1.3%, or ¥10,029 million, year on year, to¥736,763 million. This decrease was attributable to the sale of land
for facilities in the Real Estate Business in the previous fiscal year andthe lower yen-equivalent value of revenues and earnings in theInternational Transportation Business that accompanied exchange
rate fluctuations. As a result of the abovementioned decrease in revenues from operations, operating income was down 5.7%, or ¥6,234
million, year on year, to ¥104,058 million.
Further, ordinary income declined 3.7%, or ¥3,872 million, year
on year, to ¥100,607 million, because the abovementioned decrease

in revenues from operations counteracted higher equity in incomeof affiliates and a decrease in interest expenses accompanying lower
interest-bearing debt.
Total extraordinary income net of total extraordinary loss was¥197 million, compared with a loss of ¥8,391 million in the previous
fiscal year, due to the recording of losses on revaluation of investment securities in the previous fiscal year. Reflecting the improvement in total extraordinary income net of total extraordinary loss,
net income attributable to owners of the parent increased 1.9%, or¥1,331 million, year on year, to ¥71,302 million.

Analysis of operating income(¥ million)

110,293

FY2016
Decrease in revenues from operations–10,029

Decrease in operating expenses and cost of sales*+2,251

Decrease in personnel expenses+1,031

Decrease in expenses+543

Increase in taxes–116

Decrease in depreciation and amortisation+39

Decrease in amortisation of goodwill

Decrease in selling,
general and administrative
expenses*+1,543+44
104,058

FY2017

YoY difference –6,234* Included in cost of revenues from operations, retirement benefit expenses increased ¥2,088 million.

Segment Information
The following table shows business performance for each core business segment. For reviews of these results, please see the respective reference pages at the bottom of the columns in the table below.
(Millions of yen)
Urban
Transportation

Real EstateEntertainment andCommunications

FY2017

237,136

215,709

115,193

29,938FY2016

239,544

220,923

112,490

30,502

76,092

YoY difference–2,407–5,213+2,703–563–4,422

TravelInternational
Transportation

HotelsOther

Adjustment

Consolidated

65,64042,646(41,172)

68,04238,859(39,660)

746,792–2,401+3,787–1,512–10,029

Revenues fromoperations
71,670736,763

Operating income
FY201742,237

41,97015,655

637

1,587

2,795

1,340

(2,167)104,058

FY2016

41,27049,851

15,301

680

1,788

3,298

967

(2,866)110,293

YoY difference+967–7,881

+354

–43

–200

–502

+372

+698

–6,234

Reference page

P.37

P.39

P.41

P.43

P.45

P.47

—

—

—

Note: Regarding transactions related to such items as the export of consolidated cargo of the International Transportation Business, the Company has changed the recognition of revenues
from operations from net presentation to gross presentation as of the fiscal year under review. As a result of this change, the amount of revenues from operations for the previous fiscal
year is the figure after retrospective application (gross presentation). Further, this change has not affected operating income.

Hankyu Hanshin Holdings • Annual Report 201769

Consolidated Financial Review

Review of Financial Position
1. Assets, Liabilities, and Net Assets
Total assets at the end of the fiscal year under review stood at¥2,349,831 million, a rise of ¥67,650 million from the previous fiscal
year-end. This increase mainly stemmed from investment thatexceeded depreciation and amortisation, the recognition of anincrease in equity in income of affiliates, a rise in the market value oflisted investment securities owned, and an increase in constructionin progress. Further, construction in progress increased in tandemwith the advancement of the Ginza 3-chome Project and the Umeda
1-1 Project.

As for liabilities, the primary causes of higher total long-term liabilities were increases in long-term debt and bonds. Meanwhile, adecrease in total current liabilities mainly resulted from lower shortterm borrowings. Consequently, interest-bearing debt was ¥17,046
million lower than at the previous fiscal year-end. Total liabilities
decreased ¥12,771 million from the previous fiscal year-end, to¥1,545,171 million.
Net assets increased ¥80,422 million from the previous fiscal
year-end, to ¥804,659 million, due mainly to higher retained earnings.
As a result, the equity ratio stood at 33.5%, and ROE was 9.4%.

AssetsLiabilities and net assets(¥ billion)(¥ billion)
Total assets¥2,349.8 billion

Total assets¥2,282.2 billion

289.1
40.5

Noncurrent assets+53.2
Main cause:
Increase inconstructionin progress

1,697.1

255.5

1,734.7

Current assets+14.5
Main cause:
Increase in tradereceivables

FY2016
Current assets
Intangible assets

70

307.9
37.3

Property and equipment
Investments and other assets

Hankyu Hanshin Holdings • Annual Report 2017

270.0
FY2017

Total liabilities
and net assets¥2,349.8 billion

Total liabilities
and net assets¥2,282.2 billion

724.2

1,101.8

456.1

Net assets+80.4
Main cause:
Increase incapital surplus
Long-term liabilities+24.1
Main cause:
Increase inlong-term debt
Current liabilities–36.8
Main cause:
Decrease in
short-term borrowings

FY2016
Current liabilities

Long-term liabilities

804.7

1,125.9

419.3
FY2017

Net assetsConsolidated Financial Review

2. Cash Flows
Cash and cash equivalents at end of year increased ¥167 million fromthe previous fiscal year-end, to ¥22,530 million.
(1) Cash Flows from Operating Activities
Net cash provided by operating activities was ¥115,633 million(down 7.4% year on year). The main factors were income before
income taxes of ¥100,805 million, depreciation and amortisation of¥52,800 million, and income taxes paid of ¥22,714 million.

(2) Cash Flows from Investing Activities
Net cash used in investing activities amounted to ¥84,845 million (up7.6% year on year). This primarily reflected purchases of noncurrent
assets of ¥92,767 million, purchases of investment securities of¥11,527 million, and receipt of contributions for construction of¥13,973 million.
(3) Cash Flows from Financing Activities
Net cash used in financing activities totalled ¥30,595 million (down
35.3% year on year). This was due partly to a net decrease in borrowings of ¥3,932 million, proceeds from new bonds issued of ¥19,858
million, redemption of bonds of ¥30,000 million, purchase of treasury stock of ¥5,271 million, and dividends paid of ¥8,803 million.

Cash flows(¥ billion)

Cash flows fromoperating activities–9.2

Cash flows frominvesting activities–6.0

Cash flows fromfinancing activities
+16.7

+19.9

+6.9

–20.0
+21.1

22.4
–0.1

+2.7

–1.5

–6.7

+7.8

22.5

Year ended 31st March 2017

–0.9

Other

+4.7

–30.0

–0.6

–2.0

Dividends paid

Purchases of treasury stock

Redemption of bonds

Proceeds from new bonds issued

Net decrease in short-term borrowings

Other

Receipt of contributions for construction

Purchases of investment securities

Purchases of noncurrent assets

Other

Income taxes paid

Depreciation and amortisation

Income before income taxes

Year ended 31st March 2016

3. Fund Procurement
The outstanding balance of interest-bearing debt at the end of the
fiscal year under review amounted to ¥899,523 million, a decrease of¥17,046 million from the previous fiscal year-end. This was because
net cash provided by operating activities more than compensatedfor capital expenditure for the Ginza 3-chome Project and the building of new rolling stock.

The ratio of interest-bearing debt/EBITDA (operating income +depreciation expenses + amortisation of goodwill), which is thebenchmark the Company uses for assessing the soundness of its
financial position, stood at 5.6 times at the end of the fiscal year
under review, compared with 5.5 times at the previous fiscal
year-end.

Hankyu Hanshin Holdings • Annual Report 201771

Consolidated Financial Review

Consolidated Capital Expenditure and Depreciation and Amortisation
Capital expenditure in the fiscal year under review (on a consolidated basis; including intangible assets) increased ¥19,573 million, or 29.4%, year
on year, to ¥86,212 million.

The following is a breakdown for each business segment.
(Millions of yen)(%)

FY2017YoY

Urban Transportation

31,158

11.4

Real Estate

43,144

52.5

Entertainment and Communications

7,388

24.8

Travel528

4.1International Transportation

384

–63.4

Hotels

3,182

42.5

Other

618

–13.7

Total

86,40629.6

Adjustment(193)–272.6

Consolidated

86,212

29.4

Urban Transportation
The railway business carried out capital investment with a focus onsafety and service improvement, built new rolling stock, andimproved existing rolling stock.
Real Estate
The Real Estate Business moved forward with the Ginza 3-chome
Project and continued implementing the Umeda 1-1 Project.
Entertainment and Communications
The Entertainment and Communications Business renewed thetransmission lines of main lines.
TravelIn the Travel Business, Hankyu Travel International stepped-up
Internet sales and invested in IT systems for in-house operations.

72

Hankyu Hanshin Holdings • Annual Report 2017

International Transportation
In the International Transportation Business, Hankyu Hanshin Express
invested in IT systems for in-house operations.
HotelsIn the Hotels Business, Hankyu Hanshin Hotels refurbished the guest
rooms of its hotels.
Depreciation and amortisation decreased ¥901 million, or 1.7%,
from the previous year (on a consolidated basis), to ¥52,800 million.

Business Risks

The various categories of risk to which the business performance, stock price, financial position, and other aspects of operationsof the Hankyu Hanshin Holdings Group are subject are detailed below. Nevertheless, these dangers do not encompass all risks
attendant on Group activities and there are risks other than those stated below which are difficult to foresee.
Information about future events that appears in this annual report was determined by the Group to be current as of 31st March 2017.

Legal Risk
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 tooperate. 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 to change the fares.
Consequently, there is a certain risk that the Group’s railway operations may be constrained in some way by the MLIT’s administrationof these regulations.

Interest-Bearing Debt
The balance of interest-bearing debt held by the Group as of the endof March 2017, on a consolidated basis, was ¥899,523 million. As aresult of the acquisition of shares in Hanshin Electric Railway through a
successful public tender offer (takeover bid) on 27th June 2006,
Hanshin Electric Railway has become a consolidated subsidiary ofHankyu Holdings. This acquisition has resulted in an increase in thebalance of interest-bearing debt of the Group. On the other hand,management integration between the Hankyu Holdings Group and
Hanshin Electric Railway Group has increased cash flows, so the Groupis 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 to minimise thenegative impact of interest rate movements. But in the unlikely
event that interest rates rise suddenly and in excess of our projections, this could exert an adverse effect on the business performanceand financial position of the Group.

Affiliated Companies
In order to ensure greater convenience for users of the Hokushin
Kyuko Railway Line (run by consolidated subsidiary Hokushin Kyuko
Railway), Hankyu Corporation (a consolidated subsidiary) has agreed
to a plan transferring railway facilities held by Hokushin Kyuko
Railway to Kobe Rapid Transit Railway (a consolidated subsidiary)
and retaining railway business as a tier 2 railway operator.
To facilitate the plan, in fiscal 2003 Hankyu Corporation provided
Kobe Rapid Transit Railway with financing for part of the funds necessary to purchase the facilities.

In September 2007, Kobe Electric Railway (an equity-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 tier2 railway operator. However, the business performance and financial
position of the Group could be affected by changes in this plan.

Decline in the Market Value of Assets Held by Members ofthe 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 HoldingsGroup.

Declining Birth Rate
In the Group’s mainstay Kyoto-Osaka-Kobe area, demographic
changes accompanying the declining birth rate are expected tolower demand for railway, bus, and taxi services and other types ofpassenger transportation and to lower demand in other businessareas. In addition, securing personnel is likely to become difficult as
an imbalance between supply and demand develops in the labour
market. Such contingencies could affect the business performanceand financial position of the Group.

Natural Disasters
Operating as it does across an extremely wide range of businesses in its
Urban Transportation, Real Estate, Entertainment and Communications,
Travel, International Transportation, and Hotels segments, the Group
has a correspondingly large assortment of facilities necessary for the
conduct of business, such as railway installations and buildings andretail outlets for rent. In the event of earthquakes or other majordisasters, the business performance and financial position of theGroup could be adversely affected by damage to these facilities.

Hankyu Hanshin Holdings • Annual Report 201773

Consolidated Balance Sheets
As of 31st March 2016 and 2017

Millions of yen

Thousands of U.S. dollars

2016

2017

2017

   Cash and deposits¥   24,225¥   24,255$   216,563   Trade receivables

73,141

83,492745,464   Land and buildings for sale

Assets:Current assets:

103,060

107,234

957,446   Finished products and merchandise

2,605

2,368

21,143   Work in progress

4,656

3,724

33,250   Materials and supplies

4,466

4,524

40,393   Deferred tax assets

6,427

7,044

62,893  Other

37,18837,606

335,768   Allowance for doubtful receivables   Total current assets

(234)

(260)

(2,321)

255,535

269,992

2,410,643

572,227

563,652

5,032,607

Noncurrent assets:
Property and equipment:   Buildings and structures–net [NOTE 5 ③]   Machinery, equipment and vehicles–net [NOTE 5 ③]

53,52957,525

513,616  Land [NOTES 5 ③ and ⑤]

931,355

935,126

8,349,339   Construction in progress

120,589

158,847

1,418,277  Other–net [NOTE 5 ③]

19,36919,552

174,571

1,697,070

1,734,702

15,488,411  Goodwill

23,29520,822

185,911  Other [NOTES 5 ② and ③]

17,211

16,461

146,973   Total intangible assets

40,50737,284

332,893

248,097

267,979

2,392,670

4,323

4,146

37,018   Total property and equipment [NOTES 5 ① and ②]
Intangible assets:

Investments and other assets:  Investment securities [NOTES 5 ③ and ④]   Deferred tax assets   Net defined benefit asset

5,947

7,194

64,232  Other [NOTE 5 ③]

31,046

28,810257,232   Allowance for doubtful receivables

(347)

(279)

(2,491)   Total investments and other assets

289,066

307,852

2,748,679

2,026,644

2,079,839

18,569,991

2,282,180

2,349,831

20,980,634

Total noncurrent assets
Total assets

74

Hankyu Hanshin Holdings • Annual Report 2017

Consolidated Balance Sheets

Millions of yen

Thousands of U.S. dollars

2016

2017

2017

Liabilities:
Current liabilities:¥   37,480¥   40,086$   357,911  Accrued expenses

18,19917,938160,161   Trade payables  Short-term borrowings [NOTE 5 ③]

205,909

178,408

1,592,929   Current portion of bonds

30,00010,00089,286  Lease obligations

1,794

1,795

16,027   Income taxes payable

6,188

9,704

86,643   Provision for bonuses

4,638

4,620

41,250  Other [NOTE 5 ③]

151,924

156,737

1,399,438   Total current liabilities

456,134

419,291

3,743,670  Long-term debt [NOTE 5 ③]

589,100

610,523

5,451,098  Bonds

82,00092,000821,429

Long-term liabilities:  Lease obligations   Deferred tax liabilities

7,765

6,795

60,670189,812

179,530

1,602,946   Deferred tax liabilities related to land revaluation [NOTE 5 ⑤]

5,152

5,152

46,000   Net defined benefit liability

61,83961,459548,741   Long-term deferred contribution for construction

54,61460,846543,268  Other

111,521

109,571

978,313   Total long-term liabilities

1,101,807

1,125,879

10,052,491

1,557,942

1,545,171

13,796,170

Total liabilities

Net assets:
Shareholders’ equity:  Common stock

99,474

99,474

888,161  Capital surplus

145,974

146,053

1,304,045  Retained earnings

449,535

527,884

4,713,250   Less treasury stock, at cost

(8,289)(13,537)(120,866)   Total shareholders’ equity

686,695

759,875

6,784,598

Accumulated other comprehensive income:
17,68422,545201,295   Deferred gains or losses on hedges

(896)

472

4,214

   Revaluation reserve for land [NOTE 5 ⑤]

5,598

5,546

49,518   Foreign currency translation adjustments

1,072

100

893

   Valuation difference on available-for-sale securities   Cumulative adjustments related to retirement benefit plans(2,818)(1,591)(14,205)   Total accumulated other comprehensive income

20,63927,074

241,732

Subscription rights to shares
Non-controlling interests [NOTE 5 ⑤]
Total net assets
Total liabilities and net assets

424

496

4,429

16,47817,213

153,688724,237

804,659

7,184,455

2,282,180

2,349,831

20,980,634

Hankyu Hanshin Holdings • Annual Report 201775

Consolidated Statements of Income
Years ended 31st March 2016 and 2017

Millions of yen

Revenues from operations
Costs of revenues from operations:Operating expenses and cost of sales of transportation
Selling, general and administrative expenses [NOTE 6 ①]
Total costs of revenues from operations [NOTE 6 ②]
Operating income
Non-operating income:Interest income
Dividend income
Equity in income of affiliates
Miscellaneous income
Total non-operating income
Non-operating expenses:
Interest expenses
Miscellaneous expenses
Total non-operating expenses
Ordinary income
Extraordinary income:Gain on contributions for construction
Gain on sales of noncurrent assets
Gain on sales of investment securities
Other
Total extraordinary income
Extraordinary loss:
Loss on reduction of noncurrent assets
Loss on retirement of noncurrent assets
Loss on impairment of fixed assets
Other
Total extraordinary loss
Income before income taxes
Income taxes–current
Income taxes–deferred
Total income taxes
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent

Thousands of U.S. dollars

2016

2017

2017

¥746,792¥736,763$6,578,241

605,51230,987
636,499
110,293603,260
29,443
632,704
104,058

5,386,250
262,884
5,649,143
929,089

106
1,017
5,748
2,285
9,158

115
976
8,630
2,066
11,7891,027
8,714
77,054
18,446105,259

12,5062,465
14,972
104,479

11,166
4,073
15,240100,607

99,69636,366
136,071898,277

37,82012633822
38,802

2,114
453
872
815
4,255

18,875
4,045
7,786
7,277
37,99137,818
951
2,692
5,732
47,19496,087
20,495
4,043
24,53871,5491,577
69,971

2,180
546
901
429
4,057
100,805
26,081
1,850
27,931
72,873
1,570
71,302

19,464
4,875
8,045
3,830
36,223900,045
232,866
16,518249,384
650,652
14,018636,625

Consolidated Statements of Comprehensive Income
Years ended 31st March 2016 and 2017
Millions of yen

Thousands of U.S. dollars

2016

2017

2017

¥71,549¥72,873$650,652

Valuation difference on available-for-sale securities

598

3,213

28,688Deferred gains or losses on hedges

(786)

1,390

12,411

Revaluation reserve for land

124

—

—

Foreign currency translation adjustments

(855)

(914)

(8,161)Remeasurements of defined benefit plans(6,336)

901

8,045

(451)

1,824

16,286

Net income
Other comprehensive income: Share of other comprehensive income of associates accounted
for using equity method
Total other comprehensive income [NOTE 7 ①]

(7,706)

6,414

57,268Comprehensive income

63,842

79,288707,929

Owners of the parent

62,49477,737

694,080

Non-controlling interests

1,348

1,551

13,848Comprehensive income attributable to:76

Hankyu Hanshin Holdings • Annual Report 2017

Consolidated Statements of Changes in Net Assets
Years ended 31st March 2016 and 2017

Millions of yen
Shareholders’ equity

Balance as of 31st March 2015
 Cumulative effect of changes in accounting policies
Balance at beginning of the current fiscal year
reflecting changes in accounting policies
Changes of items during the period:
Dividends from surplus
Net income attributable to owners of the parent
Reversal of revaluation reserve for land
Purchase of treasury stock
Disposal of treasury stock Change in treasury stock of parent arising fromtransactions with non-controlling interest shareholders
Change in scope of consolidation Changes in equity in affiliates accounted
for by equity-method treasury stock Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance as of 31st March 2016
 Cumulative effect of changes in accounting policies
Balance at beginning of the current fiscal year
reflecting changes in accounting policies
Changes of items during the period:
Dividends from surplus
Net income attributable to owners of the parent
Reversal of revaluation reserve for land
Purchase of treasury stock
Disposal of treasury stock Change in treasury stock of parent arising fromtransactions with non-controlling interest shareholders
Change in scope of consolidation Changes in equity in affiliates accounted
for by equity-method treasury stock Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance as of 31st March 2017

Total
shareholders’equityCapitalsurplusRetainedearnings

Less treasury
stock, at cost

¥99,474¥150,027(4,500)¥389,511(527)¥ (4,534)¥634,479(5,027)

99,474

145,527

388,984(4,534)629,452(3,779)24(8,227)
69,9710(3,779)23

Common stock(8,227)
69,971
0
(0)

(0)

447

447
(1,192)(1,192)——
99,474447
145,974

60,550449,535
15,281(3,755)(8,289)57,242686,695
15,281

99,474145,974

464,817(8,289)701,976(5,271)53(8,803)71,3020(5,271)44(8,803)71,302
0
(9)
79

79
577

—
99,47479
146,053

63,067
527,884

577
(30)

(30)

(5,247)(13,537)

57,898759,875
Millions of yen

Accumulated other comprehensive income

Balance as of 31st March 2015
Cumulative effect of changes in accounting policies
Balance at beginning of the current fiscal year
reflecting changes in accounting policies
Changes of items during the period:
Dividends from surplus
Net income attributable to owners of the parent
Reversal of revaluation reserve for land
Purchase of treasury stock
Disposal of treasury stock Change in treasury stock of parent arising fromtransactions with non-controlling interest shareholders
Change in scope of consolidation Changes in equity in affiliates accounted
for by equity-method treasury stock Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance as of 31st March 2016
 Cumulative effect of changes in accounting policies
Balance at beginning of the current fiscal year
reflecting changes in accounting policies
Changes of items during the period:
Dividends from surplus
Net income attributable to owners of the parent
Reversal of revaluation reserve for land
Purchase of treasury stock
Disposal of treasury stock Change in treasury stock of parent arising fromtransactions with non-controlling interest shareholders
Change in scope of consolidation Changes in equity in affiliates accounted
for by equity-method treasury stock Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance as of 31st March 2017

Total
accumulated
othercomprehensive
incomeValuationdifference on
available-for-salesecurities

Deferred gains
or losses onhedges

Revaluation
reserve for land

Foreigncurrencytranslation
adjustments

Cumulative
adjustments related
to retirement
benefit plans¥18,052¥ (143)¥5,417¥1,756¥ 3,033¥28,116—¥318¥16,566¥679,482(5,027)

18,052

(143)

5,417

1,756

3,033

28,116318

16,566674,454

Subscription Non-controllingrights to sharesinterests

Total
net assets(8,227)
69,9710(3,779)23
447(1,192)
—
(368)
(368)
17,684

(752)
(752)
(896)

180
180
5,598

(684)
(684)
1,072

(5,851)(5,851)(2,818)(7,476)(7,476)
20,639
—

105
105
424

(88)
(88)
16,478(7,459)49,783
724,237
15,281

17,684

(896)

5,598

1,072

(2,818)20,639424

16,478739,519(8,803)71,3020(5,271)
44
79
577
(30)

4,861
4,861
22,545

1,369
1,369
472

(52)
(52)
5,546

(971)
(971)
100

1,227
1,227
(1,591)

6,434
6,434
27,074

72
72
496

735
735
17,2137,241
65,140804,659

Hankyu Hanshin Holdings • Annual Report 201777

Consolidated Statements of Changes in Net Assets

Thousands of U.S. dollars
Shareholders’ equity

Balance as of 31st March 2016
 Cumulative effect of changes in accounting policies
Balance at beginning of the current fiscal year
reflecting changes in accounting policies
Changes of items during the period:
Dividends from surplus
Net income attributable to owners of the parent
Reversal of revaluation reserve for land
Purchase of treasury stock
Disposal of treasury stock Change in treasury stock of parent arising fromtransactions with non-controlling interest shareholders
Change in scope of consolidation Changes in equity in affiliates accounted
for by equity-method treasury stock Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance as of 31st March 2017

Less treasury
stock, at cost

Total
shareholders’equityCommon stock

CapitalsurplusRetainedearnings$888,161$1,303,339$4,013,705
136,438$ (74,009)$6,131,205
136,438

888,161

1,303,339

4,150,152(74,009)6,267,643(47,063)473(78,598)
636,6250(47,063)393(78,598)
636,625
0
(80)
705

705
5,152

—
888,161705
1,304,045

563,098
4,713,250

5,152
(268)

(268)

(46,848)(120,866)

516,946
6,784,598

Thousands of U.S. dollars
Accumulated other comprehensive income

Balance as of 31st March 2016
 Cumulative effect of changes in accounting policies
Balance at beginning of the current fiscal year
reflecting changes in accounting policies
Changes of items during the period:
Dividends from surplus
Net income attributable to owners of the parent
Reversal of revaluation reserve for land
Purchase of treasury stock
Disposal of treasury stock Change in treasury stock of parent arising fromtransactions with non-controlling interest shareholders
Change in scope of consolidation Changes in equity in affiliates accounted
for by equity-method treasury stock Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance as of 31st March 201778

Hankyu Hanshin Holdings • Annual Report 2017

Total
accumulated
othercomprehensive
incomeDeferred gains
or losses onhedges

Revaluation
reserve for land

Foreigncurrencytranslation
adjustments

Cumulative
adjustments related
to retirement
benefit plans$157,893$ (8,000)$49,982$ 9,571$(25,161)$184,277—$3,786$147,125$6,466,402
136,438

157,893(8,000)49,982

9,571(25,161)

184,277

3,786

147,125

6,602,848

Valuationdifference on
available-for-salesecurities

Subscription Non-controllingrights to sharesinterests

Total
net assets(78,598)
636,6250(47,063)
393
705
5,152
(268)
43,402
43,402201,295

12,223
12,223
4,214

(464)
(464)
49,518(8,670)(8,670)893

10,955
10,955(14,205)

57,44657,446
241,732

643
643
4,429

6,563
6,563
153,688

64,652581,607
7,184,455

Consolidated Statements of Cash Flows
Years ended 31st March 2016 and 2017

Millions of yen

Thousands of U.S. dollars

2016

2017

2017

Income before income taxes¥ 96,087¥100,805$  900,045

Depreciation and amortisation

52,800471,429

Loss on impairment of fixed assets

53,701
2,692

901

8,045

Amortisation of goodwill

2,471

2,426

21,661Equity in (income) losses of affiliates(5,748)(8,630)(77,054)

Increase (decrease) in net defined benefit liability(2,077)(179)(1,598)

(42)

20

179

Cash flows from operating activities:

Increase (decrease) in allowance for doubtful receivables
Interest and dividend income(1,124)(1,092)(9,750)Interest expenses

12,506

11,166

99,696

Loss on reduction of noncurrent assets

37,818951

2,180

19,464

Loss on retirement of noncurrent assets

546

4,875

Loss (gain) on sales of noncurrent assets

183

(426)

(3,804)Gain on contributions for construction(37,820)(2,114)(18,875)

(33)

(869)

(7,759)Decrease (increase) in trade receivables

6,129(10,595)(94,598)

Decrease (increase) in inventories(1,174)(2,506)(22,375)

Increase (decrease) in trade payables(5,028)3,083

27,527

Other

4,436

(1,096)(9,786)

Subtotal

163,930

146,420

1,307,321

Loss (gain) on valuation of investment securities

Interest and dividends received
Interest paid

3,156

3,208

28,643(12,591)(11,282)(100,732)

Income taxes (paid) refunded(29,656)(22,714)(202,804)

Net cash provided by operating activities

124,838

115,633

1,032,438(92,686)(92,767)(828,277)

5,064

2,186

19,518(14,228)(11,527)(102,920)

Cash flows from investing activities:
Purchases of noncurrent assets
Proceeds from sales of noncurrent assets
Purchases of investment securities
Proceeds from sales of investment securities

618

1,611

14,384

Receipt of contributions for construction

20,623

13,973

124,759

Other
Net cash used in investing activities

1,765

1,677

14,973(78,843)(84,845)(757,545)

Cash flows from financing activities:
Net increase (decrease) in short-term borrowings(21,628)(546)(4,875)

Proceeds from long-term debt

65,83065,190582,054

Repayment of long-term debt

(612,286)(76,570)(68,576)

Proceeds from new bonds issued—

19,858177,304

Redemption of bonds—(30,000)(267,857)

Purchases of treasury stock(3,779)(5,271)(47,063)

Dividends paid

(8,227)(8,803)(78,598)

(331)

(406)

(3,625)Other(2,571)(2,038)(18,196)

Net cash used in financing activities Dividends paid to non-controlling shareholders of consolidated subsidiaries(47,278)(30,595)(273,170)

Effect of exchange rate changes on cash and cash equivalents

(694)

(673)

(6,009)

Increase (decrease) in cash and cash equivalents(1,978)(480)(4,286)

Cash and cash equivalents at beginning of year

23,49722,363

199,670

Increase in cash and cash equivalents from newly consolidated subsidiary
Cash and cash equivalents at end of year

844

648

5,786

22,363

22,530201,161

Hankyu Hanshin Holdings • Annual Report 201779

Notes to the Consolidated Financial Statements

1 Framework for Preparing Consolidated Financial Statements 
1 Method of preparation for consolidated financial statements
The Company’s consolidated financial statements were prepared in accor-

3	Special measures to ensure the appropriateness of consolidated
financial statements and other reports

dance with the “Regulations Concerning the Terminology, Forms and

The Company makes special efforts to ensure the appropriateness of its con-

Preparation Method of Consolidated Financial Statements” (Finance Ministrysolidated financial statements and other reports. In addition to subscribing to

Ordinance No. 28 of 1976, hereinafter, “Regulations for Consolidated Financial

related publications, it has joined the Financial Accounting Standards

Statements”).

Foundation and participates in seminars and other events held by theFoundation, audit firms and other relevant organisations to establish a system

2 Audit verification

for understanding the accounting standards in detail and responding suitably

The Company’s consolidated financial statements for the fiscal year ended

to changes made to them. The Company also compiles and provides common

31st March 2017 (1st April 2016 to 31st March 2017) were audited by KPMG

manuals for preparing the consolidated financial information on a Groupwide

AZSA LLC, as per Article 193-2 (1) of Japan’s Financial Instruments andbasis, and arranges training courses for accounting staff at affiliates.

Exchange Act.

4 Translation into U.S. dollars
The U.S. dollar amounts have been translated, for convenience only, at ¥112 =US$1, the prevailing exchange rate on the Tokyo Foreign Exchange Market asof 31st March 2017.

2 Basis of Preparation of Consolidated Financial Statements 
1 Scope of consolidation

3 Items related to fiscal year-ends, etc., for consolidated subsidiaries(a) Number and names of consolidated subsidiaries

The account closing date for Hankyu Hanshin Express (USA) Inc., Hankyu

Number of consolidated subsidiaries—93.

Hanshin Express (Deutschland) GmbH and 20 other consolidated subsidiaries

		

Names of primary consolidated subsidiaries are listed on page 107.

is 31st December. The consolidated financial statements have been prepared		Further, as of the fiscal year ended 31st March 2017, Hanshin Sharyousing the financial statements based on the closing date of each company,

Maintenance and one other company have been included in the scope ofand major transactions conducted between the individual closing dates

consolidation due to their increased significance.

and the consolidated closing date have been adjusted for as necessary for		

Also, Iina Dining Co., Ltd. has been excluded from the scope of consoli-

the consolidation.

dation because a portion of its shares were sold in the fiscal year ended
31st March 2017, and Nippon Rent-A-Car Hankyu Inc. has been excluded

4 Accounting policies

from the scope of consolidation because all of its shares were sold in the(a) Valuation standards and method for major assets

fiscal year ended 31st March 2017.

I. Securities
Available-for-sale securities:(b) Names of major nonconsolidated subsidiaries
Hankyu Mediax Co., Ltd.

Available-for-sale securities with fair market values:	The market value method is applied based on the market price, etc., at theNonconsolidated subsidiaries have been excluded from the scope offiscal year-end. (Related valuation differences are directly included underconsolidation because the total amounts of their entire assets, sales, net

net assets and the cost of securities sold is determined by the moving

income or loss (amount equivalent to equity interests), retained earnings

average method.)(amount equivalent to equity interests) and other figures are limited, andAvailable-for-sale securities without fair market values:		

the effect on the consolidated financial statements as a whole is negligible.

The moving average cost method is applied.
		

For investments in limited liability investment partnerships and similar

2 Items related to application of equity-method accounting

investments, however, the Company’s share of assets held by such part-(a) Number and names of affiliates for which equity method is appliednerships is recorded.

Number of affiliates for which equity method is applied—11.
		Names of the major affiliates for which equity method is applied arelisted on page 107.
		

II. Derivatives
The market value method is applied.

Further, as of the fiscal year ended 31st March 2017, the equity method

has been applied to Iina Dining Co., Ltd., previously a subsidiary, because
a portion of its shares were sold.

III. Inventories
Land and buildings for sale:	The identified cost method is applied. (Balance sheet values are calculated(b)	Names of nonconsolidated subsidiaries and affiliates for which equity
method is not applied

Other inventories:

	The nonconsolidated subsidiaries (Hankyu Mediax Co., Ltd., etc.) and affili-	The moving average cost method is applied. (Balance sheet values areates (OS Co., Ltd., etc.) to which the equity method does not apply use thecalculated by writing down book values based on decreased profitability.)

cost method rather than the equity method because the total amounts of
their net income or loss (amount equivalent to equity interests), retained
earnings (amount equivalent to equity interests) and other figures arelimited, and the effect on the consolidated financial statements as awhole is negligible.

80

by writing down book values based on decreased profitability.)

Hankyu Hanshin Holdings • Annual Report 2017



Notes to the Consolidated Financial Statements(b) Depreciation methods for major depreciable assets
I. Property and equipment (excluding leased assets)
Replacement assets of railway operations:Replacement method (mainly the declining-balance method) is applied.
Other property and equipment:	While property and equipment (excluding leased assets) are depreciated(f ) Significant hedge accounting methods
I. 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-denominatedfor the most part using the declining balance method, there is also somereceivables and payables that have forward exchange contracts anduse of the straight-line method.

which satisfy the requirements for designation accounting.

		 However, regarding the abovementioned “Replacement assets ofrailway operations” and “Other property and equipment,” depreciation of

II. Hedging instruments and hedged items

buildings acquired on or after 1st April 1998 (excluding facilities attachedlated using the straight-line method.

Hedging instruments
Forward exchange contracts
Currency swap contracts
Currency option contracts

II. Intangible assets (excluding leased assets)

Interest rate swap contracts Interest on bonds andInterest rate option contracts  loans payable

to buildings) and depreciation of facilities and structures that are attached
to buildings and which were acquired on or after 1st April 2016 are calcu-

Hedged items
Foreign currency receivables and payables and future foreign currencytransactions

	
Intangible assets (excluding leased assets) are amortised using thestraight-line method.
		Internal-use software is amortised by the straight-line method over its

useful life (mainly 5 years).

III. 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.

III. Lease assets
	Lease assets are depreciated using the straight-line method with the leaseterm as the useful life and the residual value as zero.

IV. 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.

(c) Accounting standards for significant transactions
I. Allowance for doubtful receivables

V. Other risk management methods concerning hedge accounting	Allowance for doubtful receivables is provided based on the ratio of past	Internal rules regarding the segregation of duties, maximum transaction

loan loss experience for general accounts and individually estimatedamounts, etc., have been established for the use of derivative transactions

uncollectible amounts for certain individual accounts.

based on which derivative transactions are used. The implementation andmanagement of derivative transactions are carried out by the accounting

II. Provision for bonuses
	The Company recognises as provision for bonuses the amount expected
to be paid to employees as bonuses for the fiscal year.

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.

(d) Accounting methods for retirement benefits(g) Method and period of amortisation of goodwill	When calculating retirement benefit obligations, the benefit formula	Goodwill is amortised, in general, in equal amounts over five years. The

method is used to distribute the estimated amount of retirement benefits

goodwill resulting from the management integration with Hanshin

into the period up to 31st March 2017.

Electric Railway Co., Ltd. in the fiscal year ended 31st March 2007 is being		

Prior service cost is recorded in expenses using the straight-line

amortised in equal amounts over 20 years.

method over a certain number of years (mainly 10 years), which is within
the average remaining years of service of the employees at the time when(h) Scope of cash included in consolidated statements of cash flows

these costs are incurred.

	In preparing the consolidated statements of cash flows, cash on hand,		Actuarial differences are recorded in expenses using the straight-line

readily available deposits and short-term highly liquid investments

method over a certain number of years (mainly 10 years), which is within

without material risk of changing their value and with maturities not

the average remaining years of service of the employees at the time when

exceeding three months at the time of purchase are considered to bethese costs are incurred.

cash and cash equivalents.

(e)	Basis for converting significant assets and liabilities in foreign currencies
into Japanese yen	
The assets and liabilities of overseas subsidiaries are converted into
yen based on the spot exchange rate on the balance sheet date, andincome and expenses of overseas subsidiaries are converted into yen
based on the average exchange rate during the relevant period.
Differences in conversion are included in foreign currency translation
adjustments and non-controlling interests in the net assets section.

Hankyu Hanshin Holdings • Annual Report 201781

Notes to the Consolidated Financial Statements(i) Other significant matters for preparing consolidated financial statements		In the consolidated statements of income, gain on contributions forI. Accounting for contributions for construction in railway operations

construction is recognised in extraordinary income, and the acquisition

	The Company accepts contributions for construction from local govern-

cost of noncurrent assets, after deducting the amounts equivalent to thements and other organisations that cover a portion of construction

contributions for construction, is recognised in extraordinary loss as loss

expenses arising from the construction of continuous grade separations

on reduction of noncurrent assets.

in railway operations. When construction is completed, noncurrent assets
acquired as a result of accepting these contributions for construction are

II. Accounting for consumption tax

recognised at acquisition cost after deducting the amounts equivalent to

Accounting for consumption tax is based on the tax exclusion method.

the said contributions for construction.
III. Adoption of consolidated tax payment system
A consolidated tax payment system has been adopted.

3 Changes in Accounting Policies 1	Application of “Practical Solution on a Change inprovider of transactions related to the export of mixed cargo, the main type ofDepreciation Method Due to Tax Reform 2016”transactions, an upgrading of the core operational systems of the major con-

Due to amendments to the Japanese Corporation Tax Act, the Company andsolidated subsidiaries in the business that enables the identification of cost ofits domestic subsidiaries adopted “Practical Solution on a Change insales such as shipping costs and the need to prepare for the future advance-

Depreciation Method Due to Tax Reform 2016” (Practical Issue Task Force No.

ment of the Hankyu Hanshin Holdings Group’s global development.

32, 17th June 2016 (hereinafter, “PITF No. 32”)) from the current fiscal year and

The Company has applied the said change in accounting policy retroac-changed the depreciation method for buildings, facilities attached to build-tively. Consequently, the Company has applied the said change in accounting

ings and structures that were acquired since 1st April 2016 from the declining-

policy retroactively to the consolidated financial statements of the fiscal year

balance method to the straight-line method.

ended 31st March 2016.

The effect of these changes on the consolidated financial statements has
been immaterial.

The Company has applied the change in accounting policy retroactively
to the consolidated financial statements of the fiscal year ended 31st March2016. As a result, revenues from operations, operating expenses and cost of2	Application of “Revised Implementation Guidance on
Recoverability of Deferred Tax Assets”

sales of transportation for the fiscal year ended 31st March 2016 increased by¥39,433 million ($352,080 thousand) compared to the amounts for these line

The Company and its domestic subsidiaries adopted “Revised Implementation

items before the retroactive application. However, retroactive application has

Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26,

not affected operating income, ordinary income and income before income

28th March 2016 (hereinafter, “Guidance No. 26”)) from the current fiscal year

taxes for the fiscal year ended 31st March 2016. Further, because there is no

and revised certain accounting for recoverability of deferred tax assets

cumulative effect that should be reflected in net assets as of 1st April 2015,

accordingly.

retroactive application has not affected retained earnings as of 1st April 2015.

The Company and its domestic subsidiaries followed the provisional treatments in article 49 (4) of Guidance No. 26. The differences between deferredAlso, the effect on segment information is stated in the segment information section.

tax assets and liabilities as of 1st April 2016 that were computed in accordancewith article 49 (3) and those as of 31st March 2016 were adjusted to retained
earnings as of 1st April 2016.

4	Change in the translation of income andexpenses of overseas subsidiaries

As a result, deferred tax liabilities (long-term liabilities) decreased by

Previously, the Company used the spot exchange rate on the balance sheet¥15,281 million ($136,438 thousand) and retained earnings increased bydate to translate the income and expenses of overseas subsidiaries of the¥15,281 million ($136,438 thousand).

International Transportation Business into yen. As of the fiscal year ended 31st

Due to reflection of such effects to net assets as of 1st April 2016, retained

March 2017, however, the Company will use the average exchange rateearnings as of 1st April 2016 in the consolidated statement of changes in net

during the relevant period for translations into yen.
As stated above in “3 Change in recognition of revenues from opera-

assets increased by ¥15,281 million ($136,438 thousand).

tions,” the significance of the income and expenses of overseas subsidiaries

3 Change in recognition of revenues from operations

has increased due to the change in recognition of revenues from operations

In the International Transportation Business, for transactions related to items

to gross presentation as of the fiscal year ended 31st March 2017. Therefore,such as the export of mixed cargo by consolidated subsidiaries, the Company

the Company implemented this change to mitigate the effect of temporary

previously presented sales to customers net of cost of sales such as shipping

exchange rate fluctuations and to reflect the business results of overseas sub-costs (net basis). As of the fiscal year ended 31st March 2017, however, thesidiaries in consolidated financial statements more appropriately.

Company is presenting sales and cost of sales separately and the totals inrevenues from operations and cost of sales (gross basis) respectively.
This change resulted from a reconsideration of the recognition of reve-and expenses of the fiscal year ended 31st March 2016 as well as the cumu­

nues from operations, which concluded that the net amount presentation

lative effect that should be reflected in net assets on 1st April 2015reflects the business activities of the business more appropriately. This conclu-

were immaterial.

sion was reached in light of the importance in business as a transportation

82

Further, the Company has not undertaken retrospective application
because the effect of the said change in accounting policy on the income

Hankyu Hanshin Holdings • Annual Report 2017



Notes to the Consolidated Financial Statements

4 Changes in Presentation 
1 Consolidated statements of income

As a result, in the consolidated statement of income for the fiscal year

To present line items in the consolidated statements of income more clearly,

ended 31st March 2016, “Loss (gain) on valuation of investment securities” of

as of the fiscal year ended 31st March 2017, the Company will present “Loss on¥4,979 million ($44,455 thousand) and “Other” of ¥4,397 million ($39,259 thou-retirement of noncurrent assets” and “Loss on impairment of fixed assets”sand) in extraordinary loss comprise “Loss on retirement of noncurrent assets” ofseparately. In the fiscal year ended 31st March 2016, the Company included¥951 million ($8,491 thousand), “Loss on impairment of fixed assets” of ¥2,692

these line items in “Other” of extraordinary loss. In the fiscal year ended 31st

million ($24,036 thousand) and “Other” of ¥5,732 million ($51,179 thousand).

March 2016, the Company presented “Loss (gain) on valuation of investment
securities” separately in extraordinary loss. As of the fiscal year ended 31st
March 2017, the Company will include this line item in “Other” of extraordinary
loss because the line item has become insignificant.

5 Consolidated Balance Sheets 
1 Accumulated depreciation of property and equipment
Millions of yen

2	Accumulated contributions for construction directly deductedfrom the acquisition cost of noncurrent assets

Thousands of U.S. dollars

2016

2017

2017

¥1,097,585¥1,123,035$10,027,098

Millions of yen

Thousands of U.S. dollars

2016

2017

2017

¥413,614¥413,812$3,694,750

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

Thousands of U.S. dollars
2017

2016

2017

Property and equipment:[$1,862,054]¥211,110[¥211,110]¥208,550[¥208,550]$1,862,054

Machinery, equipment and vehicles

42,841[42,841]

44,980[44,980]

401,607[401,607]

Land

255,924[255,924]

255,965[255,965]

2,285,402[2,285,402]

Other

2,297

[2,297]

2,780

2,780

24,821[24,821]

128

[128]

128

[128]

1,143

[1,143]

3,033

[—]

1,007

[—]

8,991

[—]

Buildings and structures

Intangible assets:
Other
Investments and other assets:
Investment securities

24

[—]

76

[—]

679

[—]

515,360[512,302]

513,489[512,406]

4,584,723[4,575,054]

Other  Total

In addition to the above, the Company pledged investment securities (fiscal year ended 31st March 2016: ¥800 million, fiscal year ended 31st March 2017: ¥800
million ($7,143 thousand)) as collateral for loans of third parties.
The following table shows the secured liabilities.
Millions of yen

Thousands of U.S. dollars
2017

2016

2017

Current liabilities:
Short-term borrowings¥ 11,118[¥  9,108]¥  9,748[¥  9,309]$   87,036[$   83,116]

75

[—]

76

[—]

679

[—]

Other
Long-term liabilities:
Long-term debt

110,598[110,065]

110,691[110,596]

988,313[987,464]  Total121,793[119,173]

120,516[119,905]

1,076,036[1,0705,80]

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

4 The following table shows the securities of nonconsolidated subsidiaries and affiliates.
Millions of yen

Investment securities

Thousands of
U.S. dollars

2016

2017

2017

¥197,131¥213,951$1,910,277

Hankyu Hanshin Holdings • Annual Report 201783

Notes to the Consolidated Financial Statements

5	Two consolidated subsidiaries and an equity-method affiliate
revaluated land for business use based on the Law Concerning
Revaluations of Land (Law No. 34, promulgated on 31st March
1998) and the Law to Partially 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 amount corresponding to the taxes on the valuation difference in the liability section
as “Deferred tax liabilities related to land revaluation” and theamount attributable to minority shareholders as “non-controllinginterests.” The amount remaining after subtracting these wasrecorded in the net assets section as “Revaluation reserve for land.”The equity-method affiliate recorded the amount corresponding
to its equity in the valuation difference (after subtracting taxes) in
the net assets section as “Revaluation reserve for land.”6 Contingent liabilities
The Company and its subsidiaries provide a liability guarantee for loans of thecompanies, etc., listed below.
Fiscal year ended 31st March 2016
Millions of yen

Nishi-Osaka Railway Co., Ltd.

¥20,376

Borrowers on loans for purchaseof land and buildings

14,039Other (two companies)

67

Total

34,483Fiscal year ended 31st March 2017
Millions of yen

Thousands of
U.S. dollars

Nishi-Osaka Railway Co., Ltd.

¥19,781$176,616

The revaluation amounts were determined based on the revaluated value of

Borrowers on loans for purchaseof land and buildings

10,08990,080noncurrent assets provided for in Article 2, Paragraph 3 of the Enforcement

Other (two companies)• Revaluation method

Ordinance for the Law Concerning Land Revaluation (Ordinance No. 119,
promulgated on 31st March 1998).

Total

65

580

29,936267,286

Further, in addition to the above, in the fiscal year ended 31st March 2017,• Date of revaluation: 31st March 2002
• The difference between the market value of the land and the book value
after revaluation on 31st March 2016 and 31st March 2017:
Millions of yen

the Company provided a letter of awareness and other documents in relation
to an affiliate’s fund procurement of ¥1,587 million ($14,170 thousand).

Thousands of U.S. dollars

2016

2017

2017

¥(6,069)¥(6,084)$(54,321)

6 Consolidated Statements of Income 1	The breakdown of selling, general and administrative expenses isshown below.
Thousands of
U.S. dollars

Millions of yen
2016

2017

2017

Personnel expenses¥15,683¥14,651$130,813

Expenses

10,96910,42593,080

Taxes

908

1,025

9,152

Depreciation andamortisation

954

914

8,161

Amortisation of goodwill

2,471

2,426

21,661

Total

30,98729,443262,8842	The retirement benefit expenses and the main expense items andmonetary amounts within the amounts of allowance and provision
included in the costs of revenues from operations are shown below.
Millions of yen
2016

2017

2017

Retirement benefit
expenses¥6,369¥8,457$75,509

Provision for bonuses

4,694

4,716

42,107

3	The breakdown of the gain on sales of noncurrent assets isshown below.
Millions of yen

Land, etc.

84

Hankyu Hanshin Holdings • Annual Report 2017

Thousands of
U.S. dollars

Thousands of
U.S. dollars

2016

2017

2017

¥126

¥453

$4,045

Notes to the Consolidated Financial Statements

4	Loss on impairment of fixed assets

Fiscal year ended 31st March 2017 (from 1st April 2016 to 31st March 2017)

Fiscal year ended 31st March 2016 (from 1st April 2015 to 31st March 2016)

The Group recorded loss on impairment of fixed assets for the following

The Group recorded loss on impairment of fixed assets for the following

asset groups.

asset groups.
Use

Assets of Hotels Business: 4 assets
Assets of Real Estate Leasing Business:
37 assets

Type of asset

RegionMillions of yen

Land, etc.

Hyogo
Prefecture, etc.

¥2,033

Buildings,
structures, etc.

Hyogo
Prefecture, etc.

658

Assets of businesses of the Other
segment: 3 assets
Assets, etc. of Hotels Business: 20 assets

Millionsof yenThousands of
U.S. dollars

Osaka
Prefecture, etc.

¥521

$4,652

Buildings,
Osakastructures, etc. Prefecture, etc.

379

3,384

Type of asset

RegionLand, etc.

(a) Method of grouping assets(a) Method of grouping assets
Assets are grouped by business based on management accounting orby property.
(b) Procedure before recognition of loss on impairment of fixed assets
The book values of fixed assets groups for which discontinuation of operations or dismantlement had been decided were reduced to their recoverable
amounts. The said reductions were recorded in extraordinary loss as loss on
impairment of fixed assets of ¥2,692 million.

Assets are grouped by business based on management accounting orby property.
(b) Procedure up to the recognition of a loss on impairment of fixed assets
The book values of fixed assets groups for which a decision for dismantlement
has been taken, those whose market values have been declining sharply fromtheir book values due to a continuous decrease in land value, and those thathave continuously resulted in operating losses and whose profitability is
unlikely to recover in the future were reduced to the recoverable amount. The
reduction has been recorded as “Loss on impairment of fixed assets” in the(c) Breakdown of loss on impairment of fixed assets
Type of assets

Use

Millions of yen

Land, etc.
Buildings, structures, etc.

¥1,639

Total

2,692

1,053

amount of ¥901 million ($8,045 thousand) under extraordinary loss.
(c) Breakdown of loss on impairment of fixed assets
Millions of yen

Thousands of
U.S. dollars

Land, etc.

¥520

$4,643(d) Method of determining recoverable value

Buildings, structures, etc.

380

3,393

The recoverable value is calculated based on the net sale value.

Total

901

8,045

Type of assets

The net sale value of assets for which discontinuation of operations or
dismantlement has been decided is assessed by using the memorandum
value. The net sale value of other assets is calculated by rationally adjusting
appraised value based on Japanese Real Estate Appraisal Standards and otherassessments.

(d) Method of determining recoverable value
The recoverable value is calculated based on the value in use or the net
sale value.
The value in use is calculated based on the discounted future cash flow,using 4.0% as a discount rate. Further, the net sale value of assets is calculatedby rationally adjusting appraised value based on Japanese Real EstateAppraisal Standards and other assessments. In addition, the net sale value of
assets for which discontinuation of operations or dismantlement has been
decided is assessed by using the memorandum value.

Hankyu Hanshin Holdings • Annual Report 201785

Notes to the Consolidated Financial Statements

7 Consolidated Statements of Comprehensive Income 
1 Reclassification adjustments and tax effects related to other comprehensive income
Millions of yen

Thousands of U.S. dollars

2016

2017

2017

¥(4,997)¥ 5,295$ 47,277

5,069

(672)

(6,000)72

4,623

41,277   Tax (expense) or benefit

526(1,410)(12,589)   Valuation difference on available-for-sale securities

598

3,213

28,688(1,272)

2,124

18,96472——(1,199)2,124

18,964

Valuation difference on available-for-sale securities:
Increase (decrease) during the year
Reclassification adjustments   Subtotal, before tax

Deferred gains or losses on hedges:
Increase (decrease) during the year
Reclassification adjustments   Subtotal, before tax   Tax (expense) or benefit

413

(734)

(6,554)   Deferred gains or losses on hedges

(786)

1,390

12,411

Increase (decrease) during the year

—

—

—

Reclassification adjustments

—

—

—

   Subtotal, before tax

—

—

—

   Tax (expense) or benefit

124

—

—

   Revaluation reserve for land

124

—

—

(855)

(914)

(8,161)

—

—

—

(855)

(914)

(8,161)

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

—

—

—

(855)

(914)

(8,161)Remeasurements of defined benefit plans:
Increase (decrease) during the year

(8,528)101

902

Reclassification adjustments(1,104)

1,242

11,089Subtotal, before tax(9,633)

1,344

12,000Tax (expense) or benefit

3,296

(442)

(3,946)(6,336)

901

8,045

Increase (decrease) during the year

(1,576)

1,762

15,732

Reclassification adjustments

1,125

61

545

  Share of other comprehensive income of associates accounted
for using equity method

(451)

1,824

16,286    Total other comprehensive income(7,706)

6,414

57,268   Remeasurements of defined benefit plans
Share of other comprehensive income of associates accounted
for using equity method:

8 Consolidated Statements of Changes in Net Assets 
1 Items related to type and total number of shares issued and type and number of shares of treasury stock
Fiscal year ended 31st March 2016

No. of shares as of 1st April 2015

Increase in number of shares(Thousands of shares)

Decrease in number of shares

No. of shares as of 31st March 2016

No. of shares issued:
Common stock  Total1,271,406——

1,271,406

1,271,406——

1,271,406

10,6634,846

42

15,466

10,6634,846

42

15,466

Treasury stock, at cost:
Common stock (Notes 1 and 2)  Total(Overview of reasons for fluctuations)
Notes:
1. The increase of 4,846 thousand shares of treasury stock was due to the purchase of 4,608 thousand shares of treasury stock based on a resolution of the Board of Directors and the purchaseof 238 thousand odd-lot shares.
2. The decrease of 42 thousand shares of treasury stock was due to a decrease of 38 thousand shares due to the exercise of stock option rights and a decrease of 4 thousand shares due tothe sale of odd-lot shares.

86

Hankyu Hanshin Holdings • Annual Report 2017



Notes to the Consolidated Financial Statements

Fiscal year ended 31st March 2017

No. of shares as of 1st April 2016

Increase in number of shares(Thousands of shares)

Decrease in number of shares

No. of shares as of 31st March 2017

No. of shares issued:
Common stock  Total1,271,406—

1,017,125

254,281

1,271,406—

1,017,125

254,281

Treasury stock, at cost:
Common stock (Notes 1 and 2)  Total15,466

6,930

17,887

4,508

15,466

6,930

17,887

4,508(Overview of reasons for fluctuations)
Notes:
1. Hankyu Hanshin Holdings, Inc. consolidated shares at the ratio of 5 shares to 1 share with an effective date of 1st August 2016.
2. The decrease of 1,017,125 thousand shares of common stock was due to a result of consolidation of shares.
3. The increase of 6,930 thousand shares of treasury stock was due to the increase of 6,837 thousand shares of treasury stock by resolution of the Board of Directors (before consolidation ofshares: 6,826 thousand shares, after consolidation of shares: 11 thousand shares); the purchase of 73 thousand odd-lot shares (before consolidation of shares: 46 thousand shares, after
consolidation of shares: 26 thousand shares); and an increase of 19 thousand shares (after consolidation of shares) due to the change of interest for equity-method affiliates.
4. The decrease of 17,887 thousand shares of treasury stock was due to a decrease of 17,807 thousand shares due to a result of consolidation of shares; a decrease of 78 thousand shares (after
consolidation of shares) due to the exercise of stock option rights; and a decrease of 1 thousand shares (before consolidation of shares: 1 thousand shares, after consolidation of shares: 0
thousand shares) due to the sale of odd-lot shares.

2 Items related to subscription rights to sharesFiscal year ended 31st March 2016

The Company(Parent company)

Number of shares subject to share subscription rights

Type of sharessubject to sharesubscription rights

As of 1st
April 2015

Increase

Decrease

As of 31st
March 2016

Subscription rights
as stock options

—

—

—

—

—

¥424

Total

—

—

—

—

—

424

Type of sharessubject to sharesubscription rights

As of 1st
April 2016

Increase

Subscription rights
as stock options

—

—

Total

—

—

Breakdown of new sharesubscription rights

Classification

Balance as of 31st March 2016
(Millions of yen)

Fiscal year ended 31st March 2017
Breakdown of new sharesubscription rights

Classification

The Company(Parent company)

Number of shares subject to share subscription rights

Balance as of 31st March 2017

Decrease

As of 31st
March 2017

(Millions of yen)(Thousands of
U.S. dollars)

—

—

—

¥496

$4,429

—

—

—

496

4,429

3 Items related to dividends
Fiscal year ended 31st March 2016(a) Dividends paid
(Resolution)

Type of shares

Dividends paid
(Millions of yen)

Dividend per share (Yen)Record date

Effective date

16th June 2015
General meeting ofshareholders

Common stock¥3,797¥  3

31st March 2015

17th June 2015

30th October 2015
Board of Directors’
meeting

Common stock

4,430

3.5

30th September 2015

1st December 2015(b) Dividends whose effective date falls in the fiscal year following the fiscal year of the record date
(Resolution)

Type of shares

Dividends paid
(Millions of yen)

Source of dividends

Dividend per share(Yen)

Record date

Effective date

14th June 2016
General meeting ofshareholders

Common stock¥4,413Retained earnings¥3.5

31st March 2016

15th June 2016

Hankyu Hanshin Holdings • Annual Report 201787

Notes to the Consolidated Financial Statements

Fiscal year ended 31st March 2017(a) Dividends paid
Dividends paid
(Resolution)

Type of shares

14th June 2016
General meeting ofshareholders
27th October 2016
Board of Directors’
meeting

Dividend per share
Record date

Effective date

$0.03

31st March 2016

15th June 2016

0.16

30th September 2016

1st December 2016

(Millionsof yen)(Thousands of
U.S. dollars)(Yen)(U.S. dollars)Commonstock¥ 4,413$39,402¥ 3.5

Common
stock

4,389

39,18817.5

Note: The Company consolidated shares at the ratio of 5 shares to 1 share. The lower figure (the portion approved by a resolution of the Board of Directors on 27th October 2016) is dividend
per share after the consolidated shares. The upper figure (the portion approved by a resolution of the General Meeting of Shareholders on 14th June 2016) is the actual dividend
amount before the consolidated shares.

(b) Dividends whose effective date falls in the fiscal year following the fiscal year of the record date
Dividends paid
(Resolution)

Type of shares

13th June 2017
General meeting ofshareholders

Commonstock

Dividend per share(Millionsof yen)(Thousands of
U.S. dollars)

Source of dividends¥4,389$39,188

Retained earnings(Yen)(U.S. dollars)

¥17.5

$0.16

Record date

Effective date

31st March 2017

14th June 20179 Consolidated Statements of Cash Flows 
Relationship between cash and cash equivalents at fiscal year-end and amounts shown on consolidated balance sheets
Millions of yen

Cash and deposits in the consolidated balance sheets

Thousands of
U.S. dollars

2016

2017

2017

¥24,225¥24,255$216,563

Deposits with maturities over 3 months(1,862)(1,725)(15,402)Cash and cash equivalents in the cash flow statements

22,363

22,530201,161

10 Lease Transactions <As lessee><As lessor>

Future lease payments for non-cancellable leases in connection with
operating lease transactions

Future lease receivables for non-cancellable leases in connection
with operating lease transactions

Millions of yen

Thousands of
U.S. dollars

Millions of yen

2016

2017

2017

Due within one year

¥ 4,211¥ 4,775$ 42,634

Due within one year

Due after one year

10,341

22,048

196,857

Due after one year

14,552

26,823

239,491

Total

Total

Thousands of
U.S. dollars

2016

2017

2017

¥  606¥   965$ 8,616

5,853

10,09690,143

6,459

11,062

98,76811 Financial Instruments 
1 Matters regarding financial instruments		Investment securities consist mainly of stocks and bonds and are(a) Policy on financial instruments

exposed to market price fluctuation risk. However, fair values and the	It is the Group’s policy to limit the investment of its funds to short-term

financial condition of the issuers are checked periodically, and the risk

deposits which are highly secure, and the Group raises funds mainly
through loans from financial institutions, bonds and commercial paper.

management system is confirmed.
		Almost all trade payables, namely note payables and trade account

Derivative transactions are used to avoid risk, as discussed later, and it ispayables, have a payment date that falls within one year. Some assets andour policy to refrain from speculative transactions.

liabilities denominated in foreign currencies are exposed to exchange rate
fluctuation risk (market risk), which is limited through forward exchange(b)	Details of the financial instruments used, the risk involved and the risk
management system

88

contracts.
		

Short-term borrowings and commercial paper are used mainly to raise	Trade receivables, namely note receivables and trade account receivables,

short-term funds for working capital, and long-term debt and bonds areare exposed to the credit risk of customers. The Group limits its exposure

used mainly to raise the long-term funds necessary for capital investment

to this credit risk by controlling due dates and balances by customer andplans. Some floating-rate debt is exposed to interest rate fluctuation risk

by making periodical checks of the credit conditions of major customers(market risk), which is limited by fixing interest rates through interest rate

pursuant to the internal regulations of each company.

swap transactions. In addition, liquidity risk—the risk that payment will

Hankyu Hanshin Holdings • Annual Report 2017



Notes to the Consolidated Financial Statements

not be made by the due date—is limited by the timely preparation

purpose of interest rate swap transactions is to hedge the interest rateof financing plans and proper fund management. Also, surplus funds offluctuation risk of certain loans. These derivative transactions involve

the Group companies are concentrated and used effectively throughcredit risk because if the other party to a transaction defaults under thecentralisation of Group funds by using a cash management system. The

terms of contract or becomes bankrupt then the benefit that would have

immediate raising of funds from financial institutions became possible

been obtained in the future if the transaction had continued will not be

through the establishment of backup financing such as commitment

received. However, credit risk is limited by carrying out transactions only

lines. In addition, the Company maintained a proper balance between
direct financing and indirect financing and diversifies the raising of fundswith financial institutions with high credit ratings.
		

by using multiple financial institutions, thus securing liquidity.
		More information regarding the means and objectives of hedging,hedging policy and the method of evaluating the effectiveness of hedges

Regarding the use of derivative transactions, internal regulations pre-related to hedge accounting for derivative transactions is described in

scribe the division of duties and transaction limits. Forward exchange“4 Accounting policies” “(f ) Significant hedge accounting methods” outlined in “ 2 Basis of Preparation of Consolidated Financial Statements.”

contracts are used to hedge exchange rate fluctuation risk involved in a
portion of foreign currency-denominated assets and liabilities. The

2 Matters regarding fair values of financial instruments
Book value, fair value and the differences between them as of 31st March 2016 and 31st March 2017 are as shown below.
Millions of yen

Thousands of U.S. dollars
2017

2016

2017

Book value

Fair value

DifferenceBook value

Fair value

DifferenceBook value

Fair value

Difference

Assets(a) Cash and deposits¥ 24,225¥ 24,225¥    —¥ 24,255¥ 24,255¥    —$   216,563  $   216,563$     —(b) Trade receivables

73,141

73,141—

83,492

83,492—745,464

745,464—(c) Investment securities

38,91638,916

043,94743,947

0392,384

392,3840—Liabilities(d) Trade payables

37,48037,480—40,08640,086—357,911357,911(e) Short-term borrowings (*1)

135,322

135,322—

134,676

134,676—

1,202,464

1,202,464—(f ) Bonds (*2)

112,000

116,753

4,753

102,000

105,387

3,387

910,714940,955

30,241(g) Long-term debt (*1)

659,687

685,991

26,304654,255

677,774

23,5195,841,563

6,051,554

209,991—(16,240)——(10,950)——(97,768)—(h) Derivative transactions(*1) Current portion of long-term debt is included in (g) Long-term debt.
(*2) Current portion of bonds is included.
Notes:
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) Investment securities		The fair values of investment securities 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
by trading financial institutions. Securities categorised by the purpose for which they are held are described in “ 12 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 bonds are based on market prices.
(g) Long-term debt
		The fair value of fixed-rate long-term debt is based on a method of calculation whereby the total principal and interest is discounted at an interest rate that is assumed for the introduction of similar new debt. The fair value of floating-rate long-term debt is based on the book value because the fair value of floating-rate long-term debt reflects market interest rates
within a short period of time and closely approximates the book values.
(h) Derivative transactions
		 Please see “ 13 Derivatives.”
2. The book value of financial instruments whose fair value is extremely difficult to ascertain
Thousands of
U.S. dollars

Millions of yen
Classification

2016

2017

2017

Non-listed equity securities and bonds¥5,823¥5,810$51,875

Investments in limited liability investment partnerships andsimilar investments

3,682

3,735

33,348Negotiable certificates of deposit

2,543

534

4,768

It is extremely difficult to ascertain the fair value of these financial instruments because market prices are not available and future cash flows cannot be estimated. As a result, they are notincluded in (c) Investment securities.

Hankyu Hanshin Holdings • Annual Report 201789

Notes to the Consolidated Financial Statements

3. The securities of nonconsolidated subsidiaries and affiliated companies are not included in (c) Investment securities.
4.	Supplementary explanation regarding fair value of financial instruments
The fair value of financial instruments is based on market price. If market prices are not available, the fair value of financial instruments is reasonably calculated. Certain assumptions areused to calculate the value. As a result, if different assumptions are used, the values may differ. For derivative contracts, the amount of the contract which is indicated in “ 13 Derivatives”
does not indicate the market risk involved in derivative transactions themselves.
5. Redemption and repayment schedule of monetary claims and investment securities with maturities
Fiscal year ended 31st March 2016
Millions of yen
Due within
one year

Due after
one yearthroughfive years

Due after
five years
throughten years

Due after
ten years

Cash and deposits¥ 24,225

¥ —

¥ —

¥ —

Trade receivables

73,141——— Held-to-maturity debt securities(government bonds, etc.)

—

9

—

—

 Available-for-sale securities with maturities(government bonds, etc.)

10

237

242

300

97,376

247

242

300

Due within
one year

Due after
one yearthroughfive years

Due after
five years
throughten years

Due after
ten years

Cash and deposits¥ 24,255¥ —¥ —Trade receivables

83,492

—

—

—

9

—

Investment securities:  TotalFiscal year ended 31st March 2017
Millions of yen

Thousands of U.S. dollars
Due within
one year

Due after
one yearthroughfive years

Due after
five years
throughten years

Due after
ten years¥ —$216,563

$   —

$   —

$   —

—

745,464

—

—

—

—

—

80

—

—

Investment securities: Held-to-maturity debt securities(government bonds, etc.) Available-for-sale securities with maturities(government bonds, etc.)  Total

26

281

165

300

232

2,509

1,473

2,679

107,755

291

165

300

962,098

2,598

1,473

2,679

Due after
five years
throughten years

Due after
ten years$  178,571

6. Amount of planned redemption and repayment of bonds and long-term debt after the consolidated closing dateFiscal year ended 31st March 2016
Millions of yen
Due within
one year

Due after
one yearthroughfive years

Due after
five years
throughten years

Due after
ten years¥ 30,000¥ 55,000¥ 17,000¥ 10,000

70,586

151,945

255,164

181,990

100,586

206,945

272,164

191,990

Due within
one year

Due after
one yearthroughfive years

Due after
five years
throughten years

Due after
ten years

Due within
one year

Due after
one yearthroughfive years

Bonds¥10,000¥ 55,000¥ 17,000¥ 20,000$ 89,286$  491,071  $  151,786

Long-term debt

43,732

153,047

292,859

164,616

390,464

1,366,491

2,614,813

1,469,786

53,732208,047

309,859

184,616

479,750

1,857,563

2,766,598

1,648,357

Bonds
Long-term debt
Total

Fiscal year ended 31st March 2017
Millions of yen

Total

90

Hankyu Hanshin Holdings • Annual Report 2017

Thousands of U.S. dollars



Notes to the Consolidated Financial Statements

12 Securities 
1 Held-to-maturity debt securities
Millions of yen

Thousands of U.S. dollars
2017

2016
Classification

2017

Book value

Fair value

DifferenceBook value

Fair value

DifferenceBook value

Fair value

Difference

¥9

¥10

¥0

¥9

¥10

¥0

$80

$89

$0

Securities with fair value
exceeding book value

2 Available-for-sale securities
Millions of yen

Classification

Securities with book value exceedingacquisition costThousands of U.S. dollars

2016

2017

2017

Book value

Acquisition
cost

DifferenceBook value

Acquisition
cost

DifferenceBook value

Acquisition
cost

Difference$145,982¥31,140¥19,089¥12,051¥39,641¥23,291¥16,350$353,938$207,955(b) Bonds

490

464

25

473

454

18

4,223

4,054

161

Subtotal

31,63019,554

12,076

40,11423,746

16,368358,161

212,018

146,143

7,275

8,420

(1,144)

3,822

4,634

(811)

34,12541,375(7,241)

—

—

—

—

—

—

—

—

—

7,275

8,420

(1,144)

3,822

4,634

(811)

34,12541,375(7,241)

38,90627,974

10,931

43,93728,38015,556392,295

253,393

138,893(a) Equity securities(a) Equity securities
Securities with book value not exceed- (b) Bonds
ing acquisition cost
Subtotal
Total

Note: Unlisted equity securities and others (fiscal year ended 31st March 2016: ¥12,049 million, fiscal year ended 31st March 2017: ¥10,080 million ($90,000 thousand)) are not included in
the above table due to the fact that establishing their fair values is extremely difficult because they do not have market values, and estimating future cash flows is not possible.

3 Available-for-sale securities sold during fiscal years ended 31st March 2016 and 31st March 2017
Fiscal year ended 31st March 2016
Omitted as the significance was negligible.
Fiscal year ended 31st March 2017
Millions of yen
Classification

Equity securities

Thousands of U.S. dollars

Amount soldTotal gains
on saleTotal losses
on saleAmount soldTotal gains
on saleTotal losses
on sale¥1,452¥828¥2$12,964$7,393$18

4 Impairment of securities
Fiscal year ended 31st March 2016
Impairment loss on investment securities (other securities) of ¥4,979 million was recognised.
Fiscal year ended 31st March 2017
Omitted as the significance was negligible.

Hankyu Hanshin Holdings • Annual Report 201791

Notes to the Consolidated Financial Statements

13 Derivatives 
1 Derivative transactions for which hedge accounting has not been applied(a) Currency
Fiscal year ended 31st March 2016
Millions of yen

Classification

Type

Contract
amountPortion of contract
amount exceeding
one year

Fair value(Note)¥1,846

¥   —

¥  2

Forward exchange contracts:
Transactions other than market
transactions

Buy contract  U.S. dollar
Currency swap contracts:
Receive yen, pay U.S. dollars   Total

598

598

(47)

2,444

598

(45)

Contract
amountPortion of contract
amount exceeding
one year

Fair value(Note)

Contract
amountPortion of contract
amount exceeding
one year

Fair value(Note)$ (27)

Fiscal year ended 31st March 2017
Millions of yen

Classification

Type

Thousands of U.S. dollars

Forward exchange contracts:
Buy contract¥   76

¥   —

¥ (3)

$   679$   —  Australian dollar

26

—

1

232

—

9

  Canadian dollar

8

—

(0)

71

—

(0)

   New Zealand dollar

7

—

0

63

—

0

Receive yen, pay U.S. dollars

598

598

(50)

5,339

5,339

(446)

Receive yen, pay Thai baht

495

—

(5)

4,420

—

(45)

1,211

598

(58)

10,813

5,339

(518)

  EuroTransactions other than market
transactions

Currency swap contracts:   Total

Notes:
1. Fair value calculation
Fair value is based mainly on prices quoted from counterparty financial institutions.
2.	Regarding the above currency swap contracts, in nonconsolidated financial statements hedge accounting is applied for monetary payables and receivables related to transactions
between consolidated subsidiaries. In consolidated financial statements, however, hedge accounting is not applied because the said hedged items are eliminated.

92

Hankyu Hanshin Holdings • Annual Report 2017



Notes to the Consolidated Financial Statements

2 Derivative transactions for which hedge accounting has been applied(a) Currency
Fiscal year ended 31st March 2016
Millions of yen

Classification

Type

Main hedged
items

Contract
amountPortion of contract
amount exceeding
one year

Fair value(Note)¥   1948¥——¥    1
0

13,525
8,476
17
1,726
1,201
220
291
77
3,330
79
1,227
30,378

—
—
—
—
—
—
—
—
—
—
—
—

(564)
(543)
0
(87)
(65)
(12)
(1)
(0)
(170)
(0)
5
(1,438)Contract
amountPortion of contract
amount exceeding
one year

Fair value(Note)

Contract
amountPortion of contract
amount exceeding
one year¥    15
10

¥  —
—

¥  0
0

$    134
89

$   —
—

$    0
0

0
8
0
0
553

—
—
—
—
—

(0)
(0)
(0)
(0)
(18)

0
71
0
0
4,938

—
—
—
—
—

(0)
(0)
(0)
(0)
(161)

47

—

0

420

—

0

8,446
6,550
302
846
854
250
463
94
351
68
18,865

—
294
—
—
—
—
—
—
—
—
294

231
327
25
43
66
14
37
(0)
20
0
748

75,411
58,482
2,696
7,554
7,625
2,232
4,134
839
3,134
607
168,438

—
2,625
—
—
—
—
—
—
—
—
2,625

2,063
2,920
223
384
589
125
330
(0)
179
0
6,679

Forward exchange contracts:
Sell contract

Trade
receivables  U.S. dollar  Japanese yen
Buy contract

Tradepayables  EuroDesignation  U.S. dollar of forward  Pound sterlingexchange
contracts, etc.   Swiss franc  Canadian dollar   New Zealand dollar  Australian dollar   Hong Kong dollar  Singapore dollar   Thai baht  Japanese yen   Total

Fiscal year ended 31st March 2017
Millions of yen

Classification

Type

Main hedged
items

Thousands of U.S. dollars
Fair value(Note)

Forward exchange contracts:
Sell contract

Trade
receivables  U.S. dollar  Japanese yen
Primary method

Buy contract

Tradepayables  Euro  U.S. dollar  Singapore dollar   Thai baht  Japanese yen
Forward exchange contracts:
Sell contract

Trade
receivables  U.S. dollar
Buy contract  EuroDesignation  U.S. dollar of forward  Pound sterlingexchange
contracts, etc.   Swiss franc  Canadian dollar   New Zealand dollar  Australian dollar   Hong Kong dollar  Singapore dollar   Thai baht
Total

Trade
payablesNote: 	Fair value calculation
Fair value is based mainly on prices quoted from counterparty financial institutions.

Hankyu Hanshin Holdings • Annual Report 201793

Notes to the Consolidated Financial Statements(b) Interest rate
Fiscal year ended 31st March 2016
Millions of yen

Classification

Main hedged
items

Type

Exceptional
Interest rate swap contracts:
Long-term accounting of Pay fixed rate/
debt
interest rate swaps
Receive floating rate

Total

Contract
amountPortion of contract
amount exceeding
one year

Fair value(Note)¥222,592¥201,188¥(14,757)

222,592

201,188(14,757)

Contract
amountPortion of contract
amount exceeding
one year

Fair value(Note)

Contract
amountPortion of contract
amount exceeding
one year

Fair value(Note)¥188,909¥183,909¥(11,641)$1,686,688$1,642,045$(103,938)

188,909

183,909(11,641)

1,686,688

1,642,045(103,938)

Fiscal year ended 31st March 2017
Millions of yen

Classification

Main hedged
items

Type

Exceptional
Interest rate swap contracts:
Long-term accounting of Pay fixed rate/
debt
interest rate swaps
Receive floating rate

Total

Thousands of U.S. dollars

Note:	Fair value calculation
Fair value is based mainly on prices quoted from counterparty financial institutions.

14 Retirement Benefits 
1 Overview of retirement benefit plans(b) Movements in plan assets

Some consolidated subsidiaries of the Company provide a defined benefit

Thousands of
U.S. dollars

Millions of yen

plan (defined benefit pension plan and lump-sum payment plan) or a defined

2016

2017

2017

¥77,249¥77,281$690,009 Expected returnon plan assets

929

1,072

9,571

has used the same accounting treatment as it used for defined contribution Actuarial loss (gain)

(917)

(8)

(71)

plans when the amount of plan assets corresponding to contributions by the Contribution paidby the employer

4,802

4,751

42,420 Retirement benefits paid

(4,783)(4,841)(43,223)

(0)

(48)

(429)

77,281

78,206698,268

contribution plan. Hankyu Corporation has also established a retirement
benefits trust.
In addition, some consolidated subsidiaries subscribe to the employees’
pension funds plan in the multi-employer plan. Among them, the Company

Company cannot be rationally calculated.

Balance at beginningof the year

2 Defined benefit plan

 Other(a) Movement in retirement benefit obligations

Balance at end of the year
Thousands of
U.S. dollars

Millions of yen

Note: Amounts in the table above include the plan assets of consolidated subsidiaries
using simplified methods.

2016

2017

2017

¥125,490¥133,174$1,189,054(c)	On 31st March 2016 and 31st March 2017, reconciliation from retirement Service cost

7,231

7,869

70,259benefit obligations and plan assets to net defined benefit liability (asset) Interest cost

1,046

293

2,616

 Actuarial loss (gain)

7,607

(110)

(982)

 Retirement benefits paid

Balance at beginningof the year

(8,300)(8,602)(76,804) Loss (gain) in priorservice cost

3

—

—

 Other

95(152)(1,357)133,174

132,471

1,182,777

Balance at end of the year

Note: Amounts in the table above include the retirement benefit obligations of consolidated subsidiaries using simplified methods.

recorded in the consolidated balance sheets
Thousands of
U.S. dollars

Millions of yen
2016

2017

2017

Funded retirement
benefit obligations¥ 71,030¥ 73,063$ 652,348

Plan assets(77,281)(78,206)(698,268)(6,251)(5,142)(45,911)

Unfunded retirement
benefit obligations

62,14359,407

530,420

Total net defined benefit
liability and asset

55,89254,264

484,500

Net defined benefit
liability

61,83961,459548,741

Net defined benefit asset(5,947)(7,194)(64,232)

Total net defined benefit
liability and asset

55,89254,264

484,500

Note: Amounts in the table above include the retirement benefit obligations and plan
assets of consolidated subsidiaries using simplified methods.

94

Hankyu Hanshin Holdings • Annual Report 2017



Notes to the Consolidated Financial Statements(g) Items related to plan assets(d) The breakdown of retirement benefit expenses
Thousands of
U.S. dollars

Millions of yen
2016

2017

2017

Service cost

¥7,231¥ 7,869$70,259

Interest cost

1,046

293

2,616

Expected returnon plan assets(929)(1,072)

Amortisation of actuarial
differences(192)

Amortisation of priorservice cost
Other
Retirement benefit
expenses

I. Breakdown of major plan assets
	The ratios of the major types of assets to total plan assets were as follows:
2016

2017

Bonds

35%

35%

Equity securities

33

32(9,571)

Cash and deposits

3

2

1,500

13,393General accountsof life insurance

28

29

(912)

(258)

(2,304)

76

65

580

6,319

8,398

74,982

Notes:
1.	Amounts in the table above include the retirement benefit expenses of consolidated
subsidiaries using simplified methods.
2.	In addition to the retirement benefit expenses shown above, the Company made extra
retirement payments of ¥9 million in the fiscal year ended 31st March 2016, which it
recorded in costs of revenues from operations, and ¥75 million ($670 thousand) in thefiscal year ended 31st March 2017, which it recorded in costs of revenues from operations and extraordinary loss.

Other

1

2

Total

100

100

Note: The retirement benefits trust established for the Company’s pension plan constituted 10% of total plan assets in the previous fiscal year and 9% of total plan
assets in the current fiscal year.

II. Method of determining the long-term expected rate of return on plan
assetsCurrent and target asset allocations and historical and expected returns
on various categories of plan assets have been considered in determining
the long-term expected rate of return on plan assets.
(h) Items related to actuarial assumptions
The major actuarial assumptions on 31st March 2016 and 31st March 2017(e) Remeasurements of defined benefit plans
	The breakdown of items related to remeasurements of defined benefit
plans (prior to the deduction of the tax effect) is as follows:
Millions of yen

Thousands of
U.S. dollars

2016

2017

Discount rate

Mainly 0.0%

Mainly 0.0%

Long-term expected rateof return on plan assets

Mainly 2.0%

Mainly 2.0%

Expected rate of salary increase

Mainly 2.5%

Mainly 2.5%

2016

2017

2017

Prior service cost¥  (916)¥ (258)$ (2,304)

Actuarial differences(8,717)

1,602

14,3043 Defined contribution planTotal

(9,633)

1,344

12,000

The required contribution for the consolidated subsidiaries’ defined contribution plan (including employees’ pension funds plan in the multi-employer
plan to which the same accounting method is applied as for the defined(f ) Cumulative adjustments of retirement benefit plans
	The breakdown of items related to cumulative adjustments of retirement
benefit plans (prior to the deduction of the tax effect) is as follows:
Millions of yen

contribution plan) was ¥49 million for the fiscal year ended 31st March 2016and ¥60 million ($536 thousand) for the fiscal year ended 31st March 2017.

Thousands of
U.S. dollars

2016

2017

2017

Unrecognised priorservice cost

¥ (618)¥ (360)$ (3,214)

Unrecognised actuarial
differences

4,311

2,708

24,179

Total

3,692

2,348

20,964

Note: The above relates to consolidated subsidiaries. In addition to the above items, theremeasurements of defined benefit plans include unrecognised items (the amountcorresponding to equity) of equity-method affiliates.

Hankyu Hanshin Holdings • Annual Report 201795

Notes to the Consolidated Financial Statements

15 Stock Options, etc. 
1 Cost amount and account associated with stock options
Millions of yen

Operating expenses and cost of sales oftransportation andcost of sales

Thousands of
U.S. dollars

2016

2017

2017

¥124

¥113

$1,0092 Details and size of stock options and changes therein(a) Details of stock options
Resolution date
Classification and numberof eligible persons

16th June 2011
10 directors of subsidiaries

20,800 shares of common stock
Class and number of shares (Note 1)(Note 2)Grant date
25th July 2011
Vesting conditions
Not definedService period
Not defined
From 26th July 2011
Exercise period
to 25th July 2041
Resolution date
Classification and numberof eligible persons
Class and number of shares (Note 1)
Grant date
Vesting conditions
Service period
Exercise period

Resolution date
Classification and numberof eligible persons
Class and number of shares (Note 1)
Grant date
Vesting conditions
Service period
Exercise period

Resolution date
Classification and numberof eligible persons

11 directors of subsidiaries
22,400 shares of common stock(Note 2)
25th April 2012
Not definedNot defined
From 26th April 2012
to 25th April 2042

27th March 2014
20 directors of subsidiaries

Grant date
Vesting conditions

40,600 shares of common stock(Note 2)
25th April 2014
Not definedService period

Not defined

Exercise period

From 26th April 2014
to 25th April 2044

Class and number of shares (Note 1)

Resolution date
Classification and numberof eligible persons

27th March 2015
22 directors of subsidiaries

Grant date
Vesting conditions

34,800 shares of common stock(Note 2)24th April 2015
Not definedService period

Not defined

Exercise period

From 25th April 2015
to 24th April 2045

Class and number of shares (Note 1)

Resolution date
Classification and numberof eligible persons

25th March 2016
21 directors of subsidiaries

Grant date
Vesting conditions

30,600 shares of common stock(Note 2)
25th April 2016
Not definedService period

Not defined

Exercise period

From 26th April 2016
to 25th April 2046

Class and number of shares (Note 1)

14th June 2012
8 directors of subsidiaries
20,400 shares of common stock(Note 2)
25th July 2012
Not definedNot defined
From 26th July 2012
to 25th July 2042
29th March 201318 directors of subsidiaries

Grant date
Vesting conditions

38,400 shares of common stock(Note 2)
25th April 2013
Not definedService period

Not defined

Exercise period

From 26th April 2013
to 25th April 2043

Class and number of shares (Note 1)

96

29th March 2012

Resolution date
Classification and numberof eligible persons

Hankyu Hanshin Holdings • Annual Report 2017

Resolution date
Classification and numberof eligible persons

14th June 2016
1 director of subsidiary

Grant date
Vesting conditions

1,600 shares of common stock(Note 2)
25th July 2016
Not definedService period

Not defined

Exercise period

From 26th July 2016
to 25th July 2046

Class and number of shares (Note 1)

Notes:
1. Indicated in the equivalent number of shares.
2. Adjustments have been made to consolidate shares at the ratio of 5 shares to 1 sharewith an effective date of 1st August 2016.



Notes to the Consolidated Financial Statementsb) Size of stock options and changes therein

3 Estimation method for fair value unit price of stock options

The covered stock options are those which existed during the fiscal year

The following method was applied to fairly valuate the unit price of stock

ended 31st March 2017, the number of which is indicated in the equivalent

options granted during the fiscal year ended 31st March 2017.

number of shares.

(a) Valuation method used: Black–Scholes model

Further, the figures below have been adjusted to consolidate shares at theratio of 5 shares to 1 share with an effective date of 1st August 2016.

(b) Major basic data and estimation method

I. Number of stock options

Resolution date
Volatility of stock price (Note 1)
Expected life (Note 2)
Expected dividends (Note 3)
Risk-free interest rate (Note 4)

Resolution date
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

Resolution date
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

16thJune 2011

29th
March 2012

14th
June 2012

29th
March 2013

—

—

—

—

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

14,40016,00017,60035,800———14,400—1,600—
14,400—4,000—
13,600—4,800—
31,00027th
March 2014

27th
March 2015

25th
March 2016

14th
June 2016

—

—

—

—

—
—
—
—

—
—
—
—

30,600—30,600
—

1,600
—
1,600
—

38,40034,800

—

—

—
2,800
—
35,600—2,400—
32,40030,600——30,600

1,600
—
—
1,600

16th
June 2011

29th
March 2012

14th
June 2012

29th
March 2013

II. Unit price information
Resolution date
Exercise price
Average stock
price at exercise
Fair value unit price at the grant date

Resolution date
Exercise price
Average stock
price at exercise
Fair value unit price at the grant date

¥1

¥1

¥1

¥1

¥—

¥3,500¥3,500¥3,500¥1,555¥1,805¥1,935¥3,07527th
March 2014

27th
March 2015

25th
March 2016

14th
June 2016

¥1

¥1

¥1
[US$0.01]¥1[US$0.01]¥3,500¥3,500¥—[US$—]¥—[US$—]¥2,075¥3,590
25th March 2016
23.64%

2.838 years¥35 [US$0.31] / Share(0.284)%

Notes:
1.	Volatility of stock price is based on the closing prices in regular transactions for theCompany’s common stock on individual transaction dates during the period of 2.838
years (from 23rd June 2013 to 25th April 2016).
2.	Expected life is based on the actual length of service of eligible directors of subsidiaries
who had resigned in the past, and on the actual length of service of eligible persons asof the grant date.
3.	Expected dividends are based on expected dividends in the fiscal year ended 31st
March 2016 that have been adjusted to consolidate shares at the ratio of 5 shares to 1
share with an effective date of 1st August 2016.
4.	Risk-free interest rate is the yield of government bonds for the period corresponding to
the expected life.

Resolution date
Volatility of stock price (Note 1)
Expected life (Note 2)
Expected dividends (Note 3)
Risk-free interest rate (Note 4)
14th June 2016
22.83%
5.320 years¥35 [US$0.31] / Share(0.341)%

Notes:
1.	Volatility of stock price is based on the closing prices in regular transactions for theCompany’s common stock on individual transaction dates during the period of 5.320
years (from 31st March 2011 to 25th July 2016).
2.	Expected life is based on the actual length of service of eligible directors of subsidiaries
who resigned in the past, and on the actual length of service of eligible persons as of
the grant date.
3.	Expected dividends are based on actual dividends paid in the fiscal year ended 31st
March 2016 that have been adjusted to consolidate shares at the ratio of 5 shares to 1
share with an effective date of 1st August 2016.
4.	Risk-free interest rate is the yield of government bonds for the period corresponding to
the expected life.

4 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.

¥3,525¥3,685[US$31.47] [US$32.90]

Hankyu Hanshin Holdings • Annual Report 201797

Notes to the Consolidated Financial Statements

16 Deferred Tax 
1 Significant components of the Company’s deferred tax assets and liabilities
Millions of yen
2016

2017

Thousands of
U.S. dollars
2017

Deferred tax assets: Loss on revaluation ofreal estate for sale2	A reconciliation of the significant differences between thestatutory tax rate and the effective tax rate reflected in theaccompanying consolidated statements of income
2016

2017

33.0%

30.8%

11.2

16.5

Amortisation of goodwill

0.9

0.7

Per capita amount of inhabitants’ tax

0.4

0.4

0.4

0.4

Statutory tax rate
(Adjustment)¥  24,497¥  24,844$   221,821

Net defined benefit liability

18,335

17,762

158,589

Tax loss carryforwards

16,482

14,661130,902

10,695

9,268

82,750Nondeductible expenses

4,658

4,376

39,071

Nontaxable income(11.1)(16.4)

Equity in (income) losses of affiliates

(2.0)

(2.6)

Valuation allowance

(0.4)

(3.9)

Other

(6.9)

1.8

25.5

27.7

 Loss on impairmentof fixed assets
Unrealised profit from assets Loss on adjustment oftransferred profit and loss

5,451

2,669

23,830

Provision for bonuses

1,979

1,872

16,714 Enterprise taxes andbusiness office taxes

937

1,279

11,420 Losses on revaluationof investment securities

1,475

1,147

10,241Other   Subtotal of deferred tax assets

Effective tax rate3	Amendments to the amount of deferred tax assets and liabilities
due to changes to the effective tax rate

11,751

10,747

95,95596,264

88,630791,339

The “Act to Partially Revise the Act on Partial Revision to the Consumption Tax
Act for the Drastic Reform of the Taxation System for Ensuring Stable Financial(42,500)(23,631)(210,991) Less amounts offset against
deferred tax liabilities(43,012)(53,807)(480,420)   Total deferred tax assets

10,75011,191

99,920

Valuation allowance Elimination of dividends fromconsolidated subsidiaries

Resources for Social Security” (Act No. 85 of 2016) and the “Act to Partially
Revise the Act on Partial Revision to the Local Tax Act and Local Allocation Tax
Act for the Drastic Reform of the Taxation System for Ensuring Stable Financial
Resources for Social Security” (Act No. 86 of 2016) were enacted on 18th

Deferred tax liabilities:

November 2016, and a rise in the consumption tax rate to 10% was postponed Gain on reversal of difference
from land revaluation(131,091)(130,694)(1,166,911) Revaluation of assets
on consolidation(79,928)(79,481)(709,652) Net unrealised holding gains
on securities(13,776)(15,170)(135,446) Gain on valuation of propertiesof business reorganisation(1,858)(1,826)(16,304)(6,181)(6,166)(55,054)   Subtotal of deferred tax liabilities(232,836)(233,340)(2,083,393)  Less amounts offset against
deferred tax assets

43,01253,807

480,420

As a result, the abolition of special local corporation tax and theaccompanying restoration of enterprise tax on corporations, the revision of
the local corporation tax rate, and the revision of the corporate residential tax

Other   Total deferred tax liabilities(189,823)(179,532)(1,602,964)   Net deferred tax liabilities(179,073)(168,341)(1,503,045)

Note: The Company reversed “Surplus from land revaluation” when, as a result of a (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 same day). As a result, “Deferred tax
liabilities related to land revaluation” has been recorded as “Deferred tax liabilities”
starting from the fiscal year ended 31st March 2006.

17 Asset Retirement Obligations 
Omitted as the significance was negligible.

98

from 1st April 2017 to 1st October 2019.

Hankyu Hanshin Holdings • Annual Report 2017

rate were also postponed from fiscal years beginning on or after 1st April 2017
to fiscal years beginning on or after 1st October 2019.
The statutory tax rate used to calculate deferred tax assets and liabilities
has not changed. However, tax rate classification between national and local
taxes has changed.
The effect of this tax rate change on the consolidated financial statements
is immaterial.



Notes to the Consolidated Financial Statements

18 Rental Property 
Some consolidated subsidiaries own rental property, such as office buildings
for lease and commercial facilities for lease in the Kita Ward of Osaka and otherareas. Rental income related to such rental property in the fiscal year ended
31st March 2016 was ¥30,194 million (significant rental revenues are recorded
in revenues from operations and significant rental expenses are recordedin costs of revenues from operations). Rental income related to such rental
properties in the fiscal year ended 31st March 2017 was ¥30,911 million($275,991 thousand) (significant rental revenues are recorded in revenues
from operations and significant rental expenses are recorded in costs of revenues from operations).
Book value, increase/decrease and fair value were as follows:
Millions of yen

Thousands of
U.S. dollars

2016

2017

2017

¥625,822¥623,357$5,565,688

Book value (Note 1): Balance at beginningof the year
Increase/decrease (Note 2)(2,465)(6,875)(61,384)

Balance at end of the year

623,357

616,4815,504,295

805,355

811,096

7,241,929

Fair value at endof the year (Note 3)

Notes:
1.	Book value is acquisition cost less accumulated depreciation.
2.	For changes in amounts in the fiscal year ended 31st March 2016, the main increase
was acquisitions of real estate of ¥17,796 million. The main decreases were depreciationof ¥13,159 million, sales of real estate of ¥3,564 million and changes in reason for ownership from rental property, etc., to property for the Company’s use of ¥3,127 million.
For changes in amounts in the fiscal year ended 31st March 2017, the main increase
was acquisitions of real estate of ¥12,017 million ($107,295 thousand). The maindecreases were depreciation of ¥12,634 million ($112,804 thousand) and exclusion ofproperties for which development began of ¥6,281 million ($56,080 thousand).
3.	Fair value as of the 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 case of
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 has not been included in the above table because of the
difficulty of ascertaining the market value of property that is in the process of development. Furthermore, property under development recognised in the consolidatedbalance sheets for the fiscal year ended 31st March 2016 and for the fiscal year ended
31st March 2017 were ¥90,367 million and ¥121,942 million ($1,088,768 thousand),
respectively.

19 Segment Information 
1 Segment information(a) Summary of reportable segments
	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,” “International Transportation”

and “Hotels.” The businesses are operated by five core companies: Hankyu Corporation, Hanshin Electric Railway Co., Ltd., Hankyu Travel International Co., Ltd.,
Hankyu Hanshin Express Co., Ltd. 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: Railway operations, automobile, retailing and advertising businesses		  Real Estate: Rental real estate, real estate sales and other businesses		 Entertainment and Communications: Sports-related businesses, stage events, communications and media, and other businesses		 Travel: Travel services
		  International Transportation: International cargo services
		  Hotels: Hotel ownership and management business(b) Method used to calculate 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 described in “ 2 Basis of Preparation of Consolidated Financial
Statements,” and internal transactions (land and structure leases and rental transactions, etc.) that are calculated through management accounting at companies with businesses spanning multiple segments are included and recorded.
		

Income (loss) for each reportable segment refers to operating income (loss).

		Intersegment revenues from operations and transfers are based mainly on similar data as those of general transaction conditions.

(c) Change in recognition of revenues from operations
	As stated in “ 3 Changes in Accounting Policies,” in the International Transportation Business the recognition of revenues from operations has been changed. As
a result of applying the said change in accounting policy retroactively, for the fiscal year ended 31st March 2016 revenues from operations of the International
Transportation segment increased ¥39,433 million compared to the amount for this line item before retroactive application. However, segment income of theInternational Transportation was unaffected.

Hankyu Hanshin Holdings • Annual Report 201799

Notes to the Consolidated Financial Statements(d) Information regarding totals for revenues from operations, income (loss), assets and other items by reportable segment
Fiscal year ended 31st March 2016
Millions of yen
Reportable segment

Revenues from operations:
I. Customers
II. Intersegment   Total
Segment income (loss)
Segment assets
Other items:  Depreciation andamortisation  Increase in property and equipment andintangible assets

Other(Note 1)

Adjustment(Note 2)

Amounts
appearing in
the consolidated
financialstatements(Note 3)¥   527(40,188)(39,660)(2,866)98,899¥  746,792—
746,792
110,2932,282,180

Urban
Transportation

Real EstateEntertainment
andCommunications¥234,410
5,133
239,544
41,270794,261¥  203,413
17,509220,923
49,851
1,022,570¥105,351
7,138
112,490
15,301
142,705¥30,492
930,502680
65,239¥76,0838
76,092
1,788
39,899¥67,304
737
68,042
3,298
82,754¥  717,056
30,538
747,594
112,191
2,147,431

25,691

17,916

6,656

773

730

1,838

53,607537

54,144(443)

53,701

27,97728,287

5,919

507

1,049

2,233

65,974717

66,691(52)

66,639Amounts
appearing in
the consolidated
financialstatements(Note 3)

TravelInternational
Transportation

HotelsSubtotal

Total¥29,209 ¥  746,265
9,649
40,18838,859786,453967
113,159
35,849 2,183,280

Fiscal year ended 31st March 2017
Millions of yen
Reportable segment
Urban
Transportation

Real EstateEntertainment
andCommunications

TravelInternational
Transportation

HotelsSubtotal

Other(Note 1)

Total

Adjustment(Note 2)¥32,284
10,36242,646
1,340
34,144¥  736,332
41,603777,935
106,225
2,235,569¥    430(41,603)(41,172)(2,167)
114,261¥  736,763

Revenues from operations:
I. Customers¥232,306 ¥  198,663

II. Intersegment

4,830
237,136
42,237802,238

17,046
215,709
41,9701,056,719¥107,162
8,031
115,193
15,655
147,307¥29,926
12
29,938637
73,938¥71,63138
71,6701,587
38,65825,91916,800

6,729

726

680

1,877

52,734546

53,280(480)

52,80031,15843,144

7,388

528

384

3,182

85,787618

86,406(193)

86,212Adjustment(Note 2)

Amounts
appearing in
the consolidated
financialstatements(Note 3)   Total
Segment income (loss)
Segment assets
Other items:  Depreciation andamortisation  Increase in property and equipment andintangible assets¥64,358 ¥  704,048
1,281
31,24065,640735,288
2,795
104,885
82,562 2,201,424—

736,763
104,058
2,349,831

Thousands of U.S. dollars
Reportable segment
Urban
Transportation

Revenues from operations:
I. Customers$2,074,161
II. Intersegment
43,125   Total
2,117,286
Segment income (loss)
377,116
Segment assets
7,162,839
Other items:  Depreciation and
231,420
amortisation  Increase in property and equipment and
278,196
intangible assets

Other(Note 1)

Real EstateEntertainment
andCommunications

TravelInternational
Transportation$1,773,777
152,196
1,925,973
374,732
9,434,991$  956,804
71,705
1,028,509
139,777
1,315,241$267,196
107
267,304
5,688
660,161$639,563
339
639,911
14,170345,161

150,000

60,080

6,482

6,071

16,759470,839

4,875

475,714(4,286)

471,429385,21465,964

4,714

3,429

28,411

765,955

5,518

771,482(1,723)769,750

HotelsSubtotal$574,625 $ 6,286,143
11,438278,929
586,071
6,565,071
24,955
936,473
737,161 19,655,571

Total$288,250 $ 6,574,393 $    3,839 $ 6,578,241
92,518371,455(371,455)—
380,768
6,945,848(367,607)
6,578,241
11,964
948,438(19,348)
929,089
304,857 19,960,438 1,020,188
20,980,634

Notes:
1. The “Other” segment is a business segment not included in the reportable segments and includes construction, etc.
2.	The main item in the adjusted amount of segment profit and loss for the fiscal year was amortisation of goodwill (¥(2,238) million in the fiscal year ended 31st March 2016 and ¥(2,238)
million ($(19,982) thousand) in the fiscal year ended 31st March 2017) (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).
		 In addition to the balance of unamortised goodwill (refers mainly to the goodwill arising from the management integration with Hanshin Electric Railway Co., Ltd. in the fiscal year
ended 31st March 2007) of ¥20,496 million ($183,000 thousand), the segment assets’ adjusted amount consists mainly of surplus working capital (cash and deposits); unallocated assets
such as long-term investment funds (investment securities) and land, etc.; and intersegment eliminations at the Company, Hankyu Corporation and Hanshin Electric Railway Co., Ltd.
3. Segment profit and loss is adjusted with operating income in the consolidated statements of income.

100

Hankyu Hanshin Holdings • Annual Report 2017



Notes to the Consolidated Financial Statements

2 Related information(a) Information about product and service categories
	Information about product and service categories is the same as that described in “① Segment information (d) Information regarding totals for revenues fromoperations, 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 breakdown by regionis 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 statements of income.

3 Information regarding loss on impairment of fixed assets by reportable segment
Fiscal year ended 31st March 2016
Millions of yen
Reportable segment

Loss on impairmentof fixed assets

Urban
Transportation

Real EstateEntertainment
andCommunications

¥391

¥240

¥22

TravelInternational
Transportation¥—

Hotels¥—Subtotal¥2,033¥2,688

Other

Total

¥—

¥2,688Adjustment(Note)

Amounts
appearing in
the consolidated
financialstatements¥3¥2,692Adjustment(Note)

Amounts
appearing in
the consolidated
financialstatements

¥1

¥901

Adjustment(Note)

Amounts
appearing in
the consolidated
financialstatements$9$8,045

Fiscal year ended 31st March 2017
Millions of yen
Reportable segment

Loss on impairmentof fixed assets

Urban
Transportation

Real EstateEntertainment
andCommunications

¥72

¥16

¥—

TravelInternational
Transportation¥—¥—

HotelsSubtotal

¥290

¥379

Other

Total

¥520

¥899

Thousands of U.S. dollars
Reportable segment

Loss on impairmentof fixed assets

Urban
Transportation

Real EstateEntertainment
andCommunications

$643

$143

$—

Travel$—International
Transportation$—

Hotels$2,589Subtotal$3,384

Other

Total

$4,643$8,027

Note: The amounts under “Adjustment” are the amounts for land, etc., not allocated to business segments.

4 Information regarding amortisation of goodwill and the balance of unamortised goodwill by reportable segment
Omitted as the significance was negligible.

5 Information regarding gains from negative goodwill by reportable segment
Omitted as the significance was negligible.

Hankyu Hanshin Holdings • Annual Report 2017101

Notes to the Consolidated Financial Statements

20 Related-Party Transactions 
1 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 2016
Type

Name ofrelated party

Address

Amountof capital(Millions of yen)

Business

Voting interest

Relationshipwith related
party

Details oftransaction

Transaction
amounts(Millions of yen)

Item

Balance as of
31st March 2016
(Millions of yen)

Audit & Supervisory
Board Member

Haruo Sakaguchi—¥ —Auditor of theCompany

Directly
0.0%

Lease of realestateLease of realestate¥   47

Deposit¥ 33

Operation andmanagementof real estate

34

Accounts
receivable0

Directly
0.1%

Operation, management, sale,purchase andbrokerage ofreal estate

Sale of realestate—Advance698

Company in which director or close
Tateishi Sangyo
family thereof holds
Co., Ltd.
majority of voting
rightsIkeda City,
Osaka

Real estatebusiness

100

Purchase of real
Concurrent post
estate(director)
Brokerage of real

Deposit

10

5,222

—

—

156

—

—

estateNotes:
1. The transaction amount does not include consumption tax, etc., and the balance, excluding deposit, at the end of the fiscal year does not include consumption tax, etc.
2. Transaction terms and conditions, and method of determining transaction terms and conditions, etc.
The terms and conditions of the property lease, operation, management and sale are determined with reference to similar transactions in the neighbouring area.
The terms and conditions of the purchase of real estate are determined with reference to the appraised values of real estate appraisers.
The terms and conditions of real estate brokerage are determined in the same manner as used for general transaction conditions.
3. Koichi Kobayashi, a managing director of a consolidated subsidiary of the Company, Hankyu Corporation, and his close family own 77% of the voting rights in Tateishi Sangyo Co., Ltd.

Fiscal year ended 31st March 2017
Amount of capital
Type

Name ofrelated party

Address

Audit & Supervisory
Board Member

Haruo Sakaguchi

Company in which director or close
Tateishi Sangyo
family thereof holds
Co., Ltd.
majority of voting
rightsBusiness

Voting interest

Relationshipwith related
party

$ —

Auditorof theCompany

Directly
0.0%

Lease of realestate893

Real estatebusiness

Directly
0.1%(Millionsof yen)(Thousandsof U.S.
dollars)—¥ —Ikeda City,
Osaka

100

Sale of realestateConcurrent post
(director)

Details oftransaction

Balance as of 31st
March 2017

Transaction
amounts(Millionsof yen)(Thousandsof U.S.
dollars)

Item

Lease of realestate¥   47$   420

Sale of realestate1,146

10,232(Millionsof yen)(Thousandsof U.S.
dollars)

Deposit¥ 40$  357

Advance

205

1,830

Notes:
1. The transaction amount does not include consumption tax, etc., and the balance, excluding deposit, at the end of the fiscal year does not include consumption tax, etc.
2. Transaction terms and conditions, and method of determining transaction terms and conditions, etc.
The terms and conditions of the property lease and sale are determined with reference to similar transactions in the neighbouring area.
The terms and conditions of the purchase of real estate are determined with reference to the appraised values of real estate appraisers.
The terms and conditions of real estate brokerage are determined in the same manner as used for general transaction conditions.
3. Koichi Kobayashi, an Audit & Supervisory Board member of the Company, and his close family own 77% of the voting rights in Tateishi Sangyo Co., Ltd.

2 Notes about parent company and major affiliated companies
No items

102

Hankyu Hanshin Holdings • Annual Report 2017



Notes to the Consolidated Financial Statements

21 Per Share Information 
The following tables show net assets per share, net income attributable to owners of the parent per share, diluted net income attributable to owners of the parent
per share and the basis for their respective calculations.
2016

2017

¥2,815.96¥3,150.67$28.13¥724,237¥804,659$7,184,455¥16,902¥17,710$158,125¥[424]¥[16,478]¥[496]¥[17,213]$[4,429]$[153,688]¥707,334¥786,949$7,026,330

254,281
2,075

254,281
3,471

1,017

1,036

251,188¥277.88249,772¥285.11$2.55

Net income attributable to owners of the parent(Millions of yen / Thousands of U.S. dollars)¥69,971¥71,302$636,625

Amount not belonging to common stockholders(Millions of yen / Thousands of U.S. dollars)

¥—

¥—

$—

¥69,971¥71,302$636,625

251,801

250,089¥277.67¥284.86

$2.54

¥(11)

¥(14)

$(125)¥[(11)]¥[(14)]$[(125)]

154

171

[154]

[171]

—

—

① Net assets per share (Yen / U S. dollars)(Basis for the calculation)
Total net assets (Millions of yen / Thousands of U.S. dollars)
Amount to be deducted from total net assets(Millions of yen / Thousands of U.S. dollars)(Of the amount, subscription rights to shares)(Of the amount, non-controlling interests)
Net assets at the end of the fiscal year related to common shares(Millions of yen / Thousands of U.S. dollars)Common shares issued (Thousands of shares)
Treasury stock shares (Thousands of shares)
Common shares held by consolidated subsidiaries and equity-method affiliates(Thousands of shares)
Common shares used to calculate net assets per share (Thousands of shares)② Net income per share (Yen / U.S. dollars)

2017(Basis for the calculation)

Net income attributable to owners of the parent related to common shares(Millions of yen / Thousands of U.S. dollars)
Average number of common shares during term (Thousands of shares)③ Net income per share—diluted (Yen / U.S. dollars)(Basis for the calculation)
Adjustment to net income attributable to owners of the parent(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 ofdiluted income per share because their effect was not dilutive

Note:	Hankyu Hanshin Holdings, Inc. consolidated shares at the ratio of 5 shares to 1 share with an effective date of 1st August 2016. Net assets per share, net income attributable to ownersof the parent per share and diluted net income attributable to owners of the parent per share have been calculated based on the assumption that the said reverse stock split was
executed on 1st April 2015.

22 Subsequent Events 1	Acquisition of treasury stock
Based on Article 156 of the Companies Act of Japan, as applied mutatis(b) Details of items related to acquisition
1 Type of shares acquired: Shares of common stock of the Company

mutandis pursuant to Paragraph 3, Article 165 of the Companies Act of Japan,

2 Total number of shares available for acquisition: 3,000,000 shares

a meeting of the Board of Directors convened on 12th May 2017 decided the(upper limit)

following items in relation to the acquisition of treasury stock.

(1.20% of issued shares (excluding treasury stock))3 Total amount of acquisition: ¥9,100,000,000 (upper limit)(a) Reason for acquisition of treasury stock

4 Period of acquisition: From 22nd May 2017 to 31st July 2017

To enhance shareholder returns and enhance capital efficiency

Hankyu Hanshin Holdings • Annual Report 2017103

Notes to the Consolidated Financial Statements

23 Consolidated Supplementary Statements 
1 Corporate bond statements
Thousands of
U.S. dollars

Millions of yen
NameIssue date

Balance as of
1st April
2016

Balance as of
31st March2017

Balance as of
31st March
2017

Interest rate

Security

Redemption
dateHankyu Hanshin Holdings, Inc.

Series 38 unsecured
corporate bonds

23rd Oct.
2009¥ 10,000¥ 10,000$ 89,286

1.87%

None

23rd Oct.
2019

Hankyu Hanshin Holdings, Inc.

Series 39 unsecured
corporate bonds

28th Jan.
2010

20,000

—

—

1.25

None

27th Jan.
2017

Hankyu Hanshin Holdings, Inc.

Series 40 unsecured
corporate bonds

22nd Sept.
2010

15,00015,000133,929

1.43

None

18th Sept.
2020

Hankyu Hanshin Holdings, Inc.

Series 41 unsecured
corporate bonds

22nd Sept.
2010

7,000

7,000

62,5001.72

None

22nd Sept.
2022

Hankyu Hanshin Holdings, Inc.

Series 42 unsecured
corporate bonds

17th Mar.
2011

10,00010,00089,286

1.54

None

17th Mar.
2021

Hankyu Hanshin Holdings, Inc.

Series 43 unsecured
corporate bonds

9th Sept.
2011

10,000

—

—

0.55

None

9th Sept.
2016

Hankyu Hanshin Holdings, Inc.

Series 44 unsecured
corporate bonds

25th Oct.
2012

10,00010,000(10,000)

89,286(89,286)

0.406

None

25th Oct.
2017

Hankyu Hanshin Holdings, Inc.

Series 45 unsecured
corporate bonds

14th Mar.
2013

10,00010,00089,286

0.589

None

13th Mar.
2020

Hankyu Hanshin Holdings, Inc.

Series 46 unsecured
corporate bonds

25th Oct.
2013

10,00010,00089,286

0.819

None

25th Oct.
2023

Hankyu Hanshin Holdings, Inc.

Series 47 unsecured
corporate bonds

18th Jul.
2014

10,00010,00089,286

1.202

None

18th Jul.
2029

Hankyu Hanshin Holdings, Inc.

Series 48 unsecured
corporate bonds

15th Dec.
2016—

10,00089,286

0.120

None

15th Dec.
2021

Hankyu Hanshin Holdings, Inc.

Series 49 unsecured
corporate bonds

15th Dec.
2016—

10,00089,286

0.817

None

15th Dec.
2036

—

—

112,000

102,000(10,000)

910,714(89,286)———

Company

Total

Notes:
1. The amount in parenthesis in the “Balance as of 31st March 2017” column is the current portion of the total amount and is recorded in current liabilities in the consolidated balance sheets.
2. Redemption schedule of bonds for five years subsequent to 31st March 2017

Due within one year

Thousands of
U.S. dollars¥10,000$ 89,286——

Due after two years through three years

20,000178,571

Due after three years through four years

25,000223,214

Due after four years through five years

10,00089,286

Due after one year through two years

104

Millions of yen

Hankyu Hanshin Holdings • Annual Report 2017



Notes to the Consolidated Financial Statements

2 Statements of loans payable
Thousands of
U.S. dollars

Millions of yen
Item

Balance as of
1st April 2016

Balance as of
31st March 2017

Balance as of
31st March 2017

¥135,322¥134,676$1,202,464

0.453%—

70,58643,732

390,464

1.132—

Short-term borrowings
Current portion of long-term debt

Average interest
rate

Repayment deadline

1,794

1,795

16,027——Long-term debt (excluding current portion)

589,100

610,523

5,451,098

0.938

2017 – 2036

Lease obligations (excluding current portion)

7,765

6,795

60,670—2017 – 2025

—

—

—

—

—

804,570

797,523

7,120,741——

Current portion of lease obligations

Other interest-bearing debt
Total

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 31st March 2017.
3.	The “Average interest rate” is not shown for lease obligations because the Company
uses mainly the method that includes the amounts equal to interest in total capitallease obligations and that spreads the total amount equal to interest equally over eachfiscal year of the lease period.
4.	Repayment schedule of long-term debt and lease obligations (excluding current
portion) within five years subsequent to 31st March 2017.

Long-term debt

Millions of yen

Thousands of
U.S. dollars$369,402

Due after one year through two years¥41,373

Due after two years through three years

34,207

305,420

Due after three years through four years

33,826

302,018

Due after four years through five years

43,639389,634

Millions of yen

Thousands of
U.S. dollars

Due after one year through two years¥1,378$12,304

Due after two years through three years

1,290

11,518Due after three years through four years

1,058

9,446

Due after four years through five years

893

7,973

Lease obligations

3 Schedule of asset retirement obligations
Omitted as the significance was negligible.

24 Others Quarterly financial information in fiscal year ended 31st March 2017
1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Revenues from operations (Millions of yen)

¥177,343¥359,950¥537,685¥736,763

Income before income taxes (Millions of yen)

27,84356,42682,513

100,805

Net income attributable to owners of the parent (Millions of yen)

19,81538,58757,382

71,302

Net income attributable to owners of the parent per share (yen)79.03

154.14229.36285.11

Cumulative period

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Revenues from operations (Thousands of U.S. dollars)$1,583,420$3,213,839$4,800,759$6,578,241

Income before income taxes (Thousands of U.S. dollars)

248,598

503,804

736,723900,045

Net income attributable to owners of the parent (Thousands of U.S. dollars)

176,920

344,527

512,339

636,625

0.71

1.38

2.05

2.55

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter¥79.03¥75.14¥75.24¥55.73

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

$0.71

$0.67

$0.67

$0.50

Cumulative period

Net income attributable to owners of the parent per share (U.S. dollars)

Accounting period

Net income attributable to owners of the parent per share (Yen)

Accounting period

Net income attributable to owners of the parent per share (U.S. dollars)Note: Hankyu Hanshin Holdings, Inc. consolidated shares at the ratio of 5 shares to 1 share with an effective date of 1st August 2016. Net income attributable to owners of the parent per
share has been calculated based on the assumption that the said reverse stock split was executed on 1st April 2016.

Hankyu Hanshin Holdings • Annual Report 2017105

Major Rental Properties / Major Sales Properties

Major rental properties
Completed

Leasable area1(1,000 m2)

Property name

Location

Umeda Hankyu Bldg.

Kita-ku, Osaka

2012

213

Use

Department stores (Hankyu Department Store), Offices

Umeda Hanshin Daiichi Bldg. (HERBIS OSAKA)

Kita-ku, Osaka

1997

82

Hotels (The Ritz-Carlton, Osaka), Offices, Commercial facilities,
Multifunctional convention hall

Umeda Hanshin Daini Bldg. (HERBIS ENT)

Kita-ku, Osaka

2004

55

Offices, Commercial facilities, Theatre (Osaka Shiki Theatre)

Hankyu Chayamachi Bldg. (Applause Tower)

Kita-ku, Osaka

1992

52

Hotel (Hotel Hankyu International), Offices, Commercial facilities

Hankyu Sanban Gai Shopping Centre

Kita-ku, Osaka

1969

40

Commercial facilities

Hankyu Grand Bldg.

Kita-ku, Osaka

1977

36

Offices, Commercial facilities

GRAND FRONT OSAKA

Kita-ku, Osaka

2013

28

Offices, Commercial facilities, Knowledge Capital, Hotel(InterContinental Hotel Osaka)

Hankyu Terminal Bldg.

Kita-ku, Osaka

1972

27

Offices, Commercial facilities

Hankyu Five Bldg. (HEP FIVE)

Kita-ku, Osaka

1998

20

Commercial facilities

Navio Hankyu (HEP NAVIO)

Kita-ku, Osaka

1980

16

Commercial facilities

Kita Hankyu Bldg.

Kita-ku, Osaka

1971

13

Offices, Commercial facilities_ –chayamachi
NU

Kita-ku, Osaka

2005

12

Commercial facilities

Noda Hanshin Bldg. (WISTE)

Fukushima-ku, Osaka

1992

32

Commercial facilities, Offices

Shin-Osaka Hankyu Bldg.

Yodogawa-ku, Osaka

2012

24

Offices, Hotel (REMM Shin-Osaka), Commercial facilities

Hankyu Nishinomiya Gardens

Nishinomiya, Hyogo

2008

108

Commercial facilities, Department stores(Hankyu Department Store)

Hankyu Kawaramachi Bldg.

Shimogyo-ku, Kyoto

1974

38

Department stores (Takashimaya)

1. Leasable area does not include areas for public use.

Major properties sold in fiscal 20172
Property name

Major properties planned to be sold in fiscal 20182
Location

Total numberof units

Condominium

Location

Total numberof units

Condominium

Geo Takatsuki Muse Resis

Takatsuki, Osaka

244

Geo Tenroku Twin Towers

Kita-ku, Osaka358

G-Clef Geo Kobe Motoyama3

Higashinada-ku, Kobe

256

Cielia Saito (First phase)3

Ibaraki, Osaka208

Geo Senri Chuo The Residence

Toyonaka, Osaka218

Geo Ibaraki Togu-cho

Ibaraki, Osaka

45

Brod Takatsuki

Takatsuki, Osaka

51

Geo Nishinomiya Kitaguchi The Grace

Nishinomiya, Hyogo40

Geo Kyoto Saga Arashiyama

Ukyo-ku, Kyoto

32

Geo Nishinomiya Kitaguchi Kawarabayashi-cho

Nishinomiya, Hyogo35

Geo Kyoto Arashiyama

Nisikyo-ku, Kyoto

25

Geo Nishinomiya Kitaguchi Yakushi-cho

Nishinomiya, Hyogo

29

Geo Sumiyoshi Honmachi

Higashinada-ku, Kobe

224

Geo Fukagawa Sumiyoshi

Koto-ku, Tokyo

190

Geo Grande Okamoto 1-chome

Higashinada-ku, Kobe

174

Geo Yotsuya Araki-cho

Shinjuku-ku, Tokyo1314

Geo Tama Center

Tama, Tokyo300

Primce Style Higashi Nihombashi3

Chuo-ku, Tokyo734

Geo Chigasaki3

Chigasaki, Kanagawa

136

Geo Yotsuya Sanei-cho

Shinjuku-ku, Tokyo

61

Geo Tsudanuma

Narashino, Chiba84

Geo Utsukushigaoka 2-chome Hills

Yokohama, Kanagawa

52

Geo Kyodo

Setagaya-ku, Tokyo78

Geo Minamiaoyama

Minato-ku, Tokyo

25

Geo Gyoen Naitomachi

Shinjuku-ku, Tokyo

63

Geo Grande Motoazabu

Minato-ku, Tokyo

194

Hapia Garden Tarumi Seiryodai

Tarumi-ku, Kobe

17

Hapia Garden Kuzuhanamiki 1-chome

Hirakata, Osaka

7

Hapia Garden Takarazuka Gotenyama

Takarazuka, Hyogo

6

Hapia Garden Shimo Shakujii

Nerima-ku, Tokyo

13

Hapia Garden Komae Izumi Tamagawa

Komae, Tokyo

9

Hapia Garden Yokohama Yamate Nibangai

Yokohama, Kanagawa

7

Detached house

Detached house

Osaka Nakajima Koen Toshi Hapia Garden
Shiki no Machi

Nishi-Yodogawa-ku, Osaka

Hankyu Saito Garden Front Saito Mino-o Residence

Minoh, Osaka48

Hapia Garden Mino-o Onohara

Minoh, Osaka

20

Grand Forum Soshigaya-Okura Hapia3

Setagaya-ku, Tokyo

27

Hapia Garden Yokohama Yamate

Yokohama, Kanagawa

14

Hapia Garden Oizumi Gakuen-cho

Nerima-ku, Tokyo

8254

2. Ordered by highest total number of condominium units first, with Kansai area and Tokyo
metropolitan area categorised separately
3. Joint-venture properties
4. Including unsold condominium units

106

Property nameHankyu Hanshin Holdings • Annual Report 2017

Major Group Companies(As of 31st March 2017)

Consolidated Subsidiaries
Urban Transportation

Entertainment and Communications

Main businessName of company

Main businessName of company

Railway operations

Hankyu Corporation
Hanshin Electric Railway Co., Ltd.
Nose Electric Railway Co., Ltd.
Kita-Osaka Kyuko Railway Co., Ltd.
Hokushin Kyuko Railway Co., Ltd.
Kobe Rapid Transit Railway Co., Ltd.
Hankyu Bus Co., Ltd.
Hanshin Bus Co., Ltd.
Hankyu Taxi Inc.
Hanshin Taxi Co., Ltd.
Hankyu Corporation
Eki Retail Service Hankyu Hanshin Co., Ltd.
Hankyu Style Labels Co., Ltd.
Hankyu Corporation
Hankyu Advertising Agency Inc.
Alna Sharyo Co., Ltd.
Hankyu Sekkei Consultant
Hanshin Station Net Co., Ltd.

SportsHanshin Electric Railway Co., Ltd.
Hanshin Tigers Baseball Club, Ltd.
Hanshin Contents Link Corporation
Hankyu Corporation
Takarazuka Creative Arts Co., Ltd.
Umeda Arts Theater Co., Ltd.
Itec Hankyu Hanshin Co., Ltd.
Bay Communications Inc.
Mt. Rokko Cable Car & Tourism Co.

Automobile

Advertising

Retailing
Other

Stage

Communicationand media
Leisure, etc.

TravelMain businessName of company

Travel agency

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

International Transportation
Main businessName of company

Internationaltransportation

Hankyu Hanshin Express Co., Ltd.
Hankyu Hanshin Logipartners Co., Ltd.
HHE (USA) Inc.
HHE (Deutschland) GMBH
HHE (HK) Limited
HHE Southeast Asia Pte. Ltd.

Real Estate
Main businessName of company

Real estate leasing

Hankyu Corporation
Hanshin Electric Railway Co., Ltd.
Hankyu Realty Co., Ltd.
Hanshin Real Estate Co., Ltd.
Hankyu Corporation
Hanshin Electric Railway Co., Ltd.
Hankyu Realty Co., Ltd.
Hankyu Hanshin Building Management Co., Ltd.
Hankyu Hanshin High Security Service Co., Ltd.
Hankyu Hanshin Clean Service Co., Ltd.
Hankyu REIT Asset Management, Inc.
Hankyu Housing Support Ltd.

Real estate sales andother business

HHE: Hankyu Hanshin Express

HotelsMain businessName of company

Hotel management

Hankyu Hanshin Hotels Co., Ltd.
Hanshin Hotel Systems Co., Ltd.
Hankyu Hanshin Restaurants Co., Ltd.
Arima View Hotel Co., Ltd.

Other
Main businessName of company

Construction

Hanshin Kensetsu Co., Ltd.
Chuo Densetsu Co., Ltd.
Outsourcing services Hankyu Hanshin Business Associate Co., Ltd.
for personnel andaccounting services
Credit and point card Hankyu Hanshin Card Co., Ltd.
Group financeHankyu Hanshin Financial Support Co., Ltd.

Equity-Method Affiliates
Main businessName of company

Department store

H2O Retailing Corporation[Securities code: 8242]
Railway operations
Nishi-Osaka Railway Co., Ltd.
Kobe Electric Railway Co., Ltd.
[Securities code: 9046]
Motion picture business Toho Co., Ltd. [Securities code: 9602]
Real estate leasing
Tokyo Rakutenchi Co., Ltd.
[Securities code: 8842]
Commercial
Kansai Telecasting Corporation
broadcasting

Hankyu Hanshin Holdings • Annual Report 2017107Group History

Hankyu Holdings, Inc.

Hanshin Electric Railway Co., Ltd.

1907

Founding of Mino–Arima Electric Railway Company(predecessor of Hankyu Corporation) by Ichizo Kobayashi

1910

Opening of Takarazuka Line (Umeda–Takarazuka) and Mino-o Line
(Ishihashi–Mino-o)

1913

Formation of Takarazuka Girls’ Revue(currently Takarazuka Revue Company)

1924

Completion of Takarazuka Grand Theatre

1929

1899

Founding of Settsu Electric Railway(renamed Hanshin Electric Railway Co., Ltd., in same year)

1905

Beginning of operations linking Kobe (Sannomiya) andouter Osaka (Deiribashi)

1924

Opening of Hankyu Department Store,
Asia’s first railway terminal
department store

1948

Launch of services as Pan American Airways agent

1964

Opening of Hotel new Hankyu Osaka

1973

Opening of New Hankyu Umeda Station as one of the largest
private railway terminals in Japan

Opening of Koshien Stadium(currently Hanshin Koshien Stadium)

1933

Opening of Hanshin Mart at Hanshin Umeda Station(currently Hanshin Department Store)

1935

Establishment of Osaka Baseball Club
(Osaka Tigers, currently Hanshin Tigers)

1948

Launch of airline agency business

1985

Hanshin Tigers win Japan Series for first time

Changing of company name from Keihanshin Kyuko Railway
Company to Hankyu Corporation
1995

Considerable damage to transportation and business infrastructure of Hankyu and Hanshin due to the Great Hanshin Earthquake

2005

Establishment of Hankyu Holdings, Inc.

2006

Establishment of Hankyu Hanshin Holdings, Inc.
Establishment of Hankyu-Hanshin-Daiichi Hotel Group2007

Announcement of Hankyu Hanshin Holdings Group 2007 Medium-Term Management Plan
Management integration of Hankyu and Hanshin department store businesses

2008

Opening of Hankyu Nishinomiya Gardens

2010

Completion of renovation of Hanshin Koshien Stadium, opening of Museum of Hanshin Koshien StadiumCompletion of Umeda Hankyu Building Office Tower

2012

Completion of Umeda Hankyu Building, full opening of Umeda Flagship Store of Umeda Department Store

2015

Announcement of the Hankyu Hanshin Holdings Group’s
Medium-Term Management Plan (Fiscal 2016–Fiscal 2019)

2016

2017

108

Hankyu Hanshin Holdings • Annual Report 2017

Opening of the Group’s first logistics centre in the ASEAN region, in Indonesia

Announcement of the Hankyu Hanshin Holdings Group’s
Long-Term Management Vision for 2025 (Fiscal 2017–Fiscal 2026)

Investor Information(As of 31st March 2017)

Hankyu Hanshin Holdings, Inc.
Head Office:Paid-in Capital:¥99,474 million

1-16-1, Shibata, Kita-ku, Osaka 530-0012, Japan

Fiscal Year-End:

31st March

Number of Employees:

21,860 (consolidated)

Authorised Shares:

640,000,000*

Issued Shares:

254,281,385*

Phone: +81-6-6373-5001(Group Planning Div., IR Office)Fax: +81-6-6373-5042
Tokyo Office (Personnel and General Affairs Div.):

Number of Shareholders: 79,271*

Toho Twin Tower Bldg.,
1-5-2, Yurakucho, Chiyoda-ku, Tokyo 100-0006, Japan

Unit of Trading:

Phone: +81-3-3503-1568

Stock Exchange Listing: Tokyo

Fax: +81-3-3508-0249

Transfer Agent:

Principal Shareholders:

100 shares*

Mitsubishi UFJ Trust and Banking Corporation

Ownership Breakdown:
National government and local
public organisations
0.00%

Name

Number of shares(Thousands)*

Percentage(%)

Japan Trustee Services Bank, Ltd. (Trust account)
The Master Trust Bank of Japan, Ltd. (Trust account)
Nippon Life Insurance Company(Standing Proxy: The Master Trust Bank of Japan, Ltd.)
Japan Trustee Services Bank, Ltd. (Trust account 5)
Sumitomo Mitsui Banking Corporation
H2O Retailing Corporation
State Street Bank West Client–Treaty 505234 (Standing Proxy:
Mizuho Bank, Ltd. Settlement & Clearing Services Division)
Japan Trustee Services Bank, Ltd. (Trust account 7)
Japan Trustee Services Bank, Ltd. (Trust account 1)
Japan Trustee Services Bank, Ltd. (Trust account 2)

12,906
9,163

5.08
3.60

5,804

2.28

Financial institutions
28.03%

4,641
4,381
4,207

1.83
1.72
1.65

Securities
companies
0.86%

3,584

1.41

3,460
3,447
3,409

1.36
1.36
1.34

Individuals and others
42.17%

Other corporations
8.76%

Foreigncorporations
and individuals
20.17%* The Company conducted a 1-for-5 reverse common stock split and the change of trading unit from 1,000 shares to 100
shares with an effective date of 1st August 2016. The figures take into account the reverse stock split and the changeof trading unit.

Stock Price and Annual Trading Volume (Tokyo Stock Exchange):
Stock price (¥)

Nikkei average (¥)

5,000

4,000

25,00020,000Stock Price (left axis)

3,000

15,000

Nikkei Average (right axis)
2,000

10,000

1,000

5,000

0

0

180,000

90,0000

Trading volume(Thousand shares)

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Notes:
1. The stock prices are as of 31st March of each year. The trading volumes are for years ended 31st March.
2. The data takes into account the reverse stock split and the change of trading unit conducted with an effective date of 1st August 2016.

Hankyu Hanshin Holdings • Annual Report 2017109

Hankyu Hanshin Holdings, Inc. ANNUAL REPORT 2017

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/en/

Hankyu Hanshin Toho Group

Printed in Japan