Creating Value for Our Network Area

Hankyu Hanshin Holdings
Annual Report 2011

Securities code: 9042

Special

An illustrated chronology

featureHankyu and Hanshin:

100
over

Keeping Kansai
connected foryears

The companies now forming the Hankyu Hanshin Holdings Group
have contributed to the development of Japan through their key rolein the Kansai community since the end of the 19th century.
This is how the story unfolded.

Ichizo Kobayashi founded the Mino-Arima Electric Railway
Company (the predecessor of Hankyu Corporation)

Part 1: This is where it all began
Part 2: Dawn of interurban transportation,and “Hanshinkan Modernism”
Part 3: Postwar reconstruction
Part 4: The mass transit age
Part 5: The Great Hanshin Earthquake

A pamphlet highlighting
the potential of thecompany and promoting
line-side areas

Part 6: Birth of Hankyu Hanshin Holdings
Ichizo Kobayashi at the time

Hanky u 1907

Ha n sh i n
1899
Founding of Settsu Electric Railway
The Settsu Electric Railway was established to provide high-speed electric railway transportation services in the short coastal corridor between
the two major cities of western Japan, Osaka and Kobe.
[Later, the Company was renamed “Hanshin Electric Railway” in
1899. The word Hanshin itself means “Osaka-Kobe,” using Chinese
pronunciations of representative characters in both words (Han=Osakaand Shin=Kobe)]

Hanshin’s first unit (the former Type 1) in action

Part 1:

1905

Operations begin linking Kobe (Sannomiya)and outer Osaka (Deiribashi)
The Hanshin Electric Railway was one of the grandfathersof all interurban railways, realising as it did the concept ofusing high-speed electric railways running on broad-gauge
tracks to link cities for first time in Japan.

Kobe Station on first day of service

This is where it all began

Takarazuka Line (Umeda-Takarazuka) and
Mino-o Line (Ishihashi-Mino-o) open

Takarazuka Girls’ Revue(later Takarazuka Revue Company)
To attract tourists to visit the hot spring resort in the terminus city of
Takarazuka, Kobayashi formed a song-and-dance troupe comprised onlyof girls. Guided by Kobayashi’s motto (Kiyoku, Tadashiku, Utsukushiku,or Modesty, Fairness and Grace), the all-female Takarazuka Revue hascontinued to perform a wide range of works from many genres, including
overseas musicals. Always remaining ahead of the times, it has attracted
a large following over the years.
©Takarazuka Revue Company

Type 1 unit on Shin Yodogawa Railroad Bridge

Launch of land and housing sales
When Ichizo Kobayashi founded the Mino-Arima Electric Railway Company,
he realised that expanding demand for transportation services would depend on
creating residential districts in areas alongside the lines, which were ideal for suchdevelopments.
In Ikeda-Muromachi, on the early Takarazuka Line, he started a land andhousing subdivision sale business immediately after the launch of railway services.
By accepting the long-term monthly-instalment payment method, which at thetime was revolutionary, he was able to capture rapidly emerging demand fromthe middle classes. The project was enormously successful. More Kobayashi land
and housing projects followed the laying of railway lines nationwide, creating abusiness model for the whole private railway industry.

Debut performance of Donburako by Takarazuka Girls’ Revue

Brochure about
advantages ofsuburban life, titled“What land shall I choose?
What home shall I live in?”Ikeda-Muromachi housing development

1910
1909

Takarazuka at the time

1913
1914

Thirty rental homes by the Nishinomiya Station

Launch of operations on double-track mainline between Deiribashi and Umeda

Rental homes by the Nishinomiya Station

Hanshin Umeda Station

In the years after the opening of Japan’s first railway in 1872 between Shimbashi (Tokyo)
and Yokohama, the network spread out across the country. Settsu Electric Railway was
founded in 1899 to provide rapid transit services between Osaka and Kobe (in the same
year, it changed its name to Hanshin Electric Railway). In 1907, Ichizo Kobayashi founded
the Mino-Arima Electric Railway Company, the predecessor of Hankyu Corporation. Both
Hankyu and Hanshin continued to develop new lines out of Umeda in central Osaka.
Annual Report 20111

Part 2:

Dawn of interurban transportation,and “Hanshinkan Modernism”
The Hankyu Kobe Line linking Kobe
and Osaka directly finally opens

Completion of Takarazuka
Grand Theatre

Launch of services between
Takatsuki and Kyoto Saiin

Operations opened on the long-awaited Hankyu direct line
between Osaka and Kobe (Kami Tsutsui) and on the Itami branchline between Tsukaguchi and Itami. In November the same year,
the original Hankyu Building was completed. In 1936, the extension of the Hankyu Kobe Line into Kobe city centre began operations, as did the Umeda-Kobe (Sannomiya) section.

The original Takarazuka Grand
Theatre had a maximum capacityof 4,000. In 1927, the Takarazuka
Girls Revue staged Mon Paris, thefirst revue performance in Japan.

Shin Keihan Line, predecessor of Hankyu
Kyoto Line, opened for service. In 1931, it
was extended as an underground line from
Saiin to Kyoto (now Omiya).
The Type 100 railway cars were
exceptionally high-performance vehicles,
dubbed the “Best Trains of the Orient.”

Brochure that cameout when Hankyu
Kobe Line started
operation

Interior of Takarazuka Grand Theatre©Takarazuka Revue Company

Type 100 on the Shin Keihan Line

Kami Tsutsui Station
at the end of the line

Opening of Takarazuka Hotel

Scene from Mon Paris

HankyuHansh i n

1920

1924
1922

1926

1928

1924

Development of Koshien area

Opening of Koshien Stadium (later Hanshin Koshien Stadium)
One of the largest stadiums of its kind in East Asia at the time of its construction, immediately after its opening, it hosted the 10th national secondary school baseball championships on 13th August (later the highschool baseball championships). Since then, Koshien has been used each spring and summer for the national
high school baseball championships and is known throughout Japan as the mecca of high school baseball.

Opening of the Hanshin Martat the Hanshin Umeda Station(later Hanshin Department Store)
The opening of the Hanshin Mart within the
Hanshin Umeda Station marked Hanshin’s fullfledged entry into retailing, under its department
store development concept.

Hanshin Main Line upgrades
tram track sections
In June 1933, when the opening of the Kobe
(Sannomiya) – Iwaya underground line enabled
upgrading of the whole Hanshin Main Lineto full railway tracks, operations were greatly
improved in terms of both speed and service
with the introduction of new expresses.

Hanshin Koshien Stadium at completion

Operations start on Dempo Line (now Hanshin Namba Line) between
Daimotsu and Chidoribashi

2 Annual Report 2011

Sannomiya
underground station

In 1920, Hankyu had opened its direct line between Osaka and Kobe (the Hankyu Kobe Line linking
Umeda with Kobe). In 1928, the Tenjinbashi-Kyoto Saiin section, the forerunner of the Hankyu
Kyoto Line, began operations. Meanwhile, to cope with still growing demand for transportation
services, Hanshin Main Line express services were launched in 1921, and, in a first for the electricrailway industry in Japan, two-car electric trains were run.
From the 1910s until the 1930s, partly in response to the interurban movement in urban
transportation, a trend later known as “Hanshinkan Modernism” (modernism in the Osaka-Kobebelt) arose. Distinctive amusement, education and lifestyle trends emerged under the influence ofWesternisation. With the full-fledged development of baseball and theatre as entertainment forms,
significant fan bases built up. In 1929, Hankyu built Asia’s first railway terminus department store,
Hankyu Department Store, at Hankyu Umeda Station. The store proved an instant profit generator,and many other railway operating companies quickly adopted the same business model.

Opening of Hankyu Department Store,
Asia’s first terminus department store(First phase works on original Umeda Hankyu Building
completed)featureAn illustrated chronology

over

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Keeping Kansai
connected for

years

Curtain rises at Tokyo Takarazuka Theatre

The Hankyu Department Store with approximately 10,000m2 of sales area
was Japan’s first terminus department store and one of the first anywhere. The
age of commuting from the suburbs had dawned, and earnings grew quickly.
This was the fruit of Ichizo Kobayashi’s ideas for maximising the potential of railway terminus buildings.

Completion of Takarazuka Theatre in Hibiya marked the full-scale arrival of
the Takarazuka Girls’ Revue in the capital. After that they also performed inforeign countries including Germany, Italy, Poland and the United States.
©Takarazuka Revue Company

Completion of Tokyo Takarazuka
TheatreOriginal Umeda Hankyu Building:first phase completed

SpecialHankyu and Hanshin:

The Takarazuka Revue goes on tour
overseas

Kobe Hankyu Building is completed,becoming terminus of the extensionof the Kobe Line to Sannomiya(central Kobe)

Sales area in Hankyu Department StoreThe Kobe Hankyu Building helped form thefoundations for the later development of thebusiness area of Sannomiya.

Umeda Hankyu Building fourth phase

1929

1934
1933

Completion of Sannomiya Hanshin
Building (leased to Kobe Sogo)
Sannomiya Hanshin Building opened, a
10,000m2 terminus building at Hanshin
Sannomiya underground station, with two
floors below ground and seven above. Key tenants included Kobe Sogo department store,
which along with Hanshin Mart formed the
beginnings of the Hanshin’s department store
business. In addition, completion of this officebuilding marked the full-fledged launch of
Hanshin’s office building leasing business.

Sannomiya Hanshin Building

1936
1935

Establishment of Osaka Baseball Club
(Osaka Tigers, later Hanshin Tigers)
As a means of getting use out of the stadium at Koshien,a professional team was formed at the instigation of theYomiuri newspaper, which was considering setting up a
professional league. Today, the Hanshin Tigers are one of
the earliest and most tradition-rich of the 12 professional
baseball teams in Japan, and their fanatical following
extends far beyond the Kansai area. In recent years, theteam have attracted the highest number of supporters inPennant Race games for six years on the trot. Every year,
the Hanshin Tigers draw around 3 million spectators.

Poster for Osaka Tigers©Hanshin Tigers

Kobe Station (now Sannomiya Station)
and Kobe Hankyu Building

1939

Start of services on Hanshin
Main Line extension from
Osaka Station subway (UmedaSonezaki) (relocation of
Hanshin Umeda Station)
To connect Hanshin lines with themunicipal Midosuji subway line, a principal artery within Osaka, an undergroundtrack extension was built from Umeda
to Sonezaki, resulting in the building ofa new Umeda Station, now the Hanshin
Umeda Station.

The new Hanshin Umeda Station
just before completion

Annual Report 20113

Part 3:

Postwar reconstruction
With the end of the Pacific War on 15th August 1945, the period of post-war recovery
in Japan began. Both Hankyu and Hanshin railway facilities had suffered considerable
damage from air raids, and only around 40% of Hankyu and 20% of Hanshin rolling stock
remained in operation. For this reason, the first priority in the post-war recovery effort
was restoration of rolling stock.
Launch of services as Pan American Airways agent
Hankyu entered the international air cargo field by opening Japan’s
first International Air Transport Association (IATA) agency. Today,
Hankyu Travel International and Hankyu Hanshin Express havebuilt up firm positions in their respective sectors, the travel andinternational transportation businesses.
(Hankyu Travel International is No. 4 in the travel industry in Japan,and Hankyu Hanshin Express has the same rank in internationaltransportation, as of 31st March 2011)
Based on the Land Transport Control
Order, Hankyu merged with Keihan
Electric Railway and the company namewas changed to Keihanshin Kyuko
Railway Company (added to Hankyu
network were the Keihan, Otsu and Shin
Keihan lines).

New “Keihanshin Kyuko Railway”
The business operations of the Keihan and Otsulines were transferred to Keihan Electric Railway.
A new railway operator, Keihanshin Kyuko
Railway, was created. Hankyu’s business became
centred on three railways, the Kobe, Takarazuka
and Kyoto lines.

The department store and ancillarybusinesses were spun off, and Hankyu
Department Store began business(now H2O Retailing Co., Ltd.).

HankyuSigning of the agency agreement

1943

End of the war

Non-stop express on the Osaka-Kyoto route Poster giving
notice of timetable
updates

1947

1945

1948

1949
1951

1953

1948

Hansh i n 1940
Launch of airline agency business

Hanshin Mart opens underground in
front of the JNR Osaka Station[The predecessor of the Hanshin
Department Store]
In May 1940, the Hanshin Mart opened in
the underground level of the current Hanshin
Department Store (then the incomplete Dai
Hanshin Building). This was the beginning of
Hanshin Department Store, which has remainedin business down to the present.

Sales areas in Hanshin Mart

4 Annual Report 2011

Hanshin Mart renamed
Hanshin Department Store

Completion of Shin Hanshin
Building

The sales area of the Umeda Hanshin
Building, which only occupied thebasement, was extended to the groundfloor. To complete the development of
the Hanshin Umeda terminus, which
had been on the drawing board since
before the war, Hanshin then set about
expanding the Umeda Hanshin Building(currently the Dai Hanshin Building),
finally realising its department store
grand project.

Amid the post-war recovery, the scarsof war remained very visible in central
Osaka, and there were almost no rentalbuildings of note in the Umeda area.
Against this backdrop, the Shin Hanshin
Building was raised in front of the JNR(now JR) Osaka Station. The whitenine-storey building stood as a symbolof the resilience of Osaka.
[The Shin Hanshin Building wasdemolished in 1999, and HERBIS ENT
was raised on the site.]

Many popular stores opened outlets in the food floor

Shin Hanshin BuildingSpecialfeatureAn illustrated chronology

Hankyu and Hanshin:

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Triple track line laid from
Umeda to Juso

Into the centre of Kyoto via an
underground extension

Hotel new Hankyu Osaka opens

Expansion of transportation capacity
became a major issue as Japan enteredits economic high-growth period anddevelopment proceeded along areas
served by Hankyu lines. To alleviate
congestion, new tracks were built for the
exclusive use of the Kyoto Line between
Umeda and Juso (the area just north ofcentral Osaka).

By bringing the line into Kawaramachi,
the central commercial district in Kyoto,
the dream of creating direct lines linking
Kyoto, Osakaand Kobe wasrealised.

years

With the opening of services on the JNR (now JR) Tokaido
Shinkansen line, it was expected that demand for hotel rooms
in Osaka would grow rapidly. The shortage of guest rooms
became serious. In addition to its convenient location rightnext to the JNR Osaka and Hankyu Umeda stations, the newhotel was committed from the first to the concept of low-rate,
no-hassle accommodation for businessmen. In addition tobusinessmen and Japanese tourists, the hotel is now used bymany overseas visitors, especially from Asia.

A commemorative special leaves
Kawaramachi Station (Kyoto)

Senriyama Line (now Senri Line)reaches Senri New Town
First triple track line on a private railway in Japan

Installation of automatic wicket and ticket
collection machines at Kita-Senri terminus
station, a first in Japan (1967).

Bridge construction work at Shin Yodogawa

Hotel new Hankyu just after opening

Shin Hankyu Building is completed
Japan’s first automatic wicket

1962

1963

Newspaper ad for the hotel

1964
1964

1959
Inside Hankyu Umeda Station

1957

1958

Hanshin’s department store
operations transferred to The
Hanshin Department Store, Ltd.

Completion of first phase extension of Umeda Hanshin
Building (now Dai Hanshin Building)In 1958, the sales area was extended up to the eighth floor above ground,and not only consumers but also the retail industry generally reacted very
positively to Hanshin’s related-product grouping strategy (related products
concentrated in one single sales area). Thereafter, in 1963, the new annex wascompleted, forming today’s
Dai Hanshin Building.

Services begin on Chidoribashi-Nishikujo section of
Nishi-Osaka Line (formerly Dempo Line, now Hanshin
Namba Line)
Because approximately 40% of all passengers in the busy Osaka-Kobecorridor were having to change trains at this time to get to Namba, thesouthern hub of Osaka, Hanshin decided to extend the short Dempo line
to enable a direct connection with Namba. First it nudged the line on to
Nishikujo, a station on the JNR Osaka Loop Line.
However, due to changes in the transportation industry, the Namba
extension plan was shelved for several decades. But in 1997, with the needto provide better access to the West Osaka area with the opening of the
Osaka Dome and other facilities becoming urgent, the extension plan wasrevisited. Third-sector company Nishi-Osaka Railway Co., Ltd. handledconstruction on the final link between Nishikujo and Namba (currently
Osaka Namba) in 2001 (third-sector means Nishi-Osaka Railway built
and owns the facilities, but Hanshin runs the trains).

Completion of Dai Hanshin Building
Nishi-Osaka Line extension to Nishikujo

Part 4:The mass transit age

In response to burgeoning transportation demand in Japan’s high growth period, capacity was increased througha range of initiatives. Also Hankyu and Hanshin developed reliable advanced safety systems such as the Automatic
Train Stop (ATS) system, realising a quantum leap in operating safety.
As the number of passengers grew rapidly, the Hankyu Umeda Station was relocated and expanded, and in 1973,
the largest private railway terminus in Japan was completed. Such initiatives greatly contributed to the revitalisationof the “Kita” (north) area of Osaka.

Annual Report 20115

Completion of first phase extension works on Umeda Station
The idea of expanding Hankyu Umeda Station was first mooted in 1961 at atime of rapidly rising passenger numbers. From the first, the emphasis was not
only on the concentration of terminus functions at the new station, but also on
the redevelopment of the whole Umeda area including measures to revitalisecommercial areas and add city centre amenities. In the expansion works, a newstation building was raised north of the JNR elevated tracks; the old station had
been south of the raised tracks and is now part of the Umeda Hankyu Building.
The scale of this project was vast. The relocation and expansion works at Hankyu
Umeda Station had to proceed without interrupting normal train services, and so
the whole development area was broken up into four phases, with works tailoredto specific lines.

Opening of Hankyu Sanban Gai, a large shopping centre
under the new Umeda Station
At this time, the thriving part of the Umeda area was mainly that south of the
JNR elevated tracks. North of the elevated tracks, the atmosphere really was“back of the station (eki-ura).” To change the image of the area, it was decided
to include commercial facilities with customer appeal in the basement of the
new Hankyu Umeda Station. In a nod to Osaka’s nickname, “City of Water,”an artificial river was created running through this shopping centre. This feature caused a considerable splash, so to speak, and became a tourist drawing
card for Osaka.

New station
Old station

Construction works at both old and new
Hankyu Umeda stations (circa 1967)

An express leaving Hankyu Umeda
Station on the Kobe Line (1967)

Hankyu Sanban Gai Shopping Centre opens

A river town

1969

Hansh i n 1967
Hotel Hanshin starts operations(completion of Nishi Hanshin Building)
Nishi Hanshin Building was established in the West Umeda area. It was thefirst building in Osaka to be approved in an area subject to building height
restrictions, and the highest skyscraper in Kansai at the time. It was comprised
hotel and offices, and The Hotel Hanshin soon became a hit with businessmen
thanks to its reasonably priced rooms (from ¥1,700 per night) and convenient
location (in front of the JNR Osaka
Station) and connections. In addition, the rental obtained from theDai Hanshin Building and the Nishi
Hanshin Building ensured stable
income, and they became pillars ofthe Hanshin business portfolio.
[With the development of West
Umeda, Nishi Hanshin Building wasdemolished in 1999 and HERBISOSAKA was raised on the site. In
addition, the hotel was moved to
LAXA OSAKA.]

Nishi Hanshin Building just before completion

6 Annual Report 2011

And a replica Fontana Di Trevi

Hankyu develops Japan’s first Total
Traffic Control (TTC) system andinstalls it on all lines

Morning rush hour at the old Umeda Station

Hankyu 1967

With cascades town

1972
1970

1971
The computer-controlled Programmed Traffic Control(PTC) system was developed, and adopted on the
Sannomiya-Motomachi section in Kobe (in 1986, all the
Hanshin network was converted to the new system).

Launch of air-conditioned cars on express andlocal trains
By the beginning of the 1970s, Hanshin was far ahead of other major private railway operators in Japan in the number of railway cars into which
air-conditioning had been introduced. At the end of 1983, it became thefirst private railway operator in Japan to provide air-conditioning in all
passenger rolling stock.

A type 7801, after modification for air-conditioning

SpecialfeatureAn illustrated chronology

Hankyu and Hanshin:

New Hankyu Umeda Station opens, one of the largest
private railway terminals in Japan

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Keeping Kansai
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The new Hankyu Umeda Station was completed at a total cost of ¥36.5
billion, approximately eight times the capital cost envisaged when the
project first came under consideration approximately 12 years earlier.
The new station was capable of handling 1.2 million passengers a day,a doubling of the earlier level. At the same time, along with the grandopening of Hankyu Sanban Gai, the new station made a major contribution to the revitalisation of the Umeda area.

Special train to commemorate
completion of Hankyu Umeda Station

Completion of landmark
Hankyu Grand Building
Hankyu Grand Building, a landmark
78,300m2 skyscraper with 32 floors
above ground and three below, opensat the heart of a cluster of Group
properties, including Hankyu Umeda
Station, Hankyu Terminal Building,and Umeda Hankyu Building.

Hankyu Umeda Station after platform relocation andextension works

Keihanshin Kyuko Railway Company
becomes Hankyu Corporation©Takarazuka Revue Company

Takarazuka Revue:
Premiere of The Rose of Versailles
From its premiere, The Rose of Versailles was asell-out hit day after day, embodying as it did thenarrative strength and romance of the Takarazuka
concept. In 2006, a last night “Oscar” performanceof The Rose of Versailles was given at the Tokyo
Takarazuka Theatre, and the production broke
all records in the history of the stage in Japan,
with 1,725 performances including revivals andrepeated national tours attracting a total of 4.2
million spectators.

1973

1974

Finale of Rose of Versailles (1974), performed by the Tsuki
troupeHankyu Grand Building

1977
1985

Permit obtained for western Umeda
development(full-fledged launch of Hanshin western
Umeda development project)
With the demolition of the JNR South Umeda
railway container yard, a development conceptof surrounding yard areas (western Umeda) waspresented in 1981 by the then mayor of Osaka to
JNR president. As a major landowner in the area(with 23,000m2), Hanshin expressed its intentionof participating proactively in the redevelopment
plan and submitted a basic blueprint for the western
Umeda plan to the city of Osaka at the behest of thecity and JNR.

Hanshin Tigers win Nippon Series title(top baseball team in Japan for first time)
The victory of the Hanshin Tigers drove supporters
into a spending frenzy and The Sumitomo Trust &Banking Co., Ltd. estimated that “Tiger Fever” would
add 0.1 percentage point to the economic growth rateof Osaka and Kobe. The importance of the Tigers
brand to the Hanshin group was further underlined
by not only the increase in the number of spectators at
Hanshin Koshien Stadium (up 35.2% year-on-year to
2.5 million people), but also the sales for commemorative merchandise at the Hanshin Department Store,
and the revenue boost from TV broadcasting rights
and stadium advertising.

Annual Report 20117

Part 5:The Great
Hanshin Earthquake
In the railway business, both Hankyu and Hanshin had completed their programmes to increase capacity and now focusedon improving convenience. In the real estate business, Hanshin had decided on an overall concept for Hanshin western
Umeda development project in February 1992, and was now fully committed to creating a modern urban hub that would
be on a par with anywhere in the world and would meet the needs of the coming new century.
As all this was happening, at 5:46 am on 17th January 1995, the Great Hanshin Earthquake devastated the Hanshin area.
Hankyu and Hanshin suffered severe damage in the disaster. Both companies worked day and night to restore damaged
railways and stations. Thanks to the willingness of municipal officials, construction teams and local residents to support
to nighttime works, both companies were able to open all railways and fully restart operations five months after theearthquake, in June 1995.
Opening of Chayamachi Applause(Hankyu Chayamachi Building)This multipurpose high-rise building was opened in the Chayamachi
area (northeast of Umeda area).
Chayamachi Applause consistsof a luxury hotel (Hotel Hankyu
International), two theatres (nowUmeda Art Theatre), offices andother facilities.

Opening of New Takarazuka Revue Theatre
Hankyu built Takarazuka Grand
Theatre in 1924. But the building
was now showing its age, and areconstruction was planned in the75th anniversary year of Takarazuka
Revue Company, February 1989.
The new theatre is reminiscent ofsouthern European building. It
contains a new rehearsal hall. The
new theatre is twice the size of theold theatre, with a seating capacityof 2,550.

Chayamachi Applause

Hankyu 1992

1993

Hansh i n 1992

1993

New Takarazuka Grand Theatre

Overall concept of Hanshin western Umeda development projectand masterplan for the first phase

Opening of underground section of Hanshin
Main Line between Noda and Umeda

In this project, Hanshin aimed to create a modern urban area that would be on a parwith anywhere in the world and would meet the needs of the coming new century.
In the first phase, Hanshin planned “intelligent” offices and a luxury hotel targeting
the international jetsetter crowd, commercial facilities with wide variety of shops
grouped by theme to support a sophisticated urban lifestyle, and multi-purpose halls
for cultural and international business exchanges.

Locating the tracks underground enabled more effective
land use in the western Umeda area.

Redevelopment in the western Umeda area
How it will look after completion

8 Annual Report 2011

SpecialfeatureAn illustrated chronology

Hankyu and Hanshin:

over

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Keeping Kansai
connected foryears

The Great Hanshin Earthquake
Hankyu and Hanshin facilities suffer
tremendous damage
The Great Hanshin Earthquake, measuring magnitude 7.3, was one of the worst inland earthquakes in
the postwar period. It caused catastrophic damage tourban infrastructure including railways, roads, andelectricity and gas supplies.

The Great
HanshinEarthquake

1995

The Hankyu Kobe Line running near the epicenter
was particularly severely damaged. Elevated tracks andretaining walls along the line collapsed. Among stations, Itami Station collapsed entirely with a two-car
train on top of it. At Sannomiya, the station was damaged and the east building of Kobe Hankyu Building
partially collapsed.
Hankyu teams worked around the clock torebuild railways and stations. The Kobe Line was
finally reopened on 12th June 1995, 147 days after thedisaster. Hankyu moved Itami Station to a temporary
location in order to construct a new station building.
The company completed the building as a station
with terminus amenities on 20th November 1998.
Double track operation to Itami Station was resumed
on 6th March 1999 and with this, Hankyu completed
its reconstruction 4 years and 2 months after theearthquake. The cost of railway business reconstruction was ¥36.2 billion. Hankyu spent more than ¥60.0
billion repairing all its facilities.

At Hanshin, railways bore the brunt. The worst
affected section was 3.1km between Mikage andNishinada, where eight land bridges fell. Elevatedtracks at Ishiyagawa marshalling yard collapsed orwere damaged.
Other train depots and railway facilities also
suffered serious damage, including complete andpartial destruction of 126 carriages. The total amountof damage reported by Hanshin Electric Railway was¥48.1 billion, of which its railway business accountedfor ¥45.4 billion.
As a provider of transportation services,
Hanshin had been working over many years with asense of mission and pride. United in its determination to recover from the disaster, Hanshin reopened
its network fully when operation between Mikage
and Nishinada resumed on 26th June, 160 days after
the earthquake. Restoration of all railway facilities wascompleted on 20th March 1996.

Itami Station and train after the quake

Elevated tracks collapse

Hankyu Line reopened fully on 12th June 1995

Construction of Hankyu Itami Station
Building completed on 20th November
1998

Damage at Ishiyagawa marshaling yard

Derailed train

Hanshin Line reopened fully on 26th June 1995

Annual Report 20119

In the wake of this earthquake, Hankyu started its first Hankyu Three-Year Management Plan in 1996, prioritising independent
management at each division. In the second Three-Year Management Plan, Hankyu further strengthened core businesses
under each division and restructured Group operations.

First directly-managed convenience store
Opening of asnas at Juso Station

Launch of KANSAI THRU PASS,
a one-card public transport pass for Kansai

Hankyu opened Japan’s first platform convenience store,
asnas, at Juso Station, with the aim of creating a “fun spacefor shopping.” Subsequently, the Group developed new
businesses under the Ekinaka format, that is, within thepremises of stations, leveraging location to attract customers. Currently Ekinaka businesses include the Book 1st.
bookstore chain, the asnas convenience store chain, the
COLOR FiELD cosmetics and accessories chain, and the
FREDS café bakery chain.

The “stored-fare” system, pioneered by Hankyu, enabled customers to pass through wicket
gates using a pre-paid card. It was later adopted by the Nosé Electric Railway, Hanshin
Electric Railway, Kita-Osaka Kyuko Railway, and Osaka
Municipal Transportation Bureau, enabling one-card usageof multiple modes of public transport. The KANSAI THRUPASS enabled freedom of movement around the whole
regional network, and helped to develop it.
We have now introduced our own complete transportation network covering all Kansai (including bus services).
KANSAI THRU PASS poster

Launch of New Hankyu Three-Year Management Plan
In the new Hankyu three-year plan, the Group set itself the goal of independent management at each business division. The Group set up independent business divisions and madeeach a core business responsible for generating its own earnings.

asnas, Hankyu’s first directlymanaged convenience store,
opened at Juso Station

Book 1st. Shibuya store(opened in 1998)
A flagship store opens in Tokyo,
to raise brand awareness.
It closed in 2007 for rebuilding
works.

Opening of HEP FIVEHEP NAVIO and HEP FIVE together formed oneof the largest urban shopping malls in Japan. HEP
FIVE attracted much attention for having Japan’s
first fully air-conditioned ferris wheel built on its
rooftop.
HEP FIVE

Hankyu1995

1996

Hansh i n

1995

1996

Opening of Diamor Osaka
Diamor Osaka is an underground mall thatconnects the redevelopment area of western
Umeda and Hanshin Department Store.
Designed to attract female office workers
and business people looking to upgrade theirurban lifestyles, it offers high-quality andsophisticated fashion products and accessories
as well as information services.

1998
1997

Launch of KANSAI THRU PASS

Completion of HERBIS OSAKA(Phase I of Hanshin western Umeda
development project)

HERBIS OSAKA

With a site area of 13,800m2, a total floor area of 137,000m2, five floors below ground and 40 above, as
well as a penthouse floor, HERBIS OSAKA took more than three years to complete. It is a multi-purpose
skyscraper, housing The Ritz-Carlton, Osaka — the heart of the building — HERBIS Plaza with its luxury
brand boutiques and restaurants, suites of hi-tech offices, and multifunctional halls.

Diamor Osaka

The Ritz-Carlton, Osaka

10 Annual Report 2011

Facilities of HERBIS OSAKA

While still restoring quake-disrupted operations, Hanshin continued with its redevelopment
project in western Umeda. More than 20 years had passed since the first blueprints weredrawn up. HERBIS OSAKA was finally opened in 1997, followed by HERBIS ENT in November
2004.

SpecialfeatureAn illustrated chronology

Hankyu and Hanshin:

over

100

Keeping Kansai
connected foryears

Announcement of Umeda Hankyu Building rebuilding
Umeda Hankyu Building housing the Hankyu Department Store Umeda Flagship Store repeatedly added extensions for more than half a century until November 1972. The group decided torebuild the building as structural deterioration was becoming noticeable, and the Act on Special
Measures concerning Urban Regeneration implemented in June 2002 had eased floor-area ratio
restrictions.
+ Please see page 38 for an overview of this project.

Second phase of
New Hankyu Three-Year Management Plan

Umeda Hankyu Building before rebuilding

Current Umeda Hankyu Building

Birth of Hankyu Holdings Inc.
Planning the Hankyu New Century
Group Vision
Regarding itself as a single company rather than aconglomerate, Hankyu Corporation Group developed a clear strategy of selection and concentration
for its business portfolio.

1999

2001

1999

2001

Opening of LAXA OSAKA
The multipurpose high-rise LAXA OSAKA
was opened at the site of the former Hanshin
Fukushima Station in front of the JR Fukushima
Station. LAXA OSAKA, containing the Hotel
Hanshin, offices, restaurants and other facilities,
rose on the site.

LAXA OSAKA

Hankyu largely realised its strategy of business selection andconcentration and completed Group restructuring, in line with
the Hankyu New Century Group Vision. It then created a holding
company — Hankyu Holdings — with Group management and dayto-day business management separated, as a measure to bolster Groupmanagement and competitiveness in each core business.

Opening of NU chayamachi

Birth of Hankyu Holdings

Hotel New Hankyu becomes wholly
owned subsidiary

2004

2005

2004

Completion of HERBIS ENT(completion of Hanshin western
Umeda development project)
In the Hanshin western Umeda developmentarea, HERBIS ENT is located closest to JR
Osaka Station and is considered a gateway tothe city. HERBIS ENT is the fulcrum of theurban development project that the HanshinGroup had been working on in Umeda, where
its department store, the Diamor Osaka mall,
HERBIS OSAKA and LAXA OSAKA are also
located.
HERBIS ENT is a multipurpose skyscraper with a sitearea of 9,600m2, a total floor areaof 106,500m2, four floors below
ground and 28 floors above, as wellas two penthouse floors. Osaka
Shiki Theatre is a core facility.

HERBIS ENT

Establishment of Nishi-Osaka Railway
Co., Ltd.
The long-shelved project to extend the Nishi-Osakaline to Namba was restarted, to give Hanshin a directconnection with the hub of southern Osaka. Today itis the Hanshin Namba Line.

Facilities of HERBIS ENT

Annual Report 201111

Part 6:Birth of Hankyu Hanshin
Birth of Hankyu Hanshin Holdings(through management integration ofHankyu Holdings and Hanshin Electric Railway)
Hankyu Holdings and Hanshin Electric Railway integrated
their managements and charted a single strategic course forsustainable growth, while respecting each other’s separate
history and culture dating back over 100 years. To rally all
employees in the Group, Hankyu and Hanshin developed theHankyu Hanshin Holdings Group Philosophy, including a
mission (“Serenity and well-being, inspiration and dreams —by delivering these to our customers, we will create satisfaction and make a positive contribution to society”) for serving
customers and the public interest.

Birth of Hankyu-HanshinDaiichi Hotel Group

Hankyu Hanshin Holdings Group 2007
Medium-Term Management Plan
The Hankyu Hanshin Holdings Group Philosophy
involves a set of basic strategies for the Group:
strengthening fundamental competitiveness and profitability business by business (building value in areas
served by our lines and revitalising the Umeda area),
identifying and maximising merger benefits, andimproving the Group’s financial position and returnon assets. The 2007 Medium-Term Management Plan
will end in fiscal 2013.
+ Please see page 25 for details of theMedium-Term Management Plan.

Poster announcing the birth ofHankyu-Hanshin-Daiichi Hotel Group

Integration of Hankyu and Hanshin
department store businesses
In October 2007, following the management integration of the Hankyu Department Stores, Inc. withThe Hanshin Department Store, Ltd., a new holding
company was created for joint department store
operations, H2O Retailing Corporation, which wasmade an equity-method affiliate of the Company.

Unveiling of Hankyu Hanshin
Holdings Group Philosophy

Poster announcing themanagement integration

Debut of Hankyu Hanshin HoldingsGroup’s new STACIA credit card

2009

Hankyu

2006

2007

2008

Hansh i n
Opening of Hankyu Nishinomiya Gardens
Hankyu Nishinomiya Gardens, one of the largest retailcomplex in western Japan, was opened near Hankyu
Nishinomiya-Kitaguchi Station on the Hankyu Kobe
Line. Hankyu Nishinomiya Gardens contains 273 retailpremises including a Hankyu Department Store, a Toho
Co., Ltd. and OS Co., Ltd.-operated multiplex cinema,
and a general merchandise store. As befits its name,Hankyu Nishinomiya Gardens has a public garden built
into its roof, while the interior relies on natural lightingfrom an open ceiling space, creating a feeling of greeneryand spaciousness. The facility is promoted as a space forcustomers to relax in even when they are not shopping.
As a result, Hankyu Nishinomiya Gardens has maintained strong sales since its opening.

Opening of the Hanshin Namba Line
(Extension between Nishikujo and Osaka-Namba)
A wide-area railway network linking Kobe, Osaka and Nara was completed with the openingof the Hanshin Namba Line. Three new stations, Kujo, Dome-mae and Sakuragawa, were built
and now connect into Osaka Municipal Subway and other existing lines. As a result, the railway
network in Osaka has greatly improved. Reflecting customer appreciation of the enhanced convenience, the line boosted revenues from railway
operations in fiscal 2011 by roughly ¥3,740 million, just shy of Hanshin’s five-year target of ¥3,800
million, after only two years of operation.

Hanshin Namba Line

Opening of Phase I of Hankyu Department Store Umeda Flagship Store(Rebuilding of Umeda Hankyu Building)Launch of STACIA point-service card,and of Hankyu Hanshin Emerald STACIA Card

Exterior of Hankyu Nishinomiya
Gardens

12 Annual Report 2011

Interior

H2O Retailing Group is now partner of the STACIA pointservice programme operated by the Group. As a joint card
usable at both the Group and H2O Retailing facilities, the
STACIA card is now renamed the Emerald STACIA card.

Emerald STACIA card

SpecialfeatureAn illustrated chronology

Hankyu and Hanshin:

over

100

Keeping Kansai
connected for

Holdings

years

Launch of Osaka Station North District (Umekita)
Development Area ProjectThis project is intended to create a cradle of Asian industrial innovation. The development
area is just north of JR Osaka Station and forms the best location in all Osaka. The area iscentred on a “Knowledge Capital” and will comprise city-centre class retail outlets and offices.
Hankyu Corporation is one of 12 companies involved in the development consortium.
+ Please see page 39 for an overview of the project.

nk
Ha

y

a
uH

n

n
shi

Ho

ng
ldi

s

Conceptual diagram (GRAND FRONT OSAKA)

2010

Completion of Umeda Hankyu Building Office Tower
Umeda Hankyu Building Office Tower was opened in May 2010. This landmark is
categorised as a Class S Building, an official mark of prestige, a rarity in Osaka. It stands
in the centre of Umeda area, which boasts western Japan’s biggest railway terminal.
+ Please see page 38 for an overview of
the rebuilding of Umeda Hankyu Building

Umeda Hankyu Building Office Tower

Works start on Shin Osaka Hankyu Building

Renovation of Hanshin Koshien Stadium completed
Opening of the Museum of Hanshin Koshien Stadium
Hanshin Koshien Stadium, home of the Hanshin Tigers, was built
more than 80 years ago. Following discovery of structural deterioration,
Hanshin renovated the whole building during three off-seasons fromfiscal 2008 to fiscal 2010. Through these works, the company enhanced
customer safety with reconstruction of decrepit sections and seismic
strengthening, while respecting the stadium’s history and traditions. In
addition, comfort standards were raised by improvement of infield andoutfield seating arrangements, and upgrading of food, drink and merchandising outlets, as well as provision of luxury (“Royal Suite”) seating.
The museum of Hanshin Koshien Stadium showcases the stadium,the Hanshin Tigers, high school baseball, and the college-level American
Football competitions also held at Koshien, and ensures the traditionis handed down to future generations. In its first year, fiscal 2011, thenumber of visitors was 157,000, more than expected.

Hanshin Koshien StadiumThis multipurpose building stands just north of JR Shin-Osaka
Station, a Shinkansen terminus. A key tenant within the Shin-Osaka
Hankyu Building will be our fourth REMM brand accommodationcentered hotel (that is, with very limited function facilities).
+ Please see page 40 for an overview of the project

Conceptual diagram (Shin Osaka Hankyu Building)

The Museum of Hanshin Koshien Stadium

Annual Report 201113

Creating Value for
Our Network Area
Looking ahead to the next 100 yearsof delivering peace of mind and convenience,and the thrills and dreams of entertainment,
to the people of Kansai
14 Annual Report 2011

Contents

16 Our Business
18

Major Group Facilities

20 Consolidated Financial Highlights

Business Environment and Financial Results
Outlook for the Year Ending 31st March 2012
Changes to the Medium-Term Management Plan
Medium-term Vision for the GroupEBITDA Outlook
Progress in Rebuilding of Umeda Hankyu Building
Disaster Prevention Measures in the Railway Business

30

Core Businesses: Overview and Outlook

30
32
36
42
44
47
49

At a glance
Urban Transportation
Real EstateEntertainment and Communications
Travel and International Transportation
HotelsRetailing

Group Overview
16~19, 30~31, 103, 104
Business Performance20~21, 23~24, 66, 68~70
Medium-Term Management Plan and Growth Strategies
Group: 24~28
Urban Transportation: 32~34
Real Estate: 38~40
Entertainment and Communications: 43
Travel and International Transportation: 45
Hotels: 48
Retailing: 50
Progress in Large-Scale Projects
27, 28, 38~40
Safety Measures in the Railway Business
29, 57~61, 72~73
Financial Policy and Shareholder Returns
67

51
55
55
56
56
(71

The reader is advised that this report contains forward-looking statements regarding the future plans, strategies, and earnings performance of Hankyu Hanshin
Holdings, Inc., which are not statements of historical fact but constitute estimatesor projections based on facts known to the Company’s management as of the timeof 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
173rd period, audited by KPMG AZSA LLC presented in somewhat changed format.
We have presented this information in such a way as to ensure that there is nodiscrepancy with the data presented in the Annual Securities Report. However, theAnnual Report itself has not been audited by KPMG AZSA LLC.
Definition“Fiscal 2011” refers to the fiscal year ended 31st March 2011. Other fiscal years arereferred to in 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.

57 Safety Management System
62 Directors and Corporate Auditors
64 Corporate Social Responsibility—Social Contribution &Environmental Protection Activities

66 Financial Section
66
67
68
71
74
76

Consolidated Six-Year Summary

77
78
79

Consolidated Statements of Changes in Net Assets

Message from the Management and Accounting Executive Team
Consolidated Financial Review

Financial Section

Forward-looking Statements

Corporate GovernanceInternal Control System
Compliance
Measures to Prevent Takeovers
Risk Management
Business Risks)

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

51 Management Organisation

Management Organisation

Search Index

Core Business:
Overview and Outlook©Takarazuka Revue Company

23
24
24
26
27
28
29

Interview with the President

22 Interview with the President

Our BusinessAnnual R ep or t 2011

Business Risks
Consolidated Balance Sheets
Consolidated Statements of Income/Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements

105

Major Group Companies

106

Investor Information

Annual Report 201115

Our BusinessSupporting, Brightening and Enriching Daily Living
Centred on the Kansai district of Japan, the holding company Hankyu

Kansai Area:
About 7% of Japan
Kansai’s Population:
About 16% of Japan

Hanshin Holdings Group operates six core businesses—Urban
Transportation, Real Estate, Entertainment and Communications,
Travel and International Transportation, Hotels, and Retailing.
The Group’s business is founded on railway operations,which have as their mission the provision of safe, comfortable,

Kansai Area*Tokyo

high-speed and high-capacity transportation services in the
Kansai district comprising Osaka, Kobe and Kyoto. By connecting these cities, and, within each of them, linking downtown
areas with the suburbs, we have greatly increased inter-regional

Kobemobility and enhanced the lifestyles of local people. In areas

Kyoto

Osaka

* For detailed map ofour main business area,
please see Page 18.

served by our stations, we also provide services that were notavailable before, in fields such as housing and commercial
facilities, and through attractions such as the Hanshin Tigers

Kansai’s GDP Compared with Selected Countries

professional baseball team and the Takarazuka Revue. In thisway, we are enriching people’s lifestyles and are contributing to
the community-building process in areas served by our stations.

($ billion)

TurkeyNetherlands
Kansai Area
MexicoBy developing these areas, we generate benefits of synergy byAustralia

increasing passenger volumes on our railways and building up

Korea

other businesses.

India

513
805
876
939
942
1,006
1,249

While leveraging the know-how and brand recognition we
have built up in community-building over the more than 100

United Kingdom
Germany

years since our founding, we will unite as a Group to provide theChina

best possible services and grow our business by increasing value
along Group railway lines.

Japan

Overall, Kansai is on a parwith the Netherlands
Kansai Area: Osaka, Kyoto, Hyogo, Shiga, Nara andWakayama prefectures
Sources: IMF/World Economic and Financial
Surveys 2008 Cabinet Office, Governmentof Japan, “Prefectural Accounts FY2008”

2,933
3,415
3,713
4,552

United States

14,306

Our Revenue Structure: Earnings Drivers are the Urban Transportation
and Real Estate Businesses
Composition Ratio by Core Business
The Urban Transportation and Real Estate businesses are the(Fiscal Year ended March 2011)

main drivers of Group earnings, together accounting for approximately 50% of revenues from operations and 80% of operating
income.
In the Urban Transportation segment, railways accountRevenues
from Operations

¥

638.7
billionfor most earnings, and the same is true of leasing operations in
the Real Estate business. This ensures stable cash flow in both

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

29.5%
21.2%
14.8%
10.6%
10.1%
8.4%
5.4%

segments.
Our Entertainment and Communications business contributes about 10% of operating income, on a stable basis. This is thebusiness that gives the Group much of its distinct identity.

Operating
Income¥64.7
billionUrban Transportation
43.9%
Real Estate
35.9%Entertainment and Communications
15.0%
Travel and International Transportation 4.4%
Hotels-1.0%
Retailing
1.1%
Other
0.7%

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

16 Annual Report 2011

Our Business

Sources of Competitiveness for the Group

Number of Passengers of Major Stations
1st in West Japan
4th in whole country(Thousands/day)
2,000
1,500

1,753

1,209

1,524

1,358

1,000

0

620

376

500

Umeda Namba Shinjuku Shibuya Ikebukuro Tokyo
KansaiTokyo Area

Umeda: Osaka Municipal Transportation Bureau, JR West, Hankyu,(Osaka) Hanshin
Namba: Kintetsu, Nankai, Osaka Municipal Transportation Bureau
Shinjuku: JR East, Keio, Odakyu, Bureau of Transportation Tokyo
Metropolitan Government, Tokyo Metro, Seibu
Shibuya: Tokyu, JR East, Tokyo Metro, Keio
Ikebukuro: JR East, Tobu, Seibu, Tokyo Metro
Tokyo: JR East, Tokyo Metro
Source: Urban Transportation Report 2009 Edition (Institution forTransport Policy Studies)

Areas along Hankyu and Hanshin lines topped the rankings overall(exception:15th-ranked Tennoji)
Rank

Place

Location

1

AshiyaAshiya, Hyogo

Rank

Place

11 Takarazuka

Location
Takarazuka, Hyogo

2 Nishinomiya Nishinomiya, Hyogo

12

MikageKobe, Hyogo

3

13

Takatsuki

Takatsuki, Osaka

Kobe

Kobe, Hyogo

4 Shukugawa Nishinomiya, Hyogo

14

Mino-oMino-o, Osaka

5

Okamoto

Kobe, Hyogo

15

TennojiOsaka

6

Senri-chuo

Toyonaka, Osaka

15

Namba

Osaka

7

Umeda

Osaka

17

Suita

Suita, Osaka

8

Ibaraki

Ibaraki, Osaka

18

Toyonaka

Toyonaka, Osaka

Kyoto

19

Kurakuen

Nishinomiya, Hyogo

Kyoto
910 Sannomiya

Kobe, Hyogo

19 Motomachi

Kobe, Hyogo

SSource:
ou
ourc
urce:
e: Survey
Surv
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urvey
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umit
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omo
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beer 2010)
2010
2010)
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Financial Section

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

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

The Group creates new demand in the areas served by our stations by
developing and managing high-class housing and commercial/amusement facilities, and attracting schools and colleges to these areas. By playing a clear role in establishing and developing local cultural institutions,
we are working with local people to develop local communities.
The services that we deliver to our customers change over time.
However, our focus is on the longer term. While valuing the relationshipsof trust that we build up with people living in areas served by our stations,
we remain committed to an unchanged basic policy of communitybuilding aimed at raising the residential appeal of the overall area.
Currently, the areas served by our stations are among the more popular in Kansai. It is a strength of the Group that we can create value along
our lines, through the real estate development and other businesses.

Survey
S
Surv
urve
u vey
ey
y of
of Prefe
Pre
P
Preferred
efer
ferre
rred
ed
d Res
R
Re
Residential
esid
side
den
enti
ntia
ial
al A
Ar
Are
Areas
reas
eas
as (K
((Ka
(Kansai
Kan
ansa
nsai
ai R
Regi
Reg
Region)
egio
ion)
on)
n)
Management Organisation2.

Ability to create value along areas
served by our stations

Core Business:
Overview and Outlook

The Umeda area of Osaka, the strategic cornerstone of Group operations, is one of themost famous shopping and entertainment districts of Japan, served by JR Osaka Stationand the Umeda stations of the Hankyu and Hanshin lines and the Osaka Municipal
Subway. It is at the heart of the Kansai economy. In this area, the Group operates railway
terminals serving both the Hankyu and Hanshin networks, and also runs key commercial
facility, office building and hotel businesses (For more information, please see Page 18,
Major Group Facilities).
The Group’s railway network also links Umeda (Osaka) with Kobe and Kyoto andother towns forming the economic hubs of the Kansai district. Areas served by our stations have relatively high population density in the Kansai district.

Interview with the President

1. High potential of areas served by our stations

Hanshin
H
an
nsh
hin
n Ko
Koshienoshhien
en StadSt
Stadiumadiu
um©Hanshin
©
©Han
Hansh
shin
n Tigers
Tig
Tiger
ers

©Takarazuka
©Tak
©T
Takar
araz
azuk
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Rev
Revue
evue
ue Company
Com
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nyy

Annual Report 201117

Our Business

Major Group Facilities (as of 31st March 2011)
N

Major Group Properties
126,261
26,76440,74732,962
13,356108,215
2,979
11,800
10,294
14,2397,978
20,021
2,915
81,58254,787
98,793
31,63021,764
7,865
13,672
10,359(Hankyu Department Store, Office Tower*2)

Hankyu Terminal Bldg.
Hankyu Sanban Gai Shopping Centre
Shin Hankyu Bldg.
Kita Hankyu Bldg.
Hankyu Nishinomiya Gardens
Shijo-Kawaramachi Bldg.
(Kotocross Hankyu Kawaramachi)
Itami Hankyu Station Bldg. (Itami Reita)(AKIBA TOLIM) 3

TX Akihabara Hankyu Bldg.
Senri Asahi Hankyu Bldg.
Kobe Hankyu Bldg.
Miyazu Hankyu Bldg. (Mipple)*4
Katsura Higashi Hankyu Bldg.

*(MEW Hankyu Katsura)

Umeda Hanshin Daiichi Bldg. (HERBIS OSAKA)
Umeda Hanshin Daini Bldg. (HERBIS ENT)
Dai Hanshin Bldg. (Hanshin Department Store)
Noda Hanshin Bldg.
Fukushima Hanshin Bldg.
Motomachi Hanshin Bldg.
Sannomiya Hanshin Bldg.
EBISTA Nishinomiya(Commercial facility under elevated railway tracks)

Hankyu Chayamachi Bldg. (Chayamachi Applause)
Navio Hankyu (HEP NAVIO)
Hankyu Five Bldg. (HEP FIVE)
Umeda Center Bldg.
Hankyu Grand Bldg.
Hankyu Kawaramachi Bldg.
Hankyu Senri Chuo Bldg.

yukoshin K
Hoku way LineRail
Sannomiyai

To Himej

Kyoto

Osaka Pref.

Hyogo Pref.
Nosé Electric
Railway Line

Mino-o Linemino-oMino-oKawanishi-noseguchi

Kita-senri
Osaka
International
AirportImazu Line

KoyoenKobe Line
Shukugawa

19
Imazu

Ishibashi Senrichuo

Kita-Osaka Kyuko
Railway Line8
Itami Line

9 26

6 Hankyu

Esaka

Nishinomiyakitaguchi

Shin-Osaka

Nishinomiya
Gardens Tsukaguchi

Hankyu Railway Network

Imazu
Daimotsu

Juso

Amagasaki

Mukogawadanchi-mae

Kobe Line

15

16

Mukogawa Line

Hanshin Namba Line

Osaka-Namba

143.6km
46.9km(Kobe Line, Imazu Line, Itami Line and Koyo Line)

Tenjimbashisuji- 12 13 14 20 21
rokuchome

Umeda
da

Main Line

Osaka Bay

Nara Pref.

Awaji

1 2 3 4 5
Mukogawa

HanshinKoshien Stadium

17

Senri Line

Takarazuka Line

Nishidai

ne

11

Kyoto Line

Shinkaichi Motomachi

i
ay L
ailw
tric R
c
e
l
E
Sanyo

KatsuraArashiyama Line

Myokenguchi

Subway Sakaisuji Line

Minatogawa

18

Kawaramachi

Nissei-chuo

Koyo Line

10

Kyoto Pref.

continuing on Phase II of the rebuilding of the department store section of
Umeda Hankyu Building, Phase I having opened in September 2009.
*3 Location: Chiyoda Ward, Tokyo.
*4 Location: Miyazu City, Kyoto.

Itami

Shin-Kobe

25 7

Arashiyama* Leasable area does not include areas for public use.
*2 The Office Tower was completed and opened in fiscal 2011. Now works are

Takarazuka

Kobe Rapid Transit Railway Line

52,065
15,711
12,613
10,21434,92338,237
15,542

1

Takarazuka
Grand Theatre

Tanigami

1992
1980
1998
1987
1977
1970
1980

en

2009
1972
1969
1962
1971
2008
2007
1998
2008
1992
1936
1997
1993
1997
2004
1963
1992
1987
1987
1933
2003

Umeda Hankyu Bldg.

20
21
22
23
24
25
26

ns

Leasable area (m2)*1

ka

Completed

in

1
2
3
4
5
6
7
8
–
9
10
–
11
12
13
14
15
16
17
18
19

Property Name

Sh

No.

Takarazuka Line22 23 24

(Takarazuka Line, Mino-o Line)For more informationon the Umeda area,
please see Page 19.

Kyoto Line

28.5km
65.4km(Kyoto Line, Senri Line and Arashiyama Line)

Kobe Rapid Transit Railway Line 2.8km
Kintetsu Nara Line

Hanshin Electric Railway Network 48.9km

To Kintetsu-Nara
To Kintetsu-Nara

Hanshin Line

43.9km(Main Line, Hanshin Namba Line and Mukogawa Line)

Kobe Rapid Transit Railway Line 5.0km

18 Annual Report 2011

Features of Our Facilities■ Hankyu Railway Network

Umeda Area in Detail
Hankyu Corporation is one of Japan’s 16 leading private railway operators, operating the Kobe, Takarazuka, and Kyoto lines as well as a number of branch lines.
Offering interurban services linking Osaka, Kobe and Kyoto, three of Japan’s leading cities, the network has the highest transportation efficiency level among private railway operators in the Kansai district. In March 2010, we began operationsat Settsu-shi Station on the Kyoto Line — the first railway station in Japan withzero net CO2 emissions.

Hankyu Chayamachi Bldg.
Hotel Hankyu
International(Chayamachi
Applause)

Owned solely by the Group
Joint ownership

Hotel Hankyu
International

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

C

Hankyu Sanban Gai
Hotel new Hankyu

Umekita(OsakaStation
StationOsaka
North
North District)
District(about(about 24ha)
24ha)* Sum of tier 1 and tier 2 operators.

Hankyu Terminal Bldg.

A

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

Block

Phase 1Development Area(about 7ha)

aka
Os
JR

■ Hanshin Electric Railway Network Hanshin Electric Railway Co., Ltd. is one of Japan’s 16 leading private railway oper-

ators. In March 2009, it began operations of the Hanshin Namba Line, enabling
the first single-line link between Namba and Kobe. By sharing lines with Kintetsu
Line (Kintetsu Corporation), we have also completed a wide-area railway network
linking Kobe, Osaka and Nara. In future, we expect further revenue growth on the
Hanshin Electric Railway Lines, the only through-route serving the Kobe and boththe two major railway terminals in Osaka, Umeda and Namba.
Total length of lines operated
Number of stations
Annual number of passengers carried

48.9km51
205,202 thousand

Umeda
Centre Bldg.

Hankyu Umeda Station

Nishi Hankyu Bldg.

Block

143.6km89
603,233 thousand

NU–
chayamachi

Kita Hankyu Bldg.

B

Total length of lines operated
Number of stations
Annual number of passengers carried

NU– Chayamachi
Plus

Block

n
tio
Sta
da

in
nsh n
HatatioSeUm

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

Dai Hanshin Bldg.
(Hanshin Department Store)

Umeda Hanshin
Daini Bldg.
(HERBIS ENT)

Shin Hankyu Bldg.

Diamor Osaka(underground mall)

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

aS

him

us
Fuk

The Ritz-Carlton, Osaka* Sum of tier 1 operator and tier 2 operator.
* HEP FIVE is jointly owned with Hankyu REIT Inc.
* Hotel Hanshin is operated by Hankyu Hanshin Hotels■ Hankyu Nishinomiya Gardens■ HERBIS OSAKA/

Hankyu Nishinomiya Gardens, which opened in November 2008 at theformer site of Hankyu Nishinomiya Stadium adjacent to NishinomiyaKitaguchi Station on the Kobe Line (Hankyu), is one of the largest
shopping centres in western Japan. It comprises 268 stores, centredon the Hankyu Department Store, a cinema complex (TOHO CINEMAS
Nishinomiya OS), and a large general merchandising store. As befits its
name, Hankyu Nishinomiya Gardens has a public garden built into its roof, and some of the outer wallinghas been greened, while the interior relies on natural lighting from an open ceiling space, creating a feeling of greenery and spaciousness.
Number of visitors (fiscal 2011)
Sales (fiscal 2011)18.28 million (YoY + 1.46 million)¥69.3 billion (YoY + ¥5.3 billion)■ Hanshin Koshien
Stadium■ Takarazuka

Please see Pages 2, 13.

(As of the end of July 2011)

HERBIS ENT(Osaka-West Umeda area
development)
The main tenant at HERBIS OSAKA, which
opened in 1997, is The Ritz-Carlton, Osaka. At
HERBIS ENT (opened in 2004), the key tenant is
the renowned Osaka Shiki Theatre. With commercial facilities that have attracted a numberof overseas luxury brands, and “intelligent
offices” in a multifunctional tower, the HERBISOSAKA and HERBIS ENT skyscraper complex
forms a gateway fitting for the international
city of Osaka.

■ Umeda Hankyu

Building
Please see Page 38.

Grand Theatre
Please see Pages 2, 8.

Annual Report 201119

Consolidated Financial Highlights

2007/3쐇

2008/3(Millions of yen)
2009/3

2010/3

2011/3(Thousands of U.S. dollars) 쐃
2011/3Result of Operations:
Revenues from operations¥[813,613]¥752,300¥683,715¥653,287¥638,770$7,696,024

Operating income[94,800]

90,724

77,82370,12664,743780,036

EBITDA쐋[146,500]

145,200

135,300

133,200

127,100

1,531,325

Income before income taxes and minority interests

65,30526,09834,06433,89932,760394,699

Net income[40,507]627

20,55010,79318,068217,687———

12,541

14,728

177,446

Capital expenditure

53,795

134,307

109,688

132,386

68,431

824,470

Depreciation and amortisation

43,88851,57754,79860,41859,669718,904

Cash flows from operating activities¥ 78,981¥ 74,902¥108,597¥146,955¥103,252$1,244,000

Cash flows from investing activities(199,578)(100,058)(115,047)(132,737)(62,516)(753,205)

Free cash flow쐏(120,596)(25,155)(6,449)14,21740,735490,783

Cash flows from financing activities

132,289

36,718

7,014(24,200)(39,544)(476,434)¥2,366,694¥2,348,476¥2,307,332¥2,337,331¥2,314,669$27,887,578

Total net assets

522,286

476,639

473,878

480,633

486,947

5,866,831

Interest-bearing debt

1,209,382

1,271,100

1,275,620

1,282,583

1,251,665

15,080,301¥ 31.84¥ 0.50¥ 16.28¥ 8.55¥ 14.32$0.17

Comprehensive income

Cash Flows:

Financial Position:
Total assets

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

0.41

16.18

8.51

14.27

0.17

Net assets

Diluted405.35369.25366.96371.70377.17

4.54

Dividend

5.00

5.00

5.00

5.00

5.00

0.06

Operating income margin (%)

11.7

12.1

11.4

10.7

10.1

—

ROA (%) 쐄

4.4

3.8

3.3

3.0

2.8

—

ROE (%) 쐂

8.4

0.1

4.4

2.3

3.8

—

Interest-bearing debt/EBITDA (times)

8.3쐊

8.8

9.4

9.6

9.8

—

Equity ratio (%)

21.7

19.9

20.1

20.1

20.6

—

Debt/equity (D/E) ratio (times) 쐆

2.4

2.7

2.8

2.7

2.6

—

Ratios:

Revenues from Operations*Operating Income*Operating Income Margin(¥ billion) [813.6]

800

Net Income*Net Income per Share(¥ billion)

100

752.3
683.7

653.3

638.8

80

600

(%)

[94.8]

40

12

32

9

24

90.7

12.1

(¥)

35
31.84

77.8
11.7

(¥ billion) [40.5]

15

11.4

70.1

28

64.7
10.1
10.7

60

21
20.6

400

18.1
14.32

14

8.55

7

16.28
40

6

16

20

3

8

0

0

10.8
200

0

07/3

08/3

09/3

10/3

11/3

0

07/3

08/3

09/3

10/3

11/3

* For the period ended 31st March 2007, figures were calculated assuming the management integration had entered effect from the beginning of the term.

20 Annual Report 2011

07/3

0.6 0.50
08/3
09/3

10/3

11/3

0

Our Business

Revenues from operations
Revenues from operations during the year under review decreased year-on-year by ¥14,517 million (2.2%) to ¥638,770 million. Despite a corrective
increase following the H1N1 flu scare and the global economic slowdown of the previous fiscal year, sales performance was dragged down by a substantial decline in condominium unit sales in the Real Estate Business (a reaction to the surge in major-project completions and deliveries in the previous term), and the impact of the Great East Japan Earthquake on operations mainly in the Travel and International Transportation, Entertainment andCommunications, and Hotels businesses.

Interview with the President

Operating income
Operating income decreased ¥5,383 million (7.7%) to ¥64,743 million, partly on increased property and equipment disposal costs in the Urban
Transportation business, which outweighed the gains from cost-cutting drives across core businesses.

Net income
Net income increased by ¥7,275 million (67.4%) to ¥18,068 million, due mainly to a corrective reduction in extraordinary losses recorded in the previous
fiscal year for a lump sum amortisation of goodwill equivalent amount under the equity method.

Comprehensive income

Core Business:
Overview and Outlook

Comprehensive income increased by ¥2,186 million (17.4%) to ¥14,728 million, due to a significant increase in income before minority interests, despitea year-on-year fall in other comprehensive income due to decline in the valuation difference on available-for-sale securities and an equivalent amount ofvaluation difference on available-for-sale securities relating to affiliates under the equity method, reflecting the weak performance of the stock market.

Interest-bearing debt
The outstanding balance of interest-bearing debt (consolidated basis) decreased by ¥30,917 million (2.4%) from the previous term to ¥1,251,665 million,
with net cash from operating activities outweighing the capital expenditure associated with the rebuilding of the Umeda Hankyu Building and otherprojects.

Notes:
쐃 The U.S. dollar amounts have been translated, for convenience only,at ¥83 = $1, the prevailing exchange rate on the Tokyo Foreign
Exchange Market at 31st March 2011.
쐇 From the second quarter of the fiscal year ended 31st March 2007,
consolidated results of Hanshin Electric Railway Co., Ltd. are included
as a result of management integration, in the scope of consolidationof the Group.
Figures in [ ] were calculated assuming the management integration
had entered effect from the beginning of the term.
쐋 EBITDA = operating income + depreciation expenses + amortisationof goodwill attendant on the management integration of Hankyu
and Hanshin.
EBITDA figures are rounded to the nearest ¥100 million.
쐏 Free cash flow = Cash flows from operating activities + Cash flows
from investing activities
쐄 ROA = operating income/total assets (average of period-start andperiod-end totals)
쐂 ROE = net income/equity (average of period-start and period-end
totals)쐆 D/E ratio = interest-bearing debt/equity
쐊 EBITDA is calculated assuming the management integration at the
beginning of the term.

Operating Income by Segment, Year-on-Year Comparison(Millions of yen)

70,126
Traveland International Transportation+2,611
Hotels+1,034Retailing+362–1,629Urban Transportation–6,942

Real EstateEntertainment andCommunications

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility–1,074

Other –87
Adjustments +342

64,743

2011/3EquityROE

Total Assets
ROA(¥ billion)(Times)(¥ billion)(%)(¥ billion)

1,500

5

600

15

5
2,500 2,366.7
2,348.5 2,307.3 2,337.3 2,314.7
4.4

4

480

12

2,000

3

360

9

1,500

600

2

240

6

1,000

2

300

1

120

3

500

1

0

0

1,200

1,209.4

1,271.1 1,275.6 1,282.6 1,251.7

513.5
466.6

463.0

469.1

475.8

(%)

4

3.8
3.3

900
2.4

2.7

2.8

2.7

2.6

8.4

4.4

3.0
2.8

Financial Section

Interest-Bearing Debt
Debt/Equity Ratio

Management Organisation

2010/3

3

3.8
2.3

0

07/3

08/3

09/3

10/3

11/3

0

0

07/3

0.1
08/3

09/3

10/3

11/3

07/3

08/3

09/3

10/3

11/3

0

Annual Report 201121

Interview with the President
Firstly I would like to offer my sincerest sympathies
to all those affected by the Great East Japan Earthquake,and my fervent hopes for a rapid recovery in the affected areas.
The Group offered support through direct contributions fromthe Company and donations from individual employees andexecutives. It was also involved in various recovery support
initiatives through its business activities.
Under its six-year Medium-Term Management Plan
ending in fiscal 2013 (ending 31st March 2013),
the Group is engaged in multiple prestige projects
aimed at building up enterprise value over the longer term.
Our business environment is now going
through a time of dramatic, unprecedented change,
typified by the global financial crisis andthe Great East Japan Earthquake.
However, we will continue to grow as a Group,
while striking an appropriate balance between
ensuring sustainable growth andimproving financial health.
I trust our shareholders will continue toextend their understanding andsupport in these endeavours.

Kazuo Sumi
President☞ For more details about financial strategy and shareholder return policy,
please see Page 67.

22 Annual Report 2011

Our BusinessBusiness Environment and Financial Results
Q

Operating income declined for various reasons, including the impact of the Great East Japan
Earthquake and special factors leading to increased expenses, but net income was up significantly,
in a correction from the extraordinary loss of the previous fiscal year.

(¥ billion)(¥ billion)

700

80

30

650.0

64.7
22.0

58.0

20

18.1
600

Financial Section

638.8

Net Income(¥ billion)

70.1
653.3

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Operating Income

Management Organisation

Revenues from Operations

Core Business:
Overview and Outlook

Prospects for the Japanese economy remained uncertain in the fiscal year ended 31st
March 2011, held back by persistent employment concerns and other worries. The impactof the Great East Japan Earthquake and tsunami drowned out signs of recovery in private
capital investment and consumer spending.
Against this backdrop, revenues from operations in the Travel and International
Transportation business increased, partly as a correction following the impact of the
H1N1 outbreak and the global economic slowdown in the previous fiscal year. But on aconsolidated basis, revenues declined due to the absence of major large-scale condominium projects of the kind that lifted the Real Estate Business in the previous fiscal year.
The earthquake disaster additionally affected all businesses.
Operating income fell in line with weakening revenues from operations, and theGroup also booked depreciation expenses and had various tax exposures in the Real
Estate Business following completion of Phase I of the rebuilding of the department store
section of the Umeda Hankyu Building. Another negative was an increase in property andequipment disposal expenses in the Urban Transportation segment, due to the Yodogawa
Hokugan street underpass works now being carried out by Hankyu Corporation. However,if these special factors are stripped out, operating income would have been in line with theprevious fiscal year.
Net income for the term, meanwhile, rose significantly due to the absence of lastyear’s booking of extraordinary loss for lump-sum amortisation of goodwill related to sharesof an equity-method affiliate.
The Great East Japan Earthquake wiped ¥4.1 billion off revenues from operations and¥3.4 billion from operating income in the term under review. The Travel, Entertainment andCommunications and Hotels businesses were particularly badly affected.

Interview with the President

A

Looking back at the year ended in March 2011, what comments do you have on the businessenvironment and the Company's overall earnings performance?

40

10.8
10

10/3

11/3

12/3
(Est.)

500

10/3

11/3

12/3
(Est.)

0

10/3

11/3

12/3
(Est.)

0

Annual Report 201123

Interview with the President

Outlook for the Year Ending 31st March 2012
QA

How do you see the year ending 31st March 2012 shaping up?

We expect another drop in operating income as we expect the damage bill following theearthquake disaster to further increase, but we forecast higher net income due partly to reduced
extraordinary losses.
Compared with our results for the fiscal year ended 31st March 2011, we expect theearthquake disaster of March to hit revenues in the Hotels, Travel and Entertainment andCommunications businesses particularly badly. However, we anticipate increased revenues
from operations overall on the back of a significant increase in the number of condominiums sold and higher tenant occupancy rates in the Umeda Hankyu Building Office Tower(Real Estate Business).
Operating income, by contrast, is likely to decline again on a consolidated basis.
Despite positives such as improved earnings in the Real Estate Business and a correction in
the Urban Transportation Business following the rise in property and equipment disposal
expenses in the previous year, the impact of the earthquake was severe. We expect also an
increase in various expenses in the Urban Transportation Business.
We see ordinarily income falling as well, but net income is expected to increase as acorrection following the booking of an extraordinary loss in the previous term.
We estimate the impact of the earthquake disaster at ¥16.0 billion on revenue fromoperations and ¥8.0 billion on operating income (both being absolute figures, and notcomparisons with the previous fiscal term).

Changes to the Medium-Term Management PlanQ

A

In discussing the previous Medium-Term Management Plan, you said that it will be difficult to meetthe numerical targets for 31st March 2013, and added: “If this situation does not improve, we will
have to factor in longer-term trends (in fiscal 2014 and beyond) in the next revision of estimatesin the new Medium-Term Management Plan, to clarify the future directions the Group must take.”In the event, you have made no public announcement regarding the Medium-Term Business Plan,and have only made public your forecasts for the year ending 31st March 2012. What is going on?
We decided to restrict forecasting to the year ending 31st March 2012, because the impact of theearthquake disaster has made it extremely difficult to make performance predictions. We remaincommitted to our basic plan of taking measures to improve our financial position in the fiscal years
ending 31st March 2012 and 2013.
To position ourselves to improve Group enterprise value by the year ending March 2013,
when the large-scale projects that we see as future earnings drivers such as the rebuildingof the Umeda Hankyu Building (currently in progress) will complete, we unveiled a six-year

24 Annual Report 2011

Our Business
Interview with the PresidentCore Business:
Overview and Outlook

business plan on 26th March 2007 for the period between 31st March 2008 and 31st March
2013. We called it the Hankyu Hanshin Holdings Group 2007 Medium-Term Management
Plan. While reviewing progress on an annual basis, we have revised the plan in light ofchanges in the business environment.
In this fiscal year, we had made preparations for the announcement of a revised
Medium-Term Management Plan in line with this policy, but, given the severe uncertainties
that have arisen following the Great East Japan Earthquake of 11th March 2011, we decided
to publish forecasts with specific numerical targets for the year ending 31st March 2012
only, with the impact of the earthquake factored in as best we could.
Specifically, the ratio of consolidated interest-bearing debt to EBITDA rose to 9.8
times in the year ended 31st March 2011, and we forecast it to rise to 10.3 times in the year
ending 31st March 2012. That is a deterioration from 9.6 times in the year ended 31st March
2010, but in both forecasts we have factored in the impact of the earthquake. However, weestimate the ratio would remain unchanged at 9.6 times in both years ending 31st March2011 and 2012, if earthquake damage is stripped out. We will continue to take measures toimprove our financial position ahead of the plan target year ending 31st March 2013.

Management Organisation

Reference: The Hankyu Hanshin Holdings Group 2007 Medium-Term Management Plan
Numerical Targets (Consolidated-Basis Management Indicators, First Announced 3rd April 2008)
FY2013 (estimate)

FY2011 (results)

Operating income

Earnings from corebusinesses¥100 billion¥64.7 billion

EBITDA

Generation of cash flows¥160 billion¥127.1 billion

Effects of integration

Quantitative effects¥5 billion or more (EBITDA;
every year after FY2010)¥7.9 billion (EBITDA)

Interest-bearing debt/
EBITDA

Financial soundness

Around 7 times

9.8 times

Total interest-bearing
debt

Full repayment of TOB
funding(Note) ¥1,130 billion or less

¥1,251.7 billion

Debt/equity (D/E) ratio

Financial soundness

Less than 2 times

2.6 times

ROE

Capital efficiency

At least 6.0%

3.8%

Financial Section

Indicator of

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Major indicators(Note) On 26th March 2007, the Hankyu Hanshin Holdings Group 2007 Medium-Term Management Plan was announced.
In view of the outlook for fiscal 2008 and other factors, we revised our target for EBITDA on 3rd April 2008. The total interest-bearing debt target
sum was revised on the assumption of progress in placing securitised properties on the balance sheet.
* EBITDA = operating income + depreciation expenses + amortisation of goodwill attendant on the management integration of Hankyu and Hanshin* D/E ratio = interest-bearing debt/equity

Because of the harsh economic environment facing Japan due to the global financial crisis triggered by the collapseof Lehman Brothers in September 2008, we announced in our review of the Medium-Term Management Plan in May
2010 that it would be difficult for us to meet numerical targets in the year ending 31st March 2013.

Annual Report 201125

Interview with the President

Medium-term Vision for the GroupQA

In the most recent Medium-Term Management Plan review, you have decided to postpone publicannouncements of progress in the plan, and of plans for the period from the year ending 31st
March 2014. Is there any significant change in the medium-term vision for the Group that Hankyu
Hanshin Holdings Group had previously unveiled?
We plan to proceed with the compilation of the next medium-term business plan, but there is nochange to our approach of growing as a business while striking a good balance between sustainable growth and improvement of our financial position.
Due to the extreme uncertainty regarding future economic prospects caused by the Great
East Japan Earthquake, we are still thrashing out the next medium-term business plan, forthe period beginning April 2013. As things stand, we cannot give any details including
specific numerical targets, but there is no change to our approach of striking the rightbalance between ensuring sustainable growth and improving our financial position.
In the current medium-term business plan (years ending 31st March 2008-2013), weare simultaneously working on multiple large-scale development projects, emphasising
improvement of medium-term enterprise value, which has inevitably bumped up the balance of interest-bearing debt on a consolidated basis. However, in the next medium-term
plan, the focus will be on improving our financial position, and we plan to rein in capital
expenditure on a yearly basis.
Turning to capital investment, we plan to draw a line under major projects in the year
ending 31st March 2013, this being the deadline for completion of the rebuilding of the
Umeda Hankyu Building. After that time, our basic approach will be one of investing for
growth while improving our financial position by keeping capital investment totals within
the scope of depreciation and amortisation expenses for the time being.

Capital Investment, Depreciation and Amortisation(¥ billion)

150

134.3

132.3
109.6

Capital Investment
Depreciation and Amortisation

Capital Investment:¥220 billion in 3 years from FY11/3 to FY 13/3

100

(Announced 15th May 2009)

51.5

08/3

54.7

60.4

68.4

59.6

68.1
59.0
50

09/3

10/3

11/3

12/3
(Est.)

13/3(Est.)

2007 Medium-Term Managememt Plan
Investment in Development for Further Growth

26 Annual Report 2011

Realisation of the Benefits of Large-Scale Investments0Our Business

EBITDA Outlook
Q

Growth prospects for EBITDA stand out in the Real Estate Business, with the Umeda Hankyu
Building rebuilding project being the prime driver. We also expect growth in EBITDA in theEntertainment and Communications, Travel and International Transportation businesses.

Core Business:
Overview and Outlook
Management Organisation

Annual Report 2011

Financial Section*1 Based on figures from CB Richard
Ellis Group, Inc.’s Japan unit (As ofJune 2011).
*2 Based on interviews with CB Richard
Ellis Group, Inc.’s Japan unit.
*3 As designated by CB Richard Ellis.
This general grade is applied toproperties in Osaka that are 5
minutes’ walk from the nearest
station (from the wickets), havea total floor space of 33,058m2 or
more, a standard floor area of 990m2
or more, were completed within
the last 11 years, and have excellent
facilities, functionality and local
landmark status.

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Looking ahead, the main business expecting to significantly expand EBITDA is the Real
Estate Business. The driver is the rebuilding of the Umeda Hankyu Building, which iscurrently underway. When the project is completed, total floor area will more than double
from 112,600m2 (old building) to 252,000m2. At the end of March 2011, we had shifted
Phase I of the department store to the new building (south side) and now we are working
on Phase II (north side). Since the launch of operations at the office tower in May 2010, we
have steadily increased occupancy, and we expect rental income to continue to increase asa result. In the third quarter of the fiscal year ending 31st March 2013 (October-December2012), we plan to complete Phase II of the department store project, and expect to increase
rental income thereafter from the department store.
It is true that a lot of large-scale office buildings are expected to become available
in the period 2010-2013 in the area around Umeda district, raising concerns of a glut of
office space. However, the Umeda Hankyu Building is one of only 15*1 (0.5%*2 of all rental
office buildings in the area) “S class” buildings*3 in Osaka’s major business districts, and in
addition we believe its ideal location makes potential demand for the office tower huge.
Within the Kansai district, the centripetal pull of the Umeda area is steadily strengthening,with not only the Umeda Hankyu Building coming onstream but also the Osaka Station City
project (renovation of the JR Osaka Station, opened May 2011) and the Grand Front Osaka(a preliminary project in the development of northern Umeda, scheduled to open in March2013). As a result, we are seeing cases of tenants in established office areas around the
periphery of Umeda moving in and setting up their operations in the centre of the area. So
we are convinced that we can steadily improve the occupancy ratio at any given time of theoffice tower at the Umeda Hankyu Building.
We also expect to see EBITDA grow at Entertainment and Communications, on theback of Bay Communications Inc.’s cable TV business and IT service businesses such as iTEC
Hankyu Hanshin Co., Ltd.
In the Travel and International Transportation business, we see great growth potential
on a rising tide of globalisation in international transportation. We expect to further consolidate our position as one of Japan's leading freight forwarders.

Interview with the PresidentA

One of the keys to improving the financial position of the Group will be expanding the cash flows
it depends on — in other words, on growing EBITDA. Which businesses show good prospects for
EBITDA growth?

27

Interview with the President

Progress in Rebuilding of Umeda Hankyu Building
Q

A

Following the launch of operations at Phase I (department store) at the Umeda Hankyu Building
rebuilding project in September 2009, you completed the office tower in April 2010 (with operational launch in May 2010). All that now remains is completion of Phase II of the department store.
What level of occupancy do you have at the office tower at the moment, and how are construction
works proceeding on Phase II?
At the office tower we have worked hard to attract tenants, and at the moment occupancy including informal tenancy commitments has reached approximately 70% of available leasable area (asof July 2011). With regard to Phase II of the department store, we plan to complete works during
the third quarter of the fiscal year ending 31st March 2013.
To repeat, the reconstructed Umeda Hankyu Building is likely to be the most important generator of future earnings among the projects initiated during the Medium-Term
Management Plan. In particular, we expect to see a net increase in earnings at the OfficeTower, which opened in May 2010 with added floorspace, in response to the Act on Special
Measures concerning Urban Regeneration, which eased floor-area restrictions.
Despite a difficult environment for the real estate market, we have increased tenant
contracts and informal tenancy commitments in the office tower to approximately 70% ofavailable leasable area, as a result of proactive solicitation, as of 31st July 2011. The Umeda
Hankyu Building is not only ideally located in the heart of Umeda area, but is also extremelycompetitive with a very high rate of standard area per floor at 2,800m2, with good security
and flexible facilities, and high recognition and credibility among tenants in occupancy as
it is a symbol of the district. In addition, office rents there are likely to become benchmarks
for the whole Umeda area. As a result, rather than push to increase occupancy to the point
where we risk lowering rents, we plan to steadily build up occupancy by responding whennecessary to the trends in the broader economy, the state of the rental market, and trends
at properties we are competing with. The total leasable area of the office tower is very
great, at approximately 70,000m2. From the earliest stage of planning, before the collapseof Lehman Brothers, we assumed that it would take some three years to be operating thebuilding with all premises filled. Therefore, the rate of tenant contracting and commitment
to contracting is proceeding in line with expectations overall.
We are planning to complete Phase II of the department store in the spring of 2012.
However, works have been obstructed by the uncleared remains of the old Hankyu Umeda
Station coming to light underground. So we have decided to reschedule completion to thethird quarter of the fiscal year ending 31st March 2013 (October-December 2012) in lightof this and the need to proceed more carefully than expected with the works to minimise
impact on the adjacent subway lines.

☞ For more information on the Umeda Hankyu Building, please see Page 38.

28 Annual Report 2011

Our Business

Disaster Prevention Measures in the Railway BusinessQ

Measures have included continued upgrading of seismic resistance through reinforcement works
and creation of earthquake response measures using emergency warning services from Japan
Meteorological Agency. In view of the March disaster, we are checking current tsunami and earthquake precautions, and plan further reviews.

Core Business:
Overview and Outlook

In the Great Hanshin (Kobe) Earthquake of January 1995, Hankyu Corporation and Hanshin
Electric Railway sustained massive damage to their railway businesses. In light of this experience, we have continued to improve the seismic resistance of our railway facilities, throughmeasures such as systematically reinforcing supporting pillars for elevated tracks.
In addition, if emergency warnings from the Japan Meteorological Agency indicatethat an earthquake of seismic intensity 4 or higher (under the Japanese 0-7 grade system)
is likely along our lines, or the same prediction is received from our own seismic sensors
developed in-house, all moving trains of both companies are automatically brought to ahalt wirelessly by our traffic control centre.
For tsunami, we have measures in place based on our previous experience withflooding events, but in light of the March disaster, we will take the necessary measures after
checking and revising procedures in line with changes made by administrative authorities
to hazard maps.
In addition, the Union of Kansai Governments comprising Osaka, Kyoto, Hyogo
and four other local prefectures (headed by Toshizo Ido, Governor of Hyogo Prefecture)
has assumed the use of elevated railway stations as tsunami evacuation points in theirframework wide-area plan for disaster prevention and planning in Kansai, which they are
currently working on. In future, as private railway operators determined to do what we can,we will offer any cooperation requested by this alliance, and will consult and coordinate
with the authorities regarding details and likely issues in that connection.

Interview with the President

A

The tsunami following the Great East Japan Earthquake caused catastrophic damage in parts of
the northeast of Japan. What measures has the Company taken to protect the railway businessagainst the effects of earthquakes and tsunami?

Management Organisation
Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility☞ For more details of safety management measures, please see Page 57.

Financial Section

Annual Report 201129

Core Businesses: Overview and Outlook
At a glance
Urban Transportation

Revenues from Operations(¥ billion)

P. 32% of Revenues from Operations

Revenues from Operations

¥

191.1

191.5

191.9

192.9

191.1

08/3

09/3

10/3

11/3

12/3
(Est.)

170.2

168.5

152.7

09/3

10/3

11/3

12/3
(Est.)

105.8

107.9

103.4

101.8

09/3

10/3

11/3

12/3
(Est.)

65.8

62.9

67.7

66.6

08/3

09/3

10/3

11/3

12/3
(Est.)

69.2

66.4

61.0

65.2

08/3

09/3

10/3

11/3

12/3
(Est.)

66.3

67.5

54.0

53.1

11/3

12/3
(Est.)

192.9 billion(YoY +0.6%)

Operating Income Margin

29.5%
Real Estate

15.2%

P. 36

179.8
% of Revenues from Operations

Revenues from Operations

¥

181.5

152.7 billion(YoY -9.3%)

Operating Income Margin

21.2%

15.7%

Entertainment and Communications P. 42% of Revenues from Operations

Revenues from Operations

¥

08/3

99.4

103.4 billion(YoY -4.1%)

Operating Income Margin©Hanshin Tigers

14.8%

9.7%

08/3

Revenues from Operations

79.5

Travel and International Transportation P. 44% of Revenues from Operations¥

67.7 billion(YoY +7.7%)

Operating Income Margin

10.6%
Hotels4.4%

P. 47% of Revenues from Operations

Revenues from Operations

¥

62.6

65.2 billion(YoY +7.0%)

Operating Income Margin

10.1%
Retailing—

P. 49% of Revenues from Operations

Revenues from Operations

¥

62.9

54.0 billion(YoY -14.1%)

Operating Income Margin

8.4%

1.3%

Notes: 1. Figures for segment revenues from operations as a percentage of Group totals are calculated on the basis ofsales to external customers (as of 31st March 2011).
2. Revenues from operations in other businesses accounted for 5.4%.

30 Annual Report 2011

08/3

09/3

10/3

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

32.2

09/3

31.0

10/3

29.4

11/3

27.0

12/3
(Est.)

41.7
33.7

30.9

09/3

10/3

10.8

10.7

11.1

25.5

11/3

12/3
(Est.)

10.0
8.4

09/3

10/3

11/3

1.5
0.6

08/3

09/3

10/3

11/3

12/3
(Est.)

1.6
0.5
-0.6
-1.7

1.3

09/3

10/3

-2.0
11/3

12/3
(Est.)

1.4

0.7
0.4

08/3

09/3

10/3

0.3
11/3

12/3
(Est.)

Our Travel and International Transportation business originally started as an International Air
Transport Association (IATA) agency business in 1948, when we signed Japan’s first agency
contract. In the travel business, centred on Hankyu Travel International Co., Ltd., we offer an
original product range featuring the comprehensive and varied Trapics core brand of travel
packages, as well as business travel services. In the international transportation business,
Hankyu Hanshin Express International Co., Ltd. uses a range of advanced technologies andglobal networks to provide high-quality logistics services efficiently combining a wide
variety of transportation modes.
The Hankyu-Hanshin-Daiichi Hotel Group operates 45 hotels, consisting of 19 that are
directly managed and 26 belonging to chains operated by franchise. It is one of Japan’s
leading hotel chains with 9,160 guest rooms (as of 31st July 2011). As a hotel operator withmany directly managed hotels in the Tokyo and Kansai areas, Japan’s two largest markets, itoffers a wide range of hotel formats, from general-purpose “city hotels” to new style hotels(with very limited function facilities). In addition to chain operations, it also manages The
Ritz-Carlton, Osaka, a venerable international luxury brand with which it has formed analliance.
This segment group comprises “Ekinaka” retail outlets operated mainly within the premisesof stations along our lines, the Lagare shop station kiosk chain, the Book 1st. bookstore
chain, the asnas convenience store chain, the COLOR FiELD cosmetics and accessories
chain, the DOUBLEDAY furniture and daily accessories chain and other sale-of-goods
outlets. In addition to our retail outlets in areas served by the Hankyu and Hanshin lines, wehave also opened Book 1st. stores in the Tokyo area, and DOUBLEDAY outlets in the Tokyo
area and Fukuoka Prefecture. Drawing on our long experience in developing businesses in
our home area, we are building our competitive strength in markets beyond the Hankyu
and Hanshin networks.

Annual Report 2011

Financial Section

08/3

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

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

0.3

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

12/3(Est.)

3.0

3.1

Total length of lines operated:
Hankyu Corporation: 143.6km Hanshin Electric Railway: 48.9km(Including tier 2 railway operator)

Management Organisation

08/3

This segment comprises railway operations (with Hankyu Corporation operating theKobe, Takarazuka and Kyoto lines out of Umeda (Osaka), and Hanshin Electric Railway
lines directly linking Kobe with Osaka’s major northern and southern terminals, Umeda
and Namba). Together, the Hankyu and Hanshin network, combined with other lines, andbus, taxi and other urban transportation services, form a single large-scale network in the
Kansai area, centred on the cities of Kyoto, Osaka and Kobe.

Core Business:
Overview and Outlook

08/3

24.0

Nature of Business

Interview with the President

08/3

32.3

(¥ billion)

Our Business

Operating Income

31

Urban Transportation

Hankyu Railway

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

Basic Information and Business Environment
Dealing with demographic change and expanding the
network
In recent years, the population of the Kansai area has been in
decline, with a falling birth-rate and a rising proportion of elderly
people. However, areas served by our stations are popular andpopulations here have maintained growth momentum since thetrough of 1996, the year after the Great Hanshin (Kobe) Earthquake(Please see page 34 for more information).
However, there is no doubting that the operating environment for the Urban Transportation Business has become moredifficult. The official Population Census of Japan shows that the
population between the ages of 15 and 64 — in other words,
the population of working age — has already begun to decline,
meaning a decline in people living in areas served by our lines isinevitable (please see Figure 2, 3 on Page 34). Compounding thiswill be continuing competition with the private car.
The Group is pursuing three basic strategies in the Urban
Transportation Business to deal with these new challenges.
(1) Providing safe, high-quality transportation services thatfully justify public trust(2) Achieving low-cost operations (pooling and improving
technology and know-how)(3) Providing high-value customer services (better business
policies and network upgrades)First, with regard to strategy (1) (providing safe, high-qualitytransportation services that fully justify public trust) as a public
service operator, a prerequisite of our business operations is that

Hankyu Railway Traffic Information Centre

32 Annual Report 2011

every company in the Group gives maximum priority to safetyof transportation services. In over 25 years, Hankyu and Hanshin
have not been responsible for a single railway accident leading
to the death or injury of a passenger (in other words, there has
been no such incident due to negligence or error on the part ofHankyu or Hanshin).*1 Looking ahead, we will continue to invest
in improved safety and meticulously instruct and train staff (fordetails of safety management systems, please see Page 57). In
measures to deal with demographic change, we are making
those of our stations with at least 3,000 people passing througheach day barrier-free, with the support of government subsidies(except for certain stations where technical obstacles make such
installations difficult). To further meet our commitment to providing safe and convenient services for railway passengers, we areworking on the improvement of customer services and railway
facilities. For example, Hankyu Corporation set up the Hankyu
Railway Traffic Information Centre, a call centre through whichfare, timetable and train-related queries have been centralised.
Hankyu Corporation is also upgrading station facilities throughmeasures such as installation of glass-walled service counters next
to the ticket gates at major stations so staff can see what is goingon in the concourse, as well as installing train information displaysthat keep passengers informed of delays and other matters at
all stations. Hanshin Electric Railway also took measures to makestation facilities more convenient and safer, through measures
such as large-scale improvement works at Sannomiya Station,
addition of new wickets and concourse spaces, and installation ofsmoke expulsion systems and elevators. In autumn 2011, Hanshin
is also scheduled to start improvement works at Koshien Station,
which, as the closest station to the Hanshin Koshien Stadium,

Information counter (Hankyu Railway station)

Artist’s impression of Hanshin’s improvement works at
Koshien Station

Urban Transportation

Core Business:
Overview and Outlook

Role of the Hanshin Namba Line in Kansai Rail Networksy
To Kawaramachi(Kyoto)Osaka Pref.

Interview with the President

the Hanshin Namba Line (Nishikujo to Osaka-Namba), opened in
March 2009. Before the opening of this line, there was no directconnection between Kobe and the Namba area of south Osaka,
two of the economic hubs of the Kansai district. This was themissing link in the whole regional network. Today, the openingof the Hanshin Namba Line has directly connected Kobe and theKobe-Osaka corridor with Namba, and has also opened up direct
links to Nara in the east of Kansai using the Kintetsu network. By
linking eastern Osaka with the Nara area, we are helping to create wide-area mobility. As a result, the Hanshin Namba Line has
generated significant new demand for transportation. We havebeen able to meet our five-year revenue target for this line after
only two years of operation. (Please see Page 35 for more detailsof performance of the line during the period under review.)

Our Businessneeds to be able to smoothly handle around 100,000 people on
baseball game days.
To ensure safe, high-quality transportation services thatfully justify public trust, the Group is taking every measure to(2) achieve low-cost operations, for example by pooling the technology and know-how of both Hankyu and Hanshin, deploying
personnel more efficiently, while ensuring an acceptable level of
earnings and continuously investing in better safety.
At the same time, by (3) providing high-value customer
services, the Group aims to win over more customers and become
the public transportation provider of choice in the Kansai area. As
part of that endeavour, the Group is cultivating “demand for new
mobility” by upgrading stations and transport networks.
In this endeavour, the highlight has been the success of

Hyogo Pref.
Takarazuka

Sh

Nishinomiya-kitaguchi

Shin-Osaka

Nara Pref.
Shin-Kobewa

Amagasaki

Sannomiya(Kobe)

Umeda(Osaka)Management Organisation

ink

an

sen

Osaka
International Airport

Kintetsu-Nara

Hanshin Line

*1 Hankyu has had zero accidents in which the company bears responsibility inmore than 33 years, and Hanshin likewise in more than 26 years (as of the end of
July 2011). Both companies have a safety management target of zero operator
accidents.

Hanshin Namba Line (after extension)
Hanshin Line
Hankyu Lines
Kintetsu Nara Line

Kintetsu Nara Line

JR Lines
Subway Midosuji Line

Evoking Kyoto’s old Machiya style(coaches 3 and 4)
Compartments are entered throughlatticework par titions, and theemphasis within is on private space.

Financial Section

As part of its ridership expansion campaign, Hankyu is also working to attract tourists to Arashiyama in Kyoto, a beauty spot thathas been one of the leading tourist attractions in Japan sinceancient times. In October 2010, Hankyu renovated the stationbuilding and forecourt area at Hankyu Arashiyama Station, thegateway to the beauty spot. In March 2011, it began operating the
Kyo-Train, a special tourist service with carriage interiors designed
to fuse ancient and modern Japanese traditions, and using imagesof traditional buildings in the old Machiya style in Kyoto.

Hanshin Namba Line (before extension)

Osaka-Namba

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Hanshin Namba LineWe extended the line from Nishikujo Station to Osaka-Namba Station. By sharing
lines with Kintetsu Corporation, we have also linked Kobe (Sannomiya) with Nara,
via Osaka-Namba. This broadening of the area network includes a 65.2km stretch ofshared line (Kobe-Nara).

Nishikujo“The Kyo-Train”
To attract passengers, coaches
are “wrapped” (covered all over)in a Kyoto fan design.

Annual Report 201133

Urban Transportation

Figure 1: Population Trends in Areas Served by Hankyu and Hanshin Lines (1991=100)
105
Hankyu/Hanshin Service Areas
Kansai Area
Osaka
Hyogo
Kyoto

104
103

The Great Hanshin (Kobe) Earthquake

102
101
100
99
98
97

(Year)1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
* Based on data in the Basic Resident Register, issued by the Ministry of Internal Affairs and Communications.

Hankyu/Hanshin Service Areas:
Following areas with stations of Hankyu
Corporation, Hanshin Electric Railway(including tier 2 railway operator)
Osaka:
Osaka City (Fukushima, Konohana,
Nishi, Naniwa, Nishi-Yodogawa, HigashiYodogawa, Yodogawa, Kita, Chuo Wards
out of 24 wards), Toyonaka, Ikeda, Suita,
Takatsuki, Ibaraki, Minoh, and Settsu
cities, Shimamoto town
Hyogo:
Kobe City (Higashi-Nada, Nada, Hyogo,
Nagata, Chuo Wards out of 9 wards),
Amagasaki, Nishinomiya, Ashiya, Itami,
Takarazuka, and Kawanishi cities
Kyoto:
Kyoto City (Nakagyo, Shimogyo, Ukyo,
Nishikyo Wards out of 11 wards), Muko
and Nagaokakyo cities, Oyamazaki Town

Figure 2: Population by Age Group along Hankyu and Hanshin Lines (Population Census of Japan)
6,000,0000

Young

5,000,0000

Working age

Old5,315,694
423,032

5,406,883
486,155

5,426,516
564,789

3,652,948

3,802,239

3,924,390

5,371,402
829,343

5,229,907
654,455

5,615,196

5,498,123
1,014,126

4,000,0000
3,000,0000

3,805,897

3,807,524

3,715,180* Compiled by the Group, based ondata from preliminary 2010 Population
Census of Japan (Ministry of Internal
Affairs and Communications).
* Age group breakdowns are not givenin the preliminary 2010 Population
Census of Japan.
* Tallies do not add up to the total at
the top for each year as age group is
not known in many cases. Unknowns
account for the difference.
* Areas served by Hankyu and Hanshinlines are as defined in Figure 1.

2,000,0000
1,000,0000
0(Year)

1,230,823

1,113,080

910,891

758,909

720,424

718,503

1980

1985

1990

1995

2000

2005

2010

Figure 3: Estimated Changes in Population (2000=100)
110
105
100

Hankyu/Hanshin Service Areas
Whole of Country
Kansai

100.0
100.0
100.0

102.4
100.7
100.2

103.1

102.6
101.3

100.2
98.8

99.3

99.1
96.7

97.6

95

96.4
94.0

93.1

95.2
90.8
92.1

90

87.2
88.5
85

84.6
80

(Year) 2000

2005

2010

2015

2020

Basic Strategies
Please see Page 32, Basic Information and Business Environment.

34 Annual Report 2011

2025

2030

2035

* Figures for 2000 and 2005 are basedon statistics in the Population Census,
issued by the Ministry of Internal Affairs
and Communications. Estimates for2010 onwards are based on Population
Projections for Japan (as of December2008), compiled by the National
Institute of Population and Social
Security Research using the 2005
National Census.

Urban Transportation

Revenues rose on the success of the Hanshin NambaLine and on streamlining of operations in the bus
and taxi businesses, but increased property andequipment disposal expenses dragged operating
income down

*1 The revenue boost from the Hanshin Namba Line cannot be compared with
figures for the previous fiscal year, but only with total forecast revenues from allother Hanshin lines (that is, except the Hanshin Namba Line).

Non-commuter pass
Hankyu Commuter pass
Total*3
Non-commuter pass
Hanshin Commuter pass
Total*3

Revenues (¥ million)*2
2010/3Difference
58,582
1,417
31,126-1,641
89,708-223
18,396
502
9,642
484
28,038
986

YoY
2.4%
-5.3%
-0.2%
2.7%
5.0%
3.5%

2011/3
306,481296,751
603,233
103,991
101,211205,202

Passengers (Thousand)*2
2010/3Difference
295,522
10,959310,441-13,690
605,963-2,73098,735
5,255
94,884
6,326
193,620
11,582

YoY
3.7%
-4.4%
-0.5%
5.3%
6.7%
6.0%

Forecasts for Fiscal 2012 Onward
Operating
Income(¥ billion)

Revenues fromOperations(¥ billion)

Revenues from Operations
Operating Income

50

191.1

191.5

32.2

32.3

191.9

192.9

200

191.1

Financial Section

The Group forecasts lower revenues from operations
and lower operating income, due to the impact of
the Great East Japan Earthquake and increased
expenses

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility*2 Sum of tier 1 and tier 2 operators for both Hankyu and Hanshin*3 For Kobe Rapid Transit Railway Line (from Hanshin Motomachi Station and Hankyu Sannomiya Station to Nishidai Station, and from Shinkaichi Station to Minatogawa Station), we
have modified our method of recording fare revenues and passenger volumes as these sections are now co-managed by Hankyu Corporation, Hanshin Electric Railway and Kobe
Electric Railway (as of October 2010). Changes in fare revenues and passenger volumes for the line for the previous fiscal year using the new method of calculation are as follows.
(Hankyu) Total transportation revenues: down ¥176 million (0.2%), total passengers carried: down 4,102 thousand people (0.7%)(Hanshin) Total transportation revenues: ¥324 million (1.1%), total passengers carried: 2,843 thousand people (1.4%)

Management Organisation

Reference: Hankyu and Hanshin Performance of Compared2011/360,00029,484
89,48518,89910,12629,025

Core Business:
Overview and Outlook

which were severe enough to discourage travel.
In addition, measures were taken to streamline the bus and taxi
businesses, including integration of vehicle maintenance operationsof both Hankyu Bus Co., Ltd. and Hanshin Bus Co., Ltd. Operating
revenues in the bus and taxi businesses increased by ¥589 million(1.2%) during the year to ¥48,042 million. This reflected the conversion of Hanshin Motor Dock Co., Ltd. into a wholly-owned subsidiarythrough the above-mentioned integration, and a correction from theimpact of the H1N1 flu scare in the previous fiscal period, which morethan offset the effects of a decline in demand for airport buses due tothe earthquake disaster as well as its generally dampening effect on
travel plans.
Revenues from operations in the Urban Transportation
segment including other businesses increased by ¥1,075 million(0.6%) year-on-year to ¥192,947 million. However, operating income
declined by ¥1,629 million (5.3%) to ¥29,378 million, due in part to
the Yodogawa Hokugan street underpass works being carried out by
Hankyu Corporation, which caused a surge in property and equipment disposal expenses, and to barrier-removal works at stations.

Interview with the President

In the railway business, the Hanshin Namba Line, which has operated
successfully since its opening in March 2009, added ¥3,742 million
to segment revenues. This means that we have already met our
five-year revenue target of ¥3,800 million per year from the Hanshin
Namba Line, based on initial demand forecasting.*1 This performance
was due to a steady increase in the number of passengers using
commuter passes on the line. In addition, there was a steady increasein entertainment- related demand in connection with festivals commemorating the relocation of Japan’s capital to Heijokyo 1,300 years
ago.
However, revenues from operations in the railway businesswere more or less unchanged year-on-year (down 0.0%) at ¥143,747
million, held back by a year-on-year decline in transportation revenues
amid depressed demand following the Great East Japan Earthquake
as well as in light of the anemic economy and summer heatwaves,

Our Business

Performance for the Fiscal Year ended March 201140
180

In the year ending March 2012, we forecast revenues from operations to decline year-on-year by ¥1,847 million (1.0%) to ¥191,100
million, and operating income to decrease ¥2,378 million (8.1%)
to ¥27,000 million. We expect the benefits of the absence of theproperty and equipment disposal burden in the fiscal year underreview to be outweighed by a decline in demand for airport bus
services due to the earthquake, as well as rising fuel and motive
power costs (crude oil and electricity) and higher maintenance bills.

30

31.0

29.4

27.0
160

20
140
10

0

2008/3 2009/3 2010/3 2011/3 2012/3(Est.)

120

Annual Report 201135

Real Estate

HERBIS ENT

Major Businesses

첸 Real estate leasing:
Extensive property-holdings, mainly along Hankyu and Hanshin lines (For details of major properties, please see Page 18)
Major companies: Hankyu Corporation, Hanshin Electric Railway, Hankyu Realty

첸 Real estate sales:
Subdivision and sale of residential land lots and sale of condominiums and single-family housing, mainly along Hankyu and Hanshin lines
Major companies: Hankyu Corporation, Hanshin Electric Railway, Hankyu Realty

첸 Other real estate businesses:
In addition to projects such as the rebuilding of Umeda Hankyu Building, property management, building maintenance and other building operation andmanagement services
Major company: Hankyu Corporation, Hanshin Electric Railway, Hankyu Hanshin Building Management

Basic Information and Business Environment
Recovery in leasing market still some way off
Most revenues and operating income in the Group’s Real EstateBusiness are generated by the leasing business, which contributes
to stable cash flow. The Group has one of the largest rental realestate portfolios of any private rail company, with many properties located near Hankyu and Hanshin lines (for details, please
see Page 18). Overall rentable area operated by the Group was
approximately 1,400,000m2 (as of 31st March 2011). Of this total,
approximately one half, or 700,000m2 (60% being commercial
facilities and the rest office facilities) are concentrated in the
Umeda area, the heart of the Kansai economy, where the Group
has a large number of very competitively located rental properties(near the Umeda stations of both Hankyu and Hanshin lines aswell as JR Osaka Station; please refer to Page 19 for detailed mapof the Umeda area).
Due to the uncertainty of economic prospects in Japan,
there have been no clear signs of a rebound in demand in theoffice leasing market in central Osaka business areas. Oversupply
has continued as newly built properties flood the market in
Umeda between 2010 and 2013. In this situation, average vacancy
rates have continued to rise since bottoming in October 2007, andaverage rents continue to shrink, albeit moderately. Vacancy rates
remain high at the moment although there has been an uptick incontract signings as companies combine and consolidate theiroffice premises.*1
Looking ahead, we expect the supply of leasable properties
to slowly become tighter as the economy rebounds, but we seehigh average vacancy rates continuing for the moment as newlarge properties come on the market up to 2013 or thereabouts.
At the same time, at our commercial facilities, we expect
tenant sales to continue to drift downwards in the wake of theeconomic slowdown that began in the second half of fiscal 2009.
But the rate of decline is now easing in the Umeda area, andsales of tenants in major shopping centres in areas served by ourlines (excluding the Umeda area) held up fairly well. In particular,
since the opening of Hankyu Nishinomiya Gardens in November
2008, tenants sales here have continued to grow, bucking the36 Annual Report 2011

consumption slowdown, and were up 8% year-on-year in fiscal
2011 to around ¥69.3 billion.
As mentioned above, the business environment surrounding the real estate leasing market remains challenging. However,the very competitive locations of our major rental office buildings close to the Hankyu and Hanshin Umeda stations in central
Umeda means that even under such conditions, we can expect
relatively stable earnings on the back of steady demand and rent
levels. We likewise expect only limited impact on earnings fromthe decline in tenant sales at our commercial facilities, due to therelatively high proportion of rental income that is accounted forby fixed-rent leases.
Looking ahead, in the Umeda area, the highest priority for
the Group, we expect a new supply of major large-scale developments to trigger intensified competition in the office building
and commercial facility markets. However, as market leader in this
district, we are taking steps to improve vacancy rates at our properties and enhance the appeal and customer drawing power ofthe entire area, while leveraging our strong relationships with our
tenants. (Please refer to Page 38 for more details on the Umeda
Hankyu Building.)*1 Source: Miki Shoji, Latest trends in the Office-building market in Osaka (August
2011)

Average Vacancy Rates for Office Buildings(Tokyo and Osaka Business Areas)
(%)

14
12

Osaka Business Areas
Tokyo Business Areas

10
8
6
4
2
0

2006/12

2007/12

2008/12

2009/122010/122011/6

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

Real Estate2(¥/3.3m )16,00015,000Umeda

14,000Shinsaibashi/Namba

13,00012,000

Osaka Business Area
Yodoyabashi/Hommachi

11,00010,0009,000

Minami-Morimachi

2006/12 2007/12 2008/12 2009/12 2010/12 2011/6
Source: Miki Shoji, Latest trends in the office-building market

Condominium sales show recovery momentum

Core Business:
Overview and Outlook
Management Organisation

In the subdivision business, we market condominiums, single
family houses, and residential land lots. The core business is Geobranded condominiums, supplied as high value-added properties
sited in excellent locations, mainly in areas along Hankyu andHanshin lines and in the Tokyo area. With Geo-branded condominiums, the focus is on quality and functionality, and quality
management is strict. We use an integrated framework spanning
development, sales, and management. The Geo marque rates
highly in market research into condominium brands.
The condominium marketing business is showing signsof recovery momentum at the moment. Although nationwide
sales in 2010 fell below 100,000 units for the third consecutive

Interview with the President

Shin-Osaka
Semba

Our Business

year, to 84,701 units, the market overall expanded by 6.4% yearon-year. By region, significant year-on-year increases were seenin the Tokyo and Kansai areas, with units sold totalling 44,535 in
the capital (up 22.4% year-on-year) and 21,716 units in Kansai(up 9.8%). Furthermore, average sales prices increased by 4.0%
year-on-year (3.4% per m2) in the Tokyo area. The corresponding
figures for Kansai were 1.2% (3.6% per m2). As the market recovers,
average prices are turning upwards again for the first time in 24
months, while per m2 prices have risen for five years on the trot.
In 2011, supply in the condominium market dropped byaround 10% year-on-year in the first half as sellers held back froma weak market and new development marketing plans wererevised in light of the Great East Japan Earthquake and otherfactors. However, demand has remained firm, due to (1) fears oftight supplies as inventory slips below desired levels, (2) values ofproperties acquired after the Lehman Brothers collapse becoming more reasonable, and (3) ongoing home purchase support
policies such as tax breaks for housing loans. Given these positives, the supply of condominium units is expected to be in linewith previous-year levels at 45,000 units for the Tokyo area, and22,000 units for the Kansai area.
The above suggests that despite concerns raised by theGreat East Japan Earthquake, the condominium market continues
to show recovery momentum from the previous year, and sales
will hold up for the time being.

Average Rents for Office Buildings (Osaka Business Area)

Note: The above figures and forecasts are based on research by the Real Estate
Economic Institute Co., Ltd.

(Unit/Year)

New Supply of
Condominiums(Tokyo and Kansai Areas)

Tokyo Area
Kansai Area

120,000
100,000

89,25688,51685,42984,148

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

83,18374,46380,00061,02160,00040,00036,67343,73339,08733,06431,85731,25830,146

22,744
Source: Real Estate Economic Institute Co., Ltd.:
National Condominium Market Trends 2010,
Condominium Supply Forecasts in the Tokyo
Metropolitan and Kansai Areas 2011

45,00019,784

21,71622,000

2009

2010

2011
(Est.)

64.2

66.4

20,0000(CY) 2001

2002

2003

2004

2005

2006

2007

2008

(¥10 thousand)Condominium Prices(Tokyo and Kansai Areas)(¥10 thousand)

6,000
5,000
4,000

Tokyo Area (average price)Kansai Area (average price)

52.3

51.3

4,026
41.7
3,188

4,003
41.4
3,237

Tokyo Area (¥/m2)
Kansai Area (¥/m2)

54.5

55.0

4,069
41.7

4,104

3,165

65.0
61.4

54.5

42.0

4,108
42.6

3,177

3,164

55.5
4,200
44.9
3,380

4,775

4,644

70
60

4,535

47.0

47.6

47.1

3,478

3,513

3,411

Financial Section

44,53536,37630,219

4,716
48.8

50

3,452 40

3,000
30
2,000

20

1,000
Source: Real Estate Economic Institute Co., Ltd.:
National Condominium Market Trends 20100(CY) 2001

10

2002

2003

2004

2005

2006

2007

2008

2009

2010

0

Annual Report 201137

Real Estate

Basic Strategies
We are taking the following measures as a matter of priority to further
capitalise on our potential, which is underpinned by our strong brandimage and sound reputation in the Kyoto-Osaka-Kobe area, and our
project planning capabilities in commercial facility development, mainlyin the Umeda area, and the Geo brand-led condominium business.
(1) By leveraging our expertise in community building, provide safe and convenient basic infrastructure and provide
services that support community lifestyles• Revitalise property assets to build value along our railway lines• Supply condominiums and promote urban single-family
housing along the Hankyu and Hanshin lines(2) Enhance enterprise value and optimise cash flow by striking
an appropriate balance between investments and returns(3) Strengthen Umeda’s profile, through renovations of ourproperties and other measures• Development projects, such as the rebuilding of Umeda
Hankyu Building, and Umekita (Osaka Station North District)Phase I Development Area Project● Development projects

Rebuilding of Umeda
Hankyu Building
Increasing Umeda’s competitiveness as abusiness area, and powering the leasing
business

Artist’s impression of completed building

Project
overview

쑗 Multiple-use building on a scale that will make it a landmark in the Umeda area of Osaka, one of the hubs of the Japanese economy
쑗 Make all underground entrances and sales floors barrier-free, facilitating smooth pedestrian flow and improving overall accessibility from surrounding rail lines and shopping mall facilities쑗 Outshine nearby competitor properties through seismic strengthening and increased earnings power쑗 Leverage easing of building-related regulations under the Urban Renaissance Special Measures Law, build one of the largest
department stores and high-rise office towers in JapanThe building
Total floor area
(excluding parking,basement, stairways,
etc.)
FloorsHeightMajor uses

Schedule

Umeda Hankyu Building today(As of August 2011)

New Building
Approx. 252,000m²
Department Store: Approx. 140,000m²
Concourse etc.: Approx. 10,000m²
Office Tower: Approx. 102,000m²
41 floors above ground and 2 below (14th and 16th floors house equipment)
Department store: 13 floors above ground and 2 below
Office tower: Floors 15 to 41(Sky Lobby: 15th floor)
Approx. 187m
Department store and offices

3rd September 2009:
Opening of Department Store Phase I

Old Building
Approx. 112,600m²

2 floors below and
12 floors above ground
Approx. 45m
Department store
Hankyu Umeda
StationOctober-December 2012 (planned):
Completion of Department Store Phase II
JR Osaka Station

tion
a Sta
med
ay U
Subw

1st April 2010 (opening: 6th May, 2010):
Completion of Office Tower

Planned investment

Umeda
HankyuBldg.

Total: ¥60 billion

38 Annual Report 2011

ion
tat
aS
ed
m
in U
nsh
Ha

ay
Subw meda
shi-U
Higa tation
S

Surrounded by JR lines, the Osaka andUmeda stations of the Hankyu andHanshin lines, and the Midosuji andTanimachi subway lines, the building
can be reached in five minutes by
underground walkways that make it
accessible in all weathers.

Real Estate

Our Business

Umekita (Osaka Station North District) Phase I Development
Completion in March 2013 (planned),by 12-company consortium in prime Osaka location

Interview with the President

Site of GRAND FRONT OSAKA today (as of August 2011)

Artist’s impression of GRAND FRONT OSAKA쑗 Create a multi-functional “city” on seven hectares comprising integrated offices, commercial facilities, hotel facilities, serviced
apartments and condominiums, based on the “Knowledge Capital” concept
쑗 Establish a management organisation for the “Knowledge Capital” facilities (KMO Knowledge Capital Management), which will
arrange events and conferences with partners from industry, academia and government, to create a “space” for building intellectual value
쑗 Establish an area planning group (which we call a “Town Management Organisation”), and build up the area brand in alliancewith public and private sector bodies and local organisations
쑗 Consortium members: 12 companies including Hankyu Corporation, Mitsubishi Estate Co., Ltd., and Orix Real Estate Corporation

Name

GRAND FRONT OSAKA

BlockFloorsB Block

C Block

38 floors above ground,
3 below(South Tower)(North Tower)
38 floors above ground, 33 floors above ground,
3 below
3 below48 floors above ground,
1 below

Site area

Approx. 10,571m²

Approx. 22,680m²

Approx. 4,666m²

Total floor area

Approx. 187,800m²

Approx. 295,100m²

Approx. 73,800m²

Major uses

Offices, commercial facilities

Offices, “Knowledge Capital,” commercial facilities,
hotel, serviced apartments, convention

Residential subdivisions for sale
Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Schedule

A Block

June 2007: Handover of land
February 2008: Designation as area for“Urban Renaissance Special Measures”
31st March 2010: Construction start

da
u Ume
Hanky tion
Sta

GRAND FRONT OSAKA

Total: ¥51 billion

Umekita* Facility investment only. Excludes investments
in land and buildings for sale.

Osaka Station
North Exit
Plaza
sak

a St

n
atio

eda
Um
hin tionsn
Ha StaSubwayeda
Higashi-Um
StationJR O

ySubwa tion
Sta
Umeda

Planned investment (Group share only)

Financial Section

April 2011: Umekita selected as name of
Osaka Station North District Phase I Development(GRAND FRONT OSAKA)
March 2013: Completion (planned)

Management Organisation

The building

Development concept: “Palace of creativity” (Generate a rich future lifestyle through the cycle of knowledge)

Core Business:
Overview and Outlook

Project
overview

SubwayNishi-Umeda
Station
JR Kitashinchi
Station

Map

Annual Report 201139

Real EstateShin-Osaka Hankyu Building
Multipurpose building conveniently located just north of JR Shin-Osaka Station(for Shinkansen), acting as a gateway to Osaka

Project
overview

쑗 Multipurpose building on Company-owned land just north of JR
Shin-Osaka Station, with offices, a hotel and commercial facilities쑗 Convenient location connecting directly to JR Shin-Osaka Stationand Shin-Osaka Station on the Midosuji subway line쑗 Facilitate pedestrian flow to improve access from surrounding
areas and help make area barrier-free
Artist’s impression of
Shin-Osaka Hankyu Building

The building

Site area

Approx. 4,150m²

Total floor area

Approx. 35,600m²
12–17

FloorsSchedule

17 floors above groundMay 2010: Construction start

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

3–11

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

2–3

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

1

Bus terminal

Planned investment

Autumn 2012: Opening (planned)

Total: ¥10 billion

Chayamachi Eastern District Redevelopment Plan
Construction of new multipurpose complex in eastern district of the Umeda
Chayamachi area following the NU– chayamachi commercial facility opened in thewestern district
Project
overview(Group’s
assigned
works)

쑗 Multiple landowners are involved in this consortium-led Primary Urban
Redevelopment Project쑗 In the tower part, the Group will operate floors 1-3 of the commercial
2
facility NU– chayamachi plus (approx. 3,000m ) and sell condominiums in
Geo GRANDE Umeda (floors 4-31, 174 units)쑗 The condominium business will obtain and develop residential space inthe development from the consortium

Schedule

September 2007: Approval granted by Governor of Osaka for
conversions of land rights for projectDecember 2008: Construction start
April 2011: NU– chayamachi plus completed and opened
July 2011: Geo GRANDE Umeda handed over

40 Annual Report 2011

Exterior view
(NU
– chayamachi plus and
Geo GRANDE Umeda)

Real Estate

Lower revenues and earnings in correction fromhigh number of condominium units sold in previous
fiscal year

*1 Number of units sold in the condominium businessYear ended March 2010: 1,064
Year ended March 2011: 680

Management Organisation

Forecasts for Fiscal 2012 Onward
Operating
Income(¥ billion)

Revenues fromOperations(¥ billion)

Revenues from Operations
Operating Income

60

200

181.5

179.8
170.2

180

168.5

50

160

152.7

41.7

140

40
120

33.7
30.9

100

30

24.0
20

25.5

2008/3 2009/3 2010/3 2011/3 2012/3(Est.)

80

Financial Section

In the year ending March 2012, we expect weak conditions topersist in the real estate rental and leasing market in Japan, leading to lower rental income from established properties for lease.
However, in the subdivision business, we plan to greatly expand
the number of condominium units sold from fiscal 2011*2 andsteadily build up rental revenues from the Office Tower of the
Umeda Hankyu Building. On this basis, we forecast revenues fromoperations to increase by ¥28,770 million (18.8%) to ¥181,500
million, and operating income to increase ¥1,504 million (6.3%) to¥25,500 million.

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Higher revenues and earnings due to increased
number of units sold in the condominium subdivision businessCore Business:
Overview and Outlook

development projects, Umeda Hankyu Building Office Tower
opened for business in May 2010, following the completion andopening in September 2009 of Phase I of the Department Storesection that will house Hankyu Department Store. Construction
works are proceeding at Phase II of the Hankyu Department Store
project but because of the inevitable curtailing of space available
for rent since the previous fiscal year, revenues from operationsin other businesses in the Real Estate segment fell ¥768 million(1.9%) to ¥39,245 million.
As a result of this, revenues from operations in the Real
Estate business overall declined ¥15,721 million (9.3%) to ¥152,730
million. Likewise, operating income fell by ¥6,942 million (22.4%)
to ¥23,996 million. Other factors were an increase in depreciation
expenses following completion of the Department Store (PhaseI) and the Office Tower at the Umeda Hankyu Building, andincreased costs from exposure to real estate taxes (affecting Phase
I of the Department Store).

Interview with the President

In the condominium business, revenues from operations fell
¥12,596 million or 22.7% year-on-year to ¥42,969 million. Thiswas due to a significant decline in the number of condominiums
sold* 1, as the year under review saw many completions andhandovers of large-scale apartment buildings contracted in theprevious fiscal year. This factor outweighed the contribution ofsales of residential units at Geo Saito Ibuki no Mori (Minoh, Osaka
Prefecture), The Senri Residence (Toyonaka, Osaka Prefecture),
Todoroki Branz Geo (Setagaya, Tokyo), and sales of plots at
Hankyu Takarazuka Yamatedai (Takarazuka, Hyogo Prefecture)
and Osaka Nakajima Koen Toshi (Hapir Garden Shiki-no-Machi)(Nishiyodogawa, Osaka).
In the leasing business of the Real Estate segment, revenues
from operations fell ¥1,467 million (1.7%) to ¥84,244 million, in
reaction to the economic slowdown and other factors, despite
our measures to support occupancy.
In other businesses in the Real Estate segment, including

Our Business

Performance for the Fiscal Year ended March 2011

60

*2 Number of condominiums to be sold in fiscal 2012 (estimate): 1,200

Annual Report 201141

Entertainment and Communications©Takarazuka Revue Company

Major Businessesm Sports business:

m Communication and media businesses:

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

m Stage businesses:

advertising, publishing, cable television business, musical entertainment(“Billboard Live” club and restaurant chain), information technology
services, etc.

Takarazuka Revue and related businesses; operation of Umeda Arts
Theatre and promotion of stage productions

Mt. Rokko and Takarazuka Garden Fields, and other leisure businessesm Leisure businesses:

Basic Information and Business Environment
Strong fan base keeps the crowds coming
According to the Ministry of Internal Affairs and Communications
Statistics Bureau’s Family Income and Expenditure Survey, total
household consumption expenditure, excluding price fluctuation(real terms) edged up 0.3% year-on-year in 2010. But recreational
service expenditure posted a (real-terms) decline of 1.0%, attributable to the prolonged economic slowdown making itself felt inthe live entertainment industry.
Despite these negatives, the Hanshin Tigers and Takarazuka
Revue continued to enjoy high levels of popularity, not only in
Kansai but also throughout Japan, thanks to their passionate fanbases.
Of the 12 teams forming the professional baseball leagues inJapan, the Hanshin Tigers have both one of the longest histories
and a bedrock of passionate fans not only in their home area,
Kansai, but also across Japan. In the past six years, attendances athome games in the Pennant Race have been the largest in Japan.
The Hanshin Tigers were the only professional baseball team toregister total attendances of over 3 million people in 2005-2007,2009 and 2010.
Over 450 performances are given by the Takarazuka Revue ateach of its two main venues, the Takarazuka Grand Theatre (Hyogo
Prefecture, 2,550 seats) and the Tokyo Takarazuka Theatre (2,069
seats). The Revue, comprising over 400 performers, is divided into
five troupes (Hana (Flower), Tsuki (Moon), Yuki (Snow), Hoshi (Star),and Sora (Cosmos), that perform in rotation. In 2010, a total of 2.5
million people came to see the Takarazuka Revue at performances
given all over Japan.
Inspiration and dreams — we will continue to deliver theseto our increasingly discerning customers, and maximise the brandvalue of the Hanshin Tigers team and Hanshin Koshien Stadium,and the Takarazuka Revue.

42 Annual Report 2011

Consumption Expenditure andRecreational Service Expenditure(total households, real change, %)Consumption Expenditure

(%)

6
5
4
3
2
1
0
-1
-2
-3
-4

Recreational Service Expenditure

5.9
2.3
0.5

-0.1
-1.9

(CY) 2004

2005

1.2
-3.5
-3.6

2006

2007

-1.2
-1.7
2008

0.1

0.3

-1.4

-1.0

2009

2010

Source: Family Income and Expenditure Survey of the Ministry of Internal Affairs
and Communications

Total Attendances at Hanshin Tigers Host Games(Thousand)

4,000
3,500

3,132

3,000

3,155

3,144

2,977

3,007

2006

2007

2008

2009

3,006

2,500
2,000
1,500
1,000
500
0(CY)

2005

Winners

Second place Third place Second place Fourth place

2010

Third place* Capacity at the Hanshin Koshien Stadium declined from 2008 following arenovation programme.

Entertainment and Communications• Upgrade and expand media use (enhance the appeal ofexisting media, broaden the range of media channels, anduse next-generation networked media)(2) Establish a communication and media business base
• Boost the value of media operations in areas served by ourlines• Develop information technology service solutions both
inside and outside the Group(3) Leverage our leisure facilities (facilities on top of Mt.
Rokko, Takarazuka Garden Fields, etc.)• Enhance synergies between customer-oriented facilities andenhance joint promotions

Core Business:
Overview and Outlook

Performance for the Fiscal Year ended March 2011
Revenues and earnings down, due to correction
from strong previous year in the stage business andimpact of the Great East Japan Earthquake

Forecasts for Fiscal 2012 Onward
Operating
Income(¥ billion)

Revenues fromOperations(¥ billion)

Revenues from Operations
Operating Income

120

20
18

105.8

107.9
103.4

99.4

101.8

16

We forecast revenues from operations to fall ¥1,607 million(1.6%) to ¥101,800 million and operating income to slump by¥1,594 million (15.9%) to ¥8,400 million, with the Great East Japan
Earthquake depressing consumer confidence and ad revenues inall businesses, compounded by a correction following the Tigers’
crowd-pulling successes in 2010, which will impact ticket sales,
and lower broadcasting right revenues.

Financial Section

Earnings likely to fall after factoring in the impactof the Great East Japan Earthquake and a correction
following the Hanshin Tigers’ good attendances in
the previous fiscal year

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

were staged. However, revenues from operations slipped by¥2,743 million (9.5%) year-on-year to ¥26,079 million due to corrections following the success of previous year productions suchas Elisabeth and strong merchandise sales after the final shows ofseveral leading talents prior to their retirement. Another negative
was suspension of performances at Tokyo Takarazuka Theatre
following the earthquake disaster.
In the cable television business of the communicationand media businesses, subscriber numbers grew steadily for our
triple-play packages of multichannel cable TV, cable internet, andCable-Plus Phone services following focused marketing efforts.
As a result of the above, overall revenues from operationsin the Entertainment and Communications business fell ¥4,445
million (4.1%) from the previous year to ¥103,407 million, and operating income dropped by ¥1,074 million (9.7%) to ¥9,994 million.

Management Organisation

In the sports business, the Hanshin Tigers garnered a lot of support
for putting up a good fight over the season and getting to the
Climax Series. However, the earthquake disaster caused a delay inthe start of the 2011 season, so that revenues from operations fell
¥695 million (2.8%) year-on-year to ¥23,863 million.
In the revue side of the stage business, highlights were
The Scarlet Pimpernel (Tsuki (Moon) troupe), a hit since it was first
performed in 2008, and the musical Romeo and Juliet (Yuki (Snow)
troupe) premiered in France in 2001. In the theatre business, at
Umeda Arts Theatre the Hoshi (Star) troupe performed Romeo andJuliet, and other talked-about musical revues such as Phantom

Interview with the President

As a group committed to offering inspiration and dreams, weplan to further enhance the appeal of our unique attractions: theHanshin Tigers, Hanshin Koshien Stadium, and Takarazuka Revue.
We will also work to upgrade our media operations so that we canoffer this content to fans through a variety of channels. Therefore,
we will strengthen our revenue base, enhance the aura of theGroup and build brand strength and greater value along our lines.
Under this basic policy, we will take following steps:(1) Maximise the value of the Hanshin Tigers, Koshien andTakarazuka brands• Increase the appeal of live events (create superior attractions,and foster or acquire star talent (players), and increase theappeal of live-event venues)

Our Business

Basic Strategies

100

14
12
10

10.8

10.7

80

11.1
10.0
8.4

8

60

6
4

2008/3 2009/3 2010/3 2011/3 2012/3(Est.)

40

Annual Report 201143

Travel and International Transportation

HANKYU HANSHIN EXPRESS (SINGAPORE) PTE LTD.

Major Businessesm Travel Business:

m International Transportation Business:

Hankyu Travel International Group (7 companies)
Total billings: ¥348.3 billion (No. 4 in the industry)
Overseas Travel: ¥222.8 billion (No. 3 in the industry)Domestic Travel: ¥124.3 billion (No. 7 in the industry)

Hankyu Hanshin Express Group (25 companies)
Sales: ¥80.1 billion
Air exports from Japan (Weight): 66,766 tons (No. 4 in the industry)
Air imports to Japan (Number of customs clearances):236,279 (No. 4 in the industry)* Total billings are Hankyu Travel International (nonconsolidated) figures forfiscal year ended March 2011.

* S ales are total of Hankyu Hanshin Express Group figures for fiscal year ended March 2011.

Basic Information and Business Environment
TravelAiming to achieve the highest customer approval
ratings in the industry
Since the 1990s, the Hankyu Hanshin Holdings Group’s Travelbusiness has focused on using newspapers and other media(mail-order and online sales) to market travel packages such as
its Trapics brand. This business is especially strong in overseas
operations, placing third in the sector in terms of overseas billingsin fiscal 2011. The Group has also risen to seventh position in
the domestic travel segment, and is now ranked fourth in theJapanese travel industry based on overall billings.
Despite the risks posed by external factors such as the H1N1

flu scare and the Great East Japan Earthquake, an aggressive
approach to travel package development is generating steady
growth in the travel business both in Japan and overseas, withmarketing undertaken using newspapers and other media.
Looking ahead, we plan to boost the added value andquality of our travel products, and also broaden our lineup, tosatisfy increasingly diverse demands, aiming ultimately to achieve
the highest customer approval ratings in the sector through aconstant focus on security, safety and providing inspiration anddreams. By providing high-quality services and travel packages
with strong appeal, the Group will work as one to win the supportof even more customers.

Total Travel Billings (Fiscal 2011)

Overseas Travel Billings (Fiscal 2011)

Domestic Travel Billings (Fiscal 2011)

Rank

Company name¥ billion

Rank

Company name

Rank

Company name

1

JTB Group (14 companies)

1,124.4

1

JTB Group (14 companies)

384.6

1

JTB Group (14 companies)

709.2

2

Kinki Nippon Tourist

387.2

2

HIS

303.3

2

Rakuten Travel

237.9

3

Nippon Travel Agency

376.2

3

Hankyu Travel International

222.8

3

Nippon Travel Agency

234.8

4

Hankyu Travel International

348.3

4

JTB World Vacations

211.1

4

Kinki Nippon Tourist

234.6

5

HIS

320.0

5

Kinki Nippon Tourist

143.6

5

ANA Sales

179.0

6

Rakuten Travel

253.5

6

Nippon Travel Agency

131.9

6

JTB Traveland

170.1

7

JTB Traveland

235.5

7

JALPAK

65.3

7

Hankyu Travel International

124.3

8

JTB World Vacations

211.1

8

Nippon Express

63.5

8

JAL Tours

110.1

9

ANA Sales

203.7

9

JTB Traveland

61.9

9

Club Tourism International

87.6

10

Club Tourism International

141.4

10

Club Tourism International

53.7

10

Top Tour79.3¥ billion* Source: Hankyu Hanshin Holdings, based on Japan Tourism Agency Bulletin (online): Business Volume for Major Travel Agents (April 2010 to March 2011)
Billings are rounded down to the nearest ¥100 million.

44 Annual Report 2011

¥ billion

Travel and International Transportation

Our Business

International Transportation
A global logistics provider using advanced IT to leadthe market

Interview with the President

Even compared with other Japanese freight forwarding companies, which are strong players in the global distribution sector, theHankyu Hanshin Group’s International Transportation business has
outpaced rivals in marine transportation and logistics in creatinga framework that optimises our customers’ supply chain management. The efficient combination of multiple transportation modes
worldwide forms an infrastructure that allows us to respond tothe complex logistics needs of our customers as a total logistics
provider with an advanced distribution management system.
Business performance has been improving on gradual
recovery in the global economy following the crisis triggered by
the collapse of Lehman Brothers in autumn 2008.
With the global logistics market continuing to expand, weplan to open new bases in growth markets and increase theGroup’s brand value overseas as a powerful company capableof supporting customers’ logistics strategies with high-quality
services and systems.

Overseas Network
Core Business:
Overview and Outlook

TangshanDalianTianjin

CHINA

YantaiQingdaoNanjing Suzhou

Kansai

NaritaNagoyaManagement Organisation

Beijing

Fukuoka

Wuxi
ShanghaiHangzhou Ningbo

Wuhan
Chongqing

Guangzhou
Shenzhen

Dongguan Fuzhou
XiamenShatinHongkong

22 subsidiaries, 81 locations / Number of employees: 2,019

Basic Strategies(1) Raise customer satisfaction levels• Consistent quality management; comprehensive risk
management(2) Strengthen sales capacity• Strengthen lineup of pre-planned package tours; expanded
sales channels(3) Create foundation for consistent profits• Improve process efficiencies in back office/administrative
departments

Financial Section

TravelSafety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Subsidiaries
BranchRepresentative OfficeInternational Transportation(1) Strengthen marketing capabilities• Target global opportunities• Strengthen the marine transportation business• Expand the logistics business• Strengthen sales of transportation equipment(2) Expand networks in promising markets• Accelerate expansion in India and upgrade bases in China• Enter other emerging markets

Annual Report 201145

Travel and International Transportation

Performance for the Fiscal Year ended March 2011
Revenues and earnings bounce back after the H1N1
flu scare (affecting Travel) and the global economic
downturn (International Transportation)
Despite a steady performance by the Travel business both in Japanand overseas packages, especially to Europe, business conditions
worsened after January 2011 due to the political uncertainty
in the Middle East Asia and the impact of the Great East Japan
Earthquake. However, revenues from operations increased ¥1,472
million or 4.9% year-on-year to ¥31,306 million, in a correction
from the slump caused by the H1N1 flu scare in the previous fiscal
year.

Oversea units of the International Transportation businesshave shown signs of a recovery after the demand decrease triggered by the rapid deterioration in the global economy fromautumn 2008. Exports by domestic companies have recovered
to levels seen before the collapse of Lehman Brothers in autumn
2008, and imports too are picking up again.
As a result, revenues from operations in the International
Transportation business increased ¥3,402 million or 10.3% yearon-year to ¥36,494 million.
Revenues from operations for both Travel and International
Transportation businesses increased ¥4,856 million or 7.7%
year-on-year to ¥67,710 million, and operating income increased¥2,611 million or 766.2% year-on-year to ¥2,952 million.

Forecasts for Fiscal 2012 Onward
The segment will see declining revenues andearnings, due to the impact of the Great East Japan
Earthquake on Travel operations
We expect sustainable growth especially in Asia in the International
Transportation business, but domestic travel will be affectedby the earthquake, with fewer customer bookings. We forecast
overall revenues from operations to decrease ¥1,110 million or
1.6% year-on-year to ¥66,600 million, and operating income toslump ¥2,352 million or 79.7% to ¥600 million.

Operating
Income(¥ billion)

90

8

79.5

80

65.8

6

67.7
62.9

66.6

70
60
50

4

3.1

40

3.0

30
2

1.5

20

0.3
0

46 Annual Report 2011

Revenues fromOperations(¥ billion)

Revenues from Operations
Operating Income

0.6

2008/3 2009/3 2010/3 2011/3 2012/3(Est.)

100Hotel Hankyu International

Our Business

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

Basic Information and Business Environment

Hankyu-Hanshin-Daiichi Hotel Group, which started business in1926 as Takarazuka Hotel, is now one of Japan’s foremost hotel
chains, operating and managing 45 hotels with 9,160 guest rooms(as of the end of July 2011).

Conditions in the hotel market and our response

Size of the Hotel market in Japan(¥ billion)

1,200

1,023

1,041

1,072

1,093

1,038

(Year) 2004

2005

2006

2007

2008

1,000

976

800
600
400
200
0

2009

New REMM hotel to open in Kagoshima

Financial Section

In October 2011, we expect to open our new REMM brand hotel (with guest
rooms designed for “a good night’s sleep,” including custom-made beds)in Kagoshima in Kyushu island. We currently operate REMM brand hotels
in Hibiya and Akihabara in Tokyo. REMM Kagoshima, the third hotel in thischain, is conveniently located at the centre of the Tenmonkan district, thelargest shopping and entertainment district in southern Kyushu, with easy
access to Kagoshima Airport and Kagoshima Chuo Station. The opening will
follow and benefit from the start of full operation of the Kyushu Shinkansenfrom Kagoshima to Osaka in March 2011, which is projected to greatly
stimulate business activity in the Kyushu region. We expect the new hotel toattract both tourists and businesspeople.

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Column*1 White Paper on Leisure, fiscal 2010 edition, published by the Japan Productivity
CenterManagement Organisation

According to estimates by the Japan Productivity Center*1, Japan’s
hotel market continued to expand from 2003 through 2007 (basedon sales). However, in 2009, room demand slumped and the scaleof the hotel market fell back to ¥976 billion, 10% below its peakin 2007. This was due to a decline in numbers of businesspeople
visiting Japan after the global economic crisis following the collapse of Lehman Brothers in the autumn of 2008, and to weakleisure spending owing to the H1N1 flu scare.
In response to these difficult conditions, we have commenced a three-year renovation programme at Hotel new

Hankyu Osaka, one of our most important hotels. To strengthen
our marketing and competitiveness, we overhauled the Hotels
group portal site along with individual websites for 45 hotels.

Core Business:
Overview and Outlook

One of Japan’s Major Hotel Chains

REMM Kagoshima

Annual Report 201147

Hotels

Basic Strategies(1) Create infrastructure for hotel chain operation• Strengthen platforms for supporting hotel chain marketingand management• Establish a framework for developing the new REMM hotelformat(2) Strengthen the earnings structure through business reform• Boost productivity by rebuilding work processes• Maintain and enhance the competitiveness of our hotels
based on an appropriate level of investment(3) Strengthen the earnings base by overhauling the business portfolio• Develop hotels using franchise or management contracts,
based on operational capabilities and brand strength

Performance for the Fiscal Year ended March 2011
Although operating income increased due to a business takeover, operating conditions remain difficult
In the Hotels Business, we strengthened our competitivenessthrough such initiatives as opening directly-managed restaurants in Hotel new Hankyu Osaka, Dai-ichi Hotel Tokyo and Hotel
Hanshin, and renovation of lobby and banquet halls in Hotel new
Hankyu Osaka, the first phase of a three-year renovation project.
We also implemented measures such as renewing the Hankyu-

Hanshin-Daiichi Hotel Group website and adding reservation
pages in Korean and Chinese. However, demand for rooms andbanquets declined as a result of the prolonged weak economy
and the Great East Japan Earthquake.
Against this background, revenues from operations
increased ¥4,243 million or 7.0% year-on-year to ¥65,220 million,
due partly to the transfer of food and drink businesses, and theoperating loss shrank to ¥639 million, a ¥1,034 million year-onyear improvement.

Forecasts for Fiscal 2012 Onward
The impact of the Great East Japan Earthquake will
reduce revenues and profits

Operating
Income(¥ billion)

Revenues fromOperations(¥ billion)

Revenues from Operations
Operating Income

80

4

69.2

We expect hotel room demand from corporate and inboundcustomers and demand for banquets to slump due to the impactof the Great East Japan Earthquake. We will continue to cut
expenses; however, we estimate that revenues from operation will
decline ¥2,620 million, or 4.0%, year-on-year to ¥62,600 million,
with the operating loss increasing ¥1,361 million or 213.0% yearon-year to ¥2,000 million.

3

61.0
2
1

65.2

62.6

40

0.5
20

-0.6

-1

-3

60

1.6

0

-2

48 Annual Report 2011

66.4

0

-1.7
-2.0
2008/3 2009/3 2010/3 2011/3 2012/3(Est.)-20

COLOR FiELD

Our Business

Retailing
Major Businesses

m Retail: Hankyu Retails Corporation
Bookstore chain Book 1st., Convenience store chain asnas, Station kiosk chain Lagare shop,
High-end supermarket chain Seijo Ishii*, Cosmetics and accessories chain COLOR FiELD,
Furniture and daily accessories chain DOUBLEDAY, etc.
Interview with the President* Seijo Ishii is operated under a franchise agreement with Seijo Ishii Co., Ltd.

Basic Information and Business Environment

Enhancing the appeal of our station-based retailingformats
Many of the retail formats and stores run by the Group’s Retailing
Business can expect comparatively stable sales revenues, thanks toManagement Organisation

The Group’s Retailing Business is mainly focused on stores inside
and near station buildings (the “Ekinaka” and “Ekichika” formats).
Outlets and operators include station kiosks such as Lagare, theconvenience store chain asnas, and formats run with partners. We
also run the bookstore chain Book 1st. and the general merchandise formats COLOR FiELD and DOUBLEDAY, and we are extending
their operations beyond areas served by our lines and boosting
their brand power and competitiveness.

their location within stations and their wide range of businesses.
These have been the strengths of the Group’s retailing operations.
However, our station-based retailing operations continue to facedifficult conditions. Train use has declined amid a worsening
employment situation and demographic change, with risingnumbers of senior citizens and a lower birth rate. In addition, thenumber of in-station shops at other railway operators is on therise, forcing our partner companies to be more rigorous in site
evaluation.
In response, we are working to boost the competitivenessand operating efficiency of our formats, while at the same timeenhancing the overall appeal of our station retail areas. One example is the launch of extensive renovation works at in-station shops
in Hankyu Umeda Station, the largest terminal in the Hankyu
network, to enable customers to get more out of their time at our
stations.

Core Business:
Overview and Outlook

Retailing formats primarily located inside and nearstations

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

asnas

Lagare shop

Seijo Ishii

COLOR FiELDDOUBLEDAY

Annual Report 2011

Financial Section

Book 1st.

49

Retailing

Basic Strategies
The Retailing Business will improve and enhance business infrastructure (in terms of product merchandising capacity, humanresources, IT environment, organisation, and logistics), and alsoachieve sustainable growth in each business. In pursuit of thisstrategy, it will be making improvements in the following important areas.
(1) Reinforce the earnings base by withdrawing from unprofitable or poorly performing stores and by rebuilding thestore network(2) Boost the competitiveness and operating efficiency of
our formats• Create new retail demand in stations through renovation of
in-station stores, and follow a more dynamic store-opening
policy• Strengthen our brand in areas beyond those served by ourlines (reinforce and overhaul the bookstore and generalmerchandise businesses)• Identify businesses with strong competitiveness anddevelop businesses that will contribute to growth

Performance for the Fiscal Year ended March 2011
Business expansion through new store openings,
but performance hurt by weak consumer spending
The Retailing Business opened a number of new stores in areas
served by our lines, including the asnas Umeda Hankyu Building
store, an asnas convenience store in the office tower at Umeda
Hankyu Building, the Cook Deli Gozen Katsura delicatessen at
Hankyu Katsura Station, as well as the Book 1st. atre Kichijoji
Higashi store and the DOUBLEDAY Tamaplaza-Terrace, a furniture and daily accessories store in Tokyo. It also developed retail
formats in areas away our station catchment areas. In addition, it

focused on strengthening competitiveness and improving profitability through renovation of established stores and withdrawal
from unprofitable stores.
As of 1st April 2010, revenues from operations in this segment declined ¥8,865 million or 14.1% year-on-year, to ¥54,008
million, mainly due to transfer of the food and drink businesses
operated by Creative Hankyu Co., Ltd. to the Hotels segment. The
segment posted operating income of ¥713 million, up ¥362 million or 103.2% year-on-year, due partly to improved profitability at
established stores.

Forecasts for Fiscal 2012 Onward
The impact of the Great East Japan Earthquake andtemporary business closures for renovation will
reduce revenue and earnings

Operating
Income(¥ billion)

4

75

66.3

Owing to weak consumer spending and shortening of businesshours following the earthquake disaster, as well as businessclosures for renovation of in-station stores for greater growth,
we forecast revenues from operations of ¥53,100 million, down
¥908 million or 1.7% year-on-year, and operating income of ¥300
million, down ¥ 413 million or 57.9%.

67.5
62.9

3

60

54.0

53.1

2

1.3

1.4
45

1

0.7
0.4

0

50 Annual Report 2011

Revenues fromOperations(¥ billion)

Revenues from Operations
Operating Income

0.3

2008/3 2009/3 2010/3 2011/3 2012/3(Est.)

30

Management Organisation
Our Business

Protecting Customer Trust, a Priceless Asset

Kazuo Sumi
President and Representative Director

Annual Report 2011

Financial Section

In this way, the Company aims to improve its supervision andoversight of all Group companies, and raise overall Group governance standards.
In further governance measures, our Board of Directors,
which includes external directors, receives reports with regard
to the above matters, and approves management decisions. The
Company has set up a Group Management Committee including
representatives of core businesses of the Group to undertake
preliminary reviews.
In addition to these initiatives, and as part of our efforts
to strengthen the Group’s overall capabilities, the Group is also
strengthening governance with regard to fund procurement.
Measures include centralising funding under the holding company, and ensuring that necessary funds are distributed within
specific parameters laid down in the business plans of the operating companies, as approved by the Company.

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Hankyu Hanshin Holdings, Inc. is a pure holding company, andconduct of operations is basically the responsibility of Group
member companies. Hankyu Hanshin Holdings’ principal role issupervision and oversight of the whole Group — meaning thatthese functions are separate from conduct of Group businesses.
Under this structure, the Company:
Takes decisions regarding Group management policy andstrategy;
Approves the medium-term and annual business planning of all
core businesses;
Requests reports on progress in management plans from time totime from the “operating companies” (that is, those that actually
run the businesses); andGrants approval in cases where a Group company takes actions
that significantly affect Group management (for example, wheninvestments rise above a certain threshold).

Management Organisation

Our Corporate Governance System

Core Business:
Overview and Outlook

Corporate GovernanceInterview with the President

Last year, a series of scandals was discovered at multiple railway companies in Japan. To avoid paying fares
when travelling on their own and other companies’
railways, certain railway employees abused theirprofessional authority in their processing of their own
electronic tickets.
This scandal was covered extensively in theJapanese media because of the highly public role ofrailways. Regardless of what Group business they
belong to, we sought to impress upon our employeesthat the wrongful conduct of certain individuals can in
one instant destroy customer trust that we have spentyears building up.
In recent years, when a scandal has broken out,
it has underlined the importance of compliance. The
word “compliance” is usually translated into Japanese

as “observance of laws,” but it goes without saying that
this is not simply a matter of avoiding legal infringement. Compliance does not simply mean “following
the law,” but also “acting in response.” Accordingly,
we consider compliance-focused management to be
management which fundamentally believes that trustis created by responding to the expectations of all
stakeholders including customers, business partners,
shareholders, regional communities, and employees.
To put this more precisely: this means, for example, setting in-house standards that are stricter thanthe legal standards, or making judgements strictly
based on an organisational ethic, even when there is
no legal infringement. This kind of attitude is precisely
what compliance demands in these times, and what
our stakeholders also expect.
There are no goals in our commitment to compliance. By realising their commitment to the concept ofsincerity, one of the core values of the Group, in theirwork, each employee from executive downwards willseek to pass on to their successors the trust of ourcustomers — that priceless asset that our predecessors
built up so painstakingly.
August 201151

Management Organisation

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

Appointment/
Dismissal of Auditors

Board of Directors
Full-time: 5

Call/Report on
execution situation

Part-time: 9(including 2 External
Directors)

Audit

Appointment/
Dismissal/Supervision

President

Board of Corporate Auditors
Standing Corporate
Auditors: 2
ReportReportAppointment/
Dismissal

ReportExternal Corporate
Auditors: 3

ReportAccounting Auditors(CPAs)

Cooperation

Cooperation Assistants to Auditors

Group Auditing Department

Call

Group Management
Committee
Participate

Participate(as observer)

Board of Directors
and Board of Corporate Auditors(including matters involving external executives)(1) Board of Directors
In fiscal year ended March 2011, the Board dealt with management
planning issues such as the amendment of the Medium-Term
Management Plan, and reviewed and gave approval for businessreorganisations, including of Hankyu Hanshin Card Co., Ltd. It also
issued reports regarding reforms to Group company management, changes to train timetabling at Hankyu Corporation andinvestment in station upgrades and large-scale developments.
It approved decisions for basic policy amendments to theinternal control system and issued progress reports.
The Board of Directors met eight times in the fiscal year
under review, with average attendance at 94% for Directors and
93% for Corporate Auditors.

(2) Directors etc.
Our Board of Directors has 14 members, and has an emphasis
on strengthening the flexibility of management and supervisory functions. Nine of these are part-time directors, including two
external directors, who bring to the table a wealth of independent
experience in corporate management. Our aim is to strengthen
our supervisory and oversight standards and raise the standard ofdecision-making.
By a decision of the General Meeting of Shareholders in June
2006, the term of office of directors was reduced to one year, toclarify management responsibilities following the introduction ofanti-takeover measures (prevention of large-scale Company sharepurchases).

(3) Board of Corporate Auditors
The Company employs the corporate auditor system to ensure
adequate management oversight. We have five Corporate Auditors,
who monitor the business operations and financial position of the

52 Annual Report 2011

Audit

Group Companies
Directors (representative of each core business)

Company and its subsidiaries, and audit the performance of theduties by the directors. Three of the five Corporate Auditors are
external, to provide an independent viewpoint and ensure a highdegree of professionalism in Group auditing. In this way, we areworking to further ensure sound decision-making in the conductof operations. We provide full backup to Corporate Auditors, forexample by involving them in the Group Management Committee
and other meetings within the Group.
The Board of Corporate Auditors meets once a month, inprinciple, to discuss and pass resolutions on important matters.
Specialist staff members are appointed to assist the
Corporate Auditors in the performance of their duties. To ensure
the independence of these staff members, prior discussions areheld with the corporate auditors over matters such as personnel
changes and evaluations.
The President of the Company holds regular meetings with
the Corporate Auditors to exchange opinions, and ratify decisions
regarding issues facing the Company, risks to which the Company
is exposed, progress in improving the environment for auditing
and major issues encountered by the Corporate Auditors in theperformance of their duties. Management must also hold discussions with the Corporate Auditors for amendment or deletionof any regulations pertaining to the functions of the Corporate
Auditors, such as matters involving corporate ethics.
As part of the auditing of the Group’s business operations, theCorporate Auditors peruse when appropriate auditing plans andresults of audits of the Group Auditing Department, composed ofinternal audit staff. The Corporate Auditors also receive from theGroup Auditing Department regular 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, they receive regular status reports fromthe accounting auditors (CPAs), and take part in on-site audits by
the accounting auditors at Group companies.

Our Business

Relations with External Directors
Name

Noriyuki Inoue(Independent
Director)(Independent
Director)

Representative director of 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 Federation. Appointed for his
wealth of management experience, perspective from top business circles, and ability to provide independent input. Meets criteria
for exercise of independent judgement stipulated by the stock exchanges, and there is no probability of a conflict of interest withgeneral shareholders.

* Mr. Noriyuki Inoue attended six out of the eight meetings of the Board of Directors held in fiscal year ended March 2011. He is able to provide the Company with pertinent and useful opinions, including at
meetings of the Board of Directors, based on his perspective as a business manager with extensive experience.
Mr. Shosuke Mori was appointed as an external director at the General Meeting of Shareholders held on 16th June 2010. He attended four out of the six meetings of the Board of Directors held in fiscal year
ended March 2011. He is able to provide the Company with pertinent and useful opinions, including at meetings of the Board of Directors, based on his perspective as a business manager with extensive
experience.

Interview with the President

Shosuke Mori

Reasons for appointment and possible conflicts of interest

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, perspective from top business circles, and ability to provide independent
input. Meets criteria for exercise of independent judgement stipulated by the stock exchanges, and there is no probability of aconflict of interest with general shareholders.

Relations with External Auditors
Reasons for appointment and possible conflicts of interest

Takaharu Dohi

Former prosecutor-general, currently a lawyer. Appointed to advise on more compliance-based management and for his ability toprovide independent input. Meets criteria for exercise of independent judgement stipulated by the stock exchanges, and there is
no probability of a conflict of interest with general shareholders.

(Independent
Auditor)

Haruo
Sakaguchi(Independent
Auditor)(Independent
Auditor)Currently a lawyer. Appointed to advise on more compliance-based management and for his ability to provide independent input.
Meets criteria for exercise of independent judgement stipulated by the stock exchanges, and there is no probability of a conflict ofinterest with general shareholders.
Former Professor of Business Administration within the Graduate School of Kobe University, currently President of the University ofMarketing and Distribution Sciences. Appointed for his ability to express useful opinions based on his high-level specialist expertisein business administration. Meets criteria for exercise of independent judgement stipulated by the stock exchanges, and there is noprobability of a conflict of interest with general shareholders.

* Mr. Takaharu Dohi attended seven out of the eight meetings of the Board of Directors held in fiscal year ended March 2011 and eleven out of the twelve meetings of the Board of Corporate Auditors. He isable to provide the Company with pertinent and useful opinions, including at meetings of the Board of Directors and of the Board of Corporate Auditors, principally in relation to compliance matters.
Mr. Haruo Sakaguchi attended eight out of the eight meetings of the Board of Directors held in fiscal year ended March 2011 and eleven out of the twelve meetings of the Board of Corporate Auditors. He isable to provide the Company with pertinent and useful opinions, including at meetings of the Board of Directors and of the Board of Corporate Auditors, principally in relation to compliance matters.
Mr. Junzo Ishii was appointed as an external auditor at the General Meeting of Shareholders held on 16th June 2010. He attended five out of the six meetings of the Board of Directors held in fiscal year ended
March 2011 and eight out of the nine meetings of the Board of Corporate Auditors. He is able to provide the Company with pertinent and useful opinions, including at meetings of the Board of Directors andof the Board of Corporate Auditors, from his perspective as an expert in management.

(1) Group Management Committee(2) Core Business Strategy Councils
Each core business has a Core Business Strategy Council, comprising the President, representative directors, the director in chargeof the Corporate Planning Dept. of the Company and executivesof each core business. The councils deliberate future business(3) The Group Presidents’ Meeting — Initiatives to foster
solidarity within the GroupThe Group Presidents’ Meeting, held twice a year, brings together
presidents of over 150 Group subsidiaries and affiliates. It is
designed to foster a deeper sense of solidarity within the Groupand ensure that the Group philosophy and management policies
permeate the whole organisation. Bringing together subsidiary
and affiliate presidents under one roof two times every year, theGroup Presidents’ Meeting aims to encourage a joint sense ofcommitment to the Medium-Term Management Plan. Awards
are made to subsidiaries that boost earnings or individuals andGroups that successfully launch initiatives or make significant
contributions at their units.

Annual Report 2011

Financial Section

The Group Management Committee, comprising full-time Directors(President, representative directors, head of Personnel and General
Affairs Dept. and head of Corporate Planning Dept.) and representatives of each core business, meets to discuss resolutions of
the Board of Directors, Group company management strategy andbusiness planning and systems and rules for maintenance of theholding company system, and major Group management matters,such as investments beyond set parameters and reorganisations.
During the year under review, the Group Management Committee
met 14 times.

development for each core business and discuss business plansand progress management (performance evaluation). Each Core
Business Strategy Council met three times in the year underreview.

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Other Deliberative Bodies

Management Organisation

Junzo Ishii

Core Business:
Overview and Outlook

Name

53

Management Organisation

Compensation for Directors
and Corporate Auditors
Our system for determining compensation for directors is designed
to incentivise contributions that enhance the Group’s enterprisevalue and business performance. In this system, compensation
comprises two elements: a basic portion determined according to
the post held by the director, and a bonus-type element linked tobusiness performance.
Half of the performance linked compensation is paid into afund used for acquisition of shares in the Company.
However, the compensation paid to part-time directors,
including external directors, and to corporate auditors, comprises
only the portion determined by post held.
The total compensation paid to directors and corporate auditors is kept within the total compensation amount approved by theCompany’s shareholders at the General Meeting of Shareholders.
Compensation for individual directors is determined by resolution of the Board of Directors, while compensation for individual
corporate auditors is determined by deliberation of Corporate
Auditors.
Note: The payment of retirement benefits to directors and corporate auditors was discontinued in
April 2004 in the interests of greater transparency in the compensation system.

Please note that the Company does not offer stock options to its
directors. However, stock options are offered to directors at subsidiary Hankyu Corporation. At a meeting of the Board of Directors,
on 16th June 2011, the Company approved the issue of new sharesubscription rights (stock options for compensation purchases) for
directors of Hankyu Corporation with the aim of further incentivising executives to work to improve business results over the longer
term and raise enterprise value, by allowing directors of subsidiary
Hankyu Corporation (excluding part-time directors) to benefit
from rising share prices while also sharing the same risk exposure
from falling share prices as our shareholders.

Compensation Paid to Directors and Corporate
Auditors (Fiscal Year Ended March 2011)

executives at the Company’s subsidiary Hanshin Electric Railway
Co., Ltd.
They have received additional compensation from eachcompany.

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

Early dispatchof notices ofconvocation

To allow shareholders sufficient time to
examine the items for resolution at theshareholders’ meeting before exercising
their voting rights, we endeavour to sendout the notices of convocation at the earliest
possible date. We sent out such notices on
27th May 2011, 20 days before the Regular
General Meeting of Shareholders.

Avoiding the“busiest day”
for shareholder
meetings

To enable as many shareholders as possible
to attend our general meeting of shareholders, we held our 2011 Regular General
Meeting of Shareholders on the 16th June,
13 days before the “busiest day” on whicha large proportion of Japanese companies
hold their general shareholders’ meetings.

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

Other

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

Investor Relations Activities

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

No. of recipients

Total paid out(Millions of yen)

15
(3)
6
(4)
21
(7)

116
(16)
17
(6)
133
(23)

*1 Recipients of compensation include one director and one corporate auditor who retired at
the conclusion of the General Meeting of Shareholders held on 16th June 2010.
*2 In addition to the above, compensation received by external directors and auditors fromsubsidiaries of the Company for their duties as directors and auditors, etc. amounted to ¥23
million for fiscal year ended March 2011.

Of the Company’s full-time Directors and Auditors, directors
Kazuo Sumi and Mitsuo Nozaki, and corporate auditor Hidekazu
Sugisawa are also senior executives at the Company’s subsidiary
Hankyu Corporation. Directors Shinya Sakai, Masao Shin and Toru
Nakashima, and corporate auditor Chikashi Suehara, are also senior

54 Annual Report 2011

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

Overview•••(1) Compliance Manual and Training Programmes
The Company’s Compliance Manual and Compliance Card express
the Company’s determination not to tolerate violation of laws orsocial norms or betrayal of customer trust, by any Group employee
from executives down. It also aims to raise awareness by pointing
out cases where compliance errors can easily be made.
The Company provides intensive compliance training on aGroupwide basis for new employees, midcareer hires and newly
appointed executives. In addition, all Group companies arrange
their own training programmes tailored to job grade and function,with the aim of further increasing compliance awareness.

(2) Corporate Ethics Consultation Desk (internal whistleblower procedures)(3) Establishment of risk management committees

Measures for Avoidance of Contact with
Antisocial Elements
To ensure compliance and protect the interests of the Company,
we have a basic policy of avoiding all contact with antisocial
elements that pose a threat to public order and safety, such as
criminal gangs and companies associated with them, and sokaiyaracketeers who disrupt shareholder meetings, and of never yielding to extortion. These policies are basic policies in our internal
control system and are clearly stated in the Hankyu Hanshin

Financial Section

We have set up a dedicated whistleblower hotline enabling all
employees to discuss or quickly bring to management’s noticesuspected or known legal violations and unethical conduct.
Business partners are also welcome to use this consultation andnotification facility, and when necessary we will use lawyers andother outside specialists to improve its effectiveness.

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility•

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

Management Organisation•

ComplianceCore Business:
Overview and Outlook•

Interview with the President

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,and revise it when deemed advisable.
As things stand, our internal control system is characterised
as follows.
A Group Management Philosophy was compiled following themanagement integration of Hankyu Holdings, Inc. and Hanshin
Electric Railway Co., Ltd., along with a Group mission (our goals),statement of values (what we consider important) 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 compilingand distributing a Compliance Manual, and have established a
dedicated whistle-blowing system.
We have established the Group Auditing Department, composedof internal audit staff under the direct control of the President,
for independent monitoring of Groupwide business activities. It
carries out internal audits into Hankyu Hanshin Holdings Groupand all its operating companies.
To create a structure for ensuring appropriate operations, theGroup vests powers of operational audit not only in its accounting auditors but also in corporate auditors of each Group
company, and at the same time provides guidance to smaller
Group companies on Board of Directors resolutions for creationof an internal control system.
Corporate Auditors and the Group Auditing Department receive
regular reports from the Risk Management Office with regard tocreation and operation of internal controls at the Company andits subsidiaries (including implementation status for risk management and promotion of compliance-based management
measures). Through such measures, they deepen their links with,and strengthen the role of, internal control departments.
With regard to systems for “Management Assessment and Audit
Concerning Internal Control Over Financial Reporting,” a sectionof the Financial lnstruments and Exchange Act, the Company
responds appropriately by carrying out management evaluations on a consolidated basis, in line with in-house rules.

Holdings Group Compliance Manual distributed among executives and employees of Group companies.
Specific measures include routinely strengthening communications with external organisations such as lawyers andthe police, and introducing into all contracts signed by Group
companies clauses that forbid contact with antisocial elements.
In addition to working to raise awareness of this issue throughinformation exchange and a range of employee training courses,
we are aggressively involved in regional activities and gatherings
aimed at rooting out antisocial elements.
When an incident does occur, we respond as a single
organisation, rallying round the department in charge, and workin partnership with outside experts.

Our Business

Internal Control System

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
at major Group companies such as Hankyu Corporation, Hanshin
Electric Railway Co., Ltd., Hankyu Hanshin Express Holdings Corp.
and Hankyu Hanshin Hotels Co., Ltd. At other companies we areappointing “compliance leaders,” to ensure our response is on aGroupwide basis.

Annual Report 201155

Management Organisation

Corporate Ethics Consultation Desk
Corporate
AuditorCorporate
AuditorReports

Consultation
Desk

Reports

Reports

President

Directs

Consultation
Desk

Reports

President

Approves/Directs

Reporting of investigation
progress and findings

Consultation
Desk

Risk Management

Overview of Group Compliancet Information to Group companiest Guidance and training
for Group companiest Risk managementt Risk Management
Committee secretariat
t Corporate Ethics Consultation Desk
(internal whistle-blower procedures)
t Internal auditing[Examples]

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

Compliance leaders

Hankyu Hanshin Holdings

Liaise with compliancedepartments ofhigher-level companies

AffiliatesorAffiliatesorHanshinElectric Railway

AffiliatesorAffiliatesorHankyu Hanshin
Express Holdings

Affiliates

Hankyu Hanshin
HotelsAffiliates

Hankyu Corporation

Affiliates

Affiliates
Cross-organisational companies

orMeasures to Prevent Takeovers
To secure and further enhance the enterprise value of theCompany, and therefore the common interests of its shareholders,
we believe that it is imperative to conduct business operations
from a medium- to long-term perspective, to build and maintaina relationship of trust with local government institutions andresidents in the areas served by our railway lines, and to place
the highest management priority on strengthening cohesion
and collaboration within the Group, so as to enhance the Group’s
comprehensive power.
For this reason, we have introduced a system to prevent a
takeover of the Company whereby, in the event of the appearanceof a potential buyer of the Company that wishes to raise theirstake above 20% or more of the Company’s outstanding shares,

56 Annual Report 2011

new share subscription rights are granted to shareholders whoare, de facto, shareholders other than the potential buyer, toconfirm a potential buyer’s intention. This system was approved at
the General Meeting of Shareholders held on 17th June 2009, andremains in effect for three years.
For more details (in Japanese) of the Company’s basic policies regarding governance of joint-stock companies including
takeover prevention measures, please see:
http://holdings.hankyu-hanshin.co.jp/ir/topics/data/
KS200906173N3.pdf

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 are overhauled from time to time. We evaluate
the likelihood of materialisation of each risk and its frequency, as
well as the extent of impact in the event of materialisation andits importance. On that basis, we draw up measures to preventthe 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 of risk 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 theeffective transmission of information in the event of unforeseen
circumstances. Under this system, in the event of materialisation ofa risk, executives and employees immediately take risk-mitigation
measures as specified in the above-mentioned documentationand other measures to prevent the further spread of the impact.
They also submit reports to pre-appointed risk management
liaison personnel.
The Company provides supervision to all companies in theGroup so that the same system is operated by them all, and has
set up a system enabling the transmission to the Company ofaccurate 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 a minor mistakes andproblems 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, bycontinuing to meticulously train staff, and share and analyse data.
Such painstaking efforts to forestall even one human error is oneof the foundation stones on which the Company ensures safety ofoperations and meets public expectations.
In the following pages, readers will find a summary of the safety
management systems at Hankyu Corporation and Hanshin Electric
Railway, both of which our major private sector railway operators.

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

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

■ Maximum priority on safety
The president, directors and employees shall do whatever
they can to ensure safety of operations, based on the understanding that putting the highest priority on ensuring safety
is the mission of railway businesses.
■ Compliance with laws and regulations
The Company shall comply with all laws and regulations
related to safety and apply them rigorously and sincerely in
its operations.
■ Maintenance of safety management systems
The Company shall implement continuous verification
procedures to ensure safety management systems areoperating appropriately.

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

Interview with the President

Hankyu Corporation Safety Policy (Code of Conduct)* Only titles for Code of Conduct items have been shown due to space restrictions. The full Code of
Conduct provides detailed explanations for each item.

Management Organisation

첸 Transport Safety Organizations
Organisation Chart(Hankyu)

Organisation Chart(Hanshin)President
Directors

President
Directors

Urban Transportation
Business

Railway Safety Council

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

Manager,
Transport Division(Chief Train Operations
Manager)Manager,
Takarazuka Line Operations

Manager,
Technical Division(Chief Civil Engineering
Facilities Manager)

Manager,
Technical Division(Chief Electrical
Facilities Manager)

Manager,
Technical Division(Chief Rolling StockManager)

Chief Train
Operations Manager(Manager,Transport Division)

Manger,Electrical Division

Manager,
Rolling Stock Division

Manager,Engineering Division

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

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

Manager,
Kyoto Line Operations

Position

Financial Section

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

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

Role

President

Ultimate responsibility for ensuring transport safety

Chief Safety Manager (Head of Urban Transportation Business)

Responsible for overseeing all activities related to ensuring transport safety

Chief Train Operations Manager (Manager, Transport Division*)

Responsible for managing all aspects of safety related to train operations, under the directionof the Chief Safety Manager

Chief Crew Training Manager(Hankyu: Deputy Operations Managers of each line;
Hanshin: Heads of East and West Rolling Stock Yards)

Responsible for ensuring all crew are properly qualified (appropriate qualifications, knowledge
and skills), under the direction of the Chief Train Operations Manager

Other Safety Managers

Individuals in each division responsible for ensuring facilities under their management do not
act as an obstacle to transport safety, under the direction of the Chief Safety Manager* In the case of Hankyu Corporation, this role is filled by the Manager or Deputy Manager of the Transport Division.

Annual Report 201157

Safety Management System

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

Creation of safety control
plans and systems

Plan
P
la

Formulation of annual plans, etc.
(Safety policy for each fiscal year withinitiatives targeting specific areas)

Safety management
regulationsDoDo

Safety management
implementation andoperation

1
2
3

Providing and sharing
information
Education and training
Equipment initiatives
and inspections

Continuous
Continuo
nuous impr
improvement
rovveement

Define policies to adhere to in business
operations to ensure safe transport
operations, as well as specific initiatives,
management systems and methods forthe implementation of these policies

Safety management
and operational checks

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

Act
A
c

Check
e ck

4
5

Internal audits
Evaluation of transport
safety management
by MLIT

Revisions to the Railway Business Act in October 2006 required railway companies to create new safety management systems dedicated to transport safety. Under our new safety management system, we are targeting evenhigher levels of safety by applying the PDCA cycle, ensuring compliance with all related laws and regulations,conducting operations that place the highest priority on safety, and fostering greater awareness of safety issues
among our employees.
Below, we explain in more detail points 1 – 5 in the above diagram.

1

Providing and Sharing Information

Hankyu Corporation■

Safety Management and Promotion Committee—Information Sharing System
The system shown below has been set up to ensure a range of information related to transport safety is shared by all divisions.
Companywide Safety Management
and Promotion Committee
Head Office Safety Management and Promotion Committee
Group Safety Information Liaison Team(Rail, Bus, Taxi and Shipping)Transport Division
Safety Management andPromotion Committee

Safety Management andPromotion Committee Office

Technical Division (Civil
Engineering Facilities)
Safety Management
Promotion Committee

Technical Division(Electrical Facilities)
Safety Management andPromotion Committee

Technical Division(Rolling Stock)
Safety Management andPromotion Committee

Front-Line Operations in Each Division

58 Annual Report 2011

Executive Safety Meeting(Group Railway Businesses)

Other Divisions

Our Business■

Enhancing Information Sharing and Communication (Key Initiatives)

Opportunities to share opinions during inspections
by the president and the heads of divisions

Free discussion meetings

Aware that communication and cooperation between front-line
operations in each division is vital to maintaining and improving
workplace safety, we began holding “management area meetings”
from the year ended March 2011 to improve communication andinformation sharing between front-line personnel in divisions
responsible for train operations, civil engineering facilities, electrical facilities and rolling stock.

Core Business:
Overview and Outlook“Free discussion meetings” arealso held during visits by thepresident or the head of the Urban
Transportation Business to provide

Management area meetings

Hanshin Electric Railway■

Information Sharing through the Railway Safety Councilof these accidents, safety incidents, and potential accidents andnear misses. Based on the results of this analysis, it formulates
countermeasures to prevent reoccurrence, and issues instructions
to the Railway Safety Liaison Team* and related divisions.
* Railway Safety Liaison Team: Comprising managers from each railway business division, this team is responsible for sharing information about operations, accidents,
and issues in each division, and discusses and reviews causes and measures toprevent recurrence.

Management Organisation

In principle, Hanshin Electric Railway holds meetings of its Railway
Safety Council twice every month. The Council is chaired by thehead of the Urban Transportation Business, and its members
are made up of other managers from within this business. The
Council hears reports from relevant managers regarding accidents, safety incidents, and potential accidents and near misses,
and shares information about these reports. It analyses the causes■

Interview with the President

During inspections by the president, the head of the Urban
Transportation Business and other managers, meetings abouttransport safety are held to give senior managers a better pictureof the situation in front-line operations and to enhance communication with managers on the front line. This is part of wider
efforts to create a more open corporate culture.

an opportunity to share opinions, without any predetermined
topic. Such discussions are not restricted to operational issues andare designed to promote smooth communication regardless of
employee position or business division.

Ensuring the Information Sharing System Continues to Function Properly2

For incidents that were caused by human error, each divisionand the Railway Safety Liaison Team assess the effectiveness ofmeasures to prevent any recurrence and report where necessary to
the Railway Safety Council. This approach has given the Company agreater capability to assess the effectiveness of countermeasures.

Financial Section

Education and Training

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Hanshin Electric Railway endeavours to ensure active communication with employees on a daily basis, with details fed back to
the front lines when the causes of accidents, safety incidents, andpotential accidents and near misses are identified and countermeasures developed.

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

Joint Drills: Hankyu Corporation* In 2010, drills were conducted to prepare for a possible terrorist attack on the rail network. These drills included joint exercises with police and fire services to improve information sharing, and evacuation andemergency life-saving drills.

Annual Report 201159

Safety Management System

Emergency Drills: Hanshin Electric Railway

An exercise to return a derailed train to the tracks

An exercise to repair overhead power cables

In May 2009, Hankyu Corporation opened a safety awarenessroom at its driver and conductor training facility. This initiative waspart of efforts to ensure lessons learnt from past accidents are notforgotten. The booth can give employees the opportunity to learn
about safety through case studies of past accidents, including
those that occurred at other companies, and the developmentof safety devices and regulations in the rail industry. Visits by all
employees and Group company employees involved in transport
safety have already been made, and we plan to continue making
effective use of these facilities in the future.

3

Safety awareness room
(Hankyu Corporation)

Safety awareness room
(Hankyu Corporation)

Equipment Initiatives and Inspections

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

Overpass and underground construction work
Both companies arepushing ahead with theconstruction of multiple rail
overpasses to reduce thenumber of level crossingsand improve traffic flownear train lines. Elevated orunderground sections now
account for large portions of Hanshin Electric Railway’s Hanshin
Main Line (87%) and its Hanshin Namba Line (90%), including the
new extension from Nishikujo Station to Osaka-Namba Station. This
work to raise the tracks has led to a marked drop in the number oflevel-crossing accidents.

Controlling rail traffic with automatic signal, point
and signage systems
Both companies utilise computer-based systems to control rail traffic.
Hankyu Corporation uses the Total Traffic Control (TTC) system, while
Hanshin Electric Railway uses the Programmed Traffic Control (PTC)
system. The companies’ TTC and PTC centres automatically control
signals, points, and platform signs and announcements based on preprogrammed information for all trains and stations (such as departure
times, line numbers, destinations, and train types). The computers at

60 Annual Report 2011

the heart of these systems (central control systems, PTC computers)
are systemised with multiple backups and inbuilt redundancy toensure a high level of reliability in the event of a problem.

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

Continuous Speed-Checking Type ATS System:
Hankyu Corporation’s Continuous Speed-Checking ATS System
Under

115km/hUnder

Train speed

70km/hUnder

50km/hUnder

30km/hUnder

ProceedsignalControl point

Cautionsignal20km/hStopsignalControl point

Our Business

Both companies are also working to improve safety by
installing ATS equipment on sharp curves and branches in lines toprevent derailments caused by excessive speed.

Initiatives to improve level crossing safety
ATS pickup

ATS indicator in driver’s cab

Speedometer in driver’s cab

Hankyu Corporation and Hanshin Electric Railway have installed
obstacle detection systems at all vehicular level crossings toprevent accidents. The system’s optical or laser sensors detect any
vehicle that becomes stuck on a level crossing ahead of a train
and automatically triggers a stop signal, thereby warning the train
driver of a problem ahead.

Initiatives to improve platform safety

Internal Audits

Financial Section

5

Managers (from Head of the Urban Transportation Business down)
undergoing interviews conducted by officers with experience as
Chief Safety Managers.
Meanwhile, Hanshin Electric Railway has created checksheets to verify the effectiveness of these internal audits in order
to assess auditors’ understanding of the audits. This process
has shown that the audits are being conducted in an effective
manner.
The skills of personnel who conduct the audits are key tothe success of the internal audit process. We therefore conduct
an ongoing training program for these personnel to improve theaccuracy of internal audits.

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

In order to reinforce their safety management systems, Hankyu
Corporation and Hanshin Electric Railway conduct internal audits
to verify the status of safety management measures.
Both companies conduct internal audits of their train operation, civil engineering (workshop) facility, electrical facility, androlling stock divisions in accordance with guidelines set out by
the Ministry of Land, Infrastructure, Transport and Tourism (MLIT).
The results of these audits are reflected in annual action plans,
and if improvements are required, each division formulates andimplements remedial measures.
Hankyu Corporation takes an even more rigorous approachto ensure its safety management system appropriates properly,with personnel including the President or current Chief Safety

Management Organisation

4

Hankyu Corporation and Hanshin Electric Railway have both
adopted a range of measures in the event that passengers fall
onto or enter the line from the platform. These include emergency
train stop buttons on the platform, mats that detect obstacles
that have fallen onto the line, spaces under the platform to allow
people to move out of the way of approaching trains, and steps
that lead back up to the platform.
When the emergency stop buttons are activated or the matsdetect an obstacle, warning lights and sirens on the platform aretriggered and trains are stopped, ensuring safety. Since fiscal 2010,
Hankyu Corporation has also been installing platform emergency
stop buttons that work in tandem with ATS systems in an effort tofurther improve platform safety.

Core Business:
Overview and Outlook

In an effort to further improve safety, Hankyu Corporation has been
adding a new pattern control system to its existing ATS equipment.
This new control system is aimed at preventing excessive speed
through level crossings, failure to stop at designated stations, andcollisions in which a train runs into the end block of lines. Thissystem is already in operation on the Kobe Line and the Kyoto Lineand is currently being rolled out on the Takarazuka Line.
Hanshin Electric Railway is working to prevent trains fromfailing to stop at designated stations. Informationfrom equipment that identifies train types is used
to trigger RED sign as trains which are supposed
to stop approach the station, while ATS equipment
automatically slows down the train if its speed
exceeds the limit set for entry into the station.

Interview with the President

Obstruction signal

Evaluation of Transport Safety Management by MLIT

MLIT assess the status of safety management systems at Hankyu
Corporation and Hanshin Electric Railway through their evaluationof transport safety management.
Under this process, MLIT check whether transport businesses
have put in place appropriate safety management systems andevaluate the operational status of these systems in accordancewith predetermined guidelines. Inspectors from MLIT conduct
interviews with senior managers, safety officers and other individuals that have important roles in the safety management system.
Based on these interviews and supporting documentation, MLIT
verifies and evaluates the performance of the systems and issues
directions on any necessary improvements.

Annual Report 201161

Directors and Corporate Auditors (As of 16th June 2011)
Directors

Kazuo Sumi
President andRepresentative Director

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

Shinya Sakai
Representative Director

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

Noriyuki Inoue

Shosuke Mori

Isao Matsuoka

Director (External*)

Director (External*)

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

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

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

Shunichi Sugioka

Takaoki Fujiwara

Hiroshi Ojima

Director (Part-time)

Director (Part-time)

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

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

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

Corporate Auditors

Hidekazu Sugisawa

Chikashi Suehara

Takaharu Dohi

Standing Corporate Auditor

Standing Corporate
AuditorCorporate Auditor(External*)

1971 Joined Keihanshin Railway
2001 Standing Corporate Auditor, Hankyu Corporation(Current position)2005 Standing Corporate Auditor, Hankyu Holdings
2006 Standing Corporate Auditor, Hankyu Hanshin Holdings(Current position)

62 Annual Report 2011

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

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

Our Business

Tomokazu Yamazawa

Nobuo Minami

Koichi Kobayashi

Director (Part-time)

Director (Part-time)

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

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

Masao Shin

Tsuneo Wakabayashi

Director

Director

Director

Head of Personnel andGeneral Affairs Dept.

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

Head of Corporate Planning Dept.

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

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

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

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility* Mr. Noriyuki Inoue and Mr. Shosuke Mori satisfy the qualificationsof external directors as provided in Article 2, Paragraph 15 of the
Corporate Law.

Management Organisation

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

Core Business:
Overview and Outlook

Mitsuo Nozaki

Interview with the President

1971 Joined Keihanshin Railway
2000 Director, Hankyu Corporation
2002 President, Dai-ichi Hankyu Hotels
2005 President, Hankyu Hotel Management
2007 Director, Hankyu Hanshin Holdings (Current position)2008 President, Hankyu Hanshin Hotels (Current position)

Financial Section

Haruo Sakaguchi

Junzo Ishii

Corporate Auditor(External*)

Corporate Auditor(External*)

1958 Lawyer (Current position)
1989 Vice Chairman, Japan Federation of Bar Association
2006 Corporate Auditor, Hankyu Holdings
2006 Corporate Auditor, Hankyu Corporation(Current position)
2006 Corporate Auditor, Hankyu Hanshin Holdings(Current position)

1986 Professor of Faculty of Commerce, Doshisha University
1989 Professor of Business Administration, Kobe University
1999 Professor of Business Administration, Graduate Schoolof Kobe University
2008 President of the University of Marketing andDistribution Sciences (Current position)2010 Corporate Auditor, Hankyu Hanshin Holdings(Current position)* Mr. Takaharu Dohi, Mr. Haruo Sakaguchi, and Mr. Junzo Ishii satisfy
the qualifications of external corporate auditors as provided in
Article 2, Paragraph 16 of the Corporate Law.
The Company has submitted notifications to the stock exchanges
on which its shares are listed, naming Mr. Takaharu Dohi, Mr. Haruo
Sakaguchi, and Mr. Junzo Ishii as external (independent) auditors.

Annual Report 201163

Corporate Social Responsibility — Social Contribution & Environmental Protection Activities
첸 Social Contribution Activities
Promoting the Hankyu Hanshin Dreams andCommunities of the Future project
To contribute more effectively to the
public interest and local community
as a Group, we launched the Hankyu
Hanshin Dreams and Communities of
the Future project in April 2009. Throughthis initiative, we help build local communities that are a joy to live in.

[Basic Policy]
For over 100 years, the Hankyu Hanshin Holdings Group hasgrown with the local community, primarily in areas along its
railway lines, and built up relations of mutual trust. To ensurethat the Group will continue to exist and prosper over the
next century as a member of the local community, we intend
to promote the creation of towns and cities in all the areas
where we operate — principally in the areas served by ourrailway lines — in which people will truly want to live,
and realise a Groupwide commitment to corporate social
responsibility.

Priority area: Environmental and humancapital development that will beof future benefit
In our view, “communities” depend on two things: the local environment and people — that is, human capital. To bring about
a better local environment, we are committed to sustainablecommunity-building with environment-friendly developmentsthat provide local residents with security, peace of mind and cultural enrichment. With regard to people, we are creating opportunities for the healthy development of ambitious children, upon
whose shoulders the task of building the communities of the
future rests. Based on these basic policies and priority areas, weoperate the following three programmes for partnership among
stakeholders (companies, communities and employees).

The Hankyu Hanshin Dreams and Communities of the
Future project
1. Fostering social
contribution activities at
Group companies(companies)
2. Hankyu Hanshin
Dreams and Communitiesof the Future Fund(communities(NPOs etc.))

64 Annual Report 2011

3. Points-basedsocial contribution
activities(employees)(1) Fostering social contribution activities at Group companies
Among the social contribution activities by Group companies,
activities tying in with the above basic policy are identified as
Dreams and Communities of the Future project activities, to be
pursued by the whole Group on an ongoing basis, with Hankyu
Hanshin Holdings Inc. providing support with PR and sponsorship.

Initiative: Storytelling sessions for kids
To develop young minds for the next generation and introduce themto the joy of picturebooks, Hankyu Retails holds storytelling sessionsfor kids at Book 1st. book stores in Umeda and other locations.

(2) Hankyu Hanshin Dreams and Communities of the Future
Fund for support of citizens’ activities
To foster cooperation with citizens’ groups in the areas served
by our lines, contributions collected from employees are added
to the Fund, and grants are distributed to citizens’ groups oncea year. Hankyu Hanshin Holdings matches employee donations
by an equal amount and transfers the donations to the citizens’
groups. In fiscal 2011, the second year of the project, a selection
panel awarded ¥500,000 to each of the ten groups.

Initiative: Sponsoring NPO Kyoto Green Fund (Kyoto City)(natural energy promotion and environmental education)
Funded by donations from ordinary citizens, Kyoto Green Fundinstalls “Ohisama Hatsudensho” solar power
units in kindergartens and similar facilities,
and organises climate change prevention
events and environmental study for children
based on these units. At the same time, theFund helps spread awareness of naturalenergy and works for a sustainable society.
(3) Points-based social contribution activities for employees
and former employees
This programme grants points for volunteering activities
by individual or former employees and participation in social
contribution-themed seminars. Points can be exchanged for Fair
Trade products or plantation seedlings, or translated into donations to citizens’ groups.
For more detailed information on the Hankyu Hanshin
Dreams and Communities of the Future project, please
visit this (Japanese-language) website:
http://www.hankyu-hanshin.co.jp/yume-machi/Our Business첸 Environment Protection(4) Measures to help protect the natural environment— Donation of environmentally-friendly toilets, andforestry protection
In measures to help protect thenatural environment, Hank yu
Travel International has donatedenvironmentally-friendly toilets,that use bacterial techniques tobreak down human waste, to theJapanese tourist areas of Yakushimaisland, Kumano-Kodo, Shiretoko and Rebun island. Likewise,
Hankyu Hanshin Express Holdings group has, in partnership withlocal governments, organised ongoing forestry thinning work,
carried out by Group employees at four locations around Japan.

(5) Measures to help protect the natural environment— Greening activities

Financial Section

In March 2010, Hanshin Koshien Stadium switched on the solar
panels installed on its “silver umbrella” roof cover. Their output infiscal 2011 was around 220,000kWh, enough to keep the lights on
during night games for one year at the stadium. This and otherinitiatives in Hyogo earned the Group the prefecture’s 11th AozoraAward.

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility(2) Measures to help prevent global warming— Installation of solar panels at Hanshin Koshien
Stadium

In developing commercial facilities, we proactively introduce
rooftop- and wall-greening. The public garden built into the roofof Hankyu Nishinomiya Gardens was selected to go on the listof “100 Corporate Greenspaces Helping to Preserve Biodiversity,”
organised by a Japanese green space foundation.
Meanwhile, Hankyu Hanshin Hotels is a member of the
Yellow River Forest Green Network, an accredited Japanese nonprofit organization which aims to promote greening and protect
the environment. It is involved in the greening support activities
in the barren Huangtu (yellow earth) Plateau in China.

Management Organisation

We opened Japan’s first carbon neutral station, the Settsu-Shi
Station on the Hankyu Kyoto Line, on March 2010. The station
features solar panels, LED lighting and other environmental
equipment that results in roughly half the CO 2 emissions of atypical station. The remaining CO2 emissions are offset throughemission credits earned by planting forests in Hyogo Prefecture.
This initiative has received many awards including the Japan
Railway Awards (Special Prize) and the Osaka Environmental
Awards (Grand Prize).

As of September 2011, Hankyu
Bus Co., Ltd. ran four of its
buses purely on biodiesel fuels
refined from used edible oils.
The oil is collected from Group
hotels and elementary schools
in Ikeda City.

Core Business:
Overview and Outlook

Initiatives(1) Measures to help prevent global warming— Carbon neutral Settsu-Shi Station(3) Measures to reduce waste and encourage resource
recycling — Biodiesel buses
Interview with the President[Basic concepts]
Mindful that global environmental protection is a task facing
all mankind, the Hankyu Hanshin Holdings Group works for asustainable society through environmental activities aimed athanding down a sounder global and human environment to
the next generation.

For more detailed information on the environmental
activities of the Hankyu Hanshin Holdings Group, please
visit this (Japanese-language) website:
http://holdings.hankyu-hanshin.co.jp/eco/

Annual Report 201165

Consolidated Six-Year Summary Six years ended 31st March(Thousands of U.S. dollars)*1(Millions of yen)2

2006/3

2007/3*

2008/3

2009/3

2010/3

2011/3

2011/3¥486,154¥743,376¥752,300¥683,715¥653,287¥638,770$7,696,024

Operating income

64,84187,00390,724

77,82370,12664,743780,036

3

EBITDA*

94,500146,500

145,200

135,300

133,200

127,100

1,531,325

Income before income taxes and minority interests

43,21665,30526,09834,06433,89932,760394,699

Net income

25,326

36,619627

20,55010,79318,068217,687

—

—

—

—

12,541

14,728

177,446

Capital expenditure

52,09053,795

134,307

109,688

132,386

68,431

824,470

Depreciation and amortisation

29,61143,88851,57754,79860,41859,669718,904

Cash flows from operating activities¥80,229¥ 78,981¥ 74,902¥108,597¥146,955¥103,252$1,244,000

Cash flows from investing activities(43,199)(199,578)(100,058)(115,047)(132,737)(62,516)(753,205)

Cash flows from financing activities(61,960)

132,289

36,718

7,014(24,200)(39,544)(476,434)

Increase (decrease) in cash and cash equivalents(24,484)

11,791

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

474

5,711

Cash and cash equivalents at end of year

28,37540,166

31,16630,69021,44022,592

272,193

Result of Operations:
Revenues from operations

Comprehensive income

Cash Flows:

Financial Position:¥1,609,116 ¥2,366,694 ¥2,348,476 ¥2,307,332 ¥2,337,331 ¥2,314,669 $27,887,578

Total assets
Total net assets

360,221522,286

476,639

473,878

480,633

486,947

5,866,831

Interest-bearing debt

889,615

1,209,382

1,271,100

1,275,620

1,282,583

1,251,665

15,080,301

Net income—Basic¥ 25.36¥ 31.84¥ 0.50¥ 16.28¥ 8.55¥ 14.32$0.17

Net income—Diluted

25.22

—

0.41

16.18

8.51

14.27

0.17

Net assets

343.45405.35369.25366.96371.70377.17

4.54

Dividend

5.00

5.00

5.00

5.00

5.00

5.00

0.06

Per Share Data (yen and U.S. dollars):

Ratios:

13.3

11.7

12.1

11.4

10.7

10.1

—

4

ROA (%)*

4.0

4.4

3.8

3.3

3.0

2.8

—

5

7.9

8.4

0.1

4.4

2.3

3.8

—

Operating income margin (%)

ROE (%)*

8

Interest-bearing debt/EBITDA (times)

9.4

8.3*

8.8

9.4

9.6

9.8

—

Equity ratio (%)

22.4

21.7

19.9

20.1

20.1

20.6

—

Debt/equity (D/E) ratio (times)*6

2.5

2.4

2.7

2.8

2.7

2.6

—

7

4.4

4.5

4.0

3.4

3.0

3.0

—

1,049,538

1,271,406

1,271,406

1,271,406

1,271,406

1,271,406—

13,31920,49819,89220,80520,93821,302—

Interest coverage ratio (times)*
Others:Number of outstanding shares (thousands)
Number of employees*1 The U.S. dollar amounts have been translated, for convenience only, at ¥83 = $1, the prevailing exchange rate on the Tokyo Foreign Exchange Market as of 31st March 2011.
*2 From the second quarter of the fiscal year ended 31st March 2007, consolidated results of Hanshin Electric Railway Co., Ltd. are included as a result of management
integration, in the scope of consolidation of the Group.
*3 EBITDA = operating income + depreciation expenses + amortisation of goodwill attendant on the management integration of Hankyu and Hanshin
EBITDA figures are rounded to the nearest ¥100 million.
Figures in 2007/3 were calculated assuming the management integration had entered effect from the beginning of the term.
*4 ROA = operating income/total assets (average of period-start and period-end totals)*5 ROE = net income/equity (average of period-start and period-end totals)*6 D/E ratio = interest-bearing debt/equity*7 Interest coverage ratio = (operating income + interest and dividend income)/interest expense*8 EBITDA is calculated assuming the management integration at the beginning of the term.

66 Annual Report 2011

Message from the Management
and Accounting Executive Team
Our Business

Tsuneo Wakabayashi

Director

Director

Strategy for high shareholder value: Reinforcing our financial position and improving capital efficiency,
to boost our ability to generate cash flow through large-scale projects.
standing as these large-scale projects begin to contribute to profit-

years 2008-2013, the Group has set itself three basic strategy tasks:

ability and strengthened cash flow, from which we will reduce thestrengthening competitiveness and raising profitability across all

interest-bearing debt burden. Accordingly, we expect interest-

businesses, rigorously pursuing and realising the benefits of inte-

bearing debt on a consolidated basis to peak at the end of fiscal

gration, and improving our financial standing and return on assets.

2010, at ¥1,282.6 billion.
Since the collapse of Lehman Brothers in the autumn of 2008,

are focusing investments on large-scale projects that will secure the

cash flow (consolidated EBITDA) has fallen short of forecasts in the

future of the Group. These include projects expected to generate2007 Medium-Term Management Plan, due mainly to the slow pacehigh returns through better use of existing land resources (rebuild-of economic recovery in the Kansai region so central to the Group’s

ing of Umeda Hankyu Building and Hankyu Nishinomiya Gardens),

business activities. That means it will likely be difficult to achieve

as well as social infrastructure projects like the Hanshin Namba Linethe fiscal 2013 targets in the plan of a consolidated interest-bearing

and the Hanshin Koshien Stadium which are expected to show

debt/EBITDA ratio of seven times and a consolidated return on

medium-term growth. These investments, aimed at improving

equity of at least 6%. However, we have made no change to ourcompetitive strength and profitability across all our businesses,

financial plans with regard to improving our financial standing

are happening concurrently, and have accordingly increased ourand capital efficiency for higher shareholder value, in light of theinterest-bearing debt on a consolidated basis.

expectation of increased cash flow from the above-mentioned

By contrast, in the second three years of the plan (fiscal years

major projects in and beyond fiscal 2014.

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

During the first three years of the plan (fiscal 2008-2010), weManagement Organisation

In the 2007 Medium-Term Management Plan covering the fiscal

Core Business:
Overview and Outlook

Financial Policy

Interview with the President

Masao Shin

2011-2013), we expect to see some improvement in our financial
Financial Section

Returning profits to shareholders
The Group regards return of profits to shareholders as an important

2011 was kept at ¥5 per share as in the previous fiscal year, andmanagement priority. However, in light of the above-mentioned

the same payout is planned for the coming fiscal year ending 31stefforts to improve our current financial standing, we are currently

March 2012.

following a basic policy of paying out a stable minimum annual

We will review our shareholder returns policies including thedividend of ¥5 per share. Other free cash flow will be used to meet

dividend policy when we are more confident of earnings stability

potential funding requirements for improvement of competitive-

and improved financial standing, firmly underpinned by the full-ness in our core businesses, and to improve our financial standing.

fledged launch of the rebuilt Umeda Hankyu Building and otherAccordingly, the dividend for the fiscal year ended 31st Marchlarge-scale projects.

Annual Report 201167

Consolidated Financial Review■ Analysis of Operating Results for the Year Ended 31st March 2011
Revenues from operations during the year under review decreased

million, partly on increased property and equipment disposal costs

year-on-year by ¥14,517 million (2.2%) to ¥638,770 million. Despitein the Urban Transportation business, which outweighed the gains

a corrective increase following the H1N1 flu scare and the global

from cost-cutting drives across core businesses.

economic slowdown of the previous fiscal year, sales performance

Net income jumped by ¥7,275 million (67.4%) to ¥18,068

was dragged down by a substantial decline in condominium unit

million, owing mainly to a reduction in extraordinary losses, asales in the Real Estate business (a reaction to the surge in major-

correction from the extraordinary losses recorded in the previous

project completions and deliveries in the previous term), and thefiscal year for one-time amortisation of the amount equivalent toimpact of the Great East Japan Earthquake on operations particu-

goodwill of an affiliate under the equity method.

larly in the Travel, Entertainment and Communications, and Hotels
businesses. The impact of the earthquake is estimated at ¥4.1 billion

Summary of consolidated business results: please also see Interview

on revenues from operations and ¥3.4 billion on operating income.

with the President (Business Environment and Results) on Page 23.

Operating income declined by ¥5,383 million (7.7%) to ¥64,743
Analysis of Operating Income(¥ million)

70,126

2010/3−14,517

Reduced revenues from operations
Decrease inoperating expenses
and cost of sales+9,002

Reduced depreciation and+754
amortisation
Decrease in operating expenses andcost of sales of transportation
Increase in personnel expenses

Decrease in selling, general andadministrative expenses+131

Decrease in expense and taxes+8,247−170+315

Increase in depreciation and amortisation −5
Increase in amortisation of goodwill −7

64,743

2011/3

YoY difference−5,383■ Segment Information
The following table shows business performance for each core segment. For a review of these results, please refer to the page indicated at thefoot of the table.
(Millions of yen)

Urban
Transportation

Real EstateEntertainment
Travel andandInternational
Communications Transportation

2011/3

192,947

152,730

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

638,770

2010/3

191,872

168,451

107,852

62,85460,97762,874

39,594−41,189

653,287

Difference

1,075−15,721−4,445

4,856

4,243

−8,8654,315

25−14,517

YoY (%)

0.6%

−9.3%

−4.1%

7.7%

7.0%

−14.1%

10.9%

0.1%

−2.2%

2011/329,37823,996

9,994

2,952

−639

713

450

−2,10364,743

2010/331,00830,938

11,068340−1,674351

538−2,44570,126

Difference−1,629−6,942−1,074

2,611

1,034

362

−87

342

−5,383

YoY (%)−5.3%−22.4%−9.7%

766.2%

61.8%

103.2%−16.3%

14.0%

−7.7%

Reference page

P. 35

P. 41

P. 43

P. 46

P. 48

P. 50

*

—

—

HotelsRetailing

Other

Adjustments

Consolidated

Revenues from operations

Operating income* Revenues rose in Hotels and fell in Retailing due to changes in segmentation.
* Revenues in Other rose from the addition of newly consolidated subsidiaries Hankyu Hanshin Card Co., Ltd. and Hankyu Hanshin Insurance Services Co., Ltd., but fell at
Hankyu Hanshin Card due to increased costs for increasing STACIA card holder numbers.

68 Annual Report 2011

Our Business■ Review of Financial Position
2. Cash Flows

Total assets at the end of the fiscal year under review decreased

Cash and cash equivalents increased ¥1,152 million from the previ-by ¥22,662 million from the previous term-end to ¥2,314,669 mil-ous term-end to ¥22,592 million. Net cash provided by operating

lion due partly to a net decrease in trade receivables. Liabilities

activities totalled ¥103,252 million, net cash used in investing

decreased by ¥28,975 million from the previous term-end toactivities totalled ¥62,516 million and net cash used in financing¥1,827,722 million, due partly to a reduction in interest-bearing

activities totalled ¥39,544 million. Increased funding expenses fordebt. Net assets increased ¥6,313 million from the previous term-

capital investment were outweighed by net cash from operating

end to ¥486,947 million on an increase in retained earnings. As a

activities. An analysis of year-on-year changes in each cash flow

result, the equity ratio stood at 20.6% and ROE at 3.8%.

category follows.

Interview with the President

1. Assets, Liabilities and Net Assets(1) Cash Flows from Operating Activities

million from the previous fiscal year, due chiefly to an increase
in inventories and a correction affecting deposits following an
increase in the previous fiscal year.
(2) Cash Flows from Investing Activities

Core Business:
Overview and Outlook

Net cash provided by operating activities decreased by ¥43,702

Net cash used in investing activities declined by ¥70,220 million,
due partly to a reduction in outlays for acquisition of property and(3) Cash Flows from Financing Activities
Net cash used in financing activities increased by ¥15,343 million,
due partly to increased expenditures for repayment of long-termloans.

2007/3

2008/3

2009/3

2010/3

2011/3Equity ratio (%)

21.7

19.9

20.1

20.1

20.6

Equity ratio (%) (market value basis)

38.2

23.2

24.4

23.4

20.9

Cash flows/interest-bearing debt ratio (times)

15.3

17.0

11.7

8.7

12.1

Interest coverage ratio (times)

4.5

4.0

3.4

3.0

3.0

3. Fund Procurement

activities outweighed capital expenditure outlays, including for theDuring the fiscal year under review the outstanding balance of

rebuilding of the Umeda Hankyu building. The ratio of consolidated

interest-bearing debt (consolidated basis) declined by ¥30,917

interest-bearing debt divided by EBITDA (operating income before

million to ¥1,251,665 million at the end of the fiscal period. This

amortisation), the benchmark we use for assessing the soundness

reflected the fact that total net cash provided by operatingof our financial position, stood at 9.8 times.

Annual Report 2011

Financial Section

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

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Trends in Cash Flow Indicators

Management Organisationequipment.

69

Consolidated Financial Review■ Capital Expenditure and Depreciation and Amortisation
Capital expenditure in the fiscal year under review (consolidated basis; including intangible assets) decreased by ¥64,114 million (48.4%) yearon-year to ¥68,431 million.
The following is a breakdown for each business segment.
2011/3(Millions of yen)

YoY
(%)

Urban Transportation

28,823

0.7

Real Estate

28,126–60.6

Entertainment and Communications

5,110

–19.8

Travel and International Transportation

3,139

106.1

Hotels

1,069

–95.2

Retailing

793

–57.7

Other

902

46.8

Total

67,966–48.7

Adjustments

464—

Consolidated

68,431–48.4<Urban Transportation><Travel and International Transportation>

With a focus on safety and service improvement, the railway busi-

In this business, Hankyu Hanshin Express Holdings Corporation

ness is investing in elevated tracks (to allow lines to cross over roads

built the KHD Tokyo Bldg. in Minato Ward.

without the need for level crossings) and general facility improvements, works to make stations barrier-free and in rebuilding andimproving existing rolling stock. This business is also replacing
vehicles.
<Real Estate >In the real estate leasing business, Hankyu Corporation continued
the rebuilding works at Umeda Hankyu Building and acquired acentral car park in Senri. Investments were also made in improvements at office buildings for rent managed by Hankyu Corporation,
Hanshin Electric Railway Co., Ltd. and Hankyu Realty Co., Ltd.
<Entertainment and Communications>
In the communication and media business, investments targeted
acquisition of cable TV terminal equipment (Bay Communications
Inc.) and in the stage revue business (Takarazuka Revue), Hankyu
Corporation financed improvement and renewal of current facilities at the Takarazuka Grand Theatre.

70 Annual Report 2011

<Hotels>
In the Hotels segment, member companies of Hankyu Hanshin
Hotels Co., Ltd. all over Japan focused capital investment on refurbishment of banqueting, wedding and other function facilities.
<Retailing>
Capital investment in the Retailing business was mainly focused on
the daily accessories chain DOUBLEDAY AMU PLAZA store in Hakata
and the DOUBLEDAY store in Tama Plaza Terrace, both stores being
directly operated by Hankyu Retails Corporation.
<Other>In our domestic logistics business, Sanyo Jidosha Unso Co., Ltd.
invested in new branches.
Depreciation and amortisation decreased by ¥749 million (1.2%)
from the previous term (consolidated basis) to ¥59,669 million.

Business Risks
Our Businesshas increased cash flows, so the Group is not expected to have any
significant difficulty in repaying its debts.
The Group will take measures to diversify its fund procurement methods to deal with an increase in interest-bearing debt
resulting from the integration, and will use all possible means tominimise the negative impact of interest rate movements. But inthe unlikely event that interest rates rise suddenly and in excess of
our projections, this could exert an adverse effect on the businessperformance and financial position of the Group.

Affiliated Companies

Interview with the President

The various categories of risk to which the businessperformance, stock price, financial position and otheraspects of operations of the Hankyu Hanshin HoldingsGroup are subject are detailed below. Nevertheless,these dangers do not encompass all risks attendant on
Group activities and there are risks other than thosestated below which are difficult to foresee.
Information about future events that appears in thisreport was determined by the Group to be current as of
31st March 2011.

In order to ensure greater convenience for users of the Hokushin
Kyuko Railway Line (run by consolidated subsidiary Hokushin Kyuko
has agreed to a plan transferring railway facilities held by Hokushin

In accordance with the stipulations of Article 3 of the Railway

Kyuko Railway to Kobe Rapid Transit Railway Co., Ltd. (a consolidated

Business Law, the Group must obtain separate permissions, fromsubsidiary). To facilitate the plan, in fiscal 2003 Hankyu Corporation

the Ministry of Land, Infrastructure, Transport and Tourism (MLIT),

provided Kobe Rapid Transit Railway with financing for part of thefor each category of railway operations on each route that it intends

funds necessary to purchase the facilities.
In September 2007, Kobe Electric Railway Co., Ltd. (an equity

tor must obtain the Ministry’s approval for the passenger fares it

method affiliate), temporarily suspended support for the reha-intends to set and on each occasion when it wishes to change thebilitation of Hokushin Kyuko Railway. To uphold the rehabilitation

fares. Consequently, there is a certain risk that the Group’s railway

project, additional financing was extended to Hokushin Kyuko

operations may be constrained in some way by the Ministry’s

Railway by Hankyu Corporation.

administration of these regulations.

We will continue to provide assistance to ensure that
Hokushin Kyuko Railway can conduct smooth and efficient opera-

Progress in Large-Scale Development Projects

tions as a tier 2 railway operator. However, the business perform-

The Group seeks to utilise its working assets more effectively toance and financial position of the Group could be affected byfacilitate the development of areas served by Hankyu and Hanshinchanges in this plan.

Management Organisation

to operate. Moreover, under Article 16 of the Law, a railway opera-Core Business:
Overview and Outlook

Railway Co., Ltd.), Hankyu Corporation (a consolidated subsidiary)

Legal Risk

lines. To raise its asset effectiveness, the Group is pursuing the

In the case of a substantial decline in the market value of inventory

Park “Saito” (a new town). These projects are all seen as key toassets, property and equipment and intangible assets, investment

the Group’s future growth, and management will be working tosecurities, and other assets, the recording of impairment losses orcomplete them as soon as possible. However, in the event of rapid

valuation losses would likely have a negative impact on the earn-

and major changes in the business environment, affecting land

ings performance and financial position of the Hankyu Hanshin

prices or urban development plans, the business performance andHoldings Group.

financial position of the Group could be adversely affected.

Natural Disasters
Interest-Bearing Debt

Operating as it does a very wide range of businesses in its Urban

The balance of interest-bearing debt held by the Group as of theTransportation, Real Estate, Entertainment and Communications,end of March 2011, on a consolidated basis, was ¥1,251,665 million.

Travel and International Transportation, Hotels, and Retailing seg-

As a result of the acquisition of shares in Hanshin Electricments, the Group has a correspondingly large assortment of facili-

Railway Co., Ltd. through a successful public tender offer (takeoverties necessary for conduct of business, such as railway installationsbid) on 27th June 2006, Hanshin Electric Railway has become aand buildings and retail outlets for rent. In the event of earthquakes

consolidated subsidiary of Hankyu Holdings. This acquisition hasor other major disasters, the business performance and financial

resulted in an increase in the balance of interest-bearing debt of

position of the Group could be adversely affected by damage to

the Group. On the other hand, management integration between

these facilities.

Financial Section

Area Project; and further development of the International Culture

development of the Chayamachi area of the Umeda district; theSafety Management System
Directors and Corporate Auditors
Corporate Social Responsibility“Umekita” (Osaka Station North District) Phase 1 Development

Decline in the Market Value of Assets Held byMembers of the Hankyu Hanshin HoldingsGroupfollowing initiatives: rebuilding of the Umeda Hankyu Building;the Hankyu Holdings Group and Hanshin Electric Railway Group

Annual Report 201171

Other Risks, and Countermeasures
The following is the Group’s perspective provided in response to questions received from our investors in relation to
the risks attendant on our business. Information about future events that appears in this report was determined by theGroup to be current as of 31st March 2011 and is not intended to negate the possibility of these risks impacting thebusiness performance, financial position and other aspects of operations of the Group.

meet its obligations under the terms and conditions of the contract

Economic Environment-related Risks

or going bankrupt, we avoid such risk by engaging in transactions
only with highly rated institutions.

Interest Rate Fluctuations
Long-term debt and corporate bonds are comprised mainly of

The Group’s overseas sales constitute less than 10% of its
consolidated operating revenues.

long-term financing needed for capital expenditure programs,
while short-term borrowings and commercial paper are comprised
mainly of financing that is associated with short-term operating

Business-related Risks

capital. Some floating exchange rate borrowings and corporate
bonds are exposed to interest rate fluctuation risk (market risk);

Demographic Change

however, we lock in interest rates by concluding interest rate swap

Due to the declining birth-rate and aging population, it is expected

and option contracts to avoid the risks attendant upon interest

that capital expenditure on safety measures and construction

rate fluctuations.

aimed at making facilities barrier-free will increase. At the same

Nevertheless, in the unlikely event that interest rates weretime, due to future population decline, it is possible that trans-

to rise sharply and dramatically, the business performance andportation demand (for the Group’s railroads, buses and taxis) will

financial position of the Group could be adversely affected.

recede, and that demand in other businesses may also decline.
In order to respond to this challenge, the Group is working

Changes in the Financing Environment

with government and educational institutions on community-

Cash-flow management plans are made in a timely manner for thebuilding initiatives with a focus on peace of mind, education andpurpose of appropriately managing funds. By doing so, we avoid

cultural enrichment. By doing so, we are working to enhance theliquidity risks which could render the Group incapable of meeting

appeal of the areas served by our stations so as to ensure that our

payment deadlines. Additionally, the centralisation of Group funds

railway lines enjoy the patronage of large numbers of people.

through the use of cash pool systems and other mechanisms( For more information about our strategies for promoting utilisa-

facilitates the consolidation and efficient usage of surplus funds bytion in our Urban Transportation business, please refer to Page 32.)

Group companies, while the establishment of back-up lines such ascommitment lines enables the Group to obtain finance from financial

Safety Management

institutions at a moment’s notice. We also disperse our transaction

In the Group’s core railway business, our passengers would suffer

partners over several financial institutions to maintain an appropriate

greatly if an accident were to occur. We are keenly aware of thebalance of direct and indirect financing. Thus, we ensure liquidity by

responsibility entrusted to us for our passengers’ lives. Therefore,

diversifying the methods we use for obtaining finance.

the cornerstone of our business is ensuring that accidents do notoccur due to negligence on our part.

Foreign Currency Market Fluctuations

Accordingly, the Group has upgraded all aspects of its safety

Foreign exchange rate contracts, currency swap contracts and cur-capabilities in the conviction that putting passengers first andrency option contracts are employed to avoid the exchange rateprioritising safety come above all else. We are engaged in a wide

fluctuation risks attendant on some foreign currency-denominatedvariety of endeavours for ensuring that we go one step further toassets and liabilities. Although these derivative transactions involve

offer our passengers even safer transportation.

some credit risk, such as the risk of being no longer able to enjoy(For safety measures in our Urban Transportation business,

the fruits of ongoing trading due to a transaction partner failing toplease refer to Page 57.)

72 Annual Report 2011

Our Businessdisease, including multiple schedules assuming a shortage of

The Group’s businesses and transportation network infrastructure

railway staff.

could be significantly damaged by natural disasters such as earthquakes, typhoons and floods or acts of terrorism.
Hankyu Corporation and Hanshin Electric Railway Co., Ltd.

Other Risks

Interview with the President

Natural Disasters and Acts of Terrorism

have installed rain, wind and river water gauges in the areas along

Changes to Accounting Standards

real-time information provided by meteorological observatories

In line with ongoing revisions to accounting standards in Japanto ensure the safe operation of our trains. If an earthquake ofto achieve convergence with International Financial Reporting

JMA seismic intensity 4 or above is detected by a seismograph orStandards (IFRS), the government of Japan is considering requir-

predicted by an earthquake early warning system, all trains that

ing listed companies to apply IFRS in their consolidated financial

operate in the zone in question will immediately prepare for emer-

statements*.
In the future, changes to accounting standards and IFRS

items or persons are identified or damage has occurred, we haveapplication could adversely affect the Group’s financial position

risk-graded management response systems.

and earnings performance due to the necessity of including addi-

We have also developed emergency response systems forminimising the social impact in the unlikely event of an incident
which causes long-term disruption to transit services or results in agreat number of casualties.

tional accounting items such as retroactive restatement and theshift from amortisation to impairment of goodwill.
Currently, we are studying the likely effect on our financial
position of application of the new accounting standards and pre-Management Organisation

gency stopping. For possible acts of terrorism, or where suspiciousCore Business:
Overview and Outlook

our railway lines for collecting observation data. We also use

paring for the systemic changes. In particular, we are setting up an

Group businesses could be significantly affected if economic

Working closely with our independent auditor KPMG AZSA LLC,

activities were restricted or customers refrained from going out

we are positioning ourselves to deal with issues that may arise indue to an outbreak or epidemic of an infectious disease such asthat connection.

SARS (Severe Acute Respiratory System) or H1N1 flu.

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

In fact, the Group was significantly impacted by customers refraining from going out during the fiscal 2010 H1N1 flu
epidemic. The main businesses affected at this time were Urban
Transportation, Travel and Hotels.
In response to the spread of infectious diseases such as H1N1
flu, the Group has developed a Business Continuity Plan (BCP) for

Financial Section

in-house task force in preparation for compulsory IFRS adoption.

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Infectious Disease Outbreaks and Epidemics

each division, under the direction of core companies. During the
H1N1 outbreak in 2009 and 2010, ongoing surveys into infection
rates among employees and their families in each division gave us
a good idea of the scale of risk, minimising the impact of H1N1 on
our business. Also, in the railway business, which is a particularly
important part of the social infrastructure, we drew up plans inadvance to minimise the impact of any explosive spread of theAnnual Report 201173

Consolidated Balance Sheets As of 31st March 2010 and 2011

Millions of yen
2011
2010

Thousands of
U.S. dollars
2011

Assets:Current assets:
Cash and deposits (Note 3) ..................................................................................................................................

¥

23,792¥

23,947$

288,518

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

78,96971,281

858,807

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

126,316

131,782

1,587,735

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

8,138

7,949

95,771Work in progress .........................................................................................................................................................

5,445

4,668

56,241

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

3,791

3,949

47,578Deferred tax assets ....................................................................................................................................................

14,623

13,160158,554

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

33,96729,422354,482

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

(2,023)(322)(3,880)Total current assets ...................................................................................................................................................

293,021285,837

3,443,819

Buildings and structures—net (Note 3) ...............................................................................................

606,498

602,710

7,261,566

Machinery, equipment and vehicles—net (Note 3) ....................................................................

58,37253,242

641,470

Land (Notes 3 and 5) ........................................................................................................................................

888,431

896,085

10,796,205

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

134,215

132,243

1,593,289

Noncurrent assets:
Property and equipment

Other—net (Note 3) .........................................................................................................................................

15,251

15,939

192,036

Total property and equipment (Notes 1 and 2)..............................................................................

1,702,769

1,700,220

20,484,578

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

43,966

41,248496,964

Other (Notes 2 and 3) ......................................................................................................................................

17,98917,671

212,904

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

61,95558,919709,867

Investment securities (Notes 3 and 4)...................................................................................................

227,826

221,004

2,662,699

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

4,996

4,170

50,241Other ..........................................................................................................................................................................

54,55645,848552,386

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

(7,793)(1,332)(16,048)

Intangible assets

Investments and other assets

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

279,585

269,691

3,249,289

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

2,044,310

2,028,832

24,443,759

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

¥2,337,331¥2,314,669$27,887,578

See the accompanying notes to the consolidated financial statements.

74 Annual Report 2011

Our BusinessMillions of yen
2011
2010

Thousands of
U.S. dollars
2011

Liabilities:
Current liabilities:¥

46,726¥40,404$

486,795

Short-term borrowings (Note 3) .......................................................................................................................

287,346

297,464

3,583,904

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

25,00040,000481,928

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

4,008

3,865

46,566

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

17,386

18,908227,807

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

3,986

3,960

47,711Other (Note 3) ..............................................................................................................................................................

139,417

142,621

1,718,325

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

523,872

547,227

6,593,096

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

135,000

127,000

1,530,120

Long-term debt (Note 3) .......................................................................................................................................

832,018

780,908

9,408,530

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

151,804

157,577

1,898,518

Interview with the President

Trade payables .............................................................................................................................................................

Long-term liabilities:

6,839

6,667

80,325

Provision for retirement benefits......................................................................................................................

58,487

58,770708,072

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

755

767

9,241

Reserve for investment loss .................................................................................................................................

6,486

6,050

72,892Long-term deferred contribution for construction ..............................................................................

15,63915,862

191,108

125,794

126,888

1,528,771

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

1,332,825

1,280,495

15,427,651

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

1,856,698

1,827,722

22,020,747

Net assets:
Shareholders’ equity:
99,474

99,474

1,198,482

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

150,027

150,027

1,807,554

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

232,135

243,264

2,930,892

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

(3,808)(4,036)(48,627)

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

477,829488,729

5,888,301

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

(8,075)(11,936)(143,807)

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

(845)

(232)

(2,795)

Revaluation reserve for land (Note 5) ............................................................................................................

1,956

1,706

20,554Foreign currency translation adjustments .................................................................................................

(1,736)(2,464)(29,687)(155,747)

Accumulated other comprehensive income(8,700)(12,927)

11,505

11,144

134,265

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

480,633

486,947

5,866,831

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

¥2,337,331¥2,314,669$27,887,578

Annual Report 2011

Financial Section

Total accumulated other comprehensive income ...............................................................................
Minority interests (Note 5) .........................................................................................................................................

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

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

Management Organisation

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

Core Business:
Overview and Outlook

Deferred tax liabilities related to land revaluation (Note 5) .............................................................

75

Consolidated Statements of Income Years ended 31st March 2010 and 2011

Millions of yen
2010
2011

Thousands of
U.S. dollars
2011

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

¥653,287¥638,770$7,696,024

Costs of revenues from operations:Operating expenses and cost of sales of transportation (Note 1).....................................................................
Selling, general and administrative expenses (Note 2) ............................................................................................
Total costs of revenues from operations (Note 3) .......................................................................................................
Operating income ..................................................................................................................................................................................

550,476
32,684583,160
70,126

541,473
32,552574,026
64,743

6,523,771
392,193
6,915,976
780,036

Non-operating income:Interest income .................................................................................................................................................................................
Dividends income ...........................................................................................................................................................................
Amortisation of negative goodwill.......................................................................................................................................
Equity in income of affiliates.....................................................................................................................................................
Miscellaneous income ..................................................................................................................................................................
Total non-operating income ....................................................................................................................................................

168
933
13
3,455
2,397
6,968

92
1,082
—
3,309
2,487
6,972

1,108
13,036—39,86729,96484,000Non-operating expenses:
Interest expenses .............................................................................................................................................................................
Miscellaneous expenses ..............................................................................................................................................................
Total non-operating expenses ................................................................................................................................................
Ordinary income .....................................................................................................................................................................................

23,627
3,058
26,68550,40922,222
2,999
25,222
46,494

267,735
36,133303,880
560,169

Extraordinary income:Gain on sale of property and equipment (Note 4) .....................................................................................................
Gain on contributions for construction .............................................................................................................................
Gain on sale of securities (Note 5) .........................................................................................................................................
Gain on investments in silent partnerships .....................................................................................................................
Other........................................................................................................................................................................................................
Total extraordinary income .......................................................................................................................................................

394
3,222
1,624
8,241
2,384
15,868354
12,089——1,059
13,504

4,265
145,651——
12,759162,699

Extraordinary loss:
Loss on sale of property and equipment (Note 6) ......................................................................................................
Loss on reduction of property and equipment ............................................................................................................
Loss on disposal of property and equipment (Note 7) ............................................................................................
Loss on impairment of fixed assets (Note 8)...................................................................................................................
Non-recurring depreciation on noncurrent assets (Note 9) .................................................................................
Special allowance for doubtful receivables ....................................................................................................................
Special reserve for investment loss ......................................................................................................................................
Provision for loss on business liquidation ........................................................................................................................
Lump sum amortisation of goodwill equivalent amount under the equity method (Note 10) ....
Other........................................................................................................................................................................................................
Total extraordinary loss ................................................................................................................................................................
Income before income taxes and minority interests ....................................................................................................
Income taxes—current.......................................................................................................................................................................
Income taxes—deferred....................................................................................................................................................................
Total income taxes.................................................................................................................................................................................
Income before minority interests ...............................................................................................................................................
Minority interests in income...........................................................................................................................................................
Net income ..................................................................................................................................................................................................

325
3,044
6,262
4,751
—
1,064
126
—
10,264
6,538
32,37733,8997,226
15,357
22,583—523¥ 10,793

502
11,175
1,232
4,261
3,083
16
78
2,780
—
4,106
27,23732,7606,054
7,975
14,03018,730661¥ 18,068

6,048
134,639
14,843
51,337
37,145193
940
33,494—49,470328,157
394,699
72,94096,084
169,036
225,6637,964$ 217,687

Consolidated Statements of Comprehensive Income Years ended 31st March 2010 and 2011
Millions of yen
2010
2011
Income before minority interests ...............................................................................................................................................
Other comprehensive income
Valuation difference on available-for-sale securities .................................................................................................
Deferred gains or losses on hedges .....................................................................................................................................
Foreign currency translation adjustments .......................................................................................................................
Share of other comprehensive income of associates accounted for using equity method ............
Total other comprehensive income (Note 2).............................................................................................................
Comprehensive income (Note 1) ................................................................................................................................................
(Details)
Comprehensive income attributable to owners of the parent ..........................................................................
Comprehensive income attributable to minority interests ..................................................................................

See the accompanying notes to the consolidated financial statements.

76 Annual Report 2011

Thousands of
U.S. dollars
2011

¥—

¥18,730$225,663

—
—
—
—
—
¥—

(2,455)611(721)(1,435)(4,002)¥14,728(29,578)
7,361(8,687)(17,289)(48,217)$177,446——

14,092
635

169,783
7,651

Consolidated Statements of Changes in Net Assets Years ended 31st March 2010 and 2011
Our BusinessMillions of yen
2010
2011

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

—¥ 99,474—¥ 99,474—$1,198,482¥150,134¥150,027$1,807,554

(107)

—

—

—
(107)
¥150,027 ¥150,027—$1,807,554¥232,135$2,796,807¥227,338(6,335)
10,793(6,337)18,068(76,349)
217,687

21
(20)
337

250
(13)
(838)

3,012
(157)
(10,096)

4,797¥232,135

11,129¥243,264

134,084$2,930,892¥ (4,143) ¥ (3,808)$ (45,880)

(137)
472

(270)
41

(3,253)
494

(228)
335
¥ (3,808) ¥ (4,036)(2,747)$ (48,627)¥472,803¥477,829$5,756,976(6,335)
10,793(6,337)18,068(76,349)
217,687

21
(137)
344
337

250
(270)
28
(838)

3,012
(3,253)337(10,096)5,025¥477,829

10,900¥488,729

131,325$5,888,301

Deferred gains or losses on hedges:
Balance at beginning of year ......................
Changes of items during the period:
Net changes of items other thanshareholders’ equity ..................................
Total changes of items during
the period ........................................................
Balance at end of year .....................................
Revaluation reserve for land:
Balance at beginning of year ......................
Changes of items during the period:
Net changes of items other thanshareholders’ equity ..................................
Total changes of items during
the period ........................................................
Balance at end of year .....................................
Foreign currency translation
adjustments:
Balance at beginning of year ......................
Changes of items during the period:
Net changes of items other thanshareholders’ equity ..................................
Total changes of items during
the period ........................................................
Balance at end of year .....................................
Total accumulated othercomprehensive income:Balance at beginning of year ......................
Changes of items during the period:
Net changes of items other thanshareholders’ equity ..................................
Total changes of items during
the period ........................................................
Balance at end of year .....................................

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

(46,506)(46,506)$ (143,807)(681) ¥(845)

$ (10,181)

(163)

612

7,373

(163)
(845) ¥

612
(232)

$

7,373
(2,795)¥ 1,978¥ 1,956$

23,566

(21)

(250)

¥

¥

(3,012)(250)(21)¥ 1,956 ¥ 1,706$¥ (1,874) ¥ (1,736)$ (20,916)(727)(8,759)(727)137¥ (1,736) ¥ (2,464)(8,759)$ (29,687)¥ (9,831) ¥ (8,700)$ (104,819)(4,226)(50,916)(4,226)1,130¥ (8,700) ¥ (12,927)(50,916)$ (155,747)¥ 10,906¥ 11,505$ 138,614

598

(360)

(4,337)598¥ 11,505(360)¥ 11,144(4,337)$ 134,265¥473,878¥480,633$5,790,759(6,335)
10,793(6,337)18,068(76,349)
217,687

21
(137)
344
337

250
(270)
28
(838)

3,012
(3,253)337(10,096)

1,729(4,586)(55,253)6,754¥480,633

6,313¥486,947

76,060$5,866,831

137

1,130

(3,012)
20,554

Financial Section

Minority interests:
Balance at beginning of year ...........................
Changes of items during the period:
Net changes of items other thanshareholders’ equity .......................................
Total changes of items during
the period .............................................................
Balance at end of year ..........................................

$ (97,289)

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

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

$1,198,482

Management Organisation

Less treasury stock, at cost:
Balance at beginning of year ......................
Changes of items during the period:
Purchase of treasury stock .......................
Disposal of treasury stock .........................
Total changes of items during
the period ........................................................
Balance at end of year .....................................

¥ 99,474

Accumulated other comprehensive income:
Valuation difference on available-forsale securities:
Balance at beginning of year ...................... ¥ (9,253) ¥ (8,075)
Changes of items during the period:
Net changes of items other thanshareholders’ equity ..................................
1,177(3,860)Total changes of items during(3,860)the period ........................................................
1,177
Balance at end of year ..................................... ¥ (8,075) ¥ (11,936)

Thousands of
U.S. dollars
2011Core Business:
Overview and Outlook

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

¥ 99,474

Millions of yen
2010
2011

Interview with the President

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

Thousands of
U.S. dollars
2011

See the accompanying notes to the consolidated financial statements.

Annual Report 201177

Consolidated Statements of Cash Flows Years ended 31st March 2010 and 2011

Millions of yen
2011
2010
Cash flows from operating activities:
Income before income taxes and minority interests ................................................................................................
Depreciation and amortisation ...............................................................................................................................................
Loss on impairment of fixed assets ......................................................................................................................................
Non-recurring depreciation on noncurrent assets.....................................................................................................
Amortisation of goodwill ............................................................................................................................................................
Amortisation of negative goodwill.......................................................................................................................................
Equity in (income) losses of affiliates ...................................................................................................................................
Increase (decrease) in provision for retirement benefits ........................................................................................
Increase (decrease) in allowance for doubtful receivables ...................................................................................
Increase (decrease) in provision for loss on business liquidation .....................................................................
Increase (decrease) in reserve for investment loss .....................................................................................................
Interest and dividend income .................................................................................................................................................
Interest expense ...............................................................................................................................................................................
Loss (gain) on sale of property and equipment ...........................................................................................................
Loss on reduction of property and equipment ............................................................................................................
Loss on disposal of property and equipment................................................................................................................
Loss (gain) on sale of marketable and investment securities ..............................................................................
Gain on contributions for construction .............................................................................................................................
Loss (gain) on investments in silent partnerships .......................................................................................................
Lump sum amortisation of goodwill equivalent amount under the equity method ..........................
Decrease (increase) in trade receivables ...........................................................................................................................
Decrease (increase) in inventories ........................................................................................................................................
Increase (decrease) in trade payables .................................................................................................................................
Increase (decrease) in other liabilities .................................................................................................................................
Other........................................................................................................................................................................................................
Subtotal .................................................................................................................................................................................................
Interest and dividends received .............................................................................................................................................
Interest paid ........................................................................................................................................................................................
Income taxes (paid) refunded..................................................................................................................................................
Extra retirement payment ..........................................................................................................................................................
Net cash provided by operating activities .......................................................................................................................
Cash flows from investing activities:
Purchases of property and equipment ..............................................................................................................................
Proceeds from sale of property and equipment..........................................................................................................
Purchases of investment securities ......................................................................................................................................
Proceeds from sale of investment securities ..................................................................................................................
Purchases of investments in consolidated subsidiaries affecting scope of consolidation................
Net decrease (increase) in short-term loans receivable ..........................................................................................
Long-term loans advanced .......................................................................................................................................................
Proceeds from collection of long-term loans receivable .......................................................................................
Receipt of contributions for construction ........................................................................................................................
Receipt of repayment of investments in silent partnerships ...............................................................................
Other........................................................................................................................................................................................................
Net cash used in investing activities....................................................................................................................................
Cash flows from financing activities:
Net increase (decrease) in short-term borrowings .....................................................................................................
Proceeds from long-term debt ...............................................................................................................................................
Repayment of long-term debt ................................................................................................................................................
Proceeds from new bonds issued.........................................................................................................................................
Redemption of bonds...................................................................................................................................................................
Dividends paid ..................................................................................................................................................................................
Dividends paid to minority shareholders of consolidated subsidiaries.........................................................
Other........................................................................................................................................................................................................
Net cash used in financing activities ...................................................................................................................................
Effect of exchange rate changes on cash and cash equivalents..................................................................
Increase (decrease) in cash and cash equivalents ..................................................................................................
Cash and cash equivalents at beginning of year ....................................................................................................
Increase in cash and cash equivalents from newly consolidated subsidiary......................................
Cash and cash equivalents at end of year ....................................................................................................................

See the accompanying notes to the consolidated financial statements.

78 Annual Report 2011

Thousands of
U.S. dollars
2011¥ 33,899
60,418
4,751
—
2,677
(13)
(3,455)
1,647
792
—
—
(1,102)
23,627
(68)
3,044
6,262
(1,278)(3,222)(8,241)
10,26419,7509,361
2,559(9,712)
24,048176,010
2,502(23,512)(6,496)(1,549)146,955¥ 32,760
59,669
4,261
3,083
2,684
—
(3,309)1,021(1,667)2,780(435)(1,174)22,222
147
11,175
1,232—(12,089)——
9,460(3,242)(6,511)(3,522)
9,622
128,170
2,578(22,446)(5,051)—
103,252$ 394,699
718,904
51,337
37,14532,337—(39,867)
12,301(20,084)
33,494(5,241)(14,145)
267,735
1,771
134,639
14,843—(145,651)——
113,976(39,060)(78,446)(42,434)
115,928
1,544,217
31,060(270,434)(60,855)—
1,244,000(161,078)
2,758(4,142)
3,628
1,813
250
(748)
363
11,865
10,5412,010(132,737)(79,398)
4,578(4,749)
331
—
29
(127)
81
17,220—(482)(62,516)(956,602)
55,157(57,217)
3,988
—
349
(1,530)976
207,470—(5,807)(753,205)(28,685)
54,100(62,066)
39,773(20,000)(6,335)(249)(737)(24,200)
302(9,680)30,690430¥ 21,440(9,016)76,731(106,059)
31,795(25,000)(6,337)(319)(1,337)(39,544)(715)
474
21,440677¥ 22,592(108,627)
924,470(1,277,819)
383,072(301,205)(76,349)(3,843)(16,108)(476,434)(8,614)
5,711
258,3138,157$ 272,193

Notes to the Consolidated Financial Statements
Our Business

METHOD OF PREPARATION FOR CONSOLIDATED FINANCIAL STATEMENTS(1st April 2009 to 31st March 2010) were prepared in accordance with
the Consolidated Financial Statement Regulations prior to their revision,and the consolidated financial statements for the fiscal year under review(1st April 2010 to 31st March 2011) were prepared in accordance withthe revised Consolidated Financial Statement Regulations.

AUDIT VERIFICATIONThe Company’s consolidated financial statements for the previous fiscal
year (1st April 2009 to 31st March 2010) were audited by KPMG AZSA &Co., and the Company’s consolidated financial statements for the fiscal
year under review (1st April 2010 to 31st March 2011) were audited by

KPMG AZSA LLC, as per Article 193-2 (1) of the Financial Instruments andExchange Act.
KPMG AZSA & Co. has changed its corporate structure, becoming
KPMG AZSA LLC on 1st July 2010.

The Company makes special efforts to ensure the appropriateness of its
consolidated financial statements and other reports. In addition to subscribing to related publications, it has joined the Financial AccountingStandards Foundation and participates in seminars and other events
held by the Foundation, audit firms and other relevant organisations toestablish a system for understanding the accounting standards in detailand responding suitably to changes made to them. The Company also
compiles and provides common manuals for preparing the consolidated
financial information on a group basis, and arranges training courses foraccounting staff at affiliates.

Core Business:
Overview and Outlook

SPECIAL MEASURES TO ENSURE THE APPROPRIATENESS OF CONSOLIDATED FINANCIAL STATEMENTS AND OTHER REPORTS

Interview with the President

The Company’s consolidated financial statements were prepared inaccordance with the “Regulations Concerning the Terminology, Forms
and Preparation Method of Consolidated Financial Statements” (Finance
Ministry Ordinance No. 28 of 1976; the “Consolidated Financial Statement
Regulations”).
The consolidated financial statements for the previous fiscal year

BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

Annual Report 2011

Financial Section

Fiscal year ended 31st March 2011(a) Number of affiliates for which equity method is applied—9.
(Names of major equity-method affiliates)
H2O Retailing Corporation, Kobe Electric Railway Co., Ltd., Toho Co., Ltd.,Tokyo Rakutenchi Co., Ltd.
Hankyu Hanshin Point, which took over the point business of Groupsubsidiary Hankyu Hanshin Card, became an equity method affiliate of
the Group following a partial share transfer, from the fiscal year underreview.
(b) Unchanged from the fiscal year ended 31st March 2010
(Changes in accounting policies)
From the fiscal year under review, the Company is applying the “Revised
Accounting Standard for Equity Method of Accounting for Investments”(Accounting Standards Board of Japan (“ASBJ”) Statement No. 16, issued

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Fiscal year ended 31st March 2011(a) Number of consolidated subsidiaries—103.
Names of primary consolidated subsidiaries—Please refer to Page 105.
Hankyu Hanshin Restaurants Co., Ltd. and four other companies,
due to their increased significance, have been included in the scope of
consolidation.
In addition, HANKYU INTERNATIONAL TRANSPORT (UK) LTD., due tothe completion of its liquidation, has been excluded from the scope of
consolidation.
(b) Unchanged from previous fiscal year(c) Unchanged from previous fiscal year

2. Items related to application of equity-method accounting
Fiscal year ended 31st March 2010(a) Number of affiliates for which equity method is applied—8.
(Names of major equity-method affiliates)
H2O Retailing Corporation, Kobe Electric Railway Co., Ltd., Toho Co., Ltd.,Tokyo Rakutenchi Co., Ltd.
(b) The nonconsolidated subsidiaries to which the equity method does
not apply (Hankyu Mediax Co., Ltd., etc.) and affiliates (OS Co., Ltd., etc.)
use the cost method, rather than the equity method because the total
amounts of their net income or loss, retained earnings and other figures
are low, and the effect on the consolidated financial statements as awhole is negligible.
(c) The differences in the amounts invested resulting from the equity
method calculation are amortised in equal amounts over five years fromthe date upon which each difference arises.
The entire unamortised balance of the difference in the investment
amount concerning H2O Retailing Corporation that arose during theperiod ended 31st March 2008 has been completely amortised in thefiscal year ended 31st March 2010 because an impairment loss fromthe stocks of H2O Retailing has been reported in the Company’s individual financial statements due to a decline in the market price of H2O
Retailing’s stocks held by the Company.

Management Organisation

1. Scope of consolidation
Fiscal year ended 31st March 2010(a) Number of consolidated subsidiaries—99.
Names of primary consolidated subsidiaries—Please refer to Page 105.
Kobe Rapid Transit Railway Co., Ltd., due to stock acquisition, andHankyu Hanshin Clean Service Co., Ltd. and three other companies,
due to their increased significance, have been included in the scope of
consolidation.
In addition, Hankyu Express Co., Ltd. and two other companies, due
to a merger, and Hankyu Airlines Co., Ltd., due to the completion of its
liquidation, have been excluded from the scope of consolidation.
(b) Major nonconsolidated subsidiaries
Hankyu Mediax Co., Ltd.
Nonconsolidated subsidiaries have been excluded from the scopeof consolidation because the total amounts of their entire assets, sales,
net income or loss, retained earnings, and other figures are low, and theeffect on the consolidated financial statements as a whole is negligible.
(c) Special purpose entities subject to disclosure
An overview of special purpose entities subject to disclosure, an overview of transactions using special purpose entities subject to disclosure,and the monetary values and other details of transactions with special
purpose entities subject to disclosure are presented in “Special purpose
entities.”

79Notes to the Consolidated Financial Statements

on 10th March 2008), and “Practical Solution on Unification of Accounting
Policies Applied to Associates Accounted for Using the Equity Method”(Practical Issues Task Force No. 24, 10th March 2008).
There is no material impact on earnings from these changes.
3. Items related to fiscal year-ends, etc. for consolidated
subsidiaries
Fiscal year ended 31st March 2010
The account closing date for Hankyu Hanshin Express (Netherlands) B.V.,
Hankyu Hanshin Express (Deutschland) GmbH and 17 other consolidated
subsidiaries is 31st December. The consolidated financial statements
have been prepared using the financial statements based on the closing
date of each company, and major transactions conducted between theindividual closing dates and the consolidated closing date have beenadjusted for as necessary for the consolidation.
Fiscal year ended 31st March 2011
The account closing date for Hankyu Hanshin Express (Netherlands) B.V.,
Hankyu Hanshin Express (Deutschland) GmbH and 18 other consolidated
subsidiaries is 31st December. The consolidated financial statements
have been prepared using the financial statements based on the closing
date of each company, and major transactions conducted between theindividual closing dates and the consolidated closing date have beenadjusted for as necessary for the consolidation.
4. Items related to accounting treatment and standards(1) Valuation standards and method for major assets(a) Inventories
Land and buildings for sale comprising the major part of the inventories
are assessed using the identified cost method (with balance sheet values
calculated by writing down book values based on decreased profitability). Finished products and merchandise, work in progress, and materials
and supplies are assessed mainly using the moving average cost method(with balance sheet values calculated by writing down book values
based on decreased profitability).
Fiscal year ended 31st March 2011
(Changes in accounting policies)
From the fiscal year under review, the Company is applying the“Accounting Standard for Valuation of Inventories” (ASBJ Statement No. 9,
issued on 26th September 2008).
There is no material impact on earnings from these changes.
(b) Among available-for-sale securities, those with available fair market
values are assessed using the market value method based on the market
price, etc., as of the fiscal year-end (with the entire amount of valuationdifferences directly included under net assets, and the cost of sales
calculated using the moving average method). Those without available
fair market values are assessed in most cases using the moving average
cost method.
For investments in limited liability investment partnerships andsimilar investments, however, the Company’s share of assets held bysuch partnerships is recorded.
(c) Derivatives are assessed using the market value method.
(2) Depreciation methods for major depreciable assets(a) While property and equipment (excluding leased assets) are depreciated for the most part using the declining balance method, there is also
some use of the straight-line method.
Depreciation of buildings acquired after 1st April 1998 (excluding
facilities attached to buildings) is calculated using the straight-line
method.

80 Annual Report 2011(b) Method of depreciation and amortisation of intangible assets (excluding leased assets)
Fiscal year ended 31st March 2010
Intangible assets (excluding leased assets) are depreciated using thestraight-line method.
Software (used by the Company), however, is depreciated by thestraight-line method over the internal available life (one to six years).
Fiscal year ended 31st March 2011
Intangible assets (excluding leased assets) are depreciated using thestraight-line method.
Software (used by the Company), however, is depreciated by thestraight-line method over the internal available life (two to six years).
(c) Lease assets related to finance leases other than those that transfer
ownership of the lease assets are depreciated using the straight-line
method, with the assumption that the lease term is the useful life andthe residual value as zero.
Finance leases that commenced prior to 31st March 2008 are
accounted for over the method applied to operating lease transactions.
(3) Accounting for contributions for construction
Some consolidated subsidiaries of the Company accept contributions
for construction from local governments and other organisations as partof the cost of construction when carrying out railroad elevations such ascontinuous grade separations and crossing-widening work.
The assets acquired using the contributions are recorded in property
and equipment at the acquisition cost, after deducting the amounts corresponding to the contributions.
The amounts received for construction, including such contributions, and are recorded in extraordinary income as a gain on contributions for construction in the consolidated statements of income, andthe amount directly deducted from the acquisition cost is recorded in
extraordinary loss as a loss on reduction of property and equipment in
the consolidated statements of income.
(4) Accounting standards for significant transactions(a) Provision for bonuses is recorded in the amount expected to be paidby some consolidated subsidiaries as bonuses during the fiscal year.
(b) Provision for retirement benefits is provided based on the estimatedamount of projected benefit obligation and the fair value of plan assets
in preparation for retirement benefits to be paid to employees at the endof the fiscal year.
Prior service costs are recorded in expenses in equal amounts using
the straight-line method over a certain number of years (3 to 15 years),
which is within the average remaining years of service of the employees
at the time when these costs are incurred, commencing, in general, in
the fiscal year in which they arise.
Actuarial differences are recorded in expenses using the straight-line
method over a certain number of years (4 to 15 years), which is within
the average remaining years of service of the employees at the time
when these costs are incurred, commencing in the fiscal year following
the year in which they arise.
(c) Provision for directors’ retirement benefits is provided in an amountbased on the internal rules of some of the consolidated subsidiaries forthe payment of retirement benefits to their directors.
(d) Allowance for doubtful receivables is provided based on the ratio of
past loan loss experience for general accounts and individually estimateduncollectible amounts for certain individual accounts.
(e) Reserve for investment loss is provided for possible losses in excess ofinvestment and loans to affiliates based on an evaluation of their assets
and other factors.

Our Business

Foreign exchange contracts
Currency swap contracts
Currency option contracts

Foreign currency tradereceivables and trade payables
and future foreign currencytransactions

Interest rate swap contracts
Interest rate option contracts

Interest on bonds and loans
payable(10) A consolidated tax payment system has been adopted.
Fiscal year ended 31st March 2010
5. Items related to the valuation of assets and liabilities at consolidated subsidiaries
Fair value valuation is used for the valuation of all assets and liabilities of
consolidated subsidiaries.
Fiscal year ended 31st March 2010
6. Amortisation of goodwill and negative goodwill
Goodwill and negative goodwill are amortised, in general, in equalamounts over five years. The goodwill resulting from the management
integration with Hanshin Electric Railway Co., Ltd. in the period ended
31st March 2007 is being amortised in equal amounts over 20 years.
Fiscal year ended 31st March 2010
7. Scope of cash included in consolidated statements of cash flows
In preparing the consolidated statements of cash flows, cash on hand,readily available deposits and short-term highly liquid investments
without material risk of changing their value and with maturities notexceeding three months at the time of purchase are considered to be
cash and cash equivalents.

CHANGES IN ACCOUNTING POLICIES
information section.
(Partial amendment to “Accounting Standards for Retirement
Benefits” (Part 3))
From the fiscal year ended 31st March 2011, the Company is applying
the “Partial Amendment to the Accounting Standards for Retirement
Benefits (Part 3)” (ASBJ Statement No. 19, issued on 31st July 2008). The
effects of this change on operating income, ordinary income, income
before income taxes and minority interests and projected benefit obligation are negligible.

Financial Section

Fiscal year ended 31st March 2010(“Accounting Standards for Construction Contracts” etc.)
From the fiscal year ended 31st March 2010, the Company is applying
the “Accounting Standards for Construction Contracts” (ASBJ Statement
No. 15, issued on 27th December 2007) and “Implementation Guidanceon Accounting Standards for Construction Contracts” (ASBJ GuidanceNo. 18, issued on 27th December 2007). The percentage-of-completion
method applies to construction projects whose contracts are initiatedduring the fiscal year and which have measurable progress at the end of
the fiscal year (the proportion-of-cost method is mainly used to estimate
the progress of such construction projects). The completed-contract
method applies to other construction projects.
This change has resulted in an increase of ¥1,311 million in revenues
from operations and ¥66 million each in operating income, ordinary
income, and income before income taxes and minority interests, fromthe amounts that would have been reported with the previous method.
The effect on the segment information is described in the segment

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Fiscal year ended 31st March 2011(7) Method and period of amortisation of goodwill
Goodwill are amortised, in general, in equal amounts over five years.
The goodwill resulting from the management integration with Hanshin(9) Accounting for consumption tax is based on the tax exclusion
method.
The non-deductible amount of the consumption tax on assets thatare not tax deductible is included in “Other” in investments and otherassets on the consolidated balance sheets as long-term prepaid consumption tax and is amortised in equal amounts based on provisions ofCorporation Tax Law.

Management Organisation(6) The assets and liabilities and income and expenses of overseas subsidiaries are converted to yen based on the spot exchange rate on thesettlement date. Differences in conversion are included in translation
adjustments and minority interests in the net assets section.

Fiscal year ended 31st March 2011(8) Scope of cash included in consolidated statements of cash flows
In preparing the consolidated statements of cash flows, cash on hand,readily available deposits and short-term highly liquid investments
without material risk of changing their value and with maturities notexceeding three months at the time of purchase are considered to be
cash and cash equivalents.

Core Business:
Overview and Outlook(c) Hedging policy
The Group is exposed to the risk of foreign exchange and interest rate
fluctuations and uses derivatives as a means of hedging these risks.
(d) Method for evaluating the effectiveness of hedges
Other than when the effectiveness of hedges is obvious, hedge effectiveness is evaluated semiannually using the comparison and analysis
method.
(e) Other risk management methods concerning hedge accounting
Internal rules regarding the division of duties, maximum transaction
amounts, etc. have been established for the use of derivative transactions, based on which derivative transactions are used. The implementation and management of derivative transactions are carried out by theaccounting department with the approval of the decision makers ineach Group company. An internal control system has been developed
to ensure that the contract signing and termination comply with theinternal rules.

Electric Railway Co., Ltd. in the period ended 31st March 2007 is being
amortised in equal amounts over 20 years.

Interview with the President(5) Significant hedge accounting methods(a) Method of hedge accounting
Deferred hedge accounting is applied.
Exceptional accounting applies to interest rate swaps that satisfy therequirements for exceptional accounting for interest rate swaps.
Designation accounting applies to foreign currency denominatedassets and liabilities with foreign exchange forward contracts.
(b) Hedging instruments and hedged items
Hedging instruments
Hedged items

Fiscal year ended 31st March 2011
(Accounting Standard for Asset Retirement Obligations)
From the fiscal year under review, the Company is applying the“Accounting Standard for Asset Retirement Obligations” (ASBJ Statement
No. 18, issued on 31st March 2008) and the “Guidance on AccountingStandard for Asset Retirement Obligations” (ASBJ Guidance No. 21, issued

Annual Report 201181

Notes to the Consolidated Financial Statements

on 31st March 2008).
The effect of this change is negligible.

Amendments to “Accounting Standard for Research and Development
Costs” (ASBJ Statement No. 23, issued on 26th December 2008), “Revised
Accounting Standard for Business Divestitures” (ASBJ Statement No. 7,
issued on 26th December 2008), “Revised Accounting Standard for Equity
Method of Accounting for Investments” (ASBJ Statement No. 16, issued on
26th December 2008), and “Revised Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business Divestitures”(ASBJ Guidance No. 10, issued on 26th December 2008).

(Accounting standards for business combinations, etc.)
From the fiscal year under review, the Company is applying “AccountingStandard for Business Combinations” (ASBJ Statement No. 21, issued on
26th December 2008), “Accounting Standard for Consolidated Financial
Statements” (ASBJ Statement No. 22, issued on 26th December 2008), Partial
CHANGES IN PRESENTATION(Consolidated Balance Sheets)
Fiscal year ended 31st March 2010
Because the amount of long-term loans receivable (¥6,415 million in thefiscal year ended 31st March 2010) categorised under investments andother assets in the previous fiscal year was insignificant, it is included in“other” for the fiscal year ended 31st March 2010.

24th 2009), based on “Accounting Standard for Consolidated Financial
Statements” (ASBJ Statement No. 22, issued on 26th December 2008).
(Consolidated Statements of Cash Flows)
Fiscal year ended 31st March 2011
1. Because the monetary significance of the “increase (decrease) in reservefor investment loss” included in “other” under cash flows from operating
activities in the previous fiscal year has increased, it is categorised separately
in the fiscal year under review. The amount of the “decrease in reservefor investment loss” included in “other” in the previous fiscal year is ¥12
million.

(Consolidated Statements of Income)Fiscal year ended 31st March 2011
1. Because the amount of “gain on sale of securities” (¥44 million ($530
thousand) in the fiscal year under review) categorised under extraordinary
income in the previous fiscal year was insignificant, it is included in “other”
for the fiscal year under review.

2. Because the amount of “gain on sale of marketable and investment
securities” (¥89 million ($1,072 thousand) in the fiscal year under review)
categorised under cash flows from operating activities in the previous
fiscal year was insignificant, it is included in “other” for the fiscal year
under review.

2. From the fiscal year under review, the Company is presenting “income
before minority interests,” after application of “Cabinet Office OrdinancePartially Revising Regulation on Terminology, Forms and Preparation of
Financial Statements” (Cabinet Office Ordinance No. 5, issued on March
ADDITIONAL INFORMATION
Fiscal year ended 31st March 2011
From the fiscal year under review, the Company is applying the“Accounting Standards for Presentation of Comprehensive Income” (ASBJ
Statement No. 25, issued on 30th June 2010). However, the previous fiscal

year amounts for “accumulated gains from revaluation and translation
adjustments” and “total accumulated gains from revaluation and translation adjustments” are recorded under “accumulated other comprehensive income” and “total accumulated other comprehensive income.”

NOTES(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

Millions of yen

Thousands of U.S. dollars

2010

2011

2011

2010

2011

2011

¥920,215¥964,847$11,624,663¥348,741¥359,050$4,325,904*3. Pledged assets and secured liabilities
The following table shows the assets pledged as collateral.
Millions of yen

Thousands of U.S. dollars
2011

2010

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

82 Annual Report 2011

¥

140

[¥

—]

¥

140

2011

[¥

—]

$

1,687

[$

—]

235,852[230,129]

225,327[219,992]

2,714,783[2,650,506]

46,456272,412
4,116[46,454][259,244][4,116]41,808
268,730
2,669[41,808][255,562][2,669]503,7113,237,711
32,157[503,711][3,079,060][32,157]

1,466[1,466]

129

[129]

1,554

[1,554]

17,044¥577,489[—][¥541,410]

14,953¥553,759[—][¥520,162]

180,157$6,671,795[—][$6,267,012]

Our Business

The following table shows the secured liabilities.
Millions of yen

Thousands of U.S. dollars
2011

2010

2011

¥ 10,979
59[¥ 9,572][—]¥ 10,469
55[¥ 9,317][—]$ 126,133
663[$ 112,253][—]

94,464¥105,503[76,652][¥86,225]

100,700¥111,225[85,560][¥94,878]

1,213,253¥1,340,060[1,030,843][$1,143,108]

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

*4. The following table shows the securities for nonconsolidated
subsidiaries and affiliates.
Thousands of
U.S. dollars

Millions of yen¥151,052

2011¥152,106$1,832,602

2011¥(4,866)¥(5,602)$(67,494)

5,780
2,625
139
¥33,155

Fiscal year ended 31st March 2011

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

Millions of yen

Thousands of
U.S. dollars¥24,135$290,783

6,339
79¥30,554

76,373952$368,120

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

(B) The Company guarantees the loans of Senchu Parking by reserving
the right of purchasing real property held by Senchu Parking.
Millions of yen

Thousands of U.S. dollars

2010

2011

2011

¥7,007¥—$—(Consolidated Statements of Income)*1. Year-end inventory balance
Fiscal year ended 31st March 2011
The year-end inventory balance is the amount after write-down due todecreased profitability, and the following write-down of inventories is
included in operating expenses and cost of sales.
Millions of yen

Financial Section

2011¥24,610

Thousands of U.S. dollars

2011

2011

¥2,881$34,711

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Thousands of U.S. dollars

2010

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

Management Organisation*5. Two consolidated subsidiaries and an equity method affiliate revaluated land for business use based on the Law Concerning Revaluationsof Land (Law No. 34, promulgated on 31st March 1998) and the Law toPartially Modify the Law Concerning Revaluations of Land (Law No. 19,
promulgated on 31st March 2001). Of the valuation differences identified
as a result of this, the consolidated subsidiaries recorded the amountcorresponding to the taxes on the valuation difference in the liability
section as “deferred tax liabilities related to land revaluation” and theamount belonging to minority shareholders as “minority interests.” Theamount remaining after subtracting these was recorded in the net assets
section as “surplus from land revaluation.” The equity method affiliates
recorded the amount corresponding to its equity in the valuation difference (after subtracting taxes) in the net assets section as “surplus fromland revaluation.”
Revaluation method
The revaluation amounts were determined based on the revaluated value of noncurrent assets provided for in Article 2, Paragraph
3 of the Enforcement Ordinance. Concerning Land Revaluation(Ordinance No. 119, promulgated on 31st March 1998).
Date of revaluation: 31st March 2002.
The difference between the market value of the land and bookvalue after revaluation at the end of previous fiscal year and fiscal
year under review are as follows:
Millions of yen

Millions of yen

2011Core Business:
Overview and Outlook

2010

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

6. Contingent liabilities(A) The Company provides a liability guarantee for loans of theCompanies, etc. listed below.
Fiscal year ended 31st March 2010

Interview with the President

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

*2. The breakdown of selling, general and administrative expenses isshown below.
Thousands of
U.S. dollars

Millions of yen

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

2010

2011

2011

¥16,083
11,988505¥16,254
11,471
706$195,831
138,205
8,506

1,429
2,677
¥32,684

1,434
2,684
¥32,552

17,27732,337$392,193

Annual Report 201183

Notes to the Consolidated Financial Statements*3. The amounts of allowance and reserves included in the costs ofrevenues from operations are shown below.
Thousands of
U.S. dollars

Millions of yen

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

2010

2011

159
4,413

¥ 125
4,260

10,0279,440

113,735

136

139

1,675

¥

2011

$

1,506
51,325

RegionType of assets

Millions of yen

Osaka

Idle assets, etc.
Total: 11

Use

Construction inprogress, etc.

¥4,576

Kyoto

Retailing stores
Total: 2

Buildings andstructures, etc.

112

Hyogo,
etc.

Retailing stores, etc.
Total: 12

Buildings andstructures, etc.

61

The following table shows a breakdown of the loss on impairment of
fixed assets in each region.
RegionType of assets
Buildings and structures

Millions of yen
¥ 132

Land

*4. The gain on sale of property and equipment resulted from thetransfer of land and other property.
*5. The gain on sale of securities
Fiscal year ended 31st March 2010
The gain on sale of securities resulted from the sale of investment
securities.
*6. The loss on sale of property and equipment resulted from thetransfer of land and other property. The breakdown is shown
below.
Thousands of
U.S. dollars

Millions of yen

Land ...................................................
Machinery, equipment andvehicles, etc. ..............................
Construction in progress ......

2010

2011

2011

¥309

¥287

$3,458

16
—

—
214

—
2,578

*7. Loss on disposal of property and equipment
The loss on disposal of property and equipment resulted mainly from therebuilding of the Umeda Hankyu Building of Hankyu Corporation. The
breakdown is shown below.
Thousands of
U.S. dollars

Millions of yen

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

2010

2011

2011

¥4,613¥482$5,807

4,446

325

3,916

166
—
1,649

—
157
750

—
1,892
9,036

*8. Loss on impairment of fixed assets
Fiscal year ended 31st March 2010
The loss on impairment of fixed assets was calculated by grouping theassets based on the smallest unit that creates a cash flow that is generally
independent of the cash flow of other assets or asset groups. As a result,the book values of a total of 25 noncurrent assets groups, the market
values of which have been declining sharply from their book values due
to a continuous decrease in land value, and those that have continuously
resulted in operating losses and whose profitability is unlikely to recoverin the future, were reduced to the recoverable amount, and the amountof the reduction has been recorded as a loss on impairment of fixed
assets (¥4,751 million) under extraordinary loss in the fiscal year ended
31st March 2010.

84 Annual Report 2011

Osaka

Kyoto

Hyogo, etc.

8Construction in progress

4,407

Other

15

Intangible assets

12

Buildings and structures

94

Other

18

Intangible assets

0

Buildings and structures

38

Machinery, equipment and vehicles

2

Land

12

Construction in progress

0

Other

8

The recoverable value of this asset group has been calculated based on
the net sale value.
The net sale value is determined by rationally adjusting the expectedsale prices, appraised values based on the Japanese Real Estate Appraisal
Standards, and/or fixed asset tax assessment values.
Fiscal year ended 31st March 2011
The loss on impairment of fixed assets was calculated by grouping theassets based on the smallest unit that creates a cash flow that is generally
independent of the cash flow of other assets or asset groups. As a result,the book values of a total of 30 noncurrent assets groups, the market
values of which have been declining sharply from their book values due
to a continuous decrease in land value, and those that have continuously
resulted in operating losses and whose profitability is unlikely to recoverin the future, were reduced to the recoverable amount, and the amountof the reduction has been recorded as a loss on impairment of fixed
assets (¥4,261 million ($51,337 thousand)) under extraordinary loss in thefiscal year under review.
RegionUse

Type of assets

Millions of yen

Thousands of
U.S. dollars¥3,071$37,000

Osaka

Property for rent, etc. Buildings andTotal: 14
structures, etc.

Tokyo

Hotel, etc.
Total: 3

Buildings andstructures, etc.

945

11,386

Hyogo,
etc.

Idle assets, etc.
Total: 13

Land, etc.

245

2,952

Our Business

The following table shows a breakdown of the loss on impairment of
fixed assets in each region.
RegionType of assets
Buildings and structures
Machinery, equipment and vehicles
Other
Intangible assets
Buildings and structures
Machinery, equipment and vehicles

Tokyo

Other
Intangible assets
Buildings and structures
Machinery, equipment and vehicles
Land
Construction in progress
Other
Intangible assets¥2,924
13
103
24
4
816
3
116
8
43
2
136
55
4
3

$35,229
157
1,241
289
48
9,831
36
1,398
96
518
24
1,639
663
48
36

*9. Non-recurring depreciation on noncurrent assets
Fiscal year ended 31st March 2011
Non-recurring depreciation on noncurrent assets arises mainly
from changes to the number of years of useful life for certain rental
properties.

Millions of yen
2010

Comprehensive income attributable toowners of the parent .................................................................................
Comprehensive income attributable tominority interests .........................................................................................
Total .................................................................................................................

595¥12,541*2. Other comprehensive income in the fiscal year ended 31st March
2010
Millions of yen
2010

Valuation difference on available-for-salesecurities ..........................................................................................................
Deferred gains or losses on hedges....................................................
Foreign currency translation adjustments.......................................
Share of other comprehensive incomeof associates accounted for using equity
method...............................................................................................................
Total .................................................................................................................

Increase in number of shares¥ (871)
(165)
187

2,074
¥1,225(Thousands of shares)

Decrease in number of shares

No. of shares as of 31st March 2010

No. of shares issued
Common stockTotal

1,271,406——

1,271,406

1,271,406——

1,271,406

Common stock (Notes 1 and 2)
Total

9,761

311

794

9,278

9,761

311

794

9,278

(Overview of reasons for fluctuations)
Notes:
1. The increase of 311 thousand shares of common stock of the Company represents the increase from the purchase of odd lot shares.
2. The decrease of 794 thousand shares of common stock of the Company includes a decrease of 731 thousand shares as a result of an exchange of shares (three-way
exchange of shares) using the treasury stock (the Company’s own shares) of consolidated subsidiaries and a decrease of 63 thousand shares due to the sale of odd lot
shares.

Annual Report 2011

Financial Section

Treasury stock, at cost

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility(Consolidated Statements of Changes in Net Assets)
1. Items related to types and total number of shares issued and types and number of treasury stock sharesFiscal year ended 31st March 2010
No. of shares as of 31st March 2009

¥11,945

Management Organisation

The recoverable value of this asset group has been calculated based on
the net sale value or value in use.
The net sale value is determined by rationally adjusting the expectedsale prices, appraised values based on the Japanese Real Estate Appraisal
Standards, and/or noncurrent asset tax assessment values. When thevalue in use is used for the calculation, the future cash flow is discounted
by 4.0%.

(Statements of comprehensive income)Fiscal year ended 31st March 2011
*1. Comprehensive income in the fiscal year ended 31st March 2010
Core Business:
Overview and Outlook

Hyogo, etc.

Thousands of
U.S. dollars

Interview with the President

Land

Osaka

Millions of yen*10. Lump sum amortisation of goodwill equivalent amount underthe equity method
Fiscal year ended 31st March 2010
The lump sum amortisation of goodwill equivalent amount under theequity method refers to the process by which the entire unamortisedbalance of the “goodwill equivalent amount” recognised when theshares of H2O Retailing Corporation, an equity method affiliate of theCompany, were acquired through the exchange of shares in the consolidated settlement because an impairment loss from the stock of H2O
Retailing has been reported in the Company’s individual financial statements due to a decline in the market price of H2O Retailing’s stock heldby the Company.

85

Notes to the Consolidated Financial Statements

Fiscal year ended 31st March 2011

(Thousands of shares)

No. of shares as of 31st March 2010

Increase in number of shares

Decrease in number of shares

No. of shares as of 31st March 2011

1,271,406——

1,271,406

1,271,406——

1,271,406

9,278

690

71

9,897

9,278

690

71

9,897

No. of shares issued
Common stock
Total
Treasury stock, at cost
Common stock (Notes 1 and 2)
Total(Overview of reasons for fluctuations)
Notes:
1. The increase of 690 thousand shares of common stock of the Company comprises 470 thousand shares purchased from owners of unknown whereabouts, and 220
thousand shares purchased of odd lot shares.
2. The decrease of 71 thousand shares of common stock of the Company includes the sale of odd lot shares.

2. Items related to subscription rights for shares and own share options
No items
3. Items related to dividends
Fiscal year ended 31st March 2010
(1) Dividends paid
(Resolution)

Type of shares

17th June 2009
General meeting ofshareholders

Common stock

Dividends paid
(Millions of yen)

Dividend per share(Yen)¥6,335¥5

Record date

Effective date

31st March 200918th June 2009

(2) Dividends whose effective date falls in the fiscal year following the fiscal year of the record date
(Resolution)

Type of shares

16th June 2010
General meeting ofshareholders

Common stock

Dividends paid
(Millions of yen)
¥6,337

Source of dividends

Dividend per share(Yen)

Retained earnings¥5

Record date

Effective date

31st March 2010

17th June 2010

Fiscal year ended 31st March 2011
(1) Dividends paid
Dividends paid
(Resolution)

Type of shares

16th June 2010
General meeting ofshareholders

Common stock(Thousands(Millions ofof U.S.
yen)
dollars)¥6,337$76,349

Dividend per share(Yen)(U.S. dollars)

¥5

$0.06

Record date

Effective date

31st March 2010

17th June 2010

(2) Dividends whose effective date falls in the fiscal year following the fiscal year of the record date
Dividends paid
(Resolution)

Type of shares

16th June 2011
General meeting ofshareholders

Common stock

86 Annual Report 2011

(Thousands(Millions ofof U.S.
yen)
dollars)¥6,334$76,313

Dividend per share
Source of dividends

Retained earnings(Yen)(U.S. dollars)

¥5

$0.06

Record date

Effective date

31st March 2011

17th June 2011

Our Business(Consolidated Statements of Cash Flows)
1. Relationship between cash and cash equivalents at fiscal year-end
and amounts shown on consolidated balance sheets
Thousands of
U.S. dollars

Millions of yen
2010

2011

2011

¥23,947$288,518(1,354)(16,313)¥22,592$272,193

Millions of yen

Thousands of U.S. dollars
2011

2011

Acquisition Accumulated Net leased
cost
depreciation property

Acquisition Accumulated Net leased
cost
depreciation property

Acquisition Accumulated Net leased
cost
depreciation property

¥
7
4,139
3,070
¥7,217$84
49,86736,988$86,952

Buildings and structures ..........................
Machinery, equipment and vehicles...
Other ....................................................................
Total ...............................................................

¥
7
4,440
4,670
¥9,117

¥
5
2,716
3,272
¥5,994

¥
1
1,723
1,397
¥3,123

¥
7
2,815
2,526
¥5,348

¥
0
1,324
544
¥1,868$84
33,91630,434$64,434$
0
15,952
6,554$22,506

Note: Acquisition cost includes interest paid due to a low percentage of future lease payments in the year-end balance of property and equipment.

(2) Amount equivalent to future lease payments
Millions of yen
2010

2011

2011

¥1,210
1,912¥3,123¥ 768
1,100¥1,868$ 9,253
13,253$22,506

Note: The future lease payments include interest paid due to a low percentage of
future lease payments in the year-end balance of property and equipment.

<As lessor>
1. Operating lease transactions
Thousands of
U.S. dollars

Millions of yen

Future lease payments
receivables
Due within one year .........
Due after one year .............
Total ............................................

2010

2011

2011

¥

¥ 381
4,972
¥5,354$ 4,590
59,904$64,506

81
979¥1,060(3) Lease payments and amount equivalent to depreciation expenses
Millions of yen

Lease payments..........................
Amount equivalent todepreciation expenses .......

Thousands of
U.S. dollars

2010

2011

2011

¥1,496¥1,161$13,988

1,496

1,161

13,988

2. Operating lease transactions
Millions of yen

Future lease payments
Due within one year .........
Due after one year .............
Total ............................................

Thousands of
U.S. dollars

2010

2011

2011

¥ 3,320
12,153¥15,473¥ 2,634
10,608¥13,242$ 31,735
127,807$159,542

1. Matters regarding the conditions of financial instruments(1) Policy on financial instruments
It is the Group’s policy to limit the investment of its funds to short-term
deposits, which are highly secure, and the Group raises funds mainly
through loans from financial institutions, bonds and commercial paper.
Derivative transactions are used to avoid risk, as discussed later, and it isour policy to refrain from speculative transactions.

Financial Section(4) Method for calculating the amount equivalent to depreciation
expenseThe straight-line method using the term of the lease as useful life withresidual value of zero is used to calculate the amount equivalent todepreciation expense.

(Financial Instruments)(Additional information)
Fiscal year ended 31st March 2010
From the fiscal year ended 31st March 2010, the Company is applying
the “Accounting Standard for Financial Instruments” (ASBJ Statement No.
10, issued on 10th March 2008) and the “Implementation Guidance forthe Disclosure of Fair Value, etc. of Financial Instruments” (ASBJ GuidanceNo. 19, issued on 10th March 2008).

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Due within one year ................
Due after one year ....................
Total ............................................

Thousands of
U.S. dollars

Management Organisation

2010

Core Business:
Overview and Outlook(Lease Transactions)<As lessee>
1. Finance lease transactions that do not transfer ownership of the lease asset, prior to the initial year for commencement of the accounting
standards for lease transactions(1) Amount equivalent to acquisition cost, accumulated depreciation and net leased property at fiscal year-end

Interview with the President

Cash and deposits in the
consolidated balance
sheets ............................................. ¥23,792
Deposits with maturities
over 3 months...........................
(2,351)
Cash and cash equivalents inthe cash flow statements ... ¥21,440

2. Major breakdown of assets and liabilities of subsidiaries added toscope of consolidation via acquisition of sharesFiscal year ended 31st March 2010
Kobe Rapid Transit Railway Co., Ltd.
Millions of yen
Current assets ............................................................ ¥ 6,681
Noncurrent assets ..................................................
55,374Current liabilities .....................................................
(12,377)
Long-term liabilities ...............................................
(49,213)(2) Details of the financial instruments used, the risk involved, and the risk
management system
Marketable and investment securities consist mainly of stocks and bonds,
and are exposed to market price fluctuation risk. However, fair values andAnnual Report 201187

Notes to the Consolidated Financial Statements

the financial condition of the issuers are checked periodically, and therisk management system is confirmed.
Trade receivables, namely note receivables and trade accountreceivables, are exposed to the credit risk of customers. The Group limits
its exposure to this credit risk by controlling the due date and balance bycustomer, and by making periodical checks of the credit conditions ofmajor customers pursuant to the internal regulations of each company.
Almost all trade payables, namely note payables and trade accountpayables, have a payment date that falls within one year.
Some foreign currency denominated assets and liabilities are
exposed to exchange rate fluctuation risk (market risk), which was
hedged through forward exchange contracts, currency swap transactions and currency option transactions.
Long-term debt and bonds are used mainly to raise the long-term
funds necessary for capital investment plans, and short-term borrowings and commercial paper are used mainly to raise short-term funds
for working capital. Some floating-rate debt and floating-rate bonds are
exposed to interest rate fluctuation risk (market risk). Exposure to interest
rate fluctuation risk is limited by fixing interest rates through interest rate
swap transactions and interest rate option transactions. In addition, there
is liquidity risk that payment will not be made by the due date. Liquidity
risk is limited by the timely preparation of financing plans and proper
fund management. In addition, surplus funds of the Group companies
are concentrated and used effectively through centralisation of Groupfunds by using the cash pool system, etc. Immediate fund raising fromfinancial institutions became possible through the establishment of
backup financing such as commitment lines. In addition, the Company
maintained a proper balance between direct financing and indirect
financing, and advanced the diversification of its fund raising means byusing many financial institutions, thus securing liquidity.

Regarding the use of derivative transactions, internal regulationsprescribe the division of duties and transaction limits. With respect toderivative transactions, the main purpose of interest rate swap transactions and interest rate option transactions is to hedge the interest rate
fluctuation risk involved in certain loans and bonds. Forward exchange
contracts, currency swap transactions and currency option transactions
are used mainly to avoid exchange rate fluctuation risk involved in a
portion of foreign currency denominated assets and liabilities. These
derivative transactions involve credit risk because, if the other party
to a transaction defaults on debts based on contracted conditions, or
becomes bankrupt, the benefit that would have been obtained in the
future if the transaction had continued will not be enjoyed. However,credit risk is limited by carrying out transactions only with financial institutions with high ratings.
For more information regarding the means and objectives of hedging, hedging policy, and the method of evaluating the effectivenessof hedges relating to hedge accounting for derivative transactions,refer to “significant hedge accounting methods” outlined in “BASIS OF
PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS” above.
(3) Supplementary explanation regarding fair values of financial
instruments
The fair values of financial instruments include values based on market
prices. If market prices are not available, the fair values of financial instruments include values that have been reasonably calculated. Certain
assumptions are used to calculate the above values. As a result, if different assumptions are used, the values may differ. For derivative contracts,
the amount of the contract, which is indicated in the note on “derivativetransactions,” does not indicate the market risk involved in derivativetransactions themselves.

2. Matters regarding fair values of financial instruments
Book value, fair value and the differences between them as of the end of the previous fiscal year and fiscal year under review are as shown below.
Millions of yen
2010
Book value(1) Cash and deposits................ ¥ 23,792(2) Trade receivables..................
78,969(3) Securities....................................
46,107
Total assets ...............................
148,869(4) Trade payables .......................
46,726(5) Short-term borrowings(*1) ..............................................
182,087(6) Bonds (*2) ..................................
160,000(7) Long-term debt (*1) ...........
937,277
Total liabilities ......................... 1,326,091(8) Derivative transactions .....
—

Fair value

Difference¥¥

23,79278,96946,107
148,868
46,726

182,087
163,078
944,593
1,336,484(21,119)

Thousands of U.S. dollars
2011

—
—
(0)
(0)
—
—
3,078
7,315
10,393—

Book value¥

Fair value

23,947 ¥ 23,947
71,281
71,281
41,132
41,132
136,361
136,361
40,40440,404

172,478
167,000
905,894
1,285,778—

172,478
169,552
916,367
1,298,804(18,335)

2011
Difference

¥

—
—
0
0
—

—
2,552
10,47313,025—

Book value$

Fair value

Difference

288,518 $ 288,518
858,807858,807495,566
495,566
1,642,904 1,642,904
486,795
486,795

$

—
—
0
0
—

2,078,048 2,078,048
2,012,048 2,042,795
10,914,386 11,040,566
15,491,301 15,648,241—(220,904)—
30,747
126,181
156,928—(*1) Current portion of long-term debt is included in (7) Long-term debt.
(*2) Current portion of bonds is included.
(Note 1) Method for calculating the fair values of financial instruments and matters regarding securities and derivative transactions(1) Cash and deposits, (2) 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 bookvalues.
(3) Securities
The fair values of stocks are based on prices quoted by stock exchanges, and the fair values of bonds are based on prices quoted by stock exchanges or prices presented bytrading financial institutions. With respect to securities categorised by the purpose for which they are held, refer to note on “Securities.”(4) Trade payables, (5) 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 bookvalues.

88 Annual Report 2011

Our Business(Note 2) Financial instruments whose fair value is extremely difficult to ascertain

Classification

Millions of yen

Thousands of
U.S. dollars

Book value

Book value

2010

2011

2011

¥ 4,833¥ 5,028$ 60,578

8,850

7,845

94,518Interview with the President(6) Bonds
The fair values of fixed-rate bonds issued by the Company and some of its consolidated subsidiaries are based on market prices. The fair values of floating-rate bonds are
based on their book values because the fair values of floating-rate bonds reflect market interest rates within a short period of time, and closely approximate their bookvalues.
(7) Long-term debt
The fair values of fixed-rate long-term debts are based on a method of calculation whereby the total principal and interest is discounted at an interest rate that is assumed
for the introduction of similar new debt. The fair values of floating-rate long-term debt are based on their book values because the fair values of floating-rate long-term
debts reflect market interest rates within a short period of time and closely approximate their book values.
(8) Derivative transactions
Refer to notes on “Derivatives.”

Available-for-sale securities

Negotiable certificates ofdeposit .................................................................

16,98814,896

179,470

Total.................................................................

¥30,672¥27,770$334,578Core Business:
Overview and Outlook

Non-listed equity securities.........................
Investments in limited liability
investment partnerships andsimilar investments.......................................

It is extremely difficult to ascertain the fair values of these because market prices are not available and future cash flows cannot be estimated. As a result, they are not includedin (3) Securities.
(Note 3) The stocks of nonconsolidated subsidiaries and affiliated companies are not included in (3) Securities.
Management Organisation(Note 4) Redemption and repayment schedule of monetary claims and securities with maturities

Fiscal year ended 31st March 2010
Millions of yen
Due within
one year

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

Due after
ten years

Cash and deposits...............................................

¥ 23,792

¥—

¥ —

¥—

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

78,969

—

—

—

5

9

—

—

Securities

Total............................................................

2

18

176

—

¥102,768

¥28

¥176

¥—

Fiscal year ended 31st March 2011

Due within
one year

Millions of yen

Thousands of U.S. dollars

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

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

Due after
ten years

Due within
one year

Cash and deposits...............................................

¥23,947

¥—

¥ —

¥—

$ 288,518

$ —

—

$—

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

71,281———

858,807

—

—

—

5

9

—

—

60

108

—

—

Securities
Held-to-maturity debt securities(government bonds, etc.) ....................
Available-for-sale securities withmaturities (government bonds,etc.) ....................................................................

—

18

231

—

—

217

2,783

—

Total............................................................

¥95,234

¥28

¥231

¥—

$1,147,398$337$2,783$—

Annual Report 2011

Financial Section$

Due after
ten years

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Held-to-maturity debt securities(government bonds, etc.) ....................
Available-for-sale securities withmaturities (government bonds,etc.) ....................................................................

89

Notes to the Consolidated Financial Statements(Note 5) Amount of planned redemption and repayment of bonds and long-term debt after the consolidated closing dateFiscal year ended 31st March 2010
Millions of yen
Due within
one year

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

Due after
ten years

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

¥ 25,000¥105,000¥ 30,000

Long-term debt ....................................................

105,258

590,774

198,151¥

43,091—

Total .....................................................................

¥130,258¥695,774¥228,151¥43,091

Fiscal year ended 31st March 2011

Due within
one year

Millions of yen

Thousands of U.S. dollars

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

Due after
ten years$ 84,337

Due after
ten years

Due within
one year

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

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

¥ 40,000¥ 65,000¥ 55,000¥ 7,000$ 481,928$ 783,133$ 662,651

Long-term debt ....................................................

124,986

556,163

175,285

49,4591,505,855

6,700,759

2,111,867

595,892

Total .....................................................................

¥164,986¥621,163¥230,285¥56,459$1,987,783$7,483,892$2,774,518$680,229(Securities)(Additional information)
Fiscal year ended 31st March 2010
From the fiscal year ended 31st March 2010, the Company is applying the “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10,
issued on 10th March 2008) and the “Implementation Guidance for the Disclosure of Fair Value, etc. of Financial Instruments” (ASBJ Guidance No. 19,
issued on 10th March 2008).
1. Held-to-maturity debt securities
Millions of yen

Thousands of U.S. dollars
2011

2010
Classification

Securities with fair value
exceeding book value...........
Securities with fair value notexceeding book value...........

2011

Book value

Fair value

DifferenceBook value

Fair value

DifferenceBook value

Fair value

Difference

¥—

¥—

¥—

¥9

¥9

¥ 0

$108

$108

$ 0

14

14

(0)

5

5

—

60

60

—

2. Available-for-sale securities
Millions of yen
Classification

Securities with book value
exceeding acquisition cost:
1) Equity securities .....................
2) Bonds............................................
3) Other .............................................
Subtotal .....................................
Securities with book value notexceeding acquisition cost:
1) Equity securities .....................
2) Bonds............................................
3) Other .............................................
Subtotal .....................................
Total .....................................

Thousands of U.S. dollars

2010

2011

2011

Book value Acquisition cost DifferenceBook value Acquisition cost DifferenceBook value Acquisition cost Difference¥20,54557
4
20,607¥ 9,50955
3
9,568¥ 11,036
1
1
11,039¥16,579249
3
16,832¥ 8,570
244
3
8,817

¥ 8,0094
0
8,014$199,747
3,000
36
202,795$103,253
2,940
36
106,229$ 96,49448
096,55425,343139
225,485¥46,092

47,715140
247,857¥57,426(22,371)(1)(0)(22,372)¥(11,333)

24,2810
224,284¥41,11747,7650
247,768¥56,586(23,483)(0)(0)(23,483)¥(15,468)

292,5420
24
292,578$495,386

575,4820
24
575,518$681,759(282,928)(0)(0)(282,928)$(186,361)

3. Available-for-sale securities sold during previous fiscal year and fiscal year under review
Millions of yen
2010
Classification

Amount soldTotal gains
on saleEquity securities...........................

¥3,386¥1,50890 Annual Report 2011

Thousands of U.S. dollars
2011

Total losses
on sale

¥395

2011

Amount soldTotal gains
on saleTotal losses
on sale

¥7

¥0

¥0

Amount soldTotal gains
on saleTotal losses
on sale

$84

$0

$0

Our Business(Derivatives)(Additional information)
Fiscal year ended 31st March 2010
From the fiscal year ended 31st March 2010, the Company is applying the “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10,
issued on 10th March 2008) and the “Implementation Guidance for the Disclosure of Fair Value, etc. of Financial Instruments” (ASBJ Guidance No. 19,
issued on 10th March 2008).
Interview with the President

1. Derivative transactions for which hedge accounting has not been applied
No items
2. Derivative transactions for which hedge accounting has been applied(1) Currency
Fiscal year ended 31st March 2010
Millions of yen

Type¥13,066
4,742
18
953
530
188
219
127
18
52
678
¥20,595

¥—
—
—
—
—
—
—
—
—
—
—
¥—

Fair value¥(559)
106
0
(2)
33
2
13
2
0
1
(16)
¥(417)

Management Organisation

Forward exchange contracts
Buy contractEuro
Deferral
US dollar
hedge
Pound sterling
accounting
Swiss franc
and
Trade
Canadian dollar
designation
receivablesof forward
New Zealand dollar
exchange
Australian dollar
contracts,
Hong Kong dollar
etc.
Singapore dollar
Thai baht
Japanese yen
Total

Core Business:
Overview and Outlook

Classification

Portion ofcontract amount
Main hedged
exceedingitems
Contract amount
one year

Fiscal year ended 31st March 2011
Millions of yen

Type¥10,190
5,001
17
920
848
97
244
261
14
41
667
¥18,304

¥—
—
—
—
—
—
—
—
—
—
—
¥—

Fair value

¥460
56
0
67
41
3
20
3
0
0
14
¥668

Portion ofcontract amountexceedingContract amount
one year$122,771
60,253205
11,084
10,217
1,169
2,940
3,145
169
494
8,036
$220,530

$—
—
—
—
—
—
—
—
—
—
—
$—

Fair value$5,542
675
0
807
494
36
241
36
0
0
169
$8,048Financial Section

Forward exchange contracts
Buy contractEuro
Deferral
US dollar
hedge
Pound sterling
accounting
Swiss franc
and
Trade
Canadian dollar
designation
receivablesof forward
New Zealand dollar
exchange
Australian dollar
contracts,
Hong Kong dollar
etc.
Singapore dollar
Thai baht
Japanese yen
Total

Thousands of U.S. dollars

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Classification

Portion ofcontract amount
Main hedged
exceedingitems
Contract amount
one year

Note: Fair value calculation
Fair value is determined based mainly on price quoted from counterparty financial institutions.

Annual Report 201191

Notes to the Consolidated Financial Statements(2) Interest rate
Fiscal year ended 31st March 2010
Millions of yen

Classification

Type

Portion ofcontract amount
Main hedged
exceedingitems
Contract amount
one yearInterest rate swap
Deferral hedge contracts
accounting andPayable fixed rate/Long-term
exceptional
Receivable floatingdebt andaccounting of
rate
bonds
interest rate
Receivable
fixed
rate/
swaps
Payable floating rate
Total

Fair value¥683,092¥643,495¥(20,750)

5,097

—

49

¥688,190¥643,495¥(20,701)

Fiscal year ended 31st March 2011
Millions of yen

Classification

Type

Deferral hedge Interest rate swap
accounting and contracts
exceptional
Payable fixed rate/accounting ofReceivable floatinginterest rate swaps
rate
Total

Thousands of U.S. dollars

Portion ofcontract amount
Main hedged
exceedingitems
Contract amount
one year

Fair value

Long-term
debt andbonds

Portion ofcontract amountexceedingContract amount
one year

Fair value¥599,445¥557,158¥(19,003)$7,222,229$6,712,747$(228,952)¥599,445¥557,158¥(19,003)$7,222,229$6,712,747$(228,952)

Note: Fair value calculation
Fair value is determined based mainly on prices quoted from counterparty financial institutions.

(Retirement Benefits)
1. Overview of retirement benefit plan
Consolidated subsidiaries provide three types of defined benefit plans,
tax qualified pension plans, defined benefit pension plans and unfunded
lump-sum payment plans. Hankyu Corporation has also established aretirement benefits trust.

2. Items related to retirement benefit obligations
Millions of yen
2010

2011

1) Projected benefit obligation ¥(128,065) ¥(123,821)
2) Plan assets ................................
66,243
61,6903) Unfunded projected
benefit obligation (1+2)(61,821)(62,131)
4) Unrecognised actuarial
differences ............................
5,881
5,020
5) Unrecognised priorservice costs.........................
1662626) Book value (net) (3+4+5)...
(55,772)(56,848)
7) Prepaid pension costs .......
2,714
1,922
8) Provision for retirement
benefits (6-7) ....................... ¥ (58,487) ¥ (58,770)

Thousands of
U.S. dollars
2011$(1,491,819)
743,253(748,566)
60,482$3,157(684,916)$23,157$ (708,072)

Note: Certain consolidated subsidiaries use simplified methods for calculating
retirement benefit obligations.

92 Annual Report 2011

Our Business

3. Items related to retirement benefit expenses

2010 (Note 1) 2011 (Note 2)2011 (Note 2)¥ 6,119¥6,334$ 76,313

2,686

2,590

31,205(1,123)(1,132)(13,639)

2,434

1,561

18,807

1

87

1,048

¥10,118¥9,440$113,735

2010

2011

$

434,108
395,819
320,699
283,337
102,458
89,12084,651
74,63960,81957,301
23,494
14,084
12,120
8,783
4,494
3,843
189,289
2,159,157(659,518)(1,290,831)
208,807(1,678,205)(1,234,157)(201,410)

Financial Section

Deferred tax liabilities:
Gain on reversal ofdifference from land
revaluation ..................................
(136,142) (139,291)
Revaluation of assets on
consolidation .............................
(102,964) (102,435)
Net unrealised holding gains
on securities ...............................
(18,464)(16,717)
Gain on valuation ofproperties of businessreorganisation ...........................
(2,983)(2,908)Other .................................................
(3,589)(3,367)
Subtotal of deferred tax
liabilities .................................
(264,144) (264,720)
Less amounts offset against
deferred tax assets..................
112,336
107,139
Total deferred tax liabilities...
(151,807) (157,580)
Net deferred tax liabilities... ¥(132,187) ¥(140,249)

2011

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Deferred tax assets:
Loss on revaluation of realestate for sale............................. ¥ 60,440 ¥ 36,031
Loss on impairment of fixed
assets ..............................................
31,38232,853Tax loss carryforwards.............
13,336
26,618Provision for retirement
benefits..........................................
22,946
23,517
Losses on revaluation of
investment securities ...........
8,750
8,504
Revaluation of assets on
consolidation .............................
7,354
7,397
Loss on adjustment oftransferred profit and loss...
4,897
7,026
Unrealised profit from assets...
6,891
6,195
Special reserve forinvestment loss ........................
8,727
5,048
Loss on valuation ofproperties of businessreorganisation ...........................
4,823
4,756
Provision for bonuses .............
1,969
1,950
Provision for loss on
business liquidation ..............
—
1,169
Allowance for doubtfulreceivables ..................................
3,244
1,006
Enterprise taxes andbusiness office taxes .............
756
729
Depreciation andamortisation ...............................
373
373
Provision for directors’
retirement benefits ................
284
319
Other .................................................
13,55815,711
Subtotal of deferred tax
assets .......................................
189,736
179,210
Valuation allowance ................
(57,779)(54,740)
Less amounts offset against
deferred tax liabilities ...........
(112,336) (107,139)
Total deferred tax assets...
19,62017,331

Management Organisation

4. Items related to basis for calculating retirement benefit obligations,etc.
1) Periodic distribution method for estimated amount of retirement
benefits
Allocated equally to each service year using the estimated number of
total service years2) Discount rate
Fiscal year ended 31st March 2010: mainly 2.5%
Fiscal year ended 31st March 2011: mainly 2.0%
3) Expected rate of return on plan assets
mainly 2.5%
4) Number of years over which prior service costs are written off
3 to 15 years (amortised using the straight-line method over a period
not exceeding the average remaining service life of active employees)5) Number of years over which actuarial differences are written off
4 to 15 years (amortised using the straight-line method over a period
not exceeding the average remaining service life of active employees
and recognised in expenses starting from the following fiscal year)

Thousands of
U.S. dollars

Millions of yen

Core Business:
Overview and Outlook

Notes:
1. In the fiscal year ended 31st March 2010, in addition to the retirement benefit
expenses shown above, the Company made extra retirement payments of ¥239
million, which are mainly recorded as extraordinary loss.
2. In the fiscal year ended 31st March 2011, in addition to the retirement benefit
expenses shown above, the Company made extra retirement payments of ¥31
million ($373 thousand), which are mainly recorded as costs of revenues fromoperations.
3. Retirement benefit expenses of consolidated subsidiaries that use a simplified
method are recorded in 1) Service cost.

(Deferred Tax)
1. Significant components of the Company’s deferred tax assets andliabilities

Interview with the President

1) Service cost (Note 3) ..........
2) Interest cost on projected
benefit obligation ............
3) Expected return on plan
assets ........................................
4) Amortisation of actuarial
differences ............................
5) Amortisation of priorservice costs.........................
6) Retirement benefit
expenses (1+2+3+4+5)...

Millions of yen

Thousands of
U.S. dollars(35,036)(40,566)(3,189,398)
1,290,831(1,898,554)$(1,689,747)

Note: The Company reversed the “Surplus from land revaluation” when, as aresult 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 aresult, “Deferred tax liabilities relating to land revaluation” are recorded as deferred
tax liabilities starting from the fiscal year ending 31st March 2006.

Annual Report 201193

Notes to the Consolidated Financial Statements

2. A reconciliation of the differences between the normal effective
statutory tax rate and the effective tax rate reflected in the accompanying consolidated statements of income
Fiscal year ended 31st March 2010
The normal effective statutory tax rate......
40.6%(Adjustment)
Elimination of dividends fromconsolidated subsidiaries ...............................
20.2
Lump sum amortisation of
goodwill equivalent amount under theequity method ........................................................
12.3
Valuation allowance ..............................................
7.1
Amortisation of goodwill....................................
3.2
Nondeductible expenses ...................................
2.2
Per capita amount of inhabitants tax..........
1.4
Non taxable income ..............................................
(19.7)
Equity in (income) losses of affiliates...........
(4.1)
Other ...............................................................................
3.4
The effective tax rate .............................................
66.6%

Fiscal year ended 31st March 2011
Omitted as the difference between the normal effective statutory tax rate
and the effective tax rate reflected in the accompanying consolidated
statements income is less than 5% of the normal effective statutory tax
rate.
(Asset retirement obligations)Fiscal year ended 31st March 2011
1. Asset retirement obligations recorded in the consolidated balance
sheetsNone of the Group’s asset retirement obligations are recorded in the
consolidated balance sheets.
For certain consolidated subsidiaries, instead of recording asset
retirement obligations as liability, a reasonable estimate of the amount ofdeposits from rental properties that cannot be finally recovered is made,and the portion for that fiscal year is recorded as expenses.
2. Asset retirement obligations not recorded in the consolidated balance sheets(1) Asset retirement obligations relating to the restoration of certain
rental assets to their original state
For certain consolidated subsidiaries, obligations arise in connection
with the restoration of offices, etc, to their original state at the end oftenancies based on the rental contract. However, the period of the rental
assets involved is not stated with certainty, and there is currently no plans
to transfer, etc. Accordingly, no reasonable estimate can be made of thecorresponding asset retirement obligations. As a result, asset retirement
obligations corresponding to these liabilities are not recorded.
(2) Retirement obligations relating to structures containing asbestos
Certain consolidated subsidiaries own structures containing asbestos.
However, they have mechanisms in place to prevent airborne dispersalof asbestos, and there are currently no plans to demolish the structuresin question. With both the timing and method of any demolition as yet
undecided, it is not possible to reasonably estimate such asset retirement obligations. As a result, asset retirement obligations corresponding
to these liabilities are not recorded.

(Rental Property)
Fiscal year ended 31st March 2010
(Additional information)
From the fiscal year ended 31st March 2010, the Company is applying
the “Accounting Standard for Disclosures about Fair Value of Investment
and Rental Property” (ASBJ Statement No. 20, issued on 28th November2008) and the “Guidance on Accounting Standard for Disclosures about
Fair Value of Investment and Rental Property” (ASBJ Guidance No. 23,
issued on 28th November 2008).
Some consolidated subsidiaries own rental property such as office buildings for lease and commercial facilities for lease in the Kita Ward of Osakaand other areas. Rental income relating to such rental property in thefiscal year ended 31st March 2010 is ¥24,598 million (significant rental
revenues are recorded in revenues from operations and significant rental
expenditures are recorded in costs of revenues from operations).
Book value, increase/decrease and fair value are as follows:
Millions of yen
Book value
Balance as of
31st March 2009

Increase/Decrease

Balance as of
31st March 2010

Fair value as of
31st March 2010

¥524,634¥45,695¥570,329¥647,511

Notes:
1. Book value is acquisition cost less accumulated depreciation and loss on impairment of fixed assets.
2. The increase/decrease this fiscal year mainly reflects an increase due to theacquisition of real estate (¥58,178 million) and a decrease due to depreciation
and amortisation (¥12,395 million).
3. Fair value as of end of the fiscal year ended 31st March 2010 is the appraisal value
according to an outside real estate appraiser based on Japanese Real EstateAppraisal 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 (Book value ¥136,564 million) is not included in theabove table, as it is still in the development stage, making it difficult to determine
fair value.

Fiscal year ended 31st March 2011
Some consolidated subsidiaries own rental property such as office buildings for lease and commercial facilities for lease in the Kita Ward of Osakaand other areas. Rental income relating to such rental property in the fiscal year under review is ¥26,892 million ($324,000 thousand) (significant
rental revenues are recorded in revenues from operations and significant
rental expenditures are recorded in costs of revenues from operations).
Impairment losses totalling ¥2,699 million ($32,518 thousand) wererecorded as extraordinary loss, as was non-recurring depreciation on
noncurrent assets totalling ¥3,069 million ($36,976 thousand).
Book value, increase/decrease and fair value are as follows:
Millions of yen
Book value
Balance as of
31st March 2010

Increase/Decrease

Balance as of
31st March 2011

Fair value as of
31st March 2011

¥570,329¥(3,904)¥566,424¥620,263

Thousands of U.S. dollars
Book value
Balance as of
31st March 2010

Increase/Decrease

Balance as of
31st March 2011

Fair value as of
31st March 2011

$6,871,434$(47,036)$6,824,386$7,473,048

Notes:
1. Book value is acquisition cost less accumulated depreciation and loss on impairment of fixed assets.

94 Annual Report 2011

Our Business2. The increase/decrease this fiscal year mainly reflects an increase due to acquisitions of real estate totalling ¥12,635 million ($152,229 thousand) and a decrease
due to depreciation and amortisation of ¥11,851 million ($142,783 thousand),
impairment losses totalling ¥2,699 million ($32,518 thousand) and non-recurring
depreciation on noncurrent assets of ¥3,069 million ($36,976 thousand).
3. Fair value as of end of the fiscal year under review 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 indicatorssuch as the assessed value of noncurrent assets and road tax rating in the caseof other properties.
4. Property under development (Book value ¥141,609 million ($1,706,133 thousand)is not included in the above table, as it is still in the development stage, making it
difficult to determine fair value.

Millions of yen
Urban
Transportation Real Estate

Travel &Entertainment & International
Communications Transportation

HotelsRetailing¥ 653,287
40,911
694,199¥— ¥ 653,287(40,911)—(40,911)653,287

Other¥

624,936(41,775)

69,263¥¥2,408,524

863

583,160¥

70,126¥(71,192) ¥2,337,331

61,037(618)

60,4184,751
130,895

—
(883)

4,751
130,012

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility
Financial Section

Notes:
1. Businesses segments represent classifications used for management and administration purposes in order to accurately reflect the diversification of the Group’s operations.
2. The principal lines of business of each segment are as follows:
Urban Transportation: railways, buses and taxis, and the manufacture of rolling stock
Real Estate: the renting of real estate, purchase and sale of real estate and property management services
Entertainment and Communications: sports-related businesses, revue business, advertising, information services and publishing businesses
Travel and International Transportation: travel and international cargo services
Hotels: hotel ownership and management businesses
Retailing: retail sales, food and drink sales
Other: construction, domestic logistics services and outsourcing services for personnel and accounting services
3. Significant corporate assets included in corporate or eliminations include the surplus working capital (cash and deposits) and long-term investment capital (investment
securities) of Hankyu Corporation and Hanshin Electric Railway Co., Ltd.
Fiscal year ended 31st March 2009 ¥57,877 million
Fiscal year ended 31st March 2010 ¥54,659 million
4. Change of segment
Starting from the first quarter of the fiscal year ended 31st March 2010, Hanshin Station Net Co., Ltd. has been transferred from the Retailing Segment to the Urban
Transportation Segment following a review of the classifications used for management and administration purposes as a result of business restructuring effective 1st April
2009.
In the Retailing Segment, this had the effect of reducing revenues from operations by ¥3,251 million, costs of revenues from operations by ¥3,065 million, operating
income by ¥186 million, assets by ¥2,660 million, and depreciation and amortisation by ¥7 million and increasing capital expenditures by ¥228 million compared withthe amounts that would have been recorded without the segment change, while in the Urban Transportation Segment, this had the effect of increasing revenues fromoperations by ¥2,748 million, costs of revenues from operations by ¥2,594 million, operating income by ¥154 million, assets by ¥2,566 million, depreciation and amortisationby ¥40 million and capital expenditures by ¥78 million.
5. Change in accounting policies(Application of Accounting Standard for Construction Contracts)
As stated in “Changes in accounting policies,” effective from the fiscal year ended 31st March 2010, the Company is applying the “Accounting Standard for Construction
Contracts” (ASBJ Statement No. 15, issued on 27th December 2007) and the “Implementation Guidance on Accounting Standards for Construction Contracts” (ASBJ
Guidance No. 18, issued on 27th December 2007).
This had the effect of increasing revenues from operations of the Entertainment & Communications Segment for the fiscal year ended 31st March 2010 by ¥273 million
and operating income by ¥48 million and reducing the revenues from operations of the Others Segment by ¥1,543 million and operating income by ¥75 million comparedwith the amounts that would have been recorded with the previous method.

Management Organisation

I Revenues from operations and operating income
Revenues from operations:(1) Customers .......................... ¥191,799 ¥ 150,037 ¥ 94,253¥62,626¥60,364¥61,273¥ 32,933(2) Intersegment ...................
3,315
19,167
9,413
228
612
1,515
6,658
Total .......................................
195,114169,205
103,667
62,85460,97762,78839,591
Costs of revenues
from operations ..................
163,562
139,575
94,37562,57862,682
63,086
39,075
Operating income(losses) ...................................... ¥ 31,552 ¥ 29,629 ¥ 9,292¥ 276¥ (1,705)¥ (297) ¥516
II Assets, depreciation and amortisation, loss on impairment of fixed assets and capital expenditures
Assets ........................................... ¥806,499 ¥1,071,745 ¥148,055¥96,006¥95,611¥24,294¥166,310
Depreciation andamortisation ..........................
30,953
16,645
7,083
1,359
3,067
1,106
822
Loss on impairment of
fixed assets .............................
20
4,418
—
—
—
312
—
Capital expenditures ..........
28,322
69,957
6,430
1,523
22,2571,870
533Core Business:
Overview and Outlook

Total

Eliminations
or
Corporate Consolidated

Interview with the President(Segment Information)[Segment information by business category]
Fiscal year ended 31st March 2010

[Geographic segment information]
Fiscal year ended 31st March 2010
Geographic segment information is not disclosed as Japan accounts for more than 90% of both the total revenues from operations of all segments andthe total assets of all segments.

Annual Report 201195

Notes to the Consolidated Financial Statements[Revenues from foreign customers]
Fiscal year ended 31st March 2010
Revenues from foreign customers are not disclosed as they account for less than 10% of consolidated revenues from operations.
[Segment information]
1. Summary of reportable segment
The Company's reportable segments are regularly reviewed, using the segment specific financial information available to enable the Board of Directors
to determine the allocation of management resources and evaluate business results.
The Group comprises six core businesses: “Urban Transportation,” “Real Estate,” “Entertainment and Communications,” “Travel and International
Transportation,” “Hotels” and “Retailing.” The businesses are operated by four core companies: Hankyu Corporation, Hanshin Electric Railway Co., Ltd.,
Hankyu Hanshin Express Holdings Corporation and Hankyu Hanshin Hotels Co., Ltd., under the leadership of the Company, which manages the Group.
The nature of business in each reportable segment is as follows:
Urban Transportation: railways, and automobile business
Real Estate: the renting of real estate, and sale of real estateEntertainment and Communications: sports related businesses, stages, communication and media and leisure and other businesses
Travel and International Transportation: travel and international cargo services
Hotels: hotel ownership and management businesses
Retailing: retail business
2. Method for calculating revenues from operations, income (loss), assets and other items for each reportable segment
The accounting treatment for each reportable business segment is based on the methods detailed in “BASIS OF PREPARATION OF CONSOLIDATEDFINANCIAL STATEMENTS.” International transactions (land and structure lease and rental transactions, etc) calculated by management accounting atcompanies with businesses spanning multiple segments are also recorded.
Income (loss) for each reportable segment refers to operating income (loss).
Intersegment revenues from operations and transfers are based on similar arms length third-party transaction data. Where no such data exist,
calculations follow certain in-house rules.
3. Information regarding totals for revenues from operations, income (loss), assets and other items by reportable segment
Fiscal year ended 31st March 2010
Millions of yen
Reportable segment
Travel &Entertainment & International
Urban
Transportation Real Estate Communications Transportation

Revenues fromoperations:(1) Customers .................... ¥187,122(2) Intersegment .............
4,749
Total .................................
191,872
Segment income (loss)(Note 2)...............................
31,008Segment assets ................
745,660
Other items
Depreciation and
30,506amortisation .............
Increase in property
and equipment
and intangible
assets ...............................
27,74396 Annual Report 2011

HotelsRetailing

Subtotal

Other(Note 1)

Total

¥ 149,725
18,726
168,451¥ 98,739
9,112
107,852¥62,626228
62,854¥60,364
612
60,977¥61,351
1,522
62,874¥ 619,930
34,952654,882¥32,932
6,662
39,594¥ 652,862
41,614694,477

30,9381,038,002

11,068
141,594340
94,785(1,674)
94,883351
22,21672,033
2,137,142

538
49,856

16,812

7,228

1,359

3,067

1,152

60,12769,720

6,330

1,523

22,257

1,867

129,443

Amounts
appearing in the
consolidated
financial
Adjustment statements¥

424(41,614)(41,189)¥ 653,287—
653,287

72,572
2,186,998(2,445)150,333

70,126
2,337,331

822

60,949(530)

60,418614

130,058(46)

130,012Our Business

Fiscal year ended 31st March 2011
Millions of yen
Reportable segment
Travel &Entertainment & International
Urban
Transportation Real Estate Communications Transportation

Retailing

Subtotal

Other(Note 1)

Total

¥ 94,727
8,679
103,407¥67,565
145
67,710¥64,613606
65,220¥53,326682
54,008¥ 603,246
32,778636,025¥35,094
8,815
43,910¥ 638,341
41,593679,935¥429 ¥ 638,770(41,593)—(41,164)
638,770

23,996
1,045,557

9,994
140,730

2,952
80,808(639)
92,469713
18,563

66,396
2,121,018

450
48,81566,8472,169,833(2,103)
144,835

64,7432,314,669

17,160

7,222

1,398

3,061

917

59,322867

60,190(520)

59,66928,126

5,110

3,139

1,069

793

67,063902

67,966464

68,431Thousands of U.S. dollars
Reportable segment
Travel &Entertainment & International
Urban
Transportation Real Estate Communications Transportation

Retailing

Subtotal

Other(Note 1)

Total

$ 778,470
7,301
785,783$642,482 $ 7,268,024 $422,819 $ 7,690,855 $ 5,169 $ 7,696,024
8,217
394,916 106,205
501,120 (501,120)—
650,699
7,662,952 529,036
8,191,988 (495,952) 7,696,024

35,566
973,590(7,699)1,114,084

8,590
223,651

799,952
25,554,434

5,422
588,133

805,386
26,142,566

16,84336,88011,048714,723

10,446725,181(6,265)

718,904

37,81912,8809,554

807,988

10,867

818,8675,590

824,470(25,337)
780,036
1,745,000 27,887,578

Notes:
1. The “Other” category comprises business such as construction and domestic logistics services not included in reportable segments.
2. Income (loss) for each reportable segment refers to operating income (loss).

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility$814,036
1,747
815,783

Management Organisation

Revenues fromoperations:(1) Customers .................... $2,265,084 $ 1,626,639 $1,141,289(2) Intersegment .............
59,578
213,470
104,566
Total ................................. 2,324,663 1,840,120 1,245,867
Segment income (loss)(Note 2)...............................
353,952
289,108
120,410Segment assets ................ 8,950,470 12,597,072 1,695,542
Other items
Depreciation and
350,723
206,747
87,012amortisation .............
Increase in property
and equipment
and intangible
assets ...............................
347,265
338,867
61,566

HotelsAmounts
appearing in the
consolidated
financial
Adjustment statementsCore Business:
Overview and Outlook¥ 135,011
17,718
152,730

Interview with the President

Revenues fromoperations:(1) Customers .................... ¥188,002(2) Intersegment .............
4,945
Total ................................. 192,947
Segment income (loss)(Note 2)...............................
29,378Segment assets ................ 742,889
Other items
Depreciation and29,110amortisation .............
Increase in property
and equipment
and intangible
assets ...............................
28,823

HotelsAmounts
appearing in the
consolidated
financial
Adjustment statements

Financial Section

Annual Report 201197

Notes to the Consolidated Financial Statements

4. Reconciliation of differences between total amounts for reportablesegments and amounts appearing in the consolidated financial
statements (adjustment of difference)
Thousands of
U.S. dollars

Millions of yen
Revenues from operations:

Total reportable segment
revenues .......................................
Revenues from operationsclassified under “Other”.......
Revenues from operations
from external customers
classified as “Adjustment”...
Revenues from operations
from intersegment
transactions and transfers...
Revenues from operationsin the consolidated
financial statements ..............

2010

2011

2011

¥654,882¥636,025$7,662,952

39,59443,910529,036

424

429

5,169

(41,614)(41,593)(501,120)

653,287

638,770

7,696,024
Thousands of
U.S. dollars

Millions of yen
IncomeTotal reportable segment
income (loss) ..............................
Income (loss) classified
under “Other” ............................
Amortisation of goodwill(Note)..............................................
Other .................................................
Operating income in the
consolidated financial
statements ..................................

2010

2011

2011

¥72,033¥66,396$799,952

538

450

5,422

(2,677)231(2,684)581(32,337)
7,000

70,12664,743780,036

Thousands of
U.S. dollars

Millions of yen
Asset

2010

2011

Total reportable segment
assets .............................................. ¥2,137,142 ¥2,121,018
Assets classified under“Other” ...........................................
49,856
48,815
Balance of unamortised
goodwill (Note 1) ....................
43,957
41,172Other (Note 2)..............................
106,375
103,663
Total assets in the
consolidated financial
statements .................................. 2,337,331 2,314,669

2011$25,554,434
588,133
496,048
1,248,952

27,887,578

Notes:
1. Refers mainly to the balance of unamortised goodwilll arising from the management integration with Hanshin Electric Railway Co., Ltd. in fiscal 2006.
2. Consists mainly of surplus working capital (cash and deposits), unallocated assets
such as long-term investment funds (investment securities) and land, etc., andintersegment eliminations at the Company, Hankyu Corporation and Hanshin
Electric Railway Co., Ltd.

Note: Refers mainly to the amortisation of goodwill arising from the management
integration with Hanshin Electric Railway Co., Ltd. in fiscal 2006.

Fiscal year ended 31st March 2010
Millions of yen

Other items

Depreciation and amortisation.........
Increase in property andequipment and in intangible
assets ......................................................................

Total
reportablesegment

Other

Adjustment

Amounts
appearing in
the consolidated financial
statements¥ 60,127¥822¥(530)¥ 60,418

129,443614(46)130,012

Fiscal year ended 31st March 2011
Millions of yen

Other items

Depreciation and amortisation.........
Increase in property andequipment and in intangible
assets ......................................................................

98 Annual Report 2011

Thousands of U.S. dollars

Total
reportablesegment

Other

Adjustment

Amounts
appearing in
the consolidated financial
statements

Other

Adjustment

Amounts
appearing in
the consolidated financial
statements¥59,322¥867¥(520)¥59,669$714,723$10,446$(6,265)$718,904

67,063902

464

68,431

807,988

10,867

5,590

824,470

Total
reportablesegment

Our Business2. Information by region(1) Revenues from operations
Because revenues from operations originating with external customers in Japan account for more than 90% of revenues from operations recorded in the
consolidated income statements, a description of regional breakdowns is omitted.
(2) 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, abreakdown by region is omitted.

[Information regarding impairment losses on property and equipment, by reportable segment]
Fiscal year ended 31st March 2011
Millions of yen
Reportable segment
Travel &Entertainment & International
Urban
Transportation Real Estate Communications Transportation¥13¥2,699¥—HotelsRetailing

Subtotal

Other

Total

¥697

¥508

¥3,955¥117¥4,072¥36¥189¥4,261Thousands of U.S. dollars
Reportable segment
Travel &Entertainment & International
Urban
Transportation Real Estate Communications Transportation

Loss on impairment of
fixed assets .......................

$157$32,518$—$434

HotelsRetailing

Subtotal

Other

Total

$8,398$6,120$47,651$1,410$49,060

Amounts
appearing in the
consolidated
financial
Adjustment statements$2,277

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Loss on impairment of
fixed assets .......................

Amounts
appearing in the
consolidated
financial
Adjustment statements

Management Organisation

3. Information about important customers
No single external customer accounts for more than 10% of the revenues from operations reported in the consolidated income statements.

Core Business:
Overview and Outlook[Related Information]
Fiscal year ended 31st March 2011
1. Information about product and service categories
Information about product and service categories is the same as that described in “Segment information: 3. Information regarding revenues fromoperations, income (loss), assets and other items by reportable segment.

Interview with the President(Changes to affiliated segments)
Food and drink businesses operated by Creative Hankyu Co., Ltd. and another company that were formerly classified as Retailing have been transferredto the Hotels segment as of 1st April 2010, and the segment to which Creative Hankyu Co., Ltd. belongs has changed from Retailing to Other after areorganization.
As a result, there were decreases in the amount of ¥5,897 million for revenues from operations, ¥97 million for segment income, ¥2,604 million
for segment assets, ¥134 million in depreciation and amortisation and ¥78 million for property and equipment and intangible assets compared to theamounts that would have been recorded in the Retailing business in the fiscal year under review without the change.
At the same time, in the Hotels segment, revenues from operations increased ¥5,279 million, the segment loss narrowed by ¥95 million, with segment assets rising by ¥1,753 million, depreciation and amortisation increasing by ¥134 million, and property and equipment and intangible assets risingby ¥75 million. In Other, revenues from operations classified increased by ¥876 million, segment income increased by ¥3 million, segment assets rose by¥494 million, depreciation and amortization increased by ¥0 million, and property and equipment and intangible assets went up by ¥3 million.

$51,337
Financial Section[Information regarding amortisation of goodwill and the balance of unamortised goodwill, by reportable segment]
Fiscal year ended 31st March 2011
Omitted as the significance is negligible[Information regarding gains from negative goodwill, by reportable segment]
Fiscal year ended 31st March 2011
Omitted as the significance is negligible(Additional information)
From the fiscal year under review, the Company is applying “Accounting Standard for Disclosures about Segments of an Enterprise and RelatedInformation” (ASBJ Statement No. 17, issued on 27th March 2009), and “Guidance on Accounting Standard for Disclosures about Segments of anEnterprise and Related Information” (ASBJ Guidance No. 20, issued on 21st March 2008).

Annual Report 201199

Notes to the Consolidated Financial Statements(Related Party Transactions)
1. Related party transactions
Fiscal year ended 31st March 2010
(1) Transactions between the company submitting the consolidated financial statements and related parties
No items(2) 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
Type

Name ofrelated party

Address

Director

TakehiroSugiyama—

Amount ofcapital(Millions of yen)Company inwhich director
or close family Tateishi Sangyo Ikeda City,
thereof holds
Co., Ltd.
Osaka
majority ofvoting rights

Business

Voting interest¥ —Director of theCompany

Directly
0.01%

¥100

Real estatebusiness

Relationshipwithrelated party

Details oftransaction

Transaction
amounts(Millions of yen)

Item

¥44

—

¥—

¥16

Deposit¥30

Sale of
Sale ofcondominiums condominiums

Balance as of
31st March 2010
(Millions of yen)

Lease of realestateNone

Rental income
Concurrent
post (director)

Notes:
1. The transaction amount and the balance at the end of the fiscal year do not include consumption tax, etc.
2. Transaction terms and conditions and method of determining transaction terms and conditions(1) The terms and conditions of the sale of the condominium were determined with reference to similar transactions in the neighbouring area.
(2) Director of the Company, Koichi Kobayashi, and his close family own 58% of the voting rights in Tateishi Sangyo Co., Ltd.
The terms and conditions of the property lease are determined with reference to similar transactions in the neighbouring area.

Fiscal year ended 31st March 2011
(1) Transactions between the company submitting the consolidated financial statements and related parties
No items(2) 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

Type

Name ofrelated party

Amount ofcapitalAddress(Millionsof yen)Company inwhich director
or close family Tateishi Sangyo Ikeda City,
thereof holds
Co., Ltd.
Osaka
majority ofvoting rights¥100(Thousandsof U.S.
dollars)$1,205Business

Voting interest

Real estatebusiness

Relationshipwithrelated party

Details oftransaction

Transaction
amounts(Millionsof yen)(Thousandsof U.S.
dollars)

Balance as of
31st March 2011
Item
(Millionsof yen)(Thousandsof U.S.
dollars)

¥30

$361

Lease of realestateNone

Rent income¥16$193 Deposit

Concurrent
post (director)

Notes:
1. The transaction amount and the balance at the end of the fiscal year do not include consumption tax, etc.
2. Transaction terms and conditions and method of determining transaction terms and conditions
Director of the Company, Koichi Kobayashi, and his close family own 58% of the voting rights in Tateishi Sangyo Co., Ltd.
The terms and conditions of the property lease are determined with reference to similar transactions in the neighbouring area.

2. Notes about Parent Company and Major Affiliated Companies
No items(Special Purpose Entities)
Fiscal year ended 31st March 2010
1. Purpose of establishment: Diversity and stability of financing
Some consolidated subsidiaries invested in two special purpose entities(in form of a special limited liability company or a special purpose entity
under the SPC Law) established for the purpose of real estate securitisation, but, by the end of the fiscal year ended 31st March 2010, the special
purpose entities had sold the securitised properties and completed the

100 Annual Report 2011

securitisation. In this securitisation, the consolidated subsidiaries transferred real estate (trust beneficiary rights) to the special purpose entities
and, using the transferred assets as backing, the special purpose entities
received capital raised through nonrecourse loans, etc. from financial
institutions as sale proceeds and leased (leaseback) the transferred realestate. The consolidated subsidiaries did not own equity with voting
rights in any of the special purposes entities nor do they dispatch directors or employees to them.

Our BusinessAmounts and other details of transactions with special purpose entities in the fiscal year ended 31st March 2010 are as follows.

Real estate purchased ...
Investments in silent
partnerships(Notes 1 and 2) ................

¥74,620

343

Distributed income(Note 3)¥9,8193,207

Receivable amount ofdividends (Note 1) .........

70

Lease (leaseback)transactions .......................

—

Lease payments(Note 3)—

Management fees
(Note 4)

Management business...

9¥8,357

Receivable amount ofdividends (Note 4) .........

716

Management business...

—

Distributed income(Note 3)¥523

Management fees
(Note 5)463

Management business...

7,819

Distributed income(Note 3)

¥320

812

Distributed loss
(Note 5)

47—

Management fees
(Note 6)409

Significant transaction amounts
or balance as of
31st March 2011 Significant income and expenditure(Thousands of(Thousands of
U.S. dollars)
Item
U.S. dollars)
Real estate purchased ...
Investments in silent
partnerships(Notes 1 and 2) ................
Receivable amount ofdividends (Note 4) .........
Management business...

$114,783

94,205Distributed income(Note 3)

9,783

Distributed loss
(Note 5)566—

Management fees
(Note 6)

4,928

$3,855

Notes:
1. Accrued future loss from valuation of investments in the aggregate amount of¥1,878 million ($22,627 thousand) for the fiscal year under review was recorded.
2. Investments in silent partnerships are recorded as investment securities in the
consolidated balance sheets.
3. Distributed income is recorded in revenues from operations in the consolidated
statements of income.
4. The receivable amount of dividends is equal to the suspended payments ofdividends.
5. Distributed loss is presented in costs of revenues from operations in the consolidated statements of income.
6. Management fees are presented in revenues from operations in the consolidated
statements of income.

Financial Section

Investments in silent
partnerships(Notes 1 and 2) ................

Receivable amount ofdividends (Note 4) .........

¥9,527

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Significant transaction amounts
or balance as of
31st March 2010 Significant income and expenditure(Millions of yen)
Item
(Millions of yen)

Real estate purchased ....
Investments in silent
partnerships(Notes 1 and 2) ................

Management Organisation

2. Purpose of establishment: development and increase value of
assetsSome consolidated subsidiaries invested in nine special purpose entities(in the form of special limited liability companies, joint ventures, etc.).
The special purpose entities use nonrecourse loans, etc. from financial
institutions to acquire real estate (trust beneficiary rights), which theyplan to sell to investors upon development, leasing, etc. The consolidated
subsidiaries are expected to recover their investments in an appropriatemanner upon completion of the business, and even in cases in which
losses arise (see note 1), the cost to the consolidated subsidiaries is limited to the amount invested. Moreover, the consolidated subsidiaries do
not own equity with voting rights in any of the special purpose entities
nor do they dispatch directors or employees to them. As of the mostrecent balance sheet date of these special purpose entities, total assets
were ¥87,704 million and total liabilities were ¥57,895 million. These aresimple totals regardless of the investment ratio.
Amounts and other details of transactions with special purpose entities in the fiscal year ended 31st March 2010 are as follows.

Significant transaction amounts
or balance as of
31st March 2011 Significant income and expenditure(Millions of yen)
Item
(Millions of yen)Core Business:
Overview and Outlook

Notes:
1. Investments in silent partnerships and receivable amount of dividends are
expected to be recovered upon completion of liquidation proceedings.
2. In the fiscal year ended 31st March 2010, the company recorded a loss on devaluation of assets as a result of completion of securitisation (¥748 million).
Investments in silent partnerships are recorded as investment securities.
3. Distributed income includes distributed income on the liquidation of special
purpose entities of ¥8,241 million, which is presented in extraordinary income.
The residual amount of distributed income is presented in costs of revenues fromoperations after offsetting lease payments.
4. Management fees are presented in revenues from operations.

Interview with the President

Significant transaction amounts
or balances as of
31st March 2010 Significant income and expenditure(Millions of yen)
Item
(Millions of yen)

Fiscal year ended 31st March 2011
Some consolidated subsidiaries invested in eight special purpose entities(in the form of special limited liability companies, joint ventures, etc.)
aimed at development and increase value of assets. The special purpose
companies use nonrecourse loans, etc. from financial institutions toacquire real estate (trust beneficiary rights), which they plan to sell toinvestors upon development, leasing, etc. The consolidated subsidiaries
are expected to recover their investments in an appropriate manner
upon completion of the business, and even in cases in which losses arise(see note 1), the cost to the consolidated subsidiaries is limited to theamount invested. Moreover, the consolidated subsidiaries do not own
equity with voting rights in any of the special purpose entities nor dothey dispatch directors or employees to them. As of the most recent
balance sheet date of these special purpose entities, total assets were¥71,118 million ($856,843 thousand) and total liabilities were ¥46,787
million ($563,699 thousand). These are simple totals regardless of theinvestment ratio.
Amounts and other details of transactions with special purpose entities in the fiscal year ended 31st March 2011 are as follows.

Notes:
1. Accrued future loss from valuation of investments in the aggregate amount of¥580 million for the year ended 31st March 2010 was recorded.
2. Investments in silent partnerships are recorded as investment securities in the
consolidated balance sheets.
3. Distributed income is recorded in revenues from operations.
4. The receivable amount of dividends is equal to the suspended payments ofdividends.
5. Management fees are presented in revenues from operations in the consolidated
statements of income.

Annual Report 2011101

Notes to the Consolidated Financial Statements(Per Share Information)
Yen

Net assets per share .................................................................................................................................................................
Net income per share .............................................................................................................................................................
Net income per share—diluted ........................................................................................................................................

U.S. dollars

2010

2011

2011

¥371.70
8.55
8.51¥377.17
14.32
14.27

$4.54
0.17
0.17

Note: Basis for the calculation
1. Net assets per share
Millions of yen
Item

Thousands of U.S. dollars

2010

2011

2011

Total net assets on consolidated balance sheets¥ 480,633¥ 486,947$5,866,831

Net assets related to common shares¥ 469,128¥ 475,802$5,732,554¥¥$ 134,265

Major causes of difference
Minority interests
Common shares issued (Thousands of shares)

11,505

11,144

1,271,406

1,271,406

Treasury stock shares (Thousands of shares)

3,829

4,448

Common shares held by consolidated subsidiaries and equity method affiliates (Thousands of shares)

5,449

5,449

1,262,128

1,261,509

Common shares used to calculate net assets per share (Thousands of shares)
2. Net income per share and diluted net income per share

Millions of yen
Item

2010

Thousands of U.S. dollars
2011

2011

Net income per share
Net income¥

10,793¥18,068Amount not belonging to common stockholders

¥

—

¥

—

Net income related to common shares¥

10,793¥18,068Average number of common shares during term (Thousands of shares)

1,261,824$217,687$—$217,687

1,261,993

Net income per share—diluted
Adjustment to net income

¥

(56)

¥

(61)

$

(735)

(Equity in income of affiliates)

¥

(56)

¥

(61)

$

(735)

Increase in number of common shares——

Summary of potential shares that were not included in the calculation of diluted income per sharebecause their effect was not dilutive.

——

102 Annual Report 2011

Our Business

CONSOLIDATED SUPPLEMENTARY STATEMENTS(Corporate Bond Statements)

Name

—

¥

—

15,000—10,00010,000(10,000)

20,000

$

—

2.46%

None

—

(See Note 2)

None

120,482(See Note 3)(120,482)

None

20,000240,964

1.85

None

10,00010,000(10,000)

120,482(120,482)

1.39

None

10,00010,000120,482

1.66

None

20,00020,000(20,000)

240,964(240,964)

1.46

None

10,00010,000120,482

1.10

None

10,00010,000120,482

1.87

None

20,00020,000240,964

1.25

None

—

15,000180,723

1.43

None

—

7,000

84,337

1.72

None

—

10,000120,482

1.54

None

15,00015,000180,723

3.525

None

10,00010,000120,482

2.22

None

¥160,000¥167,000(40,000)$2,012,048(481,928)———

4. Redemption schedule of bonds for five years subsequent to 31st March 2011.
Millions of yen

Thousands of
U.S. dollars

Due within one year ............................................................

¥40,000$481,928

Due after one year through two years .....................

35,000421,687

Due after two years through three years ...............

10,000120,482

Due after three years through four years ...............

20,000240,964Due after four years through five years ...................

——

Financial Section

Notes:
1. The amount in parenthesis in the “Balance as of 31st March 2011” column is thecurrent portion of the total amount and is recorded in current liabilities on the
consolidated balance sheets.
2.
1) From the day after 28th September 2000 to 30th September 2001
3.00% annualised2) From the day after 30th September 2001
The floating rate was then the 20-year swap rate minus the 2-year swap rateplus 0.95% from 1st October 2001. (If the result of this calculation was below 0,
the rate would be 0%)3.
1) From the day after 28th June 2001 to 28th June 2004
1.30% annualised2) From the day after 28th June 2004
The floating rate was then the 20-year swap rate minus the 2-year swap rateplus 0.15% from 29th June 2004. (If the result of this calculation was below 0,
the rate would be 0%)

17th Sept.
2010
30th Sept.
2010
28th June2011
18th July
2012
14th Nov.
2011
14th Nov.
2013
29th July
2011
23rd Oct.
2014
23rd Oct.
2019
27th Jan.
2017
18th Sept.
2020
22nd Sept.
2022
17th Mar.
2021
25th June
2012
23rd June
2014

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility—¥ 10,000

Redemption
dateManagement Organisation

Total

18th Sept.
1998
28th Sept.
2000
28th June
2001
18th July
2007
14th Nov.
2007
14th Nov.
2007
30th July
2008
23rd Oct.
2009
23rd Oct.
2009
28th Jan.
2010
22nd Sept.
2010
22nd Sept.
2010
17th Mar.
2011
25th June
1997
23rd June
2004

Security

Core Business:
Overview and Outlook

Series 19 unsecured
corporate bonds
Series 27 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 28 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 33 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 34 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 35 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 36 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 37 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 38 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 39 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 40 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 41 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 42 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 12 unsecured
Hanshin Electric Railway Co., Ltd.
corporate bonds
Series 14 unsecured
Hanshin Electric Railway Co., Ltd.
corporate bonds
Hankyu Hanshin Holdings, Inc.

Issue date

Interview with the President

Company

Balance
Balance as of Balance as of
as of 31st
31st March
31st March
March 20112010 (Millions 2011 (Millions (Thousands ofof yen)of yen)U.S. dollars) Interest rate (%)

Annual Report 2011103

Notes to the Consolidated Financial Statements(Statements of Loans Payable)

Item

Balance as of
31st March 2010
(Millions of yen)

Balance as of
31st March 2011
(Millions of yen)

Balance as of
31st March 2011
(Thousands of
U.S. dollars)

Average interest
rate (%)

Repayment deadline

Short-term borrowings ..................................................................
Current portion of long-term debt.........................................
Current portion of lease obligations .....................................
Long-term debt (excluding current portion) ...................
Lease obligations (excluding current portion)................
Other interest-bearing debt .......................................................
Total ....................................................................................................

¥ 182,087
105,258
835
832,018
2,383—¥1,122,583¥ 172,478
124,986
1,380
780,908
4,911—¥1,084,665$ 2,078,048
1,505,855
16,627
9,408,530
59,169—$13,068,253

0.791%
1.150
—
1.233
—
—
—

—
—
—
2012-2031
2012-2024——

Notes:
1 Corporate and eliminations are not shown.
2 The “Average interest rate” of loans payable is the weighted average interest rate
for outstanding loans payable as of end of the fiscal year under review.
3 The “Average Interest rate” is not shown for lease obligations because theCompany mainly adopts the method of including the amounts equal to interest
in total capital lease obligations and the method of spreading the total amountequal to interest equally over each fiscal year of the lease period.
4 Repayment schedule of long-term debt and lease obligations (excluding current
portion) for five years subsequent to 31st March 2011.

Long-term debt

Millions of yen

Thousands of
U.S. dollars

Due after one year through two years .....................

¥139,175$1,676,807

Due after two years through three years ...............

184,653

2,224,735

Due after three years through four years ...............

155,134

1,869,084

Due after four years through five years ...................

77,199930,108

Millions of yen

Thousands of
U.S. dollars

Lease obligations
Due after one year through two years .....................

¥1,283$15,458

Due after two years through three years ...............

990

11,928Due after three years through four years ...............

655

7,892

Due after four years through five years ...................

414

4,988

(Schedule of asset retirement obligations)
Items to be reported in the schedule of asset retirement obligations are omitted since they are recorded in the notes to Article 15-23 of Consolidated
Financial Statement Regulations.
OTHERS
Quarterly revenues from operations, etc. in fiscal year ended 31st March 2011
1st Quarter

Revenues from operations (Millions of yen)
Income before income taxes and minority interests(Millions of yen)
Net income (Millions of yen)
Net income per share (Yen)

104 Annual Report 2011

3rd Quarter

4th Quarter¥158,575¥154,774¥169,925

17,037
10,742
8.51

15,073
7,571
6.00

12,804
7,313
5.79(12,154)(7,558)(6)

1st Quarter

Revenues from operations (Thousands of U.S. dollars)
Income before income taxes and minority interests(Thousands of U.S. dollars)
Net income (Thousands of U.S. dollars)
Net income per share (U.S. dollars)

2nd Quarter¥155,495

2nd Quarter

3rd Quarter

4th Quarter$1,873,434$1,910,542$1,864,747$2,047,289

205,265
129,4220.10

181,60291,2170.07

154,265
88,1080.07(146,434)(91,060)(0)Major Group Companies (As of 31st March 2011)
Our Business

Consolidated Subsidiaries

Urban Transportation ■ ■ ■Travel and International Transportation ■ ■ ■Name of Company

Name of Company

Hankyu Corporation

Hankyu Travel International Co., Ltd.
Travel Agency

Nosé Electric Railway Co., Ltd.
Kita-Osaka Kyuko Railway Co., Ltd.
Railway Operations

Hankyu Hanshin Business Travel Co., Ltd.
Hankyu Travel Support Co., Ltd.

Hokushin Kyuko Railway Co., Ltd.

International
Transportation

Hankyu Hanshin Express Co., Ltd.

Kobe Rapid Transit Railway Co., Ltd.

Other

Hankyu Hanshin Express Holdings Corporation

Railway Technology Co., Ltd.
Globaltech Co., Ltd.
Hankyu Hanshin Electric System
Hankyu Bus Co., Ltd.
Hanshin Bus Co., Ltd.

Hotels ■ ■ ■Hankyu Kanko Bus Co., Ltd.

Name of Company

Osaka Airport Transport Co., Ltd.

Hankyu Hanshin Hotels Co., Ltd.

Hankyu Denen Bus Co., Ltd.

Hanshin Hotel Systems Co., Ltd.
Dai-ichi Hotel Kyushu Co., Ltd.

Hankyu Taxi Inc.
Hanshin Taxi Co., Ltd.

Other

Hotel Management

Arima View Hotel Co., Ltd.

Nippon Rent-A-Car Hankyu Inc.

Amanohashidate Hotel Co., Ltd.

Alna Sharyo Co., Ltd.

Hankyu Hanshin Restaurants Co., Ltd.

Retailing ■ ■ ■Name of Company

Name of Company

Hankyu Corporation

Hankyu Corporation
Hanshin Electric Railway Co., Ltd.

Retailing

Hankyu Retails Corporation
Iina Dining Co., Ltd.

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

Management Organisation

Real Estate ■ ■ ■Real Estate Leasing

Hotel New Hankyu Kochi Co., Ltd.

Hankyu Hanshin Motor Technology Co., Ltd.

Core Business:
Overview and Outlook

Automobile

Interview with the President

Hanshin Electric Railway Co., Ltd.

Hankyu Corporation
Real Estate Sales

Hanshin Electric Railway Co., Ltd.

Other ■ ■ ■Name of Company

Hankyu Hanshin Building Management Co., Ltd.
Hankyu Hanshin Security Service Co., Ltd.
Other

Construction

Hanshin Construction Co., Ltd.

Hankyu Hanshin Clean Service Co., Ltd.

Domestic Logistics

Chuo-Densetsu Co., Ltd.
Sanyo Jidosha Unso Co., Ltd.

High Security System Co., Ltd.

Group FinanceHankyu Hanshin Financial Support Co., Ltd.

Hankyu REIT Asset Management, Inc.

Outsourcing Services
for Personnel andAccounting Services

Hankyu Hanshin Business Associate Co., Ltd.

Hankyu Hanshin Techno Service Co., Ltd.

Financial Section

Entertainment and Communications ■ ■ ■Name of Company

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

Equity-method Affiliates
Main BusinessTakarazuka Creative Arts Co., Ltd.
Stage

Takarazuka Stage Co., Ltd.

Department Store

Umeda Arts Theater Co., Ltd.
Hankyu Advertising Agency Inc.
Communication andMedia

Leisure, etc.

Safety Management System
Directors and Corporate Auditors
Corporate Social Responsibility

Hankyu Realty Co., Ltd.

Name of Company

H2O Retailing Corporation[Securities code: 8242]
Nishi-Osaka Railway Co., Ltd.

Railway Operations

Hanshin Contents Link Corporation
Itec Hankyu Hanshin Co., Ltd.
Hankyu Communications Co., Ltd.

Motion Picture Business

Bay Communications Inc.

Commercial Broadcasting

Kobe Electric Railway Co., Ltd.
[Securities code: 9046]
Tokyo Rakutenchi Co., Ltd.
Toho Co., Ltd. [Securities code: 9602]
Kansai Telecasting Corporation

Hanshin Electric Railway Co., Ltd.

Annual Report 2011105

Investor Information (As of 31st March 2011)

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

Paid-in Capital:¥99,474 million
Fiscal Year-End:
31st March
Number of Employees: 21,302 (consolidated basis)
Authorised Shares:
3,200,000,000
Issued Shares:
1,271,406,928
Number of Shareholders: 130,688
Unit of Trading:
1,000 shares
Stock Exchange Listing: Tokyo, Osaka
Transfer Agent:
Mitsubishi UFJ Trust and Banking
Corporation

Tokyo Office (Personnel and General Affairs Dept.):
Toho Twin Tower Bldg.,
1-5-2, Yurakucho, Chiyoda-ku, Tokyo 100-0006, Japan
Phone: +81-3-3503-1568
Fax:+81-3-3508-0249

Principal Shareholders:Ownership Breakdown:
Number of shares
Percentage (%)(thousands)Name

56,832
42,68031,48830,947
20,418Japan Trustee Services Bank, Ltd. (Trust account)
Nippon Life Insurance Company
The Master Trust Bank of Japan, Ltd. (Trust account)
Sumitomo Mitsui Banking Corporation
H2O Retailing Corporation

13,665

1.07

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

11,1900.88

SSBT OD05 OMNIBUS ACCOUNT — TREATY CLIENTS(Standing Agent: The Hongkong and Shanghai Banking
Corporation Limited, Tokyo Branch)

10,4770.82

State Street Bank West Client Treaty(Standing Agent: Mizuho Corporate Bank, Ltd.)

10,361

0.81

Japan Trustee Services Bank, Ltd. (Trust account 1)

9,788

0.76

0.00%

52.56%

4.47
3.35
2.47
2.43
1.60

Japan Trustee Services Bank, Ltd.
(The Sumitomo Trust & Banking Co., Ltd. Retirement Benefit Trust Account)

National government andlocal public organisations

Individuals
and others

Financial
institutions

26.51%
Securities
companies

0.51%
Other
corporations

10.09%
Foreign corporations
and individuals

10.33%

Stock Price Range and Trading Volume (Tokyo Stock Exchange):
Stock Price (¥)

Nikkei Average (¥)

600

21,000500

Nikkei Average (right scale)

400

7,000

Stock Price (left scale)300
100,000

0

50,000

Trading Volume 0(thousand shares)

14,000

4

5

6

7

8

9 10 11 12

1

2

3

4

5

6

7

8

9 10 11 12

1

2

3

4

5

6

7

8

9 10 11 12

1

2

Fiscal year ended March 2009

Fiscal year ended March 2010

Fiscal year ended March 2011

539
406
447

485
381
433

452
316
384

High
Low
At year-end

106 Annual Report 20113

Hankyu Hanshin Holdings, Inc.

Annual Report 2011

Hankyu Hanshin Holdings, Inc.
1-16-1, Shibata, Kita-ku, Osaka 530-0012, Japan
Phone: +81-6-6373-5001 Fax: +81-6-6373-5042
http://www.hankyu-hanshin.co.jp/english/

Hankyu Hanshin Toho Group

Printed in Japan