Annual Report 2006

Tokyo and Eastern Honshu... Annual Report 2006 For the year ended March 31, 2006 Who We Are East Japan Railway Company (JR East) is the largest passenger railway company in the world, serving about 16 million passengers daily. JR East operates a five-route Shinkansen network between Tokyo and major cities in eastern Honshu (mainland). JR East has the ability to leverage passenger traffic and railway assets to develop non-transportation businesses. JR East alone provides nearly half of the huge volume of railway transportation in the Tokyo metropolitan area. JR East has a passenger line network covering OPERATING AREA 7,526.8 kilometers, (As of June 30, 2006) JR Hokkaido accounting for 27% of Japan’s railway network. JR East operates JR East 5 high-speed Shinkansen routes linking Tokyo and major cities in the eastern portion JR West JR Central of Japan’s main island of Honshu. JR Kyushu JR Shikoku JR East accounts for nearly half of the railway Akabane transportation volume Ikebukuro Tachikawa Ueno in the vibrant Tokyo metropolitan area. Shinjuku Tokyo Narita Airport Hachioji Shinagawa Chiba NUMBER OF STATIONS WITH Kawasaki LARGE DAILY PASSENGER USE Yokohama 32 54 JR East 1 3 JR Central Ofuna 6 6 JR EAST RAILWAY NETWORK JR West 2 14 AROUND TOKYO Tokyu 0306090 More than 200,000 passengers/day 100,000 to 200,000 passengers/day Data: Year ended March 31, 2005 International Railway Comparisons PASSENGER KILOMETERS (Millions) NUMBER OF PASSENGERS (Millions) JR East 125,752 JR East 5,886 U.K. 40,400 U.K. 1,014 Germany 69,596 Germany 1,682 France 71,937 France 879 Italy 45,221 Italy 498 U.S. 9,141 U.S. 25 0 30,000 60,000 90,000 120,000 150,000 0 1,2002,400 3,600 4,800 6,000 7,200 Data: For the year ended December 31, 2003, except for JR East and U.K. figures, which are for Data: For the year ended December 31, 2003, except for JR East and U.K. figures, which are for the year ended March 31, 2004 the year ended March 31, 2004 2006 JR East’s synergistic non-transportation operations are performing well, as measured by sales and income growth. These activities include 123 shopping centers, 17 office buildings, and 40 hotels. JR East is actively leveraging JR East serves this wide-ranging network and 16 million passenger flow to passengers daily and is the largest passenger realize synergies with railway company in the world. non-transportation businesses. JR East’s core transportation business is Suica can be used instead of tickets at approximately strong and stable, generating 900 stations and as electronic money at approximately 6,300 shops and stores. The number of subscribers to 70% of operating revenues. Suica has surpassed 17 million and is continuing to grow. JR East has a large and stable operating cash flow, Transportation Businesses amounting to more than ¥448 billion during the fiscal year under review. Non-Transportation Businesses Performance Tokyo Area Comparisons PASSENGER KILOMETERS (Millions) POPULATION DENSITY (Per Square Kilometer) JR East 76,695 Tobu 12,667 Tokyo Area 2,595 Tokyo Metro 16,356 Seibu 8,669 Toei 5,270 Odakyu 10,528 Other 256 Keisei 3,508 Tokyu 9,469 Keihin 6,220 Keio 7,186 National Average 338 Sagami 2,604 0 20,000 40,000 60,000 80,000 100,000 0 5001,000 1,500 2,000 2,500 3,000 Data: For the year ended March 31, 2005 Data: As of October 1, 2005 1 2006 2006 Our Story Contents Financial Highlights 4 06 A Message from the Management Mutsutake Otsuka Satoshi Seino Strategy 5 08 An Interview with the President 14 New Frontier 2008 Transportation 18 Shinkansen Network 20 Tokyo Metropolitan Area Network 22 Intercity and Regional Networks, Travel Agency Services Review of Non-Transportation Operations 16 24 Station Space Utilization 26 Shopping Centers & Office Buildings 28 Other Services 30 Report on the Uetsu Line Accident and Earthquake Countermeasures 32 Corporate Social Responsibility Management 34 Corporate Governance Systems 31 37 Organization 38 Board of Directors and Corporate Auditors 40 Eleven Year Summary 42 Management’s Discussion and Analysis of 10 Financial Condition and Results of Operations 8 47 Operational and Other Risk Information 56 Consolidated Balance Sheets 6 Financial 58 Consolidated Statements of Income 4 59 Consolidated Statements of Shareholders’ Equity 2 Section 39 60 Consolidated Statements of Cash Flows 0 61 Notes to Consolidated Financial Statements 74 Independent Auditors’ Report 76 JR East: Domestic and International Perspectives 89 JR East: Our Origins and Long-Term Goals Corporate 92 Consolidated Subsidiaries and Equity Method Affiliated Companies 95 Stock Information Information 75 96 Corporate Data/For Inquiries 97 Glossary 2 2006 2006 Three Benchmarks of Our Medium-Term Management Plan: New Frontier 2008 CASH FLOWS FROM OPERATING RATIO OF TOTAL LONG-TERM DEBT RATIO OF OPERATING INCOME TO ACTIVITIES TO SHAREHOLDERS’ EQUITY AVERAGE ASSETS (ROA) (Billions of yen) (Times) (%) FY ’04 FY ’04 FY ’04 ’05 ’05 ’05 5.9 ’06 447.7 ’06 2.7 ’06 2,000 6.0 ’06~’09 ’09 2.0 (approximately) ’09 (Target) (Target) (Target) 0 500 1,000 1,500 2,000 0124 3 0125 346 CONSOLIDATED OPERATING REVENUES (For fiscal 2006) CONSOLIDATED OPERATING INCOME (For fiscal 2006) Transportation 70% Transportation 75% Station Space Utilization 15% Station Space Utilization 8% Shopping Centers & Office Buildings 7% Shopping Centers & Office Buildings 13% Other Services 8% Other Services 4% JR East will maintain high ethical standards and management transparency while earnestly taking progressive measures in response to major issues facing society as a whole. Through those efforts, JR East intends to continue fulfilling the expectations of society and the trust of shareholders and other stakeholders. In particular, JR East will redouble efforts focused on stringent management compliance and measures that address global environmental issues. TREND OF OPERATING INCOME AND CASH FLOW (Billions of Yen) Operating revenues advanced 2.2% from 500 Operating Income Cash Flows from the previous fiscal year, to ¥2,592.4 billion, 250 Operating Activities Cash Flows from and operating income increased 10.5%, to 0 Investing Activities ¥396.1 billion. Net income amounted to Cash Flows from -250 Financing Activities ¥157.6 billion, up 41.2%. Free Cash Flows -500 FY ’02 ’03 ’04 ’05 ’06 TOTAL STOCK MARKET VALUE (Millions of U.S. Dollars) TOTAL STOCK MARKET VALUE (Millions of U.S. Dollars) INTERNATIONAL DOMESTIC JR East 29,784 JR East 29,784 British Airways 6,991 JAL 5,211 Lufthansa 6,989 Tokyu 8,022 Union Pacific 21,330 TEPCO 33,853 FedEx 27,011 NTT 59,658 UPS 82,932 0 20,000 40,000 60,000 80,000 100,000 0 18,000 36,000 54,000 72,000 Data: As of March 31, 2006 (Year ended December 31, 2005, for Lufthansa, Union Data: As of March 31, 2006 Pacific, and UPS and year ended May 1, 2005, for FedEx) 3 2006 Financial Highlights East Japan Railway Company and Subsidiaries Years ended March 31, 2004, 2005 and 2006 Millions of Yen Percent Millions of U.S. Dollars (except for per share data) Change (except for per share data) 2004 2005 2006 2006/2005 2006 For the Year Operating revenues.............................................................. ¥2,542,297 ¥2,537,481 ¥2,592,393 +2.2% $22,157 Operating income ................................................................ 351,420 358,535 396,100 +10.5 3,385 Net income .......................................................................... 119,866 111,592 157,575 +41.2 1,347 Depreciation ........................................................................ 322,300 317,957 316,038 -0.6 2,701 Capital expenditures*1 ......................................................... 313,911 319,912 361,372 +13.0 3,089 Cash flows from operating activities..................................... 387,061 407,737 447,722 +9.8 3,827 Free cash flows*2 ................................................................. 152,470 192,789 138,233 -28.3 1,182 Amount per share of common stock (yen and U.S. dollars): Earnings........................................................................... ¥0,029,928 ¥0,027,868 ¥0,039,370 +41.3% $00,336 Cash flows from operating activities................................. 96,784 102,026 112,035 +9.8 958 At Year-End Total assets .......................................................................... ¥6,781,692 ¥6,716,268 ¥6,821,584 +1.6% $58,304 Long-term debt (including current portion)........................... 1,940,321 1,940,255 1,960,211 +1.0 16,753 Long-term liabilities incurred for purchase of railway facilities*3 (including current portion) ..................... 2,034,203 1,892,827 1,743,657 -7.9 14,903 Total long-term debt (sum of two items above).................... 3,974,524 3,833,082 3,703,868 -3.4 31,656 Total shareholders’ equity .................................................... 1,100,176 1,183,546 1,357,359 +14.7 11,601 Percent (except for debt-to-equity ratio) Financial Ratios Net income as a percentage of revenues .............................. 4.7% 4.4% 6.1% Return on average equity (ROE)............................................ 11.5 9.8 12.4 Ratio of operating income to average assets (ROA)............... 5.2 5.3 5.9 Equity ratio .......................................................................... 16.2 17.6 19.9 Debt-to-equity ratio*4 .......................................................... 3.6 3.2 2.7 *1 These figures exclude expenditures funded by third parties, mainly governments and their agencies, that will benefit from the resulting facilities. *2 Net of cash flows from operating activities and cash flows from investing activities

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