Introduction Business Strategy and Operating Results ESG Section Financial Section

The President’s Message Medium-Term Management Plan Operating Results by Business Segment — —

Operating Results by Business Segment

Transportation Operations

JR-West’s transportation operations segment consists of railway Railway Revenues operations and small-scale bus and ferry services. Its railway operations encompass 18 prefectures in the western half of ’s Sanyo main island of and the northern tip of Kyushu, covering a total service area of approximately 104,000 square kilometers. Other Conventional Lines The service area has a population of approximately 43 million people, equivalent to 34% of the population of Japan. The railway network comprises a total of 1,222 railway stations, with an operating route length of 5,015.7 kilometers, almost 20% of passenger railway kilometerage in Japan. This network includes the Sanyo Kansai Urban Area Shinkansen, a high-speed intercity railway line; the Kansai Urban (including the Urban Network) Area, serving the –– metropolitan area; and other conventional railway lines (excluding the three JR-West branch offices in Kyoto, Osaka, and Kobe).

The Sanyo Shinkansen is a high-speed intercity to the major stations of the Sanyo Shinkansen passenger service between Shin-Osaka Station in Line, such as , , and Hakata, Osaka and in in northern without changing trains. These services are Kyushu. The line runs through several major cities enabled by direct services with the services of Sanyo in western Japan, including Kobe, Okayama, the Tokaido Shinkansen Line, which Central Shinkansen Hiroshima, and Kitakyushu. It has a total Japan Railway Company (JR-Central) operates operating kilometerage of 644.0 kilometers and between and Shin-Osaka. In addition, has 19 railway stations, including Shin-Osaka following the March 12, 2011 commencement of Station. JR-West owns the entirety of the railway operations on all lines of the , facilities related to the existing Sanyo Shinkansen, JR-West launched the and and with the exception of Shin-Osaka Station services, which travel directly between the Sanyo (owned by JR-Central), operates all of the other Shinkansen and Kyushu Shinkansen lines. These 18 railway stations. new services enable customers to travel between The , , and services Shin-Osaka and -Chuo in as little as 3 have been operating on the Sanyo Shinkansen hours and 42 minutes. Line for some years. Many of the Nozomi services allow passengers to travel from Tokyo or Nagoya

Transportation Revenues Number of Passengers

357.0 Billions of yen 65 Millions of passengers (Billions of yen) (Millions of passengers) 2009 339.1 2009 62 2010 312.4 2010 58 2011 323.9 2011 60 2012 351.5 2012 64 2013 357.0 2013 65

0014 Annual Report 2013 Future Initiatives

Enhance 3 Expand business area by creating new Kyoto-Osaka-Kobe Area to Fukuoka For the Shinkansen, work to further increase demand Years ended March 31 Capture seniors’ demand JRAirlines (Number of passengers) safety and reliability, and provide competitive JR’s Market Share (%) transportation services, while also creating Capture inbound demand 2009 81.3 new demand by expanding services for 4 Entrench and expand benefits of 2010 82.4 seniors and foreign tourists. Press ahead with direct service with the Kyushu 85.3 preparations for the start of 2011 Shinkansen service to Kanazawa, and Continue campaigns and product 2012 88.0 promote exchanges among people, to development in cooperation with 2013 117 83.8 enhance the potential of the Shinkansen. local communities Note: Each graph bar represents the number of passengers using JR and the number of passengers using airlines; the bars indicate the total number of passengers using JR or using airlines Kyoto-Osaka-Kobe Metropolitan Area - Fukuoka compared to the base year index of 100 (the fiscal year ended Key Measures (As of March 31, 2013) Travel Time Fare (¥) Frequency March 1997). The base year index of 100 (the fiscal year 1 Sustain sound facilities and services 14,890 57.0 ended March 2008) Shinkansen 2h 22m Source: Ministry of Land, Infrastructure and Transport into the future, and enhance ability Airlines 2h 20m 21,900 17 to respond to natural disasters (Itami ) Maintain and manage tunnels, Airlines 3h 00m 21,900 7(6) (Kansai Intl. Airport) elevated railway tracks, and other Travel Time and Fare: JAL or ANA structures appropriately Frequency: All airlines. Numbers in parentheses are frequency Advance earthquake and tsunami excluded those of JAL or ANA. countermeasures and derailment Notes 1: Fare for the Shinkansen is the regular Nozomi fare, and for airlines the regular fare. prevention measures 2: Travel time for the Shinkansen is the shortest on Advance the introduction of Nozomi and Mizuho trains. Travel time for the airlines is new ATC systems estimates. For airlines, in addition to the travel time required from the airport to the city center, the Shin-Kobe Nagoya 2 Increase market share by heightening calculation includes 10 minutes travel time from the Kyoto Airport Limousine Bus or nearest station the airport to competitiveness the boarding gate, 20 minutes waiting time at the Okayama Shin-Osaka Enhance and publicize frequency, on-board boarding gate, and 10 minutes from the gate to the Airport Limousine Bus or station nearest the airport. communications environment, Internet Osaka reservations, punctuality, and comfort Hiroshima Introduce N700A Hakata (Fukuoka)

Kumamoto

N700A ICOCA &

Kagoshima-Chuo Annual Report 2013 0015 Introduction Business Strategy and Operating Results ESG Section Financial Section

The President’s Message Medium-Term Management Plan Operating Results by Business Segment — —

The Kansai Urban Area comprises the densely hub station—as Osaka Station City on May 4, populated metropolises and surrounding areas 2011. Osaka Station serves as the gateway to of Kyoto, Osaka, and Kobe. (Population of the the as well as the gateway into Kyoto–Osaka–Kobe metropolitan area is more Osaka itself. For this reason, we hope that Osaka Kansai than 20 million.) It has an operating route length Station City will serve as a new landmark in Urban Area of 946.0 kilometers, forming a comprehensive Osaka, a landmark that embodies a sense of flair network stretching across the entire and sophistication befitting its role as a gateway. Kyoto–Osaka–Kobe Area. This strong desire was a key factor in our The Kansai Urban Area includes the section naming of Osaka Station City. Furthermore, it is of the between Tsukaguchi our wish that it will come to be loved by all who Station and Station, the location visit it as a “city” that is both highly appealing where JR-West caused a terrible accident on and convenient. April 25, 2005, resulting in a substantial loss of the trust we have built with customers and society. We recognize that redoubling our efforts to prioritize safety and regaining that trust is one of our highest management priorities. Furthermore, we held the grand opening of Osaka Station—the largest JR-West-operated

Transportation Revenues Number of Passengers

291.4 Billions of yen 1,451 Millions of passengers (Billions of yen) (Millions of passengers) 2009 301.5 2009 1,462 2010 286.1 2010 1,423 2011 284.4 2011 1,424 2012 287.3 2012 1,439 2013 291.4 2013 1,451

Boundary Stations between JR-West and Other JR Companies Main Lines Omishiotsu in the Kansai Urban Area Shinkansen Line (Bullet Train) Intercity Lines Regional Lines Maibara

Osaka Loop Line JR Kobe Line (Osaka–) Yamashina Kusatsu JR (Osaka–Kyoto) Kyoto (Kyoto–Nagahama) Shin-Osaka Kameyama Aioi Himeji JR Tozai Line (Kyobashi–Amagasaki) Amagasaki Kakogawa Tsuge JR Yumesaki Line (Nishi-Kujo–Sakurajima) Shin-Kobe Kyobashi Nara JR Takarazuka Line (Osaka–Sasayamaguchi) Kobe Nishi-Akashi Osaka Tennoji (Kyoto–Sonobe) Oji Gakkentoshi Line (Kyobashi–Kizu) Takada Kansai Airport Nara Line (Kyoto–Kizu) Yamatoji Line (JR-Namba–Kamo) (Tennoji–) Wakayama (Hineno–Kansai Airport) (Hanaten–Kyuhoji)

0016 Annual Report 2013 Future Initiatives

Improve Increase and improve guidance for Start of nationwide reciprocal use of For the Kansai Urban Area, pursue higher levels customers during transport disruptions transportation IC cards of safety and implement thoroughgoing Promote new underground station measures for reliable transport to build a 2) Create an appealing Kansai facilities in step with development of railway that offers high-quality transport Urban Area the Osaka Higashi Line (northern part) and is used repeatedly by customers. and Umekita Also, enhance the to 1 Advance urban tourism increase the value of railway belts and improve the appeal of urban areas. 2 Create railway belts that are easy to use and where people will want to reside ICOCA Convert to over-track stations and Key Measures build new stations that integrate with community development 1) Increase quality of transport Enhance lifestyle-related services Pursue safe, reliable transport service businesses Replace rolling stock, introduce new safety system, increase safety of level 3 Build a more convenient railway crossings, increase facilities for turn network back operation, take natural disaster Advance creation of a seamless Transportation IC card countermeasures railway network March 23, 2013:

Annual Report 2013 0017 Introduction Business Strategy and Operating Results ESG Section Financial Section

The President’s Message Medium-Term Management Plan Operating Results by Business Segment — —

JR-West’s other conventional lines comprise conventional lines continues to be difficult due intercity transport provided by to the declining population of the areas it and express services, regional transport for serves. However, considering that this network commuters and students in and around plays a role as a feeder for Shinkansen services Other regional hub cities such as Hiroshima and as well as functions as a vital part of the overall Conventional Lines Okayama, and local lines with low transport JR-West railway network, we are working to density. The other conventional lines have an provide more community-oriented services and operating route length of 3,425.7 kilometers. undertake other management efforts, while The operating environment for other placing priority on ensuring safety.

JR-West’s transportation operations segment includes bus and ferry services. In our bus services, we have endeavored to increase customer convenience Bus and by implementing flexible Ferry Services fares reflecting usage trends. In our ferry services (the Miyajima Line), we have focused on securing revenues through initiatives like marketing activities targeting travel companies.

0018 Annual Report 2013 Operating revenues in the transportation Rail Pass and implementation of the “Detective Fiscal 2013 operations segment increased 0.7% from the Conan Okayama and Kurashiki Mystery Tour” for Results previous fiscal year, to ¥844.9 billion, and travelers from Taiwan, to encourage railway usage operating income rose 17.4%, to ¥90.1 billion. by foreign tourists. On another front, we worked to In transportation operations, the Sanyo enhance the convenience of railway usage by Shinkansen and Urban Network both adding Kintetsu Corporation to our partnership experienced strong ridership. In addition, we with for the sale of the worked to enhance customer convenience by ICOCA Connection Pass for three railway revising timetables in March 2013. These revisions companies, and by introducing nationwide resulted in changes such as increases in Nozomi reciprocal use of transportation IC cards. and Sakura Shinkansen services, and, for our To improve customer service, we introduced conventional lines, increases in limited services, like the issuance of delay certificates express services and 12-car special rapid service from a PC- and cell phone-accessible website, services on the JR Kyoto and JR Kobe Lines. that seek to further improve services from the Despite our best efforts, however, last summer’s customer’s perspective. localized torrential rainstorms damaged tracks in “Osaka Station City,” which had its grand multiple locations and caused numerous opening in May 2011, welcomed its 200 millionth unavoidable service suspensions and delays in visitor in November 2012 and has seen other our Urban Network and other operations. indicators that its strong popularity with Through marketing initiatives, we worked to consumers continues. increase travel between West Japan and Kyushu. One We moved forward with “innovation by example was a PR campaign using multiple media technology” initiatives in areas like the transfer channels to promote direct service operations between of technical skills to younger workers, the Sanyo Shinkansen and Kyushu Shinkansen. We improvement of practical capabilities and skills, also held the “Kagoshima College” program in which the promotion of “system change of railway university students use social media to disseminate operation” activities, and protection of the information on the appeal of travelling through global environment. exchanges at sightseeing destinations. Meanwhile, with regard to train car Other marketing initiatives focused on technologies, to improve our train car increasing use of our railway through an technologies in general, we acquired shares in ongoing proactive campaign calling attention to The Co. Ltd. and entered into a the convenience and price advantages of the business tie-up agreement with that company. “e5489” online reservation service. We also To promote railway businesses through undertook efforts, like the “Miyajima and Kure international exchanges, we also entered into Campaign” and “Sanin Destination Campaign,” to cooperation agreements with Renfe Operadora, a stimulate travel demand; launched the “Super Spanish government-owned operator of freight Haya-toku” Ticket and other initiatives with an and passenger railways, and Administrador de eye toward beating back competition from other Infraestructuras Ferroviarias, a Spanish modes of transportation; and took steps like government-owned company in charge of expansion of the valid travel area for the JR-West managing railway infrastructure.

Operating Revenues Operating Income

844.9 Billions of yen 90.1 Billions of yen (Billions of yen) (Billions of yen) 2009 856.1 2009 89.1 2010 797.4 2010 45.2 2011 806.4 2011 61.1 2012 839.0 2012 76.7 2013 844.9 2013 90.1

Annual Report 2013 0019 Introduction Business Strategy and Operating Results ESG Section Financial Section

The President’s Message Medium-Term Management Plan Operating Results by Business Segment — —

Non-Transportation Operations

JR-West’s non-transportation operations segment individual railway stations and their surrounding areas. comprises three operations: retail business, real In development initiatives, our basic approach is estate business, and other businesses. Those to clarify management responsibility in order to operations contribute to the sustainable growth accelerate operational development and pursue of the Group as a whole by vigorously taking development through Group companies. In advantage of their assets, improving services for accordance with that approach, we will develop customers using railway services and customers in commercial facilities in and around railway stations areas alongside railway lines, as well as providing as well as areas between railway stations, and high-quality services that are safe and reliable to conduct operations that use idle land for the further increase the appeal of railway stations and development and sales of condominiums. earn the increased trust of customers. The Railway Also, in order to foster earnings mainstays for Operations Headquarters and the Business the next era, JR-West is furthering initiatives to Development Headquarters will increase the value create new businesses through collaborations both of its railway belts through initiatives that entail inside and outside the Group. collaboration with local communities to develop

Non-Transportation Revenues

Retail Business

Other Businesses

Real Estate Business

Operating Revenues Operating Income

453.9 Billions of yen 39.8 Billions of yen (Billions of yen) (Billions of yen) 2009 419.1 2009 34.1 2010 392.6 2010 32.4 2011 407.0 2011 35.5 2012 448.6 2012 33.3 2013 453.9 2013 39.8

0020 Annual Report 2013 JR-West’s retail services, centered on railway however, we are now moving ahead with an passengers, consist of convenience stores, examination of fundamental business specialty stores, and food and beverage outlets revitalization measures, as we strive to create located in and around station buildings, as well stores capable of earning the patronage of local Retail as the Isetan department stores. customers. Other initiatives for making stations Business more appealing went forward at Osaka Station, where we opened the Eki Marché Osaka Fiscal 2013 Results commercial center and an Entrée Marché hybrid The retail business segment recorded a 0.5% increase convenience store; Tennoji Station, where we in operating revenues from the previous fiscal year, to opened another Entrée Marché hybrid convenience ¥234.6 billion, but an operating loss of ¥400 million. store; and Station, where we developed a At JR Osaka Mitsukoshi Isetan department store, retail space. In addition to these activities, we also we endeavored to offer highly original goods and opened the Viainn Okayamaya, a business hotel services. Given the tight commercial climate, near the west side of .

Operating Revenues Operating Income

234.6 Billions of yen –0.4 Billions of yen (Billions of yen) (Billions of yen) 2009 215.3 2009 4.7 2010 201.9 2010 3.1 2011 201.3 2011 3.5 2012 233.5 2012 –2.9 2013 234.6 2013 –0.4

Annual Report 2013 0021 Introduction Business Strategy and Operating Results ESG Section Financial Section

The President’s Message Medium-Term Management Plan Operating Results by Business Segment — —

JR-West’s real estate business consists of the side of Okayama Station, we also undertook management of shopping centers in station various types of renovations of existing facilities. buildings and other facilities, the operation of Examples of the latter include the main and plaza large station buildings at hub railway stations, buildings of Tennoji Mio in the Tennoji Station Real Estate the development of commercial facilities near Building and Okayama Ichibangai underneath Business railway station areas and underneath elevated Okayama Station. Furthermore, we moved ahead tracks, and real estate sales and leasing with efforts to develop station and surrounding operations for residential and urban properties, for instance by opening educational development focused on railway lines. facilities and commercial centers near Nijo Station and Takatsuki Station. LUCUA, at Osaka Station City, is performing well, and we have Fiscal 2013 Results undertaken the leasing of office space and In the real estate business segment, operating other activities. To revitalize all of the areas revenues fell 2.9% on the year, to ¥90.9 billion, surrounding Osaka Station, we have promoted while operating income rose 7.7%, to ¥28.0 billion. area management activities in collaboration While opening a new ALBi commercial center with nearby businesses. And we have undertaken under the elevated tracks of Suminodo Station sales of condominiums on property formerly and Sun Station Terrace Okayama on the west occupied by company housing.

Operating Revenues Operating Income

90.9 Billions of yen 28.0 Billions of yen (Billions of yen) (Billions of yen) 2009 71.1 2009 22.6 2010 70.9 2010 22.5 2011 75.7 2011 22.2 2012 93.5 2012 25.9 2013 90.9 2013 28.0

0022 Annual Report 2013 JR-West’s other businesses consist of the travel on its top floor and embarked on a marketing agency business operated by Nippon Travel campaign including various types of promotional Agency, the hotel business, an advertising agency events to boost its overall sales. business, maintenance and engineering services, and In the travel agency business, we focused on Other other businesses to facilitate the smooth and increasing Internet sales and worked to increase Businesses efficient operation of the mainstay railway business. sales of products that use the services of our railway network. We began offering an online enrollment service for the J-WEST Card, and worked to increase Fiscal 2013 Results membership for the Osaka Station City J-WEST Card. The other businesses segment reported operating For the ICOCA e-money service, we took steps like revenues up 5.7% compared to the previous fiscal enabling the nationwide reciprocal use of year, to ¥128.4 billion, and operating income up transportation IC cards to increase usage 19.0%, to ¥12.3 billion. opportunities. In a new business endeavor, we In the hotel business, the Hotel Granvia Osaka established J-Palette Minami-tanabe to enter the opened its Granvia Floor of premium guest rooms rehabilitation daycare service business.

Operating Revenues Operating Income

128.4 Billions of yen 12.3 Billions of yen (Billions of yen) (Billions of yen) 2009 132.6 2009 6.7 2010 119.6 2010 6.7 2011 129.9 2011 9.6 2012 121.4 2012 10.3 2013 128.4 2013 12.3 Future Initiatives

Develop 2 Aggressively develop areas other 3) Real Estate Business In the area of new business development, than those adjacent to railway lines and within the JR-West service area 1 Advance sales of condominiums expand lifestyle-related services businesses, (Sales revenue) Opening of the Viainn Nagoya increase Group asset value by advancing (¥100 million) development of terminal stations and business hotel thoroughly reevaluating Osaka Station City’s 2009 31 North Gate Building, and foster new 2) Department stores 2010 25 48 business development by developing and Thorough reevaluation of Osaka Station 2011 2012 107 pioneering new business fields. City’s North Gate Building (Store renovation taking advantage of the strengths of 2013 69 department stores and shopping centers) 2014 218 (Forecast) Key Measures Timing: Targeting spring 2015 opening Outlook for profitability 1) Sales of goods and food services 2 Advance development and West Japan Railway Isetan Limited: Targeting renovation 1 Renovate retail shops in stations profitability by fiscal 2016 (ending March 31, 2016) piole Himeji, Shamine Tottori, and when stations are upgraded JR Osaka Mitsukoshi Isetan Department Store, Porta and The Cube (both located Sannomiya Station concourse nonconsolidated: Profitability to be achieved rapidly at )

Annual Report 2013 0023