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Tetsudo Kaikan and Nihon Hotel to Become Wholly-Owned Subsidiaries of East Japan Railway

East Japan Railway Company
(Mutsutake Otsuka, President and CEO)
Tetsudo Kaikan Co., Ltd.
(Kazuhiko Suzuki, President)
Nihon Hotel Co., Ltd.
(Yutaka Nochiide, President)

May 12, 2004

The Board of Directors of East Japan Railway Company (hereinafter as "JR East"), Tetsudo Kaikan Co., Ltd. (hereinafter as "Tetsudo Kaikan") and Nihon Hotel Co., Ltd. (hereinafter as "Nihon Hotel") voted today to approve a share exchange that will result in Tetsudo Kaikan and Nihon Hotel becoming wholly-owned subsidiaries of JR East. Following approval by the shareholders of Tetsudo Kaikan and Nihon Hotel at general shareholders meetings of the two companies, each to be held on June 29, the share exchange is to take place on October 1. In accordance with the provisions of Article 358 of the Commercial Code regulating simple stock swaps, the transaction does not require the approval of JR East's shareholders. JR East will use treasury shares for the exchange, which requires shareholder approval under the provisions of Article 210 of the Commercial Code.

1. Reasons for Making Tetsudo Kaikan and Nihon Hotel Wholly-Owned Subsidiaries

The JR East Group is conducting business consolidation and reorganization to achieve "management with a sense of speed and flexibility" and to raise corporate value under its New Frontier 21 medium-term business plan.
Recently, Tetsudo Kaikan and Nihon Hotel, both members of the JR East Group, and JR East have been promoting a development plan for the area around Tokyo Station. They determined that the creation of development and management structures based on rapid decision making is essential and that the most appropriate means of maximizing shareholder value would be to become wholly-owned subsidiaries of JR East.
In the future, all three companies will continue to develop and improve business in the Tokyo Station area while seeking to raise corporate value as part of a trusted lifestyle-enhancement services group.

2. Conditions of the Share Exchange

(1) Schedule

May 12, 2004 Boards of Directors approve the share exchange contract
May 12, 2004 Share exchange contract concluded
June 29, 2004 (scheduled) Tetsudo Kaikan and Nihon Hotel regular general shareholders meetings approve the share exchange contract
October 1, 2004 (scheduled) Exchange of shares

(2) Share exchange ratios

Company JR East (Parent) Tetsudo Kaikan (Wholly-Owned Subsidiary)
Share exchange ratio 1 0.040
Company JR East (Parent) Nihon Hotel (Wholly-Owned Subsidiary)
Share exchange ratio 1 0.00063
Note: 1. Share allocation ratios
Each share of Tetsudo Kaikan common stock shall be exchanged for 0.040 shares of JR East common stock. Each share of Nihon Hotel common stock shall be exchanged for 0.00063 shares of JR East common stock.
2. Bases for the share exchange ratios
JR East requested that Mizuho Securities Co., Ltd. calculate the exchange ratios, and Tetsudo Kaikan and Nihon Hotel requested that Mitsubishi Securities Co., Ltd. also calculate the ratios. The figures referenced above were agreed upon by making reference to the results of both companies' calculations and through discussions by the three parties.
3. Results, methods, and bases for calculations performed by third-party organizations
Mizuho Securities used the market price standard method with respect to JR East's shares and the discounted cash flow (DCF) method and a comparison of similar companies with respect to the shares of Tetsudo Kaikan and Nihon Hotel and made its calculations taking these results into account.
Mitsubishi Securities used the market price method with respect to JR East's shares and the discounted cash flow (DCF) method and compared the share prices of similar publicly-traded companies with respect to the shares of Tetsudo Kaikan and Nihon Hotel and made its calculations taking these results into account.
4. Number of shares to be allocated under the exchange
7,434.06 shares of common stock

(3) Share exchange payments
No money shall be paid in conjunction with the share exchanges.

3. Shares to be allocated by JR East for the exchange

(1)  Acquisition of treasury shares from the market
The shares to be exchanged are to be acquired by purchasing them on the market following approval by the shareholders at a general shareholders meeting to be held by JR East as described in (2) below.
(2)  JR East will seek approval from its shareholders at a general shareholders meeting concerning the type of shares to be acquired, the maximum number of shares to be acquired, and the maximum acquisition cost.

4. Overview of the Companies Involved

(1) Name
East Japan
Railway Co., Ltd.
(Parent)
Tetsudo Kaikan Co., Ltd.
(Wholly-owned Subsidiary)
Nihon Hotel Co., Ltd.
(Wholly-owned Subsidiary)
(2) Business activities Passenger railway business
Passenger automobile transportation business
Real estate sale, purchase, leasing, management, intermediary services, and appraisal Hotel and restaurant operation
Real estate leasing and management
(3) Date established April 1, 1987 September 1, 1952 August 28, 1950
(4) Location of head office Shibuya-ku, Tokyo Chiyoda-ku, Tokyo Chiyoda-ku, Tokyo
(5) President Mutsutake Otsuka Kazuhiko Suzuki Yutaka Nochiide
(6) Capital 200 billion yen 340 million yen 150 million yen
(7)
Shares issued and outstanding
4 million 680,000 3 million
(8) Shareholders' equity 1,028.789 billion yen 9.39 billion yen* 813 million yen*
(9) Total assets 6,307.321 billion yen 24.74 billion yen 2.346 billion yen
(10) End of fiscal year March 31 March 31 March 31
(11) Number of employees 68,857 132 109
(12)
Major shareholders and ownership
Japan Trustee Services Bank Trust Account
7.20%
Master Trust Bank of Japan Trust Account
5.70%
Mizuho Corporate Bank
5.00%
JR East
73.05%
UFJ Bank
0.74%
Nagoya Terminal
Building
0.74%
JR East
83.93%
Meiji Yasuda Life Insurance
6.00%
Nihon Life Insurance
4.00%
(13) Main banks Mizuho Corporate Bank
Bank of Tokyo- Mitsubishi
Sumitomo Mitsui Bank
Mizuho Bank
UFJ Bank
Bank of Tokyo- Mitsubishi
Mizuho Bank
Sumitomo Mitsui Bank
(14)
Capital and other relationships among the parties
Capital JR East owns 73.05% of Tetsudo Kaikan outstanding shares
JR East owns 83.93% of Nihon Hotel outstanding shares
Personnel JR East has assigned one managing director and two part-time directors to Tetsudo Kaikan.
JR East has assigned one managing director, two part-time directors, and one part-time corporate auditor to Nihon Kaikan.
Transactional JR East and Tetsudo Kaikan engage in land lease and other transactions
JR East and Nihon Hotel engage in building lease and other transactions

* ; As of March 31, 2003;
All other figures are as of March 31, 2004

JR East acquired 5,000 shares of Tetsudo Kaikan from Nagoya Terminal Building on April 1, 2004, bringing its ownership to 73.79%.

(15)  Financial results for the last three fiscal years
(Figures are in million yen unless otherwise indicated)
  JR East
Year Fiscal Year
Ended March
2002
Fiscal Year
Ended March
2003
Fiscal Year
Ended March
2004
Operating
revenues
1,901,977 1,899,488 1,897,242
Operating
income
279,565 301,366 307,526
Ordinary
income
99,330 164,071 183,209
Net income 71,957 86,966 104,319
Net income per
share
17,989.30 yen 21,693.96 yen 26,035.59 yen
Annual
dividends per
share
5,000 yen 8,000 yen 6,000 yen
Shareholders'
equity per
share
220,350.61 yen 231,206.85 yen 257,153.14 yen
  Tetsudo Kaikan Nihon Hotel
Year Fiscal Year Ended
March 2001
Fiscal Year Ended
March 2002
Fiscal Year Ended
March 2003
Fiscal Year Ended
March 2001
Fiscal Year Ended
March 2002
Fiscal Year Ended
March 2003
Operating
revenues
11,228 10,921 11,126 3,746 3,702 4,031
Operating
income
409 716 883 191 142 145
Ordinary
income
629 802 944 192 144 143
Net income 848 219 436 100 63 66
Net income per
share
1,247.42 yen 322.59 yen 642.62 yen 33.66 yen 21.27 yen 22.26 yen
Annual
dividends per
share
50 yen 50 yen 75 yen
Shareholders'
equity per
share
9,553.76 yen 13,951.04 yen 13,809.02 yen 227.50 yen 248.77 yen 271.09 yen

5. Status following the share exchange

(1)  Trade names, business activities, head offices, presidents
There will be no changes in the trade names, business activities, head offices, or presidents of the three companies from the status indicated in section 4 above.
(2)  Capital of JR East
There will be no increase in capital of JR East as a result of the share exchange.
(3)  Impact on financial results
Tetsudo Kaikan and Nihon Hotel are currently subsidiaries of JR East. Consequently, there will be no impact on JR East's consolidated financial performance as a result of the share exchange.
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