Financial Results and Investor Meeting

CONSOLIDATED AND NON-CONSOLIDATED FINANCIAL HIGHLIGHTS FOR SIX MONTHS ENDED SEPTEMBER 30, 2002

Overview of Interim Results and Outlook

Results of Operations

1. Overview of Results in the Interim Period

Summary

The Japanese economy in the current interim period has remained generally grim. Personal consumption was sluggish due to a severe employment condition and income environment, and the level of corporate capital expenditures also remained low. In addition, the level of stock price averages entered a continuous downward trend from summer onwards. However, there were some indications of a partial rally, including increases in exports and production. JR East, its consolidated subsidiaries and equity method affiliated companies continued to make efforts to expand revenues by maximizing the use of operational resources such as railway networks of the Shinkansen lines, etc. and stations in order to overcome such severe situations and effected measures to increase the efficiency of business operations by carrying out a scrupulous review of the overall expenses.
As a result, operating revenues increased by 0.6% to 1,269.5 billion yen, while operating income increased by 12.9% to 201.4 billion yen. Ordinary income increased by 31.2% to 125.6 billion yen due to a decline in interest expenses as a result of a further reduction in interest bearing debt by expanding a cash management system, introduced in fiscal 2002, which controls the combined total group funds. Net income increased by 114.8% to 63.1 billion yen, due in part to a rebound effect following the extraordinary losses posted in the previous interim period caused by revaluation loss of some of the holding securities.

Cash Flows

Net cash provided by operating activities decreased by 51.3 billion yen to 185.8 billion yen affected by an increased outflow of cash due to the reduction of accounts payable despite an increase in income before income taxes.
Net cash used in investing activities increased by 6.0 billion yen to 133.6 billion yen, due to capital expenditures for measures to ensure safe and stable transportation, improvement in transportation capacity and development of shopping centers and hotels.
Net cash used in financing activities decreased by 57.4 billion yen to 106.3 billion yen, as a result of a continuation of dividend payments and a decrease of long-term debt to 89.7 billion yen which was smaller than the level of the previous interim period.
As a result, cash and cash equivalents as of September 30, 2002 decreased by 53.9 billion yen to 146.0 billion yen.
The balance of long-term debt as of September 30, 2002 amounted to 4,290.3 billion yen.

Segment Information

In the transportation, JR East made full use of its assets, especially its Shinkansen network and Tokyo metropolitan area network, which now includes Tokyo Monorail. Marketing policies were targeted toward promotion of rail use and advancement of revenues through carefully planned strategies that included the design of products to meet a wide range of needs. Specifically, the Tohoku Campaign helped to stimulate travel demand, and new products were developed in collaboration with travel companies and other organizations. JR East also enhanced its targeted marketing strategies by introducing the new Watashi no Kazoku brand of family travel options geared toward the enforcement of a two-day weekend for schoolchildren. Other targeted product ranges include Meguri Hime, Nombiri Komachi, and Otona no Kyujitsu.
As regards measures to improve services utilizing IT, the IC card, Suica, which was introduced in fiscal 2002 at the stations in the Tokyo metropolitan area, can now be used in Tokyo Monorail.
As a result, these efforts were reflected in an increase in passenger numbers on JR East's rail network, compared with the previous interim period. This trend was aided by buoyant demand in the Tokyo metropolitan area. Operating revenues increased by 0.6% to 929.0 billion yen. Reasons for this growth included the addition of operating revenues from Tokyo Monorail for the first time in the current interim period. JR East gained management control of Tokyo Monorail in the previous accounting period. Operating expenses decreased by 2.0% to 767.4 billion yen, due to a fall in personnel expenses made possible by the reduction of employees and the completion, in the previous term, of accounting for the payment for transfer to welfare pension. Operating income increased by 14.7% to 161.5 billion yen.

In station space utilization, JR East continued to implement its Station Renaissance, which is creating new station environments for the 21st century. Under the Cosmos Plan, which carries out major developments centering on terminal stations in the Tokyo metropolitan area, JR East established new outlets in the atreUeno, which was opened in the previous period. Achievements under the Sunflower Plan, which is designed to make effective use of space in and around stations, included the opening of complexes integrating View Plazas with retail and restaurant outlets at Ikebukuro and Hachinohe stations. Furthermore, new type of store development progressed to strengthen the profitability in association with non-group companies such as the restaurant Sanuki Udon NRE & Merkenya at Ebisu station.
As a result, operating revenues increased by 0.3% to 189.5 billion yen. Operating expenses increased by 0.3% to 175.5 billion yen due to an increase of selling general and administrative expenses because of the increase in the number of stores, etc. despite efforts made to improve profitability such as greater business efficiency. Operating income increased by 0.1% to 13.9 billion yen.

In shopping centers and office buildings, JR East opened a large office building, the JR Tokyu Meguro Building, and the atreMeguro (Tokyo metropolis) shopping center in the same building. Other shopping centers, including atreYotsuya (Tokyo metropolis) and Yokohama CIAL (Kanagawa prefecture), were updated with the emphasis on restaurants and shops selling groceries. On the other hand, leading tenants who have power of attracting customers were introduced in existing shopping centers.
Under the continuing reorganization of group companies, Chiba Station Building Co., Ltd. was merged with Sobu Station Development Co., Ltd. to enhance the JR East Group's external competitiveness in the shopping center business and to strengthen profitability by creating a stronger financial structure and carrying out low-cost operation.
As a result, operating revenues increased by 3.1% to 87.8 billion yen. Operating expenses decreased by 0.9% to 65.7 billion yen due to meticulous pursuit of low-cost operation, etc. Operating income increased by 17.2% to 22.1 billion yen.

In other services, in hotel operations JR East opened the HOTEL METS Kamakura Ofuna (Kanagawa prefecture) and carried out positive marketing activities such as joint advertising as well as a further strengthening of chain management. In advertising, revenue increases were sought by expanding sales of advertising within stations and trains, and by carrying out highly event-oriented advertising measures, utilizing AD Trains on the Yamanote line. In housing development and sales, sales of condominiums such as View Park Oimachi Hills (Tokyo metropolis) have started. In credit card business, the number of cardholders exceeded 2.2 million. JR East developed card-related initiatives in conjunction with its comprehensive travel site, eki-net Travel. It also continued to expand its new VIEW ALTTE ATM network, which is located mainly in the Tokyo metropolitan area. JR East further enhanced the services and convenience of the Internet shopping mall eki-net Shopping and its portal site Ekipara, which provides integrated access to the information from the JR East Group shopping centers.
As a result, operating revenues increased by 1.6% to 227.0 billion yen. The growth is attributable to the inclusion of operating revenues from The Orangepage, Inc., which came under JR East management control in the last fiscal term and was posted from the current interim period. Operating expenses increased by 2.0% to 222.5 billion yen, due to increased outsourcing and personnel costs resulting from growth in the volume of construction consulting and facility maintenance work. Operating income decreased by 12.4% to 4.4 billion yen, mainly due to a decrease of operating income from advertising and housing development and sales.

Dividend Policy

JR East's basic policy regarding the appropriation of earnings is to maintain a stable dividend for shareholders while increasing retained earnings, as necessary, to ensure a sound operating base for the future development of business centered around railway services.
Based on this policy, JR East has consistently paid an interim dividend of 2,500 yen per share since fiscal 1992. In addition to an ordinary interim dividend of 2,500 yen per share for the current interim period, on November 15, 2002, the Board of Directors also resolved a commemorative dividend of 1,500 yen to mark the completion of privatization. This brings the total dividend to 4,000 yen per share. (Payment will commence on December 10.)
Retained earnings will be used to reduce total long-term debt and improve JR East's financial position.
JR East will make efforts to improve business performance and establish a strong operating base where a stable dividend payment can be maintained.

2. Outlook for the Full Term

JR East faces a business environment that has become extremely harsh because of factors that include not only Japan's chronic economic recession, but also a falling birth rate and an aging population. JR East will take advantage of full privatization to further promote "speedy and flexible management." At the same time, it will intensify its efforts to meet the expectations of shareholders through the early realization of the Group's medium-term business plan, New Frontier 21.
In the Tokyo metropolitan area network, JR East will strengthen its competitive edge by prioritizing enhancement of its railway network and introduction of new types of trains. As far as the Shinkansen network is concerned, JR East plans comprehensive service improvements and powerful sales promotion efforts to coincide with the opening of the section from Morioka to Hachinohe of Tohoku Shinkansen in December 2002. Priorities for the Group's lifestyle service business activities include the continuing implementation of Station Renaissance, and the improvement of customer satisfaction levels. By strengthening marketing capabilities, JR East will also target the provision of products and services that reflect customer needs, and the creation of business activities with high added value. The Company's IT strategies include the continuing expansion of Suica system coverage. JR East will also continue to evaluate and introduce new services, and to enhance the functionality of its Internet-based services.

Estimated results for the full term as of November 15, 2002 are as follows:

In addition to an ordinary year-end cash dividend of 2,500 yen per share, another 1,500 yen commemorative dividend will also be paid at the end of fiscal 2003 to mark the completion of the full privatization. This will bring the total dividend for the full term to 8,000 yen per share (inclusive of commemorative dividends of 3,000 yen per share), including the interim dividend of 4,000 yen per share.

Forward Looking Statements

Statements contained in this guide with respect to JR East's plans, strategies and beliefs that are not historical facts are forward looking statements about the future performance of JR East, which are based on management's assumptions and beliefs in light of the information currently available to it. These forward looking statements involve known and unknown risks, uncertainties and other factors that may cause JR East's actual results, performance or achievements to differ materially from the expectations expressed herein. These factors include, without limitation, (i)JR East's ability to successfully maintain or increase current passenger levels on its railway services, (ii)JR East's ability to improve the profitability of its railway and other operations, (iii)JR East's ability to expand its non-railway operations and (iv)general changes in economic conditions and laws, regulations and government policies in Japan.

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