Internal Control in JR EAST Group

<Basic views>

The Company views the internal control system as various measures to appropriately and efficiently pursue the Group’s philosophy and realize the Group’s management vision. The Company will ensure compliance and safety, prevent financial losses, ensure soundness of financial conditions, and promote risk management that reflects consideration of expansion into new businesses, and thereby improve the Group’s value.
The Company undertakes a wide range of risk management efforts not merely to reduce risks (*) of negative elements, such as avoidance of losses, but also to improve the value of the Group including through risk taking among others.
Based on this, we have established the following system to ensure the appropriateness of business operations based on the Companies Act;

* Risks include not only those relating to operation such as compliance, safety and natural disasters, but also those relating to the domestic and international social and economic environment such as changes in market and trends among competitors, and those relating to management decisions on new businesses.

<Status>

1. (1) Systems to ensure that Directors and employees of the JR East Group perform their duties in accordance with relevant laws and regulations as well as with the Articles of Incorporation
   • To promote rigorous legal compliance and high corporate ethics standards, the Company and its consolidated subsidiaries (hereinafter Group companies) have drafted “Policy on Legal and Regulatory Compliance and Corporate Ethics,” which serves as corporate action guidelines for the JR East Group, and implement corporate actions in line with such guidelines such as distributing a handbook that explains conduct standards in concrete terms to each corporate officer and employee of the Company and Group companies.
   • The Company’s Corporate & Legal Strategies Department handle overall control over horizontally integrated compliance matters throughout the Company, and liaise with legal and administration departments of the Group companies to ensure compliance in the JR East Group.
   • Units to provide compliance-related advice and receive whistle-blower reports and other reports related to compliance issues as affecting the JR East Group have been established inside and outside the Company. - The Company and Group companies maintain the confidentiality of whistle-blowers and matters reported, and prohibit unfavorable treatment on the basis of any such report.
   • The Company has established an internal audit system to ensure the appropriateness and efficiency of operational execution. In addition, to ensure that all operations throughout the JR East Group are appropriate, the Company participates in the management of Group companies by seconding directors to those companies and by other means. In addition, the Company’s Audit Department performs audits of Group companies at regular intervals.
2. (2) Preservation and administration systems for information related to Directors’ performance of their duties
   • The Company appropriately preserves and administers documents related to Directors’ performance of their duties in accordance with relevant laws and internal regulations. Directors can view these documents whenever necessary.
3. (3) Risk management rules and systems of the JR East Group
   • As part of our risk management, we have established a system for managing the risk of loss.
   • With regard to the risk of a significant adverse influence on corporate operations due to changes in the internal and external management environment, such incidents as external offenses or internal scandals and legal violations in the Company and the Group companies, each unit of the Company manages its own risk and the risk of the Group companies which it supervises. In addition, the Company has established a Crisis Management Headquarters as well as crisis management-related internal regulations, so that in the event of a problem, a preliminary task force may be immediately established with the participation of top management and may gather relevant information and rapidly implement countermeasures. In addition, the Company instructs Group companies to establish similar risk management systems and report incidents as necessary to the Company.
   • The Company has established systems to ensure rapid and appropriate responses in the event of an accident or disaster in railway operations and to improve safety and reliability of transportation.
   • To ensure effectiveness of risk management, the Board of Directors of the Company monitors its status and policies periodically.
4. (4) Systems for promoting efficient performance of duties by directors and other employees in the JR East Group and systems for reporting performance of duties from Group companies to the Company
   • To promote efficiency in the Company’s operations, internal regulations have been established that allocate authority by clearly defining the authority and roles of each unit.
   • To promote the Group management vision, and to attain the vision’s objectives, the Company and Group companies have established action programs for each organizational unit and project. Progress in action program implementation is periodically evaluated as a means of promoting the efficient implementation of strategic measures. In addition, Group companies regularly report to the Company material information, including business results and financial conditions.
5. (5) Items related to employees who assist the Audit and Supervisory Committee in the performance of their duties
   • Dedicated staff are assigned to the Audit and Supervisory Committee office to assist the duties of the Audit and Supervisory Committee in the performance of their duties. This is a system designed to increase the efficiency of audits, etc. and enable the duties of the Audit and Supervisory Committee to be executed smoothly.
6. (6) Independence from Directors (excluding Directors who are Audit and Supervisory Committee members) of employees who assist the Audit and Supervisory Committee in the performance of their duties and effectiveness of instructions to such employees
   • The staff of the Audit and Supervisory Committee Office of the Company, with regard to instructions from the Audit and Supervisory Committee, are not subject to orders from Directors (excluding directors who are Audit and Supervisory Committee members) or other employees.
7. (7) Systems in the JR East Group for reports to the Audit and Supervisory Committee of the Company
   • The Company has established standards for matters to be resolved at the Board of Directors meeting based on the Regulations of the Board of Directors and appropriately submits such matters for resolution. The contents of important items other than those to be resolved by the Board of Directors may also be confirmed by the Audit and Supervisory Committee at meetings of the Board of Directors and meetings of the Corporate Planning Committee to be attended by Directors, who are Audit and Supervisory Committee members, by hearing from Directors (excluding Directors who are Audit and Supervisory Committee members) and employees and by reviewing documents concerning performance of duties by Directors.
   • The Company’s Audit and Supervisory Committee holds informational meetings regularly with corporate auditors of Group companies to share information concerning audits.
   • The Company reports regularly to the Company’s Audit and Supervisory Committee on whistle-blower reports and other matters related to compliance issues of the JR East Group, as well as results of Group company audits conducted by the Company’s Audit Department.
   • The Company prohibits unfavorable treatment of any person who reports to the Auditor and Supervisory Committee based on any such report.
8. (8) Policies on payment of expenses arising from performance of duties of Directors who are Audit and Supervisory Committee members
   • When the Company’s Director, who is an Audit and Supervisory Committee member, requests advanced payment of expenses arising from performance of his/her duties based on Article 399-2, Paragraph 4 of the Companies Act, the Company shall pay such expense unless the Company establishes that such expense or liability is unnecessary for such performance of duties by such a Director who is an Audit and Supervisory Committee member.
9. (9) Other systems for promoting the effective performance of the Audit and Supervisory Committee’s audits
   • The Audit and Supervisory Committee of the Company holds meetings regularly with the President and CEO and the accounting auditor to exchange information and opinions.
10. (10) The Company’s basic views on internal control system over financial reporting are as described below.
    • The Company organizes and operates the system necessary to ensure the adequacy of documents on financial calculation and other information
    • The Company evaluates every fiscal year the status of the organization and operation of the above system using criteria concerning internal controls over financial reporting that are generally accepted as fair and appropriate.