Overview of corporate governance structure

The Company is a "company with statutory auditors," and the overview of the system is as follows.

1. (1)The Board of Directors (nine Directors including two Outside Directors)
   Directors have the fiduciary duty to exercise their business judgment in the best interests of shareholders. We consider the size of the Board appropriate because it allows each director to participate meaningfully and exercise effective business judgment through free and vigorous discussions. In addition, we have appointed new outside directors to bring additional independent perspectives to the Boards' decision-making process. Basically, the term of office of a director is two years. However, the term of office of any director elected due to an increase in the number of directors, or any director elected to fill a vacancy caused by a resignation of a director before the expiration of his/her term, will expire at the same time as the expiration of the term of office of other directors. A regular meeting of the Board of Directors must convene at least once every three months, and special meetings of the Board of Directors are convened from time to time when necessary.


2. (2)The Board of Statutory Auditors (three Statutory Auditors including two Outside Statutory Auditors)
   The Board of Statutory Auditors is an independent organ from the Board of Directors. Its major role is to audit the execution of business by the directors. It monitors business decisions and execution by the Board of Directors to confirm compliance with laws and the Company's Articles of Incorporation as well as internal standards of business conduct. It also monitors the establishment and state of implementation of corporate governance and internal control systems to appropriately preserve shareholder interests. Statutory auditors attend important meetings, such as meetings of the Board of Directors and visit major sites such as refineries, terminals and branch offices to audit activities. Moreover, TonenGeneral directors, responsible managers of various divisions, and the directors of subsidiaries are periodically required to explain operations and management control to the statutory auditors. The statutory auditors discuss the audit plans prepared by the accounting auditors and the Internal Audit Group in advance, and receive reports on the audit results. They also review the content of agenda items and relevant documents to be submitted to the General Meeting of Shareholders to ensure that those do not violate laws and/or the Articles of Incorporation.

Reason for adopting this corporate governance structure

TonenGeneral believes that the "Statutory Auditors" system the Company adopted is the most ideal for practicing business management using business expertise and knowledge and for ensuring corporate governance of the Company. We determined that the current system that helps Statutory Auditors such as Outside Statutory Auditors recognize and monitor the details of business conduct through auditing is optimal, considering that the Company conducts business, including business entrusted between the Company and affiliates such as the parent company. The Company also believes that, by electing Outside Directors, the Company's corporate governance will be further enhanced.