What was the impact of the Great East Japan Earthquake on TonenGeneral, and how did the Company respond to the disaster?

First of all, on behalf of everyone at TonenGeneral and the ExxonMobil Group, I would like to express our deepest sympathies to the people who suffered from the effects of the Great East Japan Earthquake. We will continue to do everything we can to support recovery efforts through social contribution activities and the stable supply of petroleum and chemical products.

The Great East Japan Earthquake certainly reaffirmed the importance of energy in general, and of petroleum in particular. TonenGeneral responded swiftly to the earthquake, demonstrating the value of our focus on safety, our consistent planning for emergencies, and our commitment to effectiveness. The Kawasaki Refinery experienced an emergency shutdown on March 11, 2011, but had restarted partial production by March 17 and was fully operational as of March 18. We mobilized people and processes immediately and intensely following the disaster, which helped us get the Kawasaki Refinery back online as quickly as we did. Our commitment to preparedness also contributed significantly to the rapid reopening of the ExxonMobil Japan Group’s Shiogama Terminal in the stricken area, in collaboration with other companies and the Japanese government. Reopening this terminal allowed the industry to resume the supply of petroleum products to the disaster area well ahead of schedule, and I am proud this cooperative effort made an important contribution to the region’s ongoing recovery.

In addition to donating one million liters of fuel to municipal authorities in Iwate, Miyagi and Fukushima prefectures, the areas hit hardest by the Great East Japan Earthquake, we had approximately 60 percent of our General, Esso and Mobil branded service stations back in operation within about two weeks of the disaster. While in the area as part of the recovery operation, I joined the mayor of a town in the disaster zone in launching a new service station that had been planned since before the quake. I got the strong impression that everyone from the area was glad to be involved in returning to business as usual, and glad the companies that served the community before the earthquake were as committed to doing so after the disaster.

Moreover, I think some people were pleasantly surprised to realize that TonenGeneral and the ExxonMobil Japan Group fulfill their social responsibilities with the same enthusiasm and commitment as they do their normal business. For us, however, support for the community is a normal part of our business. We see ourselves as a member of society, and stakeholder satisfaction will always be a top priority.

Going forward, many of the longer-term effects of the earthquake have yet to emerge, and we will be dealing with them over the next several quarters. However, the earthquake has not changed our long-term strategy, or our commitment and ability to maintain strong shareholder returns.

What strengths helped TonenGeneral handle the disaster?

I think the number one feature that differentiates TonenGeneral is the quality of our people. We are exceptionally skilled and well trained, and have a systematic, quality-oriented culture that emphasizes compliance. This is critical in our business, because it is the backbone of our highly safe, reliable and competent operations. It was also key to responding effectively to the earthquake and restoring our ability to create value.

Our refineries are large, complex installations, but the strong seismic activity did not cripple them, demonstrating the benefits of our comprehensive attention to safety in everything we do, from the design and operation of facilities to the safety of delivery and service stations. Operations in Japan are extremely successful at managing change, and we demonstrated that again in dealing with the effects of the earthquake and quickly restoring full capacity.

Our people are also part of an effective operating system. Operational excellence is in our blood. Every day we work to maintain safety, preclude problems, and prepare for potential problems such as earthquakes. We invest a tremendous amount of time and effort to continuously improving Process Safety, and have complied with laws and ordinances as well as our exhaustive Operations Integrity Management System* to make continuous improvements in this critical area. Our system demonstrated its value yet again in March 2011.
* The Operations Integrity Management System developed by ExxonMobil. Composed of 11 elements, this rigorous management system requires continuous improvement of operations.

What market developments are affecting TonenGeneral, and how is the Company adapting to them?

In July 2010, the Ministry of Economy, Trade and Industry required all oil refining companies to increase the bottom-cracking capacity ratio of equipment used in refining heavy oil by March 2014. We assiduously examined all the alternatives for complying with the regulations and submitted a plan at the end of October 2010 that incorporated multiple scenarios, including reducing atmospheric distillation equipment and increasing bottom-cracking capacity. Since about two and half years remain until the compliance date, we will make a final decision after continuing to assess the options in our typically rigorous manner.

A key theme of our operations, however, is adhering to our long-term strategy. According to the Ministry of Economy, Trade and Industry's "Long-term Energy Demand and Supply Outlook,"oil is and will remain a central player in Japan's primary energy supply, meeting one-third of the country's 2030 energy needs. However, demand for petroleum products in Japan is expected to decline between now and 2030, driven by continued focus on energy conservation, a shift to other energy sources, relatively slow economic growth, and an aging population.

In this business environment, all functions of our Oil and Chemical segments are working together to pursue efficiency and improve profitability. While our strategy is long term, it provides flexibility to accommodate short-term trends as we work to maximize returns. For example, our world-class facilities give us the ability to excel at molecule management, which means we can adjust our product mix in the short-term to supply the most profitable types of molecules, from gasoline or kerosene to chemicals, that we can produce from crude oil at any given time in any given market cycle. Detailed molecule management lets us focus on efficiency, margin upgrading, and the use of lower-cost crudes. That is how we have been creating value for many years, and how we will generate the additional margin that our competitors cannot.

Being part of the ExxonMobil Group helps us because we have immediate access to support outside Japan. It also helps us optimize molecule management because we can exchange finished and intermediate products between refineries both in Japan and overseas.

Will TonenGeneral continue paying stable dividends despite the Great East Japan Earthquake?

The short answer is yes. The earthquake was a major disaster that has caused great loss and sadness, and our hearts go out to the people who have been affected. In terms of TonenGeneral's business, however, it is a short-term phenomenon. We have restored operations, and Japan is steadily rebuilding. Longer term, it is not going to change the markets we serve or the petroleum and chemical demand trends we foresee.

And we are not going to let short-term trends distract us from our focus on the significant opportunities from which we can generate consistently strong, long-term returns. TonenGeneral does not commit to "me too" projects in response to short-term developments. Instead, we invest in projects that are unique, that differentiate TonenGeneral, and that provide sustained competitive advantage. This selective, disciplined investment builds a long-term base for superior shareholder returns. At the same time, we are maintaining our focus on continuous efficiency gains. This benefits shareholders because it drives consistently strong returns, and benefits the environment because it consistently reduces our environmental footprint by reducing the energy and resources we use to provide the energy society needs.

TonenGeneral has rigorous standards for return on investment. We reinvest the capital our business generates when doing so will meet or exceed these standards, and we return capital to shareholders when it will not. The best way to fulfill this commitment to shareholders is by paying stable and consistent dividends, rather than changing dividends according to short-term results. Consequently, we focus on generating superior value, because that allows us to generate consistent dividends for our shareholders. Our approach is built on financial strength and a strong balance sheet. We intend to maximize shareholder value over the very long investment cycles that characterize our business, and our dividend policy is tied to that long-term view.

Over the past 10 years, our approach has provided our shareholders with an average annual return of 7 percent including share price appreciation and cumulative dividends, which outpaces the TOPIX and TP-Oil. We will continue to manage the company's financial affairs prudently with a long-term commitment to maximizing shareholder value.

September 2011

Philippe P. Ducom
Representative Director, President