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Press Release

Announcement on Initiating Preparation for
Transformation to a Holding Company

February 5, 2015
Cosmo Oil Co., Ltd.
Corporate Communications Dept.
Public Relations Office

We hereby announce, as set forth below, that Cosmo Oil Co., Ltd. resolved at today's Board of Directors meeting to initiate preparation for transformation to a holding company planned tentatively for October, 2015.

This transformation to a holding company will be subject to the resolution at our Shareholders' meeting and the approval by related governmental institutions, etc. We will announce the details as soon as we have reached a decision.

1. Background of Transformation to a Holding Company

The business environment surrounding the Cosmo Group is significantly changing, including the volatile fluctuation of crude oil prices, the gradual decrease in domestic demand for oil products, and the expanded introduction of renewable energy. Under these circumstances, companies in the industry are accelerating their movement towards enhancement of their business portfolios and reorganization, in addition to their domestic petroleum businesses.

Cosmo Group has raised as its business vision the transformation to a "Vertically Integrated Global Energy Company" and is working on thorough streamlining centered on the oil refining and marketing business, and shifting business resources to the businesses of resource development, retail and wind power generation, which are positioned as growth drivers, with the aim of transforming the business portfolio. At the moment, however, our business resources remain biased towards oil refining and sales operations and optimal distribution of such resources is a pressing issue.

For Cosmo Group to realize sustainable growth in the future, it is essential to implement optimal distribution of limited business resources, surveying the whole group, and strengthening its competitiveness by business unit. To accomplish this target, we have determined that it would be effective to undergo a transformation to a holding company.

In addition, we believe that the holding company structure, where the "business surveillance function" and the "business execution function" are separated, is a suitable solution from the perspective of enhancing our corporate governance.

2. Objectives

We will prepare for the transformation to a holding company with the following objectives:

(1) Strengthen Business Competitiveness / Realize Stable Profits of the Holding Company

Each business company, by clearly defining responsibilities and authority, aims to expedite decision-making as well as to enhance the expertise and motivation of employees, which will enable each business company to conduct business execution quickly to respond to changes in business environment and improve corporate value.

The aim in implementing a holding company is to realize stable profits by separating business risks, such as inventory valuation due to market fluctuation.

(2) Accelerate the Enhancement of Group Management and Shift Management Resources

In order to realize optimal management resource distribution from a group-wide perspective, monitoring of the group's management will be separated from business execution and the holding company will focus on determination of the group's management policy.

(3) Promote an Alliance in Each Business Line

We will pursue a flexible and swift alliance strategy by business line to respond to changes in economic and business environments by establishing organizations by business domain.

3. Plan of Transformation to a Holding Company / Schedule

The specific plan of transformation to a holding company is scheduled to be determined after consideration, but regardless of the plan, we intend to employ a plan under which current shareholders will continue to own shares of the listed holding company.

The schedule of transformation to a holding company is as follows:

May, 2015 (scheduled) Resolution of Board of Directors for transformation to a holding company
June, 2015 (scheduled) Approval at annual general Shareholders' meeting for transformation to a holding company
October, 2015 (scheduled) Execution of transformation to a holding company

4. Group Structure and Governing Form After Transformation to a Holding Company

We will work on preparations to undergo a transformation to a holding company, with the governing form of a company with audit and supervisory committees to enhance governance, as well as the establishment of a group structure composed on the basis of a holding company and the core three business companies.

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