Showa Shell's policy is to ensure an efficient and stable supply of the funds necessary to strengthen its financial position and carry out its growth strategy while continuing the payment of stable dividends.

Investment Strategy

Showa Shell, in addition to reinforcing the stability and earning power of the oil business, is strategically investing in the expansion of its major new business - the next generation CIS solar business - to realize sustainable growth driven by both the oil business and new businesses.
1. Oil Business:
· Operational maintenance and safety measures - We will continuously invest to maintain the operational stability of our refineries and other major facilities, invest to ensure legal and regulatory compliance, and invest to minimize environmental impact throughout our entire supply chain.
· Reinforcing earning power - We will invest to enhance competitiveness, including through developing service stations and other means to improve our sales network.Similarly, we will invest to boost the competitiveness of both our refining and distribution facilities.
2. New Businesses:
· Scale expansion in next-generation CIS solar business - We will invest not only in production facilities, but also in R&D facilities to improve production technologies.As part of this effort, we invested in the Miyazaki Plant 2 in 2008.
· Entry into new business fields - In tandem with investment in the development of eco-friendly energies and other new initiatives, we will invest in other business areas, such as the power business, that are expected to create synergies with our existing businesses.

Showa Shell carefully selects projects for investment after comprehensive consideration of each project's strategic importance and investment return profile.

Strengthening Our Financial Position

Showa Shell is working to strengthen its financial position by maintaining an optimal capital structure for securing a stable supply of funds while pursuing the minimization of financing costs. Since 1995, we have continued to greatly reduce interest-bearing debt largely through the sale of assets of little importance to our core businesses, and by restricting investment. The earnings stability that has resulted has enabled Showa Shell to retain a financial standing that enables it to carry out investments for achieving sustainable growth even in a severe financial environment.

Financing Policy

Showa Shell finances funds through cash flow from operations, financial institutions,and the capital markets. We attempt to lower our funding cost by making aggressive use of the capital markets based on our credit ratings. We are working to maintain the stability of funds by establishing a ratio of long-term to short-term debt that takes into consideration the time needed to recover invested capital, given that Showa Shell has a significant amount of fixed assets, which is a characteristic of a capital intensive industry. We are also striving to diversify procurement from financial institutions by making use of city banks, regional banks, and other private financial institutions such as shinkin banks or credit associations, and credit cooperatives, as well as life insurance companies.

Financial Risk Management Policy

Vice President, Director Carruth (left) accepting presentation of a commemorative gift from Mr. Akira Segawa, Managing Executive Officer of Mizuho Corporate Bank, Ltd., in commemoration of the conclusion of a special earthquake response line of credit agreement. Showa Shell has signed revolving credit contracts (lines of credit agreements) totaling 150 billion yen with financial institutions as a means of securing the liquidity of funds should unforeseen conditions materialize. Of these lines, 140 billion yen is in the form of earthquake response financing. In this way, we have made preparations to procure funds needed to reopen operations swiftly in the event that a major earthquake or other disaster damages our main production facilities. As for property and casualty insurance, we have insured against all risks above a certain threshold in order to ensure management stability and mitigate any negative effects on business performance of a major natural disaster or accident. Furthermore, in purchasing crude oil, exporting products and other foreign currency transactions we control the risk of fluctuations in exchange rates by taking currency hedges within the limits of actual demand.

Group-Wide Financial Management

We work to reduce financing costs by concentrating fund procurement and fund management for the entire Group at the parent company. By concentrating and distributing funds in this manner, we increase fund efficiency by connecting the financial activities between group companies through a Cash Management System (CMS).