August 30, 2005		Cosmo Oil Co., Ltd.		Public Relations Office

News Concerning the Issuance and Offering of New Shares and the 4th Unsecured Convertible Bond Type Warrant Bond

Cosmo Oil Co., Ltd. (Head Office: Shibaura, Minato-ku, Tokyo; President: Yaichi Kimura) decided the issuance and the offering of new shares and the issue of the 4th unsecured convertible bond type warrant bond, which were resolved at the Cosmo's board of directors' meeting held on August 30, 2005.

<Background and Purposes of Finance>

The demand structure of the Japanese oil industry is seeing changes such as a decreasing demand for oil products and a shift to lighter distillates in the domestic market, and a tightening of the balance in oil supply and demand in the Asia Pacific area. Under such business circumstances, Cosmo Oil Group started the New Consolidated Medium-Term (3 years) Management Plan from the beginning of fiscal 2005. The new medium-term management plan is composed of two basic management policies, "strengthening the management base to sustain future structural changes" and "shifting to a growth strategy".

Cosmo Oil Group aims to pursue higher returns that can cover the cost of capital by flexibly responding to changing management environments. We will be making investments to reinforce profitability of refineries, and to growth sectors such as crude oil development and petrochemical businesses in accordance with the new medium-term management plan. We have concluded that this time's financing would contribute to 1) the strengthening response capabilities toward business risks and 2) the establishment of base powers for flexible expansion of new business fields, and decided to issue and offer the new shares and to issue the warrant bond.

In addition, Cosmo Oil considers the financing will reinforce the financial ground of the Company and increase the interests of shareholders.

<Significance and objectives of concurrent issue of new shares by public offering and the CB type warrant bond>

Taking consideration of this being a selective investment toward growing business sectors, we selected a public stock offering, known for its immediate effect in terms of capital increase, as the method for raising funds. However, since a public stock offering has its demerit (tends to immediately dilute stock value), Our Company made a choice of combining the public stock offering with the issue of the CB type warrant bond, which enables us to 1) determine the conversion price above the market price , 2) reap the merit of lower interest cost through zero coupons for the time being, 3) the warrant bond will gradually change to capital, depending on how our Company enhances its profitability. The outline of the finance is as follows:

1. Issuance of new shares through public offering

   Initial public offering: 37,000,000 common stocks

2. Secondary offering due to over-allotment

   Secondary sales: 3,000,000 common stocks

3. Issuance of new shares through third-party allocation

   Number of new shares to be allocated: 3,000,000 common stocks

4. Issue of the 4th unsecured convertible bond type warrant bond (with the special agreement on the concurrent liens limited to CB type warrant bonds)

   The bond shall be publicly offered at the offering price (¥102.5 per par value) different from the issue price of the bond (¥100 per par value).

   (1) Issue price of the bond: ¥100 per par value of ¥100

   (2) Total amount of the bond: ¥18 billion

<For Reference>

1. Financing purpose

   (1) How the fund from the financing will be used

   Of the proceeds from this public offering, third party allocation of new shares and issuance of the 4th unsecured CB type warrant bond up to approximately ¥39,290 million, will be invested in various projects. Investments will include the following: 1) ¥19,694 million will be spent in capital investment in refineries, 2) ¥4,596 million is going to be allocated to investment and loans to subsidiaries (for their equipment funds concerning construction of production facilities and development of oil exploration by CM Aroma Co., Ltd. and Qatar Petroleum Development Co., Ltd. (Japan)), and 3) ¥15,000 million will be invested in self-service style-service station facilities (totaling to ¥15,000 million), as a part of a strategic investment in the New Consolidated Medium-Term Management Plan for the period from FY2005 to FY2007.

   (2) Forecast for effects on operating results

   Our Company maintains "strengthening the management base to sustain future structural changes" and "switching to strategies of growth" as the basic management policies in the New Consolidated Medium-Term Management Plan for the period from FY2005 to FY2007. All amount of proceeds from the financing in the above will be invested in capital spending based on the new medium-term management plan above, and is expected to contribute to the improvement of the Company's performance in the future.

2. Return of profit to shareholders

   (1) Basic policy on return of profit to shareholders

   The Company makes it one of their priorities to return profit to shareholders.

   (2) Policy concerning dividends

   As for the determining of dividends, the Company maintains a payout of stable dividend, taking consideration of enhancing business structure, future business operations, operating results and balance of funds.

   (3) Use of earning retention

   Concerning the use of earning retention, the Company generally invests in capital investment regarding maintenance and renewal of equipment, but will selectively allocate the fund to the strategic project items related with rationalization and creation of added value.

   (4) Dividend payout in the latest three fiscal years

   	FY2002	FY2003	FY2004
   Net income per share	4.37 yen	4.92 yen	21.59 yen
   Dividend for the year	6 yen	6 yen	8 yen
   Dividend payout ratio	137.30%	121.95%	37.05%
   Net income on equity	1.66%s	1.86%	7.80%
   Dividend on equity	2.27%	2.26%	2.87%

   Notes:
   1. Net income on equity was calculated by dividing net income by shareholders’ equity (average of starting balance and ending balance of shareholders’ equity) and is shown in the percentage.
   2. Dividend on equity was calculated by dividing the total amount of dividend for the year by shareholders'equity (average of starting balance and ending balance of shareholders' equity) and is shown in the percentage.

<Document Disclaimer>
This document is only for press release for general publication about the issuance and secondary offering of the Company's new shares and the issue of the 4th CB type warrant bond, and does not intend any solicitation for investment. When considering investment, you are kindly requested to read the prospectus and reissued prospectuses filed for the issue and the offering of new shares and the prospectus filed for the issue of the convertible bond type warrant bond and to decide investment in your own judgment.