B U I LT- I N S U S TA I N A B I L I T Y

DRIVING FUTURE GROWTH THROUGH RESEARCH AND DEVELOPMENTTo help drive its growth, the Tokyo Gas Group is pursuing original research and development leading
to the creation of innovative products and services as well as to the maintenance and enhancement ofbasic technologies. These efforts will serve as building blocks for new business models.

[What’s New■ Launch of Environment-friendly Residential Fuel Cells Planned for Fiscal 2004
Tokyo Gas is collaborating with system manufacturers on the development of a residential fuel cell cogeneration system. The introduction ofthis next-generation product is expected to lead directly to increased useof gas. The system that Tokyo Gas is developing is based on solid polymer electrolyte fuel cell (PEFC) technology and will be fueled by hydrogen extracted from city gas. It will have an output capacity of 1 kW. The
specifications were basically finalized in 2003 after trials in typicalhouseholds. The product is now in the final stages of development, andthe priorities are to improve durability and reduce costs ahead of thetarget launch date in the fourth quarter of fiscal 2004.

Pursuing
Our Responsibilities
to All Stakeholders] Commitment to Good Corporate Citizenship■ A New and More Efficient Method of Pipeline Maintenance
The period over which existing gas pipelines can be used safely has important implications
for capital investment planning and tariffs. Tokyo Gas has developed and started using“Double-lining Technology” that allows maintenance to be carried out without excavation.
Existing pipes are strengthened through the application of two resin coatings applied with aspray gun inserted into the pipes. There are major cost savings, since this method saves
time, compared with the conventional method.

WinchSpray system

BranchOther pipe

 Corporate Governance and Compliance Management Organization

Spray gun

Gray cast iron pipe

■ “TES Remote PLUS”—Information Technology the Key to Enhanced Convenience and Safety
The new “TES Remote PLUS” service developed by Tokyo Gas allows customers to control their TES gas water heater/heating systems remotely using mobile telephony. The
new system, which has been available since April 2004 for newly built condominiums,
also supports remote operation of other residential equipment with home automationcapabilities, including door locks and electric air conditioners. TES system is becoming
increasingly popular, and TES floor heating is now installed many newly built condominiums in the Tokyo metropolitan area. Tokyo Gas developed the new service to provide
enhanced comfort, convenience, safety and peace of mind. The operation is also linked
to Tokyo Gas’ monitoring station, which can provide warnings or shut off the gas supply
remotely if necessary, such as when a customer leaves home and forgets to turn off agas appliance. The service also includes enhanced maintenance support by detecting
and reporting faults in appliances.

[ 19 ]TOKYO GAS ANNUAL REPORT 2004

TOKYO GAS ANNUAL REPORT 2004

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COMMITMENT TO GOOD CORPORATE CITIZENSHIPThe Tokyo Gas Group is making an active contribution to more pleasant lifestyles and to the development ofenvironment-friendly urban communities. The Group aims to achieve continuing growth and success inpartnership with society, as a corporate group that earns and maintains the trust of all stakeholders
through all of its business activities.

Tokyo Gas and the Environment

0Oil

Coal70100NOxOilCoal20-40 70100■ Issuing environmental reports■ Educational outreach centers

Natural Gas
Oil

Coal80100

Source: IEA Natural Gas Prospects (1986),Tokyo Gas and Society

Gas is an essential commodity for day-to-dayliving, and the most important responsibility forTokyo Gas as a supplier of that commodity is toensure reliability and safety. To fulfill thatresponsibility, Tokyo Gas is constantly working
to secure reliable access to gas resources, andto maintain a full array of safety systems covering the process, delivery and use of naturalgas. In addition to these efforts to maintainuser confidence at all times, Tokyo Gas also
has active programs of social contribution thatbuild and maintain relationships of trust with
communities and customers.

Earthquake Precautions
Tokyo Gas has developed the world’s mostadvanced real-time disaster prevention
system. Known as SUPREME, the system
works in conjunction with automatic shutoff and remote shut-off systems to provide
24-hour security. This technology can significantly mitigate the risk of secondary
damage after earthquakes.

A neighborhood bus
Thirteen buses powered by natural
gas were introduced in Fuchu
City,Tokyo in fiscal 2003.

TOKYO GAS ANNUAL REPORT 2004

• Energy & Earth Emporium• Gas Science Center• Gas Museum■ Educational programs to raise awareness of the environment throughsessions and lectures■ Support for introduction of environmental management systems atGroup companies■ Green purchasing■ Human rights education programs■ Collaborating with local communities and organizations inexhibitions and events■ Corporate compliance training programs■ Programs for supporting child rearing(Parental leave, flexible work shifts, etc.)■ Supporting education on energy and the environment■ Programs for supporting the care of dependents(Long-term leave, etc.)
School VisitsTokyo Gas presents educational programs about energy and the environment to elementary and junior highschools.
[About 90,000 students have attended as of March 2004.]©TOKYO GAS/U-COM■ Programs for supporting volunteer activities(holidays/leave for volunteer work, etc.)

Number of employees taking
parental leave(People)
60

40“Gas Maru,” Tokyo Gas’ characterfor communication activities
200(FY) ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03

Social responsibility investment (SRI) is growing in importance. Under SRI,investors and financial institutions make investment decisions based on not
only a company’s business results but also its social and environmental performance. Tokyo Gas is included in several SRI indexes/funds such as the Dow
Jones Sustainability Index.

[ 21 ]■ Pursuing initiatives aimed at acquiring ISO 14001 certification groupwideof March 2004]

CO260■ Promoting an eco-lifestyle■ Promoting the use of natural gas vehicles (NGVs) as apractical means of helping to prevent air pollution.
[A total of 8,368 NGVs are in regular use in Tokyo Gas’ service area asNatural GasNatural Gas Prospects and Policies (1991)

Maintaining Public Confidence
in the Tokyo Gas Group■ Encouraging wider use of natural gas cogeneration andresearch and development of highly efficient gas appliances to help prevent global warming

TOKYO GAS GROUP

Compared with other fossil fuels, natural gas isa very clean form of energy with a low environmental impact. As a corporate group that has
made this clean energy the core of its activities,
the Tokyo Gas Group is determined to be aleader in the field of environmental management and is strongly committed to environmental protection through various aspects of its
business. It is working to minimize environmental impact by using resources effectively
and efficiently, by strengthening its environmental partnership with local communities, andby developing and rolling out innovative technologies that contribute to achieving higher
standards of environmental protection.

SOx
Natural Gas

COMMUNITY

Clean Natural Gas as the Coreof its BusinessEco-cooking ®
The Eco-cooking program is designed to raise environmental
awareness by offering food ideas from the perspective of an
eco-lifestyle. The aim is to promote the concept of environment-friendly cooking process, including shopping and cleaning. The approach taken is to run Eco-cooking sessions, publish brochures and set up dedicated websites. Tokyo Gas
plans to expand these activities with the cooperation of government agencies, schools and others.
[About 40,000 participants have attended as of March 2004.]

SRI indexes that include Tokyo Gas• Dow Jones Sustainability Index (DJSI)• FTSE4Good• Ethibel Sustainability Index• MS-SRITOKYO GAS ANNUAL REPORT 2004

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CORPORATE GOVERNANCE AND COMPLIANCE
The value of the Tokyo Gas brand is the result of decades of effort to build a reputation for reliability,safety and trust. The Tokyo Gas Group is working to protect and enhance that reputation by reaching
higher and strengthening corporate governance and compliance.

Corporate governance has been enhanced through the introduction, in June 2002, of a new board

code of conduct will be promoted throughout the Group as partstructure. The number of directors was substantially reduced and the term of service shortened.

of efforts to raise awareness of compliance.

Outside directors were appointed to the board to provide closer supervision of management. TokyoTokyo Gas is developing and introducing its own monitoring

Gas also became the first company in the Japanese gas industry to introduce a corporate executive

mechanisms to scrutinize the observance of compliance require-officer system to speed up decision-making and improve operational efficiency.

ments on a continuing basis. Basic policies are to be determined

These structural changes will now form the basis for continuing efforts to revitalize the board ofTokyo Gas Group Compliance Management SystemTop management
Management Ethics Committeeby the Management Ethics Committee, and their implementation

directors and ensure fair disclosure of information, while increasing management transparency.

Compliance Department

will be monitored by the Audit and Operational Enhancement

With regard to risk management, Tokyo Gas established a total management system for han-Department. Problems identified through this process will thendling risks and formulated basic guidelines for groupwide implementation.

Compliance committees
in each division

be addressed in forthcoming policies. Tokyo Gas has long enjoyed

In keeping with its important role in society as a public utility, the Tokyo Gas Group alreadythe confidence of customers and aims to maintain that reputation

makes all possible efforts to ensure compliance with legal and social requirements. Tokyo Gas

by applying this cyclical system throughout the Tokyo Gas Group.
Tokyo Gas Group employees

revised its code of conduct to ensure compliance at the individual employee level of the Group, byutilizing the new compliance promotion system established in the previous fiscal year. The newAudit

Board of Directors

YUKIO SATOYURI KONNOYUZABURO MOGIHIDEHARU UEHARAKUNIO ANZAINORIO ICHINO

MITSUNORI TORIHARASHIGERO KUSANO

KOUYA KOBAYASHITADAAKI MAEDA

TAKASHI KUNITOMITSUYOSHI OKAMOTO

Outside Director

Outside Director

Outside Director

Vice Chairman

ChairmanPresident

Executive Vice President

Executive Vice President

Executive Vice President

Senior Executive Officer

Senior Executive Officer

Senior Executive Officer

Chief Executive,Corporate
Communication Div.;
Compliance Dept.

Chief Executive, Energy
Sales and Service Div.;
General Manager, Volume
Sales Dept.

Chief Executive,
Energy Production Div.

Chief Executive, Energy
Resources Div.; Internal
Audit Dept.

Chief Executive,
Residential Sales Div.

Chief Executive,
Strategic Planning Div.

[ 23 ]TOKYO GAS ANNUAL REPORT 2004

TOKYO GAS ANNUAL REPORT 2004

[ 24 ]

MANAGEMENT STRUCTURE
Top Management

Strategic Business Units
Residential Sales Div.

Customer Relationship Dept.
Residential Sales Planning Dept.
Customer Service Management Dept.
● Area Development Dept.
● Residential Sales Promotion Dept.
● Residential Market Development Dept.
● Remodeling Sales Dept.
● Residential Facility Sales Dept.
● 36 group companies●●Corporate●

Strategic Planning Div.

Corporate Planning Dept.
Finance & Managerial
Accounting Dept.
● Personnel Dept.
● Business Development Dept.
● Affiliated Companies Dept.
● 19 group companies●●Corporate
Communications Div.

11 officesEnvironmental Affairs Dept.
Corporate Communications Dept.
● General Administration Dept.
● Secretary Dept.
● 1 group company●Energy Sales andService Div.

●Wide Area Marketing Div.

●Pipeline Network Div.

●●
●Shared Service / R&D
R&D Div.

R&D Planning Dept.
Research Dept.
● Technology Development Dept.
●●Corporate Service Div.

Service Integration andPromotion Dept.
● Personnel Support Dept.
● Accounting Dept.
● Purchasing Dept.
● Information andCommunication Systems Dept.
● Real Estate Management Dept.
● 6 group companies●Compliance Dept.

Energy Sales and Service Planning Dept.
Air-conditioning and Commercial Customer
Development and Service Dept.
● Industrial Gas Sales Dept.
● Energy Solution Business Dept.
● Natural Gas Vehicle Dept.
● Volume Sales Dept.
● 4 group companies[ Contents ]●Wide Area Development Planning Dept.
● Wholesale and Regional Service Dept.
● 7 service branches● 12 group companies
Strategy Planning Dept.
● Pipeline Dept.
● 3 pipeline regional offices● Emergency Management Dept.
● Supply Control andDisaster Management Dept.
● 2 group companies

Energy Production Div.

●Energy Resources Div.

●Energy Production Dept.
● 3 LNG terminals● 1 group company●Gas Resources Dept.
3 group companies

Internal Audit Dept.

Management’s Discussion
and Analysis of Operation
and Financial Position[ 27 ]

Frequently Asked Questions[ 33 ]

11-year Summary[ 35 ]

Consolidated Balance Sheets[ 37 ]

Consolidated Statements ofIncome[ 39 ]

Consolidated Statements ofShareholders’ Equity[ 40 ]

Consolidated Statements ofCash Flows[ 41 ]

Notes to Consolidated
Financial Statements[ 42 ]FINANCIAL SECTION(As of April 1, 2004)

Auditors●Corporate Auditors’ Office

Executive Officers and Corporate Auditors (As of June 29, 2004)
Executive Officers

Executive Officers
President
Executive Vice Presidents

Senior Executive OfficersTokio Imazawa
Coordinator, Energy Sales and Service Div.

Norio Ichino

Seiichi Nakanishi

Mitsunori Torihara

General Manager, Residential Sales Promotion Dept.

Chief Executive, Corporate Communication Div.; Compliance Dept.

Taiichi Okuzawa

Shigero Kusano

General Manager, Kanagawa Branch

Chief Executive, Energy Sales and Service Div.; General Manager,
Volume Sales Dept.

Norikazu Hoshino

Kouya Kobayashi

Tadashi Kaburagi

Chief Executive, Energy Production Div.

General Manager, Industrial Gas Sales Dept.

Masahiro Ishiguro

Toshiyuki Kanisawa

Chief Executive, Corporate Service Div.

General Manager, Corporate Planning Dept.

General Manager, Customer Relationship Dept.

Kunihiro Mori

Tadaaki Maeda

General Manager, Energy Production Dept.

Chief Executive, Energy Resources Div.; Internal Audit Dept.

Yasuhiro Hiruma

Takashi Kunitomi

General Manager, Corporate Communications Dept.

Chief Executive, Residential Sales Div.

Tsutomu Oya

Tsuyoshi Okamoto

General Manager, Air-conditioning and Commercial Customer Development andService Dept.

Chief Executive, Strategic Planning Div.

Akira Habu

Mikio Itazawa

Managing Director, The Japan Gas Association

General Manager, Pipeline Dept.

Toshio Tezuka

Michiaki Hirose

Chief Executive, Wide Area Marketing Div.

General Manager, The Japan Gas AssociationMasaki Sugiyama
Chief Executive, Pipeline Network Div.

Shigeru Muraki
Chief Executive, R&D Div.

Corporate Auditors
Standing Corporate Auditors Soichiro Akimoto

Hiroshi Hirai
Corporate Auditors[ 25 ]TOKYO GAS ANNUAL REPORT 2004

Kazuo Nemoto
Masayoshi Hanabusa
TOKYO GAS ANNUAL REPORT 2004

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