ExxonMobil is committed to being the world's premier petroleum and petrochemical company. Through the execution of long-standing, fundamental strategies that capitalize on our core strengths, the company achieves superior financial and operating results which enhance the long-term returns to our shareholders.

Leadership Position in Core Businesses

ExxonMobil is an industry leader in each of our key businesses. This leadership position allows the company to capture the full advantages of its scale and contributes to efficient operations.

Relentless Drive to Improve Productivity and Efficiency

Operating Expense Management

One of ExxonMobil's fundamental strategies is an ongoing commitment to manage controllable aspects of the business to improve the competitiveness of base operations. The company's continual pursuit of productivity improvement through operating expense management is a critical component of that strategy.

ExxonMobil's total reported operating expenses, excluding merger costs but without making any other adjustments, declined by $400 million in 1999. Efficiency initiatives and high-grading of exploration spending more than offset the impacts of new business activity, inflation, affiliate reorganizations, and sharply higher energy costs. Base cash operating expenses, which exclude energy costs and depreciation, declined by $1.2 billion. However, the company's emphasis is not simply on expense reduction. By working to maximize the contribution from all its resources — financial assets, property and equipment, people, raw materials, and contracted services — ExxonMobil will improve productivity without compromising long-term growth, safety, or reliability.

In 1999, the company's worldwide unit operating costs declined in every major business segment, after adjusting for changes in foreign exchange rates. Upstream unit expenses were down 3 percent. Downstream unit expenses were down 1 percent, despite higher energy costs, and chemical unit expenses declined by 4 percent, benefiting from both lower overall costs and increased volumes.

Productivity Leadership

While Exxon and Mobil were each considered industry leaders in productivity, the merged company will be even better as it employs the best practices and people of both organizations and captures merger synergies.

In 1999, base business and other efficiencies, including the restructuring of affiliate operations in Japan and the formation of a paramins joint venture, enabled regular staffing (excluding company operated retail station – CORS – employees) to be reduced by approximately 5 thousand employees. Merger synergies are expected to allow ExxonMobil to reduce staffing requirements by about 16 thousand regular positions compared to year-end 1998 levels.

Profit generated per employee is a key measure of workforce productivity. ExxonMobil's historical leadership in this indicator, relative to competition, is shown on the chart at the right. The combination of merger synergies and reduced staffing should further improve ExxonMobil's position. Improve Earnings Stability Through Functional and Geographic Diversity ExxonMobil's functional and geographic diversity benefits shareholders by reducing the sensitivity of the corporation's earnings to volatile market conditions inherent in the energy business. The company's diverse portfolio of assets — crude oil and natural gas production, petroleum refining and marketing, and petrochemicals — has consistently helped ExxonMobil generate more stable operating cash flows and higher long-term returns than companies more leveraged to crude oil prices. From a geographic standpoint, ExxonMobil's efficient worldwide operations provide a sound base in mature areas and position the company to capture growth opportunities in emerging markets.

Developing and Employing the Best Technology

ExxonMobil's leadership in the development and application of proprietary technology has long been viewed as a competitive advantage. The company's many proven innovations — gas-to-liquids, catalytic cracking, metallocene catalysts, three-dimensional seismic — and expenditures of well over $600 million per year on research and development are testaments to the company's continuing commitment to technology. The merger will further enhance ExxonMobil's technology advantage as research and development costs are reduced through the elimination of redundant programs and technology benefits are leveraged across a larger base.

Maintain Investment Discipline and Capitalize on Financial Strength

Investment Discipline ExxonMobil's high investment standards and adherence to fundamental strategies produce superior long-term returns. Additionally, the company's long-term perspective results in a stable investment profile through the business cycle, avoiding the inefficiencies associated with large year-to-year changes in spending levels. The company tests potential investments over a wide range of economic scenarios and selects those projects that will provide a resilient return. This long-term investment perspective and a strong financial position allow ExxonMobil to pursue attractive projects at times when others cannot and improves the quality of earnings over time. Financial Position ExxonMobil's financial capacity is as strong as any company in the world. The company's AAA credit rating, sustained by Exxon for 81 years, provides ready access to large amounts of capital at very attractive rates. The company's strong financial position and proven record of prudent financial management make ExxonMobil an attractive partner for any major oil, gas, or petrochemical project. Cash flows of almost $16 billion in 1999 enabled the company to continue to invest in projects with attractive long-term returns while increasing dividend payments to shareholders for the 17th consecutive year. Debt as a percentage of book capitalization was 22 percent at year-end 1999. Consistent with pooling of interests accounting requirements, the purchase of shares to reduce shares outstanding, which both Exxon and Mobil used in the past to efficiently return cash to shareholders, was suspended at the time of the merger.

Asset Management

ExxonMobil employs a disciplined review process to ensure that all assets are contributing to the company's strategic and financial objectives. Management focuses on improving the performance of existing assets through cost reductions and productivity enhancements. As business conditions change, some assets become candidates for highgrading or divestment. Assets no longer strategic, or worth considerably more to others, are considered for divestment.

As a condition of the merger, required divestments are expected to yield sales proceeds of $4 to 5 billion before taxes and positive after-tax earnings of roughly $1 billion. In addition to the required divestments, the company will continue to selectively highgrade its asset base within the constraints of pooling of interests accounting.

Dividend and Other Shareholder Information
	1999	1998	1997
Net income per common share	$2.28	$2.31	$3.32
Net income per common share — assuming dilution	$2.25	$2.28	$3.28
Dividends per common share(1)
First quarter	$0.4165	$0.4165	$0.3965
Second quarter	0.4165	0.4165	0.4075
Third quarter	0.4165	0.4165	0.4075
Fourth quarter	0.4375	0.4165	0.4075
Total	$1.6870	$1.6660	$1.6190
Annual dividend growth (percent)	1.3	2.9	5.3
Number of common shares outstanding (millions)
Average	3,453	3,468	3,511
Average — assuming dilution	3,518	3,533	3,581
Year end	3,477	3,458	3,490
Number of registered shareholders at year end (thousands)	779	812	827
Annual total return to shareholders (percent)(2)	12.5	22.4	28.3
Market quotations for common stock(3)
High	$87.25	$77.31	$67.25
Low	$64.31	$56.63	$48.25
Average daily close	$76.80	$69.19	$58.71
Year-end close	$80.56	$73.13	$61.19
Cash dividends paid on common stock (millions)	$5,836	$5,783	$5,688
Cash dividends paid on preferred stock (millions)	36	60	69
Total cash dividends paid (millions)	$5,872	$ 5,843	$ 5,757
Cash dividends paid to net income (percent)	74.2	72.4	49.1
Cash dividends paid to cash flow (percent)(4)	37.0	32.5	24.4

⁽¹⁾Dividends per common share reflect the sum of the dividends paid by Exxon and Mobil divided by the number of shares that would have been outstanding for the periods, after adjusting the Mobil shares for the exchange ratio of 1.32015 shares of ExxonMobil common stock.
⁽²⁾Total return to shareholders is the appreciation of the stock price over a year plus the value of the dividends, with dividend reinvestment, and excluding trading commissions and taxes.
⁽³⁾Market quotations for common stock reflect Exxon share prices through November 30, 1999, the effective date of the merger, and ExxonMobil share prices thereafter.
⁽⁴⁾Cash flow includes cash from operations and asset management.