esso-page 12 to proxyform (2.6mb)

8/3/2019 ESSO-Page 12 to ProxyForm (2.6MB)

1/49ANNUAL REPORT & ACCOUNTS 2010

ESSO MALAYSIA BERHAD

Fatimah Merican

Abu Bakar Siddik Che Embi

Faridah Ali

Executive Business Services DirectorHigher National Diploma, Polytechnic of Central London (now University of Westminster) (1976)

Puan Fatimah Merican, aged 56, a Malaysian, was appointed Business Services Director of theCompany on December 1, 2008. She joined ExxonMobil Exploration and Production Malaysia Inc.(EMEPMI) in 1977. Over her career with the Company she has held various professional and managerialpositions in the local and global Information Technology organisations of ExxonMobil. Fatimah has alsocompleted a rotational assignment in EMEPMI Public Affairs, and foreign assignments with ExxonMobilAsia Pacific Pte. Ltd., Singapore and ExxonMobil Limited, Thailand.

Prior to October 1, 2008, Fatimah Merican was Manager, Downstream/Chemical Applications, BusinessLine Applications, Information Technology, ExxonMobil Business Support Centre Malaysia Sdn. Bhd. inKuala Lumpur. Effective October 1, 2008, she was transferred to Upstream Business Services andthereafter appointed Business Services Director. In addition, on October 1, 2010, Fatimah was alsoappointed the Tax Manager of ExxonMobil Subsidiaries in Malaysia; that includes Esso MalaysiaBerhad.

Executive Refinery DirectorB.Sc. (Hons.) Chemical Engineering, Leeds University, United Kingdom

Encik Abu Bakar Siddik Che Embi, aged 58, a Malaysian, was appointed Refinery Director of theCompany on September 1, 2003. He started his career with the Port Dickson Refinery in 1976 and heldvarious technical, operational and supervisory positions in the Refinery unti l 1990, when he was assignedto the Baytown Refinery, Exxon U.S.A., for about three years. In this assignment, he held the position ofTechnical Advisor and a number of leadership roles in the Process Department. Following that, he spentsix months with Exxon Company International's Refinery Department in Florham Park, New Jersey asRefinery Advisor. In 1994, he returned to Malaysia and assumed the position of Deputy ManufacturingManager of the Port Dickson Refinery. In 1995, he was promoted to Manufacturing Manager and held thisposition until 2003, when he was appointed Refinery Director.

Puan Faridah Ali, aged 46, a Malaysian, was appointed Retail Business Director of the Company on June13, 2005. She began her career in ExxonMobil Malaysia Sdn. Bhd., and over the years, held supervisoryroles in various functions including financial accounting, costing, planning, financial analysis, humanresources and retail business. In 2000, after the merger of Exxon Corporation and Mobil Corporation inthe United States of America, she assumed the position of Marketing Support Manager and subsequentlyBusiness Analysis and Reporting Manager before assuming her current position.

Executive Retail Business DirectorB.Sc. (Hons.) Accounting, University of East Anglia, Norwich, ACA (England & Wales)

Hugh W. ThompsonChairmanB. Sc. (Hons.) Geology, University of Aberdeen, ScotlandM.Eng (Petroleum Engineering), Heriot-Watt University, Edinburgh, Scotland

Mr. Hugh W. Thompson, aged 48, a citizen of the United Kingdom, was appointed a Director andChairman of the Company on June 4, 2009. He joined ExxonMobil in 1988 and over the past 22 years hasheld positions of increasing responsibility in assignments ranging from Engineering and OperationsManagement, major project management and strategic business planning. He has spent the majority ofhis career with ExxonMobil in international assignments and has worked in Aberdeen and London in theUnited Kingdom as well as in Louisiana, Texas and California in the United States of America. He was thePlanning Manager (Planning and Business Analysis) with ExxonMobil Production Company in Houston,Texas, United States of America before being appointed the Global Planning Manager for theExxonMobil Production Company; a position he held until his appointment in 2009 as the Chairman of theExxonMobil Subsidiaries in Malaysia.

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Profile of Directors


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Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim

Y. Bhg. Tan Sri Abdul Halim Ali

Y. Bhg. Dato' Zainal Abidin Putih

Independent / Non-Executive Director and Member of the Board Audit CommitteeP.S.M., D.S.S.A., D.P.M.P., J.S.M. F.A. Sc., B.V.Sc., University of Punjab, M.Phil. and Ph.D.,University of London, D.Sc., Honoris Causa, University of Hull, U. K., D.Sc., Honoris Causa, SokaUniversity, Japan, D.Agriculture Technology, Honoris Causa, Thaksin University, Thailand, D.Sc.,Honoris Causa, Open University Malaysia.

Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim, aged 67, a Malaysian and a national sciencelaureate, as well as a founder fellow of the Academy of Sciences Malaysia, was appointed Director of theCompany on February 15, 2000. He had a long illustrious academic carrier in both University of Malayaand University Putra Malaysia (UPM) before retiring as Vice Chancellor of UPM in 2001. He wasresponsible for transforming UPM to become one of the leading centres of higher education. As anaccomplished academician, he has helped found many academic societies and associations, and haspublished over 350 papers in journals and proceedings in the fields of animal science, universitymanagement and education. For his meritorious career and services, he has received numerousawards, decorations and honours nationally as well as internationally. He retired from UPM in April 2001.He is the Chairman of Bank Kerjasama Rakyat Malaysia Berhad, Kejuruteraan Samudra Timur Berhad,Taylor's Education Berhad and Halal Industry Development Corporation. He is a Director of TAFIIndustries Berhad and is also the Chancellor of Taylors University.

ndependent / Non-Executive Director and Member of the Board Audit CommitteeP.M.N., P.J.N., S.P.M.S., S.I.M.P., D.G.S.M., D.H.M.S., D.S.D.K., J.S.M., K.M.N.B.A. (Hons.), University of Malaya

Y. Bhg. Tan Sri Abdul Halim Ali, aged 67, a Malaysian, was appointed Director of the Company on May22, 2001. Upon graduation from University of Malaya, he joined the Ministry of Foreign Affairs in 1966.After several domestic and foreign postings, he was appointed the Malaysian Deputy PermanentRepresentative to the United Nations in 1979. He was appointed Ambassador to Vietnam in 1982 andreturned to Malaysia in 1985 to be Deputy Secretary General in the Ministry of Foreign Affairs beforebeing appointed Ambassador to Austria. In 1991, he again returned to Malaysia to be Deputy SecretaryGeneral I in the Ministry of Foreign Affairs and in 1996 he was promoted to Secretary General. In July1998, he was appointed Chief Secretary to the Government, the highest ranking civil service post in thecountry and was responsible for overseeing and coordinating the policies of the government and their

implementation. He retired as Chief Secretary to the Government in March 2001. He currently is theChairman of the Multimedia Development Corporation and Malaysia Building Society Berhad and he isalso a Director of Malakoff Corporation Berhad and IJM Corporation Berhad.

ndependent / Non-Executive Director and Chairman of the Board Audit CommitteeD.S.N.S., J.P., FCA (ICAEW), CA (M), CPA (M)

Y. Bhg. Dato' Zainal Abidin Putih, aged 65, a Malaysian, was appointed Director of the Company onMarch 6, 2003. Upon qualifying from the Institute of Chartered Accountants in England and Wales, he

joined the firm of Hanafiah Raslan & Mohamad, which merged with Ernst & Young in July 2002. He hasextensive experience in audit having worked as a practicing accountant throughout his career

covering many principal industries including banks, insurance, energy, transport, manufacturing,government agencies, plantations, properties, hotels, investment companies and unit trusts. He alsohas a good working knowledge of taxation matters and management consultancy, especially in theareas of acquisitions, takeovers, amalgamations, restructuring and public listing of companies. He playsan active role in the community and the corporate world being a Past President of the Malaysian Instituteof Certified Public Accountants. He was also a member of the Malaysian Communication & MultimediaCommission, a body set up by the Malaysian government to oversee the orderly development of themultimedia and telecommunication industry in Malaysia. He was the Chairman of PengurusanDanaharta Nasional Berhad as well as the Malaysian Accounting Standards Board (MASB). He iscurrently the Chairman of Dutch Lady Milk Industries Berhad and Land & General Berhad. He is alsoa Director of Tenaga Nasional Berhad and a Director of CIMB Group Holdings Berhad, including itssubsidiaries CIMB Bank Berhad and CIMB Investment Bank Berhad. He is also Chairman of CIMBGroup's subsidiary Southeast Asia Special Asset Management Berhad. He also acts as a Trustee ofthe National Heart Institute Foundation.

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1ANNUAL REPORT & ACCOUNTS 2010


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orporate citizenship has long been an integral part of our approach as we conduct our business of

providing efficient, affordable and environmentally responsible energy to Malaysia. Being a good

corporate citizen is embedded in every facet of our operations; from ensuring the highest

standards in safety and health, to protecting the environment, operating with the highest business

integrity and contributing to the communities where we work. This section describes the corporate

citizenship efforts and accomplishments of EMB and the other subsidiaries of ExxonMobil in Malaysia.

Our efforts to be a good corporate citizen are demonstrated on many fronts, but none is more fundamental than setting

and meeting the highest ethical standards for the way we do business. We support transparency, oppose corruption andare committed to honest and ethical behaviour wherever we operate.

Our philosophy on business ethics is enshrined in our which serves as a guidetoward the highest standards of integrity in all our dealings and every aspect of our operations. These are furtherstrengthened by each employees annual affirmation of their familiarity with the policies and on-going reviews toassess compliance and identify areas for improvement.

OurOperations Integrity Management System provides a disciplined framework for controlling and managingsafety, health, security and environmental risks at all our facilities. It is designed to help minimise operationalincidents and meets the requirements of the International Organisation for Standardisations standard forenvironmental management systems (ISO 14001).

In 2010, we conducted refresher training for employees on our business practices to ensure they fully understandcompany expectations. Controls clinics were organised to encourage dialogue on the application of guidelines and

policies. We also conducted training for employees who interact with government officials or may do so in the futureto ensure they understand expectations of ethical and honest dealings with governments and obligations to complywith competition laws and anti-trust legislation of the United States.

Upholding Standards In Corporate Governance and Business Integrity

Standards of Business Conduct

Corporate Citizenship - Highlights


ANNUAL REPORT & ACCOUNTS 201014

EMB emerged as a double winner at the STARBiz-ICRMalaysia Corporate Responsibility Award 2010 in theWorkplace and Community categories. It was one of 21finalists selected from a shortlist of companies listed on

Bursa Malaysia and was the only company among thefinalists with market capitalisation below RM1 billion to win intwo categories.


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Safety Excellence - The Number One Priority

We are committed to maintaining the highest standards of safety and security in our day-to-day operations in order toprotect the welfare of our employees, contractors, customers and the public.

Our goal is Hurt-Free, Every Site, Every Day. We enforce strict compliance with safety procedures and managementsystems to achieve this vision. While these systems provide a valuable framework for achieving safety excellence,active employee involvement is crucial to maintaining this performance. Safety programmes such as U-See U-Act, JobSafety Analysis and a Loss Prevention System reinforce the message of personal accountability towards mitigating risks

in our operations. These programmes are extended to our contractors and third-party workers to ensure a commonapproach to safety.

Port Dickson Refinery continued its outstanding safety performance, achieving eight years Lost Time Incident (LTI)free as at April 2010 and six years Total Recordable Incident (TRI) free as at September 2010. The Refinery wasawarded the ExxonMobil Refining & Supply Safety Excellence Award (Platinum) for the former and ExxonMobilRefining & Supply Nobody Gets Hurt Special Recognition Award for the latter. The Refinery also received a GoldMerit Award from the Malaysian Society for Occupational Safety & Health (MSOSH) for its 2010 occupational safetyand health performance.

Our Distribution terminals achieved flawless operations throughout 2010, recording zero LTI. Our terminalsbusiness also logged 13.8 years straight without LTI, representing 16.78 million hours worked without incident. PortDickson and Bagan Luar Terminals obtained Gold Awards from MSOSH for their exemplary safety performanceduring the previous 12 months.

EMBs construction services provider, which services ExxonMobils Asia Pacific retail business, celebrated eight

years and five million manhours without LTI. In addition, EMB together with ExxonMobils retail businesses in theAsia Pacific region, received the ExxonMobil Fuels Marketing Presidents Safety Award, which recognised them forexceptional overall security, safety, health and environmental performance as well as continuous improvement overtime. For a number of years, ExxonMobils Asia Pacific retail sales group has consistently achieved the lowest totalrecordable incident rate for a retail business. Showing relentless attention to SSH&E, the team posted best-in-classemployee and contractor recordable rates, a nearly 70% improvement in employee incident rates since 2008, and

zero environmental incidents in the past two years.

ANNUAL REPORT & ACCOUNTS 2010 15


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Environmental Performance - Protect Tomorrow. Today.

Supporting Sustainability

We are committed to operating our business in an environmentally responsible manner thatbalances the environmental and economic needs of the communities in which we operate.In addition to strict compliance with applicable environmental legislation and regulations,we continuously seek ways to understand and mitigate the impact of our business on theenvironment. As part of ourProtect Tomorrow. Today. initiative, we take active measures at

all our facilities to reduce emissions, improve energy efficiency, prevent environmentalincidents and minimise our environmental footprint.

Port Dickson Refinery achieved exemplary performance in flare reduction with 55percent improvement compared to 2009. The site also sustained zero reportable spillsin 2010 for the second year running.

Port Dickson Refinery is also a pace setter in energy conservation through its energyefficiency measures, resulting in some RM5 million in cost savings. The Refinery ranksin second place among all ExxonMobil refineries throughout Asia Pacific for energyefficiency.

All our distribution terminal storage tanks for gasoline products are equipped with aninternal floating roof to reduce the release of Volatile Organic Compounds (VOCs) into

the atmosphere. At the same time, we operate a robust Preventive MaintenanceProgramme for all storage tanks and pipelines to ensure their integrity is maintained, allwith the goal of zero leaks or spills to the environment.

We are dedicated to minimising the risks and impacts associated with the manufacture anduse of our products, from development through to their end use and ultimate disposal. Wehave processes in place to ensure the quality and high standards of our products. Weensure our products are safely delivered to our customers in all sectors and conduct regularsafety checks of all our equipment. We provide up-to-date product specifications and safehandling procedures of the products we sell.

Our service station dealers are trained in preventive and responsive safety and

environmental procedures to ensure safety at all our sites and to minimise the impact of anysecurity or environmental incident that may occur.

We are committed to supporting our customers sustainability efforts by developinginnovative, high-performance products and services that deliver both business andsustainability related benefits.

In 2010, our Lubricants & Specialties business ran a communications campaign with itsdistributors to highlight the measures we are taking on sustainability in our business.Specific initiatives include:

A focus on helping to extend equipment life, and increase efficiencies and

productivity in order to benefit equipment manufacturers and users alike.

Working with engine manufacturers to boost fuel economy and lower emissions.This also enables marine/truck fleet operators to reduce oil consumption and thusresulting in cost savings. Our formulations are also designed with increased fueleconomy as a primary goal.

Extending the performance and protection of vehicle engines by developing longerlasting lubricants. Our longer lasting synthetic motor oils also cut down on used oilvolumes.

Reducing the use of materials through package design enhancements.

Using fully recyclable road bitumen to conserve building materials.

Reducing marine fleet oil consumption with a feed rate optimisation programme.

Product Safety & Stewardship

Protect TomorrowToday


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A Healthy Workplace, A Healthy Business

Active In The Community

We know that the success of our business lies fundamentally in the personal well-being andprofessional growth of our employees. During the year, we ran a number of occupationalhealth programmes and initiatives to reduce the risk of occupational injury or illness and toraise awareness of the importance of health among employees, contractors and othersinvolved in our operations.

The Ergo Lead / Ergo Contact Network continued its stewardship of the Office Ergonomics

programme with regular assessment and reviews to ensure that potential injury andillness among employees related to ergonomic factors were minimised. An ErgoResource Centre was also opened during the year to help employees learn more aboutpreventing illness and injury in the workplace and at home. A Health Week wasorganised for employees featuring a series of talks on health topics withdemonstrations and presentations on maintaining a healthy lifestyle.

Nurturing Talent -We recognised the importance of attracting and retaining top performersfrom the broadest possible talent pool to meet our business requirements. We put in placefair and responsive succession plans and opportunities for advancement, keeping pacewith our employees progress and achievements in order to identify areas in which they cancontribute and grow. We encourage a healthy work-life balance, and instill respect for thisphilosophy among our employees and management.

Equal Treatment -Employees are treated equally regardless of race, religion, gender,

sexual orientation or impairment due to health conditions. We adopt policies thatencourage diversity in the work place and practice zero tolerance of all forms of harassmentin the workplace.

Developing Potential - We strive to provide our employees with the best careeropportunities in our industry, including assignments abroad to help foster individual growthand achievement. During 2010, a number of EMB employees were among the 100Malaysians on international assignments within ExxonMobil.

ExxonMobil has a long tradition of community involvement via employee volunteerism andfinancial contributions. We work with government and non-government bodies andcommunity leaders to identify areas of need and make positive contributions throughprojects that bring sustainable, long-term benefits in the areas of human capitaldevelopment, health and safety, energy literacy and corporate governance.

In 2010, about RM1.3 million was contributed by EMB and other ExxonMobil subsidiaries tosome 35 organisations to support a number of human capital development, environment,safety and health projects. Some of our contributions include:

ExxonMobil Education & Scholarship Fund for deserving students in NegeriSembilan.

Sports award to recognise outstanding young athletes under the Majlis SukanSekolah-Sekolah Negeri Sembilan (MSSNS) programme.

In addition to financial contributions, EMB employees are very much involved in communityservice. Our employees have once again been the driving force behind the success of ourvarious employee volunteer programmes during the year which aim to make a difference inthe lives of the underprivileged.

ExxonMobil Community Projects Programme: In 2010, EMB employees were partof about 650 employees and family members who carried out a total of 14community projects at various locations. These included arranging a shoppingexpedition for children from a local orphanage to help them prepare for the newschool year; and working with children from poor urban communities to helpgenerate an understanding of what makes strong families and to build their selfworth. At Rumah Alam Darul Aminan Orphanage in Senawang, Port DicksonRefinery employees and their families carried out a project to upgrade theorphanage buildings and gardens and organised a day of activities with theresident children. In total, RM220,000 was spent for the years programme.


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CORPORATE GOVERNANCE

The Board of Directors of Esso Malaysia Berhad is committed to ensuring that the highest standards of corporategovernance are practised throughout the Company. The Board views this as a fundamental part of its responsibil ities toprotect and enhance shareholder value. Accordingly, the Board fully supports the principles laid out in the MalaysianCode on Corporate Governance.

Exxon Mobil Corporation, as the Company's ultimate holding company, has developed a series of policies andmanagement systems that are designed to create and support a strong system of corporate governance. The policiesand management systems have been adopted by the Board and are communicated to the Company's employees,contractors and vendors, so that each has a clear understanding of the Company's expectations.

The policies, which are set out in a Standards of Business Conduct booklet, and the management systems are strictlyenforced. The Foundation Policies include Business Ethics, Conflicts of Interest, Antitrust, Alcohol and Drug Use, Giftsand Entertainment, Harassment in the Workplace and Outside Directorships. The management systems are designed toachieve high standards of performance in the areas of safety, operations integrity, internal control and legal andenvironmental compliance.

The Board and the Board Audit Committee ensure that the policies and the management systems are fully implementedand consistently enforced. They are supported by an internal Management Committee and an Audit and Controls

Committee, both led by the Chairman.

The Board leads and controls the Company. The Board meets at least four times a year, with additional matters resolvedby way of Circular Resolutions as and when necessary. Each Non-Executive Director is independent and bringsinvaluable judgment to bear on issues of strategy, performance, resource allocation, risk management and standards ofconduct.

For the year ended December 31, 2010, four Board and four Board Audit Committee meetings were held. Details of theDirectors' attendance at these meetings are summarised below:

Directors Number of Board Number of Board AuditMeetings Committee Meetings

Held Attended Held Attended

Mr. Hugh W. Thompson 4 4 Non-member Non-member

Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim 4 4 4 4

Y. Bhg. Tan Sri Abdul Halim Ali 4 4 4 4

Y. Bhg. Dato' Zainal Abidin Putih 4 4 4 4

Puan Fatimah Merican 4 4 Non-member Non-member

Encik Abu Bakar Siddik Che Embi 4 3 Non-member Non-member

Puan Faridah Ali 4 4 Non-member Non-member

The Board



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Board Membership

Supply of Information

Appointment and Re-election of Directors

Remuneration Committee

Directors' Remuneration

The Board had 7 members as at the end of 2010, with 3 Independent Non-Executive Directors and 4 Executive Directors(including the Chairman). Together, the Directors form the mind and management of the Company.

The functional organisation of the Company provides a system and structure of checks and balances in the decisionmaking process. There is a clear division of responsibilities between the Chairman and each of the other ExecutiveDirectors.

Balance in the Board is achieved and maintained with the composition of both Executive and Independent Non-ExecutiveDirectors. In recognition that the Independent Non-Executive Directors have a primary role in providing unbiased andindependent views, the Company has selectively appointed highly qualified individuals of integrity and character, withbroad experience and proven business and management expertise.

Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim is the longest serving Independent Non-Executive Director of theCompany. Shareholders are at liberty to approach Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim, or any of the otherIndependent Non-Executive Directors, should there be any concerns relating to the Company and its Management.

Information regarding the Company's business and affairs is normally provided to the Board by the Company'smanagement and staff and by the Company's independent auditors. Towards meeting this objective, Board meetings arestructured with a pre-determined agenda. Board papers covering the Company's operational and financial performance,strategic plans on any significant matters and developments, together with the minutes of the previous Board and BoardAudit Committee meetings, are circulated to the Directors (or Members of the Board Audit Committee, as the case may be)in advance of each meeting. This allows the Directors time to deliberate on the issues to be raised and discussed at eachmeeting. The Board, in addition to having full access to the advice and services of the Company Secretary, has theauthority to retain such outside advisors, including accountants, legal counsels, and other experts, as it deemsappropriate. The fees and expenses of any such advisors will be paid by the Company.

In accordance with the Company's Articles of Association, the Board can appoint any person to be a Director as and when itis deemed necessary. However, consistent with the best practices of the Malaysian Code on Corporate Governance, theNominating Committee makes recommendations to the Board prior to such appointments. Any person so appointed shall

hold office until the next Annual General Meeting at which time the candidate will be subject to election by theshareholders. An election of Directors takes place every year, with each Director retiring from office at least once everythree years. Directors retiring by rotation are eligible for re-election by the shareholders at the Annual General Meeting.

The Remuneration Committee is responsible for the recommendation of the remuneration of the Executive and theIndependent Non-Executive Directors, for the Board's consideration and decision.

The current members of the Remuneration Committee are as follows:1. Mr. Hugh W. Thompson (Executive Director) - Chairman

Puan Fatimah Merican (Executive Director) - Alternate Chairman2. Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim (Independent Non-Executive Director)3. Y. Bhg. Dato' Zainal Abidin Putih (Independent Non-Executive Director)

The remuneration received by the Independent Non-Executive Directors in 2010 was recommended by the Board as awhole (with the Independent Non-Executive Directors abstaining from participation in the discussions and voting on thematter) and approved by the shareholders at the Annual General Meeting on May 25, 2010.

With the recommendation of the Remuneration Committee, the Board has adopted Exxon Mobil Corporation'scompensation system to set the remuneration of Executive Directors. The compensation system took into account theperformance of each Executive Director and the competitive environment in which the Company operates. The ExecutiveDirectors took no part in deciding their own remuneration.

CORPORATE GOVERNANCE (Continued)




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An analysis of the aggregate Directors' remuneration incurred by the Company for the year ended December 31, 2010 asprescribed under Appendix 9C Part A Item 11(a) of the Main Market Listing Requirements of the Bursa Malaysia SecuritiesBerhad (BMSB) is set out below :

FEES VALUE OF TOTAL(RM) AND (RM)

EXECUTIVE DIRECTORS - 1,359,779 1,359,779

INDEPENDENT NON-EXECUTIVE 126,000 33,000 159,000DIRECTORS

An analysis of the number of Directors whose remuneration, incurred by the Company, falls in successive bands ofRM50,000 as prescribed under Appendix 9C Part A Item 11(b) of the Main Market Listing Requirements of the BMSB is setout below:

Remuneration (RM) Number of Executive Number of Non-ExecutiveDirectors Directors

Less than 50,000

50,001 - 100,000 3

100,001 - 150,000 1

150,001 - 200,000

200,001 - 250,000 1

250,001- 300,000

300,001 - 350,000 1

350,001 - 400,000

400,001 - 450,000

450,000 - 500,000

500,001 - 550,000

550,001 - 600,000

600,001 - 650,000

650,001 - 700,000 1

The Company has opted not to disclose each Director's remuneration as the Board considers the information to besensitive and proprietary.

The Nominating Committee is responsible for the recommendation of candidates for Independent Non-ExecutiveDirectors and Executive Directors and the recommendation of Directors for Committees, for the Board's consideration anddecision.

The Nominating Committee is also responsible for the assessment of the effectiveness of individual Directors, BoardCommittees and the overall Board on an ongoing basis. These assessments, based on a combination of qualitative andquantitative factors, were carried out by the Nominating Committee in 2010. The findings and results of theseassessments by the Nominating Committee were reported to the Board.

The current members of the Nominating Committee are as follows:1. Mr. Hugh W. Thompson (Executive Director) - ChairmanPuan Fatimah Merican (Executive Director) - Alternate Chairman

2. Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim (Independent Non-Executive Director)3. Y. Bhg. Tan Sri Abdul Halim Ali (Independent Non-Executive Director)

The Board when setting up the Nominating Committee in 2003 formed the view, which it still holds today, that the Chairmanof the Company, being an Executive Director, should be a member and Chairman of the Nominating Committee. While thecomposition of the Nominating Committee departs from the Best Practices as outlined in the Malaysian Code on CorporateGovernance, compliance with which is not compulsory, the Board is of the view that the inclusion of the Chairman of theCompany provides the Nominating Committee with invaluable perspective on the business and operational needs of theCompany. Such input is needed in the selection and recommendation of suitable candidates for appointment by the Board,as well as in assessing the performance of the Board, Directors and Committees.

Apart from the Chairman, the Nominating Committee members are all Independent Non-Executive Directors.

REMUNERATIONOTHERS (RM)

Nominating Committee




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Directors' Training

Dialogue between the Company and Investors

Annual General Meeting

Accountability and Audit

Internal Control

The Board places great emphasis on continuous education for Directors. In this regard, the status of each Director'scontinuous education was regularly monitored and reviewed by the Board. The Board had in 2006, adopted the 'Principlesfor Training of Directors of the Company'that sets out the philosophies on and the types and modes of training, that the

Directors will undertake in each year, to help them serve the Board more effectively. These same Principles were appliedby the Board in determining the relevant training for Directors of the Company in 2010.

All Directors on the Board had received or undergone relevant training in 2010. Further details of the training programmesattended by the Directors in 2010 are as set out in pages 24 to 26.

The Company reimburses Directors for costs incurred in attending continuous education programmes.

The Directors are also briefed at quarterly Board meetings on any significant changes in laws and regulations that arerelevant to the Company's operations.

The Board values and encourages dialogue with the shareholders to establish better understanding of the Company'sobjectives and performance. The Annual General Meeting provides an appropriate forum for the shareholders to dialogue

with the Board. Additionally, queries from investors and potential investors are dealt with by our Investor Relations. TheCompany also has its own website with contact details of a dedicated officer for such purpose. The Company holds opendiscussions with investors and analysts upon request. In this regard, the Company disseminates information in strictadherence to the disclosure requirements of the Main Market Listing Requirements of the BMSB. Material informationrelating to the Company is disclosed to the public by way of announcements to the BMSB, as required by the Main MarketListing Requirements of the BMSB.

At the Annual General Meeting, the Chairman of the Board reviews the progress and performance of the Company withthe shareholders. A question and answer session is also conducted to allow shareholders the opportunity to questionManagement on the Company's business and the proposed resolutions. The Chairman, the Board members and theexternal auditors are available at the Annual General Meeting to respond to questions.

In announcing the quarterly, semi-annual and annual financial statements to the shareholders and the public, the Boardendeavours to present a balanced and understandable assessment of the Company's financial position and prospects.The Board Audit Committee assists the Board by ensuring the accuracy and adequacy of the information announced.

The Directors are responsible for the Company's system of internal controls. The system applies to all financial andoperating activities with the objective of safeguarding the shareholders' investment and the Company's assets. Theinternal control system has clear management support, including the involvement of the Board, and is designed to meetthe risks to which the Company is exposed. The Board is satisfied with the design of the control system and believes thatthere is compliance with all of the requirements.

Key elements of the Company's internal control system include:

1. a comprehensive and clearly documented System of Management Control Standards Manual that establishes thecore requirements for good controls within the Company. The Manual not only identifies the principal risks faced bythe Company, but also prescribes the appropriate systems to manage these risks. The Manual also specifies theoverall control framework, the required control checks and the required checks on the system's effectiveness,

2. a clearly defined organisational structure with clear lines of accountability and delegation of authority for each level,

3. annual reviews of the control system, including internal and external audits. The results are reviewed with variouslevels of management and any major concerns are raised to senior management and the Board Audit Committee,





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Internal Control (Continued)

Statement of Directors' Responsibility for Preparing the Financial Statements

Relationship with Auditors

Material Contracts

Non-Audit Fees

Other Information

4. key policies covering, among others, Business Ethics, Conflicts of Interest, Antitrust, Alcohol and Drug Use, Giftsand Entertainment, Harassment in the Workplace and Outside Directorships. They include requirements to complywith all applicable laws and regulations. These policies are communicated to and acknowledged by employees on

an annual basis,

5. a Controls Integrity Management System to assess and sustain the effectiveness of the organisation's system ofcontrols; and

6. a yearly representation of compliance to the internal control system and key policies by the managers of eachbusiness unit in the Company. Managers are required to document any outstanding control concerns and theplanned corrective action steps.

It should be noted that systems of internal controls and risk management are designed to manage rather than eliminatethe risk of failure to achieve business objectives, and any system can only provide reasonable and not absoluteassurance against material misstatement or loss.

The Directors are required by the Companies Act, 1965 and the Main Market Listing Requirements of the BMSB toconfirm that the financial statements for each financial year have been made out in accordance with the applicableapproved accounting standards and that they give a true and fair view of the results of the business and state of affairs ofthe Company for the financial year.

The Directors have carried out their responsibilities by:

selecting suitable accounting policies and applying them consistently;

making judgments and estimates that are reasonable and prudent;

ensuring that all applicable accounting standards have been adhered to; and

basing the financial statements on a going-concern basis, as the Directors have a reasonable expectation, afterhaving made due enquiries, that the Company has adequate resources to continue in operational existence for theforeseeable future.

The Directors are responsible for ensuring that the Company keeps accounting records which disclose with reasonable

accuracy, the financial position of the Company, enabling the Directors to ensure that the financial statements complywith the Companies Act, 1965 and to safeguard the assets of the Company.

The Board has established a formal and transparent relationship with the auditors of the Company. The role of the BoardAudit Committee in relation to the internal and external auditors is described on pages 27 and 28.

The Company is not and was not a party to any material contracts involving the Directors' interests during the year.Further the Company is not and was not a party to any material contracts that are not in its ordinary course of businessinvolving its major shareholders' interests during the year.

No non-audit fees were paid or are payable to the external auditors, PricewaterhouseCoopers, by the Company for thefinancial year ended December 31, 2010.

i) Family Relationship

None of the Directors have any family relationship with any other Director and/or major shareholder(s) of theCompany.

ii) Conflicts of Interest

None of the Directors have any conflicts of interest with the Company.



13/49

Other Information(Continued)

iii) Conviction for offences (excluding traffic offences)

None of the Directors have been convicted for any offences within the past 10 years.

iv) Sanctions and/or penalties

No sanction or penalty has been imposed on the Company, or the Directors or the Management, bythe relevant regulatory bodies.

This Statement is made in accordance with the Board of Directors' resolution dated February 25, 2011.

Training Attended by Directors in 2010Directors / Training Date in 2010 Organiser

Hugh W. Thompson Upstream Working Group Feb 22 PETRONAS

Offsite Strategy Planning Mar 2 ExxonMobil

Operations - ALT Effectiveness Workshop Mar 16 ExxonMobil

ESG Drill Apr 1 ExxonMobil

Production Leadership Team Conference Apr 12-15 ExxonMobil -

Houston, USA

Annual Safety Forum Apr 19 ExxonMobil

Data Privacy Laws May 20 ExxonMobil

Offsite Strategy Meeting May 26 ExxonMobil- PUL Alignment Workshop

Asia Oil & Gas Conference Jun 7-8 PETRONAS- Panel Chairman The Roundtable Carbon Agenda

Upstream Working Group Jun 21 PETRONAS

Visiting Senior Executive Programme Jun 30 Thunderbirds

Offsite External Engagement Strategy Conference - 1 Jul 6 ExxonMobil

Advanced ESG Training Jul 19-21 ExxonMobil


Upstream Oil & Gas Business in Malaysia Aug 27 ExxonMobil

Upstream Working Group Oct 4 PETRONAS

Economic Transformation Programme Roadmap Oct 24 Govt of Malaysia

Leadership Offsite - Safety Nov 25 ExxonMobil

Tan Sri Dato' Dr. Syed Jalaludin Syed Salim


Banking Insight Programme - Prof. Nabil Jun 8-9 Bank Negara Malaysia






14/49

Training Attended by Directors in 2010 (Continued)Directors / Training Date in 2010 Organiser

Tan Sri Abdul Halim Ali

Enhancing Protection for Directors and Officers Jan 26 IJM Corporation Bhdin an Escalating Risk Environment

Financial Instruments Seminar Mar 16-17 Malaysia Building- FRS 101, 139, 132, 7 and IFRIC 15 Society Berhad


Corporate Governance Seminar Mar 25 MSWG

Leaders building Leaders Jul 13 Ministry of Higher Education

Seminar of Competition Bill 2010 Aug 5 Rahmat Lim & Partners

A Contrarian View of Corporate Governance by John Zinkin Sep 30 IJM Corporation Bhd


Dato' Zainal Abidin Putih

Talk on Managing Risks in Mortgage Financing Jan 13 Bank Negara Malaysia& Cagamas Berhad

Forum on The Challenges of Implementing FRS 139 Jan 21 Bursa Malaysia

Building Organisational Capability for Strategic May 4 Bank Negara MalaysiaTransformation - Prof. Dave Ulrich


Building Audit Committees for Tomorrow May 20-21 Bank Negara Malaysia- David Brown (Brown Governance)

Banking Insight Programme - Prof. Nabil Jun 8-9 Bank Negara Malaysia

Advance Risk Management Programme - David Bobker Jun 21-22 Bank Negara Malaysia

Capitalize Investment Opportunity Aug 2-5 IBC Asia - Singapore- Nuclear Energy Sector in Asia

Khazanah Megatrend Forum 2010 Oct 4-5 Khazanah Nasional


BNM Financial Industry Conference 2010 Nov 3 Bank Negara Malaysia

Annual Management Dialogue Nov 26-27 CIMB

Faridah Ali

Data Privacy Laws May 20 ExxonMobil Work-Life Balance Seminar Jul 8 ExxonMobil

Antitrust Briefing Jul 23 ExxonMobil


Professional Development - Supervisors Training Sep 22-23 ExxonMobil

Defensive Driving Oct 6 ExxonMobil/SAMP

Retail Investments Basis Seminar Oct 14 ExxonMobil

Project Management Workshop Oct 20-21 ExxonMobil

Business Practices Review Oct 29 ExxonMobil

DOSS NTI Workshop Dec 2 ExxonMobil




15/49

Directors / Training Date in 2010 Organiser

Fatimah Merican

SH+E Leadership Workshop by John Gelland Feb 4 ExxonMobil

Speakers Coalition Media Training by Ray Thompson Mar 18 ExxonMobil

ESG Drill Apr 1 ExxonMobil

NIEW Gender Series: Women and New Economic Model Apr 9 Ministry of Women,Family and Community

Development


Offsite Strategy Meeting May 26 ExxonMobil- PUL Alignment Workshop

Asia Oil & Gas Conference Jun 7-8 PETRONAS




First Ladies Summit 2010 Oct 1 Govt of Malaysia

US Security Briefing Oct 14 US Embassy

Energy Outlook Nov 22 David S Reed& ExxonMobil

Leadership Offsite - Safety Nov 25 ExxonMobil

Abu Bakar Siddik Che Embi



Training Attended by Directors in 2010 (Continued)





16/49


17/49

Meetings and Minutes (Continued)

Authority

Duties

The Secretary to the Committee shall be appointed by the Committee. The Secretary shall be responsible for the timelyissuance of meeting notices together with meeting agenda and any supporting documents in advance of such meeting, forrecording, keeping and distributing the minutes of meetings and any other duties ordinarily discharged by a secretary ofsuch Committee.

The Committee is authorised by the Board:

to investigate any matter within its terms of reference;

to have the resources which are required to perform its duties;

to have full and unrestricted access to any information pertaining to the Company;

to have unrestricted access to and communication with the external auditors of the Company and internal auditors;

to obtain external legal or other independent professional advice as necessary; and

to convene meetings with the external auditors of the Company, without the attendance of the executive members ofthe Committee, whenever deemed necessary.

The Committee is charged with the following duties:

to review with the external auditors of the Company and internal auditors, the audit plan of the Company, therespective auditors' evaluation of the Company's system of internal accounting controls and the audit report, theexternal auditors' management letter and management's response to such letter, and report the same to the Board;

to review and report to the Board the assistance given by the Company's employees to the external auditors of theCompany and internal auditors;

to review and report to the Board the adequacy of the scope, functions, competency and resources of the internalaudit function and that it has the necessary authority to carry out its work;

to review and report to the Board the internal audit programme, processes, the results of the internal auditprogramme, processes, or investigation undertaken, and whether or not appropriate action has been taken on therecommendations of the internal audit;

to review and report to the Board the quarterly results and year end financial statements, including the balance sheetand profit and loss statement, prior to submission of the statements to the Board for approval, focusing particularly on:- changes in existing accounting policies or implementation of new accounting policies;- significant and unusual events;- compliance with accounting standards and other legal requirements; and- the going concern assumption;

to review and report to the Board any related party transaction and conflict of interest situation that may arise withinthe Company;

to review and report to the Board any removal, resignation, appointment and audit fee of the Company's externalauditors;

to review and report to the Board whether there is reason (supported by grounds) to believe that the Company'sexternal auditors are not suitable for reappointment;

to recommend the nomination of a person or persons as external auditors of the Company;

to report promptly to Bursa Malaysia Securities Berhad (BMSB) matters reported by the Committee to the Boardwhich have not been satisfactorily resolved resulting in a breach of the Main Market Listing Requirements of BMSB ;and

to perform such other functions as may be agreed to by the Committee and the Board.

This Statement is made in accordance with the Board of Directors' resolution dated February 25, 2011.

Board Audit Committee Report (Continued)





REPORT OF THE DIRECTORS

The Directors are pleased to submit the annual report together with the audited financial statements of the Company for the yearended December 31, 2010.

PRINCIPAL ACTIVITIES

The Company is a public company incorporated in Malaysia under the Companies Act, 1965 and is listed on the Bursa MalaysiaSecurities Berhad. The Company's principal activities are the manufacturing and marketing of petroleum products in PeninsularMalaysia. There has been no significant change in the nature of the Company's activities during the year.

FINANCIAL RESULTSRM'000

Net profit attributable to shareholders 268,579Retained profits brought forward 370,243Profits available for appropriation 638,822Dividends paid less income tax at 25% (24,300)Retained profits carried forward 614,522

DIVIDENDS

The amount of dividends paid since December 31, 2009 are as follows:RM'000

In respect of the year ended December 31, 2009:

Final dividend per stock unit, paid on June 21, 2010:Ordinary 12 sen gross less income tax at 25% 24,300

The Directors propose that a final dividend of 14 sen less income tax at 25% per ordinary stock unit, amounting to RM28,350,000be paid for the year ended December 31, 2010.

RESERVES AND PROVISIONS

All material transfers to or from reserves and provisions during the year are shown in the financial statements.

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the statement of comprehensive income and statement of financial position were completed, the Directors tookreasonable steps:

1. to satisfy themselves that all receivables had been properly analysed, that bad debts had been written off whereappropriate and that adequate provision for impairment of receivables had been established; and

2. to ensure that any current assets, which were unlikely to be realised in the ordinary course of business, were writtendown to the expected realisable amount.

At the date of this report, the Directors are not aware of any circumstances:

1. which would make the amounts written off for bad debts or the provision for impairment of receivables in the financialstatements of the Company inadequate to any substantial extent; or

2. which would make the values attributed to current assets in the financial statements of the Company misleading; or

3. which would make adherence to the existing method of valuation of assets or liabilities of the Company misleading orinappropriate.

No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months afterthe end of the year which, in the opinion of the Directors, will or may affect the ability of the Company to meet its obligations whenthey fall due.


19/49



STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (Continued)

At the date of this report, there does not exist:

1. any charge on the assets of the Company which has arisen since the end of the year which secures the liability of anyother person; or

2. any contingent liability of the Company which has arisen since the end of the year.

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financialstatements which would make any amount stated in the financial statements misleading.

In their opinion:

1. the results of the Company's operations during the year were not substantially affected by any item, transaction or eventof a material and unusual nature; and

2. there has not arisen in the interval between the end of the year and the date of this report any item, transaction or event ofa material and unusual nature likely to affect substantially the results of the operations of the Company for the year inwhich this report is made.

DIRECTORS

The Directors who have held office during the period since the date of the last report are as follows:

Mr. Hugh W. ThompsonY. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed SalimY. Bhg. Tan Sri Abdul Halim AliY. Bhg. Dato' Zainal Abidin PutihPuan Fatimah MericanEncik Abu Bakar Siddik Che EmbiPuan Faridah Ali

DIRECTORS' BENEFITS

Since the end of the previous year, no Director has entered into orreceived or become entitled to receive a benefit (other thanbenefits disclosed in notes 8 and 9 to the financial statements) by reason of a contract made by the Company or a relatedcorporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financialinterest. All transactions between the Company or a related corporation and companies in which Directors have interests areconducted on an arms-length, commercial basis in the ordinary course of business.

The Company was not a party to any contract or arrangement during the year and at the end of the year, as envisaged by section169(6)(f) of the Companies Act, 1965, which would have enabled any of the Directors to acquire benefits through the acquisition ofshares in or debentures of the Company or any other body corporate.



DIRECTORS' INTERESTS IN SHARES

According to the register of Directors' shareholdings, the interests of Directors who held office at the end of the year in the sharecapital of the Company and its related corporations are as follows:

No other Director in office at the end of the year held any interest in the share capital of the Company or its related corporationsduring the year.

ULTIMATE HOLDING COMPANY

The Directors regard Exxon Mobil Corporation, a corporation incorporated in the state of New Jersey, United States of America,as the ultimate holding company of the Company.

AUDITORS

The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.

In accordance with a resolution of the Board of Directors dated February 25, 2011.

...............................Hugh W. ThompsonChairman

...............................Fatimah MericanDirector

Kuala Lumpur,February 25, 2011

As at As at01.01.10 Acquired Sold 31.12.10

Exxon Mobil Corporation(Ultimate holding company)- Number of common stock without par value

held by the following Directors:

Mr. Hugh W. Thompson 5,041 6,018 - 11,059Puan Fatimah Merican 9,852 6,550 (3,308) 13,094Puan Faridah Ali 437 570 (400) 607


21/49

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED DECEMBER 31, 2010

REVENUES 5 8,427,445 8,032,440

COST OF SALES (7,650,829) (7,429,880)

GROSS PROFIT 776,616 602,560

OTHER INCOME 22,229 22,946

OPERATING EXPENSES (344,645) (334,522)

ADMINISTRATIVE AND OTHER EXPENSES (65,311) (67,793)

FINANCE COST 6 (20,432) (22,195)

PROFIT/(LOSS) BEFORE TAX 7 368,457 200,996

TAX (EXPENSE)/BENEFIT 10 (99,878) (55,478)

NET PROFIT/(LOSS) ATTRIBUTABLE TO 268,579 145,518SHAREHOLDERS

OTHER COMPREHENSIVE INCOME - -

TOTAL COMPREHENSIVE INCOMEATTRIBUTABLE TO SHAREHOLDERS 268,579 145,518

Earnings/(Loss) per ordinary stock unit (sen) 11 99.5 53.9

Proposed final gross dividend less income tax at 25%(2009: 25%) per ordinary stock unit (sen) 14.0 12.0

Note 2010 2009RM'000 RM'000



The accompanying notes 1 to 28 form part of these financial statements.



STATEMENT OF FINANCIAL POSITIONAS AT DECEMBER 31, 2010

NON-CURRENT ASSETSProperty, plant and equipment 12 830,244 806,203Long-term assets 13 308,714 315,310Intangible assets - software 14 148 671TOTAL NON-CURRENT ASSETS 1,139,106 1,122,184

CURRENT ASSETSInventories 15 468,109 456,380Assets held for sale leasehold land - 2,552Receivables 16 243,830 143,924Amounts due from related corporations 19 140,417 181,699Deposit, cash and bank balances 102,261 75,869Taxation - 35,234

TOTAL CURRENT ASSETS 954,617 895,658

CURRENT LIABILITIESPayables 17 142,327 135,467Retirement benefits obligations 18 1,006 2,721Amounts due to related corporations 19 396,907 443,040Borrowings (unsecured) 20 616,307 807,950Taxation 54,257 -TOTAL CURRENT LIABILITIES 1,210,804 1,389,178

NET CURRENT LIABILITIES (256,187) (493,520)

LESS: NON-CURRENT LIABILITIESRetirement benefits obligations 18 50,383 48,449Deferred taxation 21 75,014 66,972

125,397 115,421

TOTAL NET ASSETS EMPLOYED 757,522 513,243

FINANCED BY:SHARE CAPITAL 22 135,000 135,000RESERVES 23 8,000 8,000RETAINED PROFITS 23 614,522 370,243SHAREHOLDERS' EQUITY 757,522 513,243

Note 2010 2009RM'000 RM'000




STATEMENT OF CHANGES IN EQUITY


At January 1, 2009 270,000 135,000 8,000 249,025 392,025

Net profit - - - 145,518 145,518

Dividends for the year endedDecember 31, 2008 (final) - - - (24,300) (24,300)

At December 31, 2009 270,000 135,000 8,000 370,243 513,243

At January 1, 2010 270,000 135,000 8,000 370,243 513,243

Net profit - - - 268,579 268,579

Dividends for the year ended

December 31, 2009 (final) - - - (24,300) (24,300)

At December 31, 2010 270,000 135,000 8,000 614,522 757,522

Issued and fully paidordinary stock of

RM0.50 each Non-distributableNumber of capital Distributable

ordinary Nominal redemption retainedstock unit value reserves profits Total

'000 RM'000 RM'000 RM'000 RM'000





STATEMENT OF CASH FLOWS


Note 2010 2009RM000 RM000

CASH FLOWS FROM OPERATING ACTIVITIESNet profit / (loss) attributable to shareholders 268,579 145,518Adjustments for:

Depreciation on property, plant and equipment 58,767 60,505Amortisation of intangible assets 523 845Tax expense / (benefit) 99,878 55,478Interest income (2,691) (581)Interest expense / commercial papers profit elements incurred 20,432 22,195Retirement / separation benefits cost 3,995 4,848(Gain) / loss on disposal of assets held for sale (659) (769)(Gain) / loss on disposal of property, plant and equipment 109 (294)Write-off of property, plant and equipment 3,976 2,763Unrealised foreign exchange (gain) / loss (7,813) 10,997

Changes in:(Increase) / decrease in inventories (11,729) (158,336)(Increase) / decrease in assets held for sale - (2,552)(Increase) / decrease in receivables (99,843) (88,800)(Increase) / decrease in amounts due from related corporations 41,282 (7,960)Increase / (decrease) in amounts due to related corporations (38,430) 199,698Increase / (decrease) in payables and provisions 6,682 (106,254)

Cash generated from operations 343,058 137,301

Interest / commercial papers profit elements paid (20,495) (23,596)Interest received 2,691 581Income taxes paid (37,580) -Income taxes refunded 35,235 -Retirement / separation benefits paid (3,666) (3,943)

Net cash from operating activities 319,243 110,343

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment (87,853) (47,096)(Increase) / decrease in long-term assets 6,596 30,982Proceeds from disposal of property, plant and equipment 960 992Proceeds from disposal of assets held for sale 3,211 5,874

Net cash used in investing activities (77,086) (9,248)

CASH FLOWS FROM FINANCING ACTIVITIESRepayment of borrowings net (191,643) (17,058)Dividends paid to shareholders (24,300) (24,300)

Net cash used in financing activities (215,943) (41,358)

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 26,214 59,737

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 68,358 8,621

CASH AND CASH EQUIVALENTS AT END OF YEAR 24 94,572 68,358




NOTES TO THE FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

The financial statements of the Company are prepared under the historical cost convention except as disclosed in thesummary of significant accounting policies in Note 2. The financial statements comply with the Financial Reporting

Standards (FRS) in Malaysia and the provisions of the Companies Act, 1965.

The preparation of financial statements in conformity with the FRS requires the use of certain critical accounting estimatesand assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the disclosure ofcontingent assets and liabilities. It also requires the Directors to make judgements that affect the application of theCompany's accounting policies. Although these estimates and judgements are based on the Directors' best knowledge ofcurrent events and actions, actual results may differ.

The financial statements have been approved for issues in accordance with a resolution of the Board of Directors datedFebruary 25, 2011.

a) Standards, amendments to published standards and interpretations that are applicable to theCompany and are effective

The new accounting standards, amendments to published standards and interpretations to existing

standards effective for the financial period beginning January 1, 2010 and applicable to the Company are asfollows:

Amendment to FRS 1 First Time Adoption of Financial Reporting Standards

Amendments to FRS 2 Share-Based Payment Vesting Conditions and Cancellations

FRS 8 Operating Segments and Amendment to FRS 8 Operating Segments

FRS 101 (Revised) Presentation of Financial Statements

FRS 123 (Revised) Borrowing Costs

Amendment to FRS 127 Consolidated and Separate Financial Statements

Amendments to FRS 132 Financial Instruments: Presentation

Amendments to FRS 132 Financial Instruments: Presentation (paragraphs 95A, 97AA and 97AB)relating to classification of the compound financial instrument into its liability and equity elements whenthe entity first applies FRS 139 Financial Instruments: Recognition and Measurement

Amendments to FRSs contained in the document entitled Improvements to FRSs (2009). Theimprovements contain amendments to twenty two FRSs which involves changes to presentation,recognition, or measurement and some are changes to terminology with little effect on accounting

IC Interpretation 9 and Amendment to IC Interpretation 9: Reassessment of Embedded Derivatives

IC Interpretation 10: Interim Financial Reporting and Impairment

IC Interpretation 11: FRS 2 Group and Treasury Share Transaction

IC Interpretation 13: Customer Loyalty Programmes

IC Interpretation 14: FRS 119 The Limit of a Defined Benefit Asset, Minimum Funding Requirementsand their Interaction

FRS 7 Financial Instruments: Disclosures and Amendment to FRS 7 Financial Instruments:Disclosures

FRS 139 Financial Instruments: Recognition and Measurement and Amendment to FRS 139Financial Instruments: Recognition and Measurement.




1. BASIS OF PREPARATION (Continued)

a) Standards, amendments to published standards and interpretations that are applicable to the Companyand are effective (Continued)

The adoption of all the standards and interpretations above do not have any material impact on the financialposition of the Company. All changes in accounting policies have been made in accordance with the adoption ofall the standards which do not result in significant changes in accounting policies and disclosures, except asdisclosed below:

FRS 8 Operating Segments and Amendment to FRS 8 Operating Segments. FRS 8 replaces FRS 1142004Segment Reporting. The new standard requires a management approach, under which segmentinformation is presented on the same basis as that used for internal reporting purposes. The amendmentto the standard clarifies that entities that do not provide information about segment assets to the chiefoperating decision-maker will no longer need to report this information. The Company determined that theoperating segment was unchanged as previously identified under 114 and additional disclosures about2004the segment is shown in Note 25. Comparative information has been presented in conformity with thetransitional requirements of such standard.

FRS 101 (Revised) Presentation of Financial Statements. It prohibits the presentation of items of incomeand expenses (non-owner changes in equity) in the statement of changes in equity. Non-owner changesin equity are to be presented separately from owner changes in equity in a statement of comprehensiveincome.

FRS 123 (Revised) Borrowing Costs. The new standard requires an entity to capitalise borrowing coststhat are directly attributable to the acquisition, construction or production of a qualifying asset. Previouslythe Company immediately recognised all borrowing costs as an expense.

FRS 139 Financial Instruments: Recognition and Measurement and Amendment to FRS 139 FinancialInstruments: Recognition and Measurement. On adoption of FRS 139, the Company measures financialassets and financial liabilities initially at fair value and subsequently carried at amortised cost using theeffective interest rate method.

The remaining standards and interpretations that are effective for financial period beginning January 1, 2010 arenot applicable to the Companys operations.

b) Standards, amendments to published standards and interpretations to existing standards that areapplicable to the Company but not yet effective

The new standards, amendments to published standards and interpretations to existing standards applicable tothe Company that will be effective but have not been early adopted by the Company, are as follows:

i) Standards effective from March 1, 2010

Amendment to FRS 132 Financial Instruments: Presentation (paragraphs 11, 16 and 97E of FRS132) relating to Classification of Rights Issues. The amendments require that rights issues beclassified as equity regardless of the currency in which the exercise price is denominated, providedcertain conditions are met.

ii) Standards effective from July 1, 2010

FRS 1 First-time Adoption of Financial Reporting Standards. This is a revision to the existing FRS 1merely to improve the structure of the standard.

FRS 127 Consolidated and Separate Financial Statements. The revised standard requires theeffects of all transactions with non-controlling interests to be recorded in equity if there is no changein control and these transactions will no longer result in goodwill or gains and losses.

IC Interpretation 17: Distributions of Non-cash Assets to Owners. It provides guidance onaccounting for arrangements whereby an entity distributes non-cash assets to shareholders eitheras a distribution of reserves or as dividends.

Amendments to FRS 2 Share-based Payment. It clarifies that contributions of a business onformation of a joint venture and common control transactions are outside the scope of FRS 2.

Amendments to FRS 5 Non-current Assets Held for Sale and Discontinued Operations. It clarifies

that all of a subsidiarys assets and liabilities are classified as held for sale if a partial disposal saleplan results in loss of control.



1. BASIS OF PREPARATION (Continued)

b) Standards, amendments to published standards and interpretations to existing standards that areapplicable to the Company but not yet are effective (Continued)

ii) Standards effective from July 1, 2010 (Continued)

Amendment to FRS 138 Intangible Assets. It clarifies that a group of complementary intangibleassets acquired in a business combination is recognised as a single asset if the individual assethas similar useful lives.

Amendment to IC 9:Reassessment of Embedded Derivatives. The amendments clarify that theInterpretation does not apply to embedded derivatives in contracts acquired in a businesscombination, businesses under common control or the formation of a joint venture.

iii) Standards effective from January 1, 2011

Amendment to FRS 1 (Limited Exemption from Comparative FRS 7 Disclosures for First-timeAdopters) relieves first-time adopters of FRS from providing the additional disclosures requiredfrom the amendments to FRS 7.

Amendments to FRS 7 (Improving Disclosures about Financial Instruments) reinforce existingprinciples for disclosures about liquidity risk and require enhance disclosures about fair value

measurements.

Amendment to FRS 1 (Additional Exemptions for First-time Adopters) exempts oil and gasentities using the full cost method from retrospective application of FRS for its oil and gas assets.

Amendments to FRS 2 (Group Cash-Settled Share-based Payment Transactions) clarify that anentity must account for goods or services received in a share-based payment arrangementregardless of which entity in the group settles the transaction and whether the settlement is inshares or cash.

Amendment to IC Interpretation 4: Determining whether an Arrangement contains a Leaseclarifies that although an arrangement does not take the legal form of a lease, it is a lease whenthe fulfilment of the arrangement is dependent on the use of a specific asset and thearrangement to convey a right to use the asset.

Amendment to IC Interpretation 18: Transfers of Assets from Customers clarifies that if an entityreceives property, plant and equipment (PPE) and such PPE meet the definition of an asset, itshall recognise it in accordance with FRS 116 Property, Plant and Equipment.

The Company will apply the above standards, amendments and interpretations from financial periodbeginning January 1, 2011. The adoptions of these standards are not expected to have a material impact onthe financial position of the Company.

The remaining standards and interpretations that are issued but not yet effective are not applicable to theCompanys operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise stated, the following accounting policies adopted by the Company are consistent with those adopted in

previous years:

(a) Property, plant and equipment

Property, plant and equipment are stated at cost or 1982 valuation less accumulated depreciation and impairment.No valuation has been conducted since 1982.




2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(a) Property, plant and equipment (Continued)

The Directors applied the transitional provisions of FRS 116 on Property, Plant and Equipment when MASB first issuedthe standard in 2000, which allowed property, plant and equipment to be stated at their prevailing valuations lessdepreciation. The valuations were determined by independent professional valuers on the following bases:

Land - Open market value based on existing useBuildings - Depreciated replacement cost

No depreciation is provided on freehold land and capital projects that are in progress. Buildings and improvements andplant and equipment are depreciated on a straight-line basis to write-off the cost or valuation of the assets to theirresidual values, over the term of their estimated service lives. The residual values and service lives are reviewed ateach balance sheet date.

The principal annual rates of depreciation used are as follows:

Buildings and improvements 3% - 5%Plant and equipment 4% - 10%

Maintenance and repairs are charged to the income statement as incurred. Major renewals and improvements arecapitalised.

Included in the respective property, plant and equipment classifications, is the Company's proportionate share in the joint venture assets of the Multi Product Pipeline System and related distribution terminal facilities (MPP). TheCompany has a 20% participating interest in the MPP. The accounting policy adopted for these jointly controlled assetsis consistent with those adopted for the Company's 100% owned property, plant and equipment.

(b) Financial assets

The Companys financial assets are loans and receivables. The Company has loans and receivables which are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They areincluded in current assets, except for financial assets with maturities greater than 12 months after the end of thereporting period. These are classified as non-current assets. Such assets are recognised initially at fair value andsubsequently at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables comprise trade and other receivables, amount due from related corporations and cash andcash equivalents (Note 2 (f)).

(c) Impairment of assets

(i) Non-financial assets

The carrying amounts of assets are reviewed annually to determine whether there is any indication that thecarrying amounts may not be recoverable. If such an indication of impairment exists, the carrying amount of theasset is assessed and written down immediately to its recoverable amount. The recoverable amount is the higherof the asset's fair valueless costs to sell and value in use and is determined for the cash generating unit to whichthe asset belongs. Impairment is measured by the amount the carrying value exceeds the recoverable amount.Impairment loss and its subsequent reversal are taken to the income statement.

(ii) Financial assets carried at amortised cost

A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initialrecognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of thatasset that can be estimated reliably.

Objective evidence that financial assets are impaired includes significant financial difficulty of the issuer orobligor, a breach of contract, such as a default or delinquency by a debtor, restructuring of an amount due to theCompany on terms that the Company would not consider otherwise and indications that a debtor will enterbankruptcy or receivership.




Leases of assets under which a significant portion of risks and benefits of ownership over the economic life of theassets are effectively retained by the lessor are classified as operating leases. Prepaid lease rentals on servicestation sites made under operating leases are charged to the income statement on a straight-line basis over theperiod of the lease. Payments for all other operating leases are charged to the income statement in the year to whichthey relate.

(e) Inventories

Crude oil and petroleum product inventories are valued at the lower of cost and net realisable value. Cost includes allapplicable purchase costs and production overheads and is determined on the first-in first-out (FIFO) basis. Materialsand supplies are valued at cost, determined on a weighted average basis, and a deduction is made for obsolete andslow moving stocks.

(f) Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents include bank balances, deposits held at callwith banks and cash in hand less bank overdrafts. To be included, these items must be readily convertible to cash

and must not be subject to a significant risk of a change in value.

(g) Provisions

Provisions are recognised when it is probable that an outflow of resources will be required to settle a present legal orconstructive obligation, and when a reliable estimate of the amount can be made. The provisions are reviewed at yearend and adjusted to reflect the current best estimate.

(h) Employee / separation benefits

(i) Short-term employee benefits

Wages, salaries, bonuses, and non-monetary benefits are accrued in the year in which the associated

services are rendered by employees of the Company.

(ii) Retirement benefits

(a) Defined contribution retirement plan

The Company's contribution to the national defined contribution plan, the Employees Provident Fund,is recognised in the income statement as incurred.

(b) Retirement benefits

The Company operates an unfunded defined benefit retirement plan for its regular nationalemployees. The liability for employees' retirement benefits is determined based on a periodicindependent actuarial reappraisal of the plan assumptions. This is based on the schedule of benefitsstipulated in the Company's retirement benefits plan. The most recent reappraisal was carried out in

December 2009.

The projected unit credit method is used to calculate the actuarial plan benefitsbased on the estimated years of service and employees' projected compensation during their last yearof employment. The liability recognised in the balance sheet represents the present value of thedefined benefit obligations adjusted for unrecognised actuarial gains or losses and past service cost.Actuarial gains or losses are amortised on a straight-line basis over the average remaining service lifeof employees expected to receive the plan benefits.

(iii) Separation benefits

Separation benefits are payments due to employees as a result of the separation from employment before thenormal retirement age. The liability for separation benefits is recognised when the Company's commitment isconfirmed without any realistic possibility of withdrawal.

(d) Operating leases





(i) Share capital

Ordinary stock units with discretionary dividends are classified as equity.

(j) Dividends

Dividends on ordinary stock units are recognised as liabili ties when the dividends are approved for payment.

(k) Trade and other payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary courseof business from suppliers. Trade and other payables are recognised initially at fair value and subsequently atamortised cost using the effective interest method.

(l) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred, and are subsequently carried atamotised cost. All interest, profit elements on Islamic Commercial Papers (ICP) Programme and other costs incurred

in connection with borrowings are expensed as incurred, except that up-front costs incurred in establishing long-termfacilities are amortised over the facility period. With the adoption of FRS 123 Borrowing Costs, borrowing costsrelating to qualifying assets for which the commencement date for capitalisation is on or after January 1, 2010, shouldbe capitalised. The change had no material impact on the financial position of the Company.

(m) Taxation

The taxation charge in the income statement comprises current and deferred taxes. Current taxes are calculated byapplying current tax rates to the chargeable income for the year.

Deferred taxes are calculated at the balance sheet date on all material temporary differences between the tax basesof assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets and liabilities areoffset when there is a legally enforceable right to offset current tax assets and liabilities, and they relate to incometaxes levied by the same tax authority on either the taxable entity, or different taxable entity where there is an intention

to settle the balances on a net basis.

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available to absorb thedeductible temporary differences. Tax rates enacted or substantively enacted by the balance sheet date are used tocalculate deferred taxes.

(n) Revenue recognition

Income from the sale of goods is recognised upon delivery of goods and acceptance by customers net of returns,discounts and allowances, in accordance with the terms of sale. Interest and other income are recognised on anaccrual basis.

(o) Research and development

Expenditures on research and development are recognised as expense except when there is sufficient certainty thatthe development efforts will result in future economic benefits for the Company, in which case these costs arecapitalised.

(p) Foreign currencies

The functional currency of the Company is Ringgit Malaysia. Transactions arising in foreign currencies are translatedinto Ringgit Malaysia at the approximate rates of exchange on the transaction dates. Transactions uncompleted at thebalance sheet date are translated at the closing exchange rates. Foreign currency exchange gains and lossesresulting from the translation and settlement of foreign currency transactions are included in the income statement.




(q) Segment reporting

Segment reporting is consistent with the internal reporting to the Companys chief operating decision maker,represented by a committee responsible for allocating resources and assessing performance of the operatingsegment.

(r) Fair value estimation

The carrying amount of current receivables and payables, carried at amortised cost, approximate their fair values.

3. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

The Company makes accounting estimates and assumptions concerning the future which may differ from actual results.The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount ofassets and liabilities within the next financial year are:

(a) Estimated useful lives and residual values of property, plant and equipment

Property, plant and equipment are depreciated on a straight line basis over the term of their useful service lives takinginto account residual values where appropriate. The estimated useful lives of these assets should be reflective offactors such as service life experience on the facilities and their maintenance programmes. The useful lives andresidual values of assets are reviewed, and adjusted if appropriate, at each balance sheet date. The significantaccounting policy for property, plant and equipment is disclosed in Note 2.

(b) Retirement Benefits Obligations

The present value of the retirement benefits obligations depends on a number of factors that are determined on anactuarial basis using a number of assumptions. The assumptions used in determining net cost (income) for theretirement benefits include the discount rate used to determine the present value of estimated cash outflowsexpected to be required to settle the retirement benefits obligations, and salary growth rate. Any changes in theseassumptions will impact the carrying amount of retirement benefits obligations. Refer to Note 18 for the sensitivity ofthe overall pension liability to changes in the discount rate and salary growth rate.

4. FINANCIAL RISK MANAGEMENT

a) Market Risk

Given the size and long-term nature of its business, the Company expects that exposure to market risk arising fromchanges in currency rate and interest rate will be moderated over time. As such, the Company discourages the use offinancial derivative instruments to manage these risks. The Company believes that the administrative and financialcosts to execute and control the use of derivatives typically outweigh the potential benefits. Any derivativetransaction would require senior management approval and periodic review. Speculative derivative activity is strictlyprohibited.

(i) Currency risk

The Companys activities are exposed to currency risk primarily arising from US dollar denominated crudepurchases. A strengthening of the Ringgit would result in a favorable impact to profitability due to credit termsfor payments for crude purchases. The Company has no other significant short-term or long-termtransactions denominated in foreign currencies as at December 31, 2010.

A 10% depreciation / appreciation of the USD against the Ringgit would result in an approximate decrease /increase in pre-tax profit of RM39 million (2009: RM41 million) with all other variables held constant.


esso-page 12 to proxyform (2.6mb)

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