annual report & accounts 2006 - · pdf filewaste water lagoon desludging work at the...
TRANSCRIPT
Annual Report & Accounts 2006
ESSO MALAYSIA BERHADAn ExxonMobil Subsidiary in Malaysia
Financial Highlights
Chairman’s Statement
Penyata Pengerusi
Five-Year Summary Charts
Board of Directors /Lembaga Pengarah
Profile of Directors
Corporate Citizenship Report
Corporate Information
Corporate Governance
Board Audit Committee Report
Report of the Directors
Report of the Auditors
Financial Statements
Information on Stockholdings
List of Major Properties Owned
Notice of Annual General Meeting
Statement Accompanying Notice ofAnnual General Meeting
Notis Mesyuarat Agung Tahunan
Penyata Yang Dilampirkan BersamaNotis Mesyuarat Agung Tahunan
Cover Picture:Esso Malaysia Berhad is committed to meeting Malaysia’s growing energy needs in an environmentally and socially responsible manner. We seek to maintain high standards of safety, product quality and environmental care while making positive contributions to the communities where we operate.
1
2
5
8
10
12
14
18
19
25
27
30
31
53
54
55
56
57
58
Contents
2006 2005 %RM Million RM Million Change
Revenues 9,336 8,269 13
Profit after taxation 7 20 (65)
Earnings per ordinary stock unit (sen) 2.6 7.3 (64)
Gross dividend per ordinary stock unit (sen) 12 12 -
Total assets employed 2,006 2,123 (6)
Total shareholders’ funds 634 650 (2)
Sales volume 93 97 (4)(thousands of barrels per calendar day)
FINANCIAL HIGHLIGHTS
AN
NU
AL R
EP
OR
T &
AC
CO
UN
TS
20
06
1
Shareholders mingled with EMB Directors and obtained a better understanding of the Company’s operations and performance at last year’s Annual General Meeting.
2006 Financial Results
The Company recorded an after tax profit of RM7 million for 2006, compared to RM20 million in 2005, as strong retail volume growth and improved marketing margins were offset by the impact of the high cost of low sulfur crudes on refining margins and adverse inventory valuation effects.
Revenues in 2006 were RM9.3 billion, an increase of RM1.1 billion or 13% over the previous year, reflecting higher product prices.
The price and margin environment in 2006 was challenging. Crude prices remained volatile across the year, and refining margins continued to be pressured by the relatively high cost of light low sulfur crude which the Port Dickson Refinery is configured to process. Escalating product costs continued to put pressure on margins in the industrial business. However, margins for controlled petroleum products were up significantly versus the prior year, in part due to a change in product cost recovery under the Automatic Pricing Mechanism (APM), which reduced timing impacts.
Chairman’s Statement
ESSO MALAYSIA BERHADA
NN
UA
L R
EP
OR
T &
AC
CO
UN
TS
20
06
2
Review of Operations
Operating performance for the year was strong.
Our plants and terminals maintained high levels of safety, health and environmental performance and operating reliability. Port Dickson Refinery and our three distribution terminals completed 10 years of continuous operations without an employee lost time injury and won several gold awards from the Malaysian Society for Occupational Safety and Health. We also conducted waste water lagoon desludging work at the refinery to improve effluent quality.
The Company progressed efforts to diversify its crude and feedstock mix to improve refinery operating flexibility and reduce costs. Work also continued on the use of automated process control, and other equipment and process upgrades to improve the yield of higher value products.
The retail business turned in strong operating performance in 2006, with 8% sales growth in the controlled petroleum products sector reflecting the benefits of retail initiatives such as the Smiles driver reward loyalty card, diesel fleetcard and diesel discount card programs. We successfully negotiated new licensing agreements for company-owned dealer operated service stations, incorporating increased use of performance based measures. The Company continued to selectively expand its retail network, investing RM million to acquire sites and construct new service stations in high growth areas.
38
Liam M. MallonChairman
EMB and her sister companies swept a total of seven MSOSH Gold Awards for safety performance in 2006.
On behalf of the Board of Directors, I am pleased to report on the financial and operating performance of the Company for the year ended
December 31, 2006.
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
3
The profitable lubricants and specialties business recorded a significant sales volume increase of more than 60% versus 2005 reflecting a more stable supply of asphalt. However, the finished lubricants sector was affected by softer demand and intense competition. Competition also remained intense in the industrial fuels and liquefied petroleum gas (LPG) businesses. The LPG business was further impacted by the higher cost of cylinders from rising steel prices.
The Company remains focused on operating cost management and over 2006 progressed a number of initiatives to optimise organisational and cost structures, and rebalance distribution and delivery models in its various businesses. Efforts to rebalance our portfolio and focus on the more profitable segments of those businesses also continued.
The Company maintained its commitment to contribute to the local community in the areas where it operates. We supported educational programmes to promote academic excellence in science, to improve the use of English and to recognise outstanding young athletes. Scholarships were awarded to primary and secondary students through the ExxonMobil Education and Scholarship Fund. Direct monetary contributions were also made to assist organisations such as public libraries and community groups. Once again our employees did us proud by showing their spirit of volunteerism in leading and actively participating in the Community Projects Programme, Employee Involvement Programme, and ExxonMobil Young Entrepreneur Programme.
Business Outlook
Dividends for Financial Year 2006
The prospects for the Malaysian economy in 2007 and beyond remain positive, and the demand for petroleum products is expected to remain strong. Nevertheless, the potential for earnings volatility remains and intense competition will continue. In this environment we will work to further diversify refinery feedstocks to increase operating flexibility and lower crude costs, selectively expand our retail business, and maintain our focus on product and service quality, flawless operations and cost control.
Management remains confident in the underlying performance of our business and in the Company's competitive position in a growing economy. In recognition of this and of our desire to continue to provide a steady return to shareholders, the Board proposes a dividend for the year ended December 31, 2006 of 12 sen less Malaysian income tax at 27% per ordinary stock unit. This matches the dividend for the 2005 financial year.
EMB continued to expand its service station network and Smiles Driver Rewards programme to bring greater value to customers.
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6 ESSO MALAYSIA BERHAD
4
Board Matters
Y.Bhg. Dato' Rob Fisher resigned from the Board on September 14, 2006 to accept an appointment as Vice President of ExxonMobil Development Company in Houston, Texas. I would like to place on record our appreciation to Dato' Rob for his many invaluable contributions as Chairman of the Company. Effective the same date, the Board appointed me as Director and Chairman in his place. I look forward to working closely with my fellow Board members and fellow employees in this new role.
Mr. Justin Chow resigned as Joint Company Secretary effective May 25, 2006. Effective the same date, the Board appointed Mr. Manoj Devadasan as Joint Company Secretary. I would like to thank Justin for his many contributions as Joint Company Secretary to the Board and look forward to working with Manoj in his capacity as Joint Company Secretary.
On behalf of the Board, I would also like to thank our employees for their continued hard work and dedication. The petroleum refining and marketing business remains challenging and the Company's success is fully dependent on the skills, abilities and commitment of each employee to overcome these challenges. I also express my appreciation to our shareholders, dealers and customers for their continued support of Esso Malaysia Berhad.
Liam M. MallonChairman
February 26, 2007
At the Port Dickson Refinery, technicians constantly monitor equipment and processes and conduct safety walk-abouts as part of our unrelenting focus on flawless operations.
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
Penyata Pengerusi
Bagi pihak Lembaga Pengarah, dengan sukacitanya, saya melaporkan prestasi kewangan dan operasi Syarikat bagi tahun berakhir 31
Disember, 2006.
Syarikat telah mencatatkan keuntungan selepas cukai sebanyak RM7 juta, berbanding RM20 juta pada tahun 2005. Pertumbuhan jualan runcit yang mantap dan kenaikan margin pasaran telah digugat oleh impak kos minyak mentah yang tinggi keatas margin penapisan serta kesan penilaian inventori yang negatif.
Hasil pendapatan dalam tahun 2006 berjumlah RM9.3 bilion, satu pertambahan sebanyak RM1.1 bilion atau 13% berbanding tahun sebelumnya, mencerminkan kenaikan harga produk.
Persekitaran harga dan margin bagi tahun 2006 adalah mencabar. Harga minyak mentah terus berubah-ubah sepanjang tahun, dan margin penapisan terus tertekan memandangkan Loji Penapisan Port Dickson (PDR) lebih sesuai untuk memproses minyak mentah "light crude" yang lebih tinggi harganya. Harga produk yang terus meningkat juga terus memberi tekanan kepada margin didalam sektor urusniaga industrial. Walaubagaimanapun, margin bagi produk petroliam terkawal meningkat dengan ketara berbanding tahun sebelumnya, antaranya oleh kerana penukaran dalam proses pengembalian kos produk dibawah Mekanisma Harga Automatik (APM) yang mengurangkan impak dari segi masa pengembalian.
Prestasi operasi bagi tahun 2006 adalah kukuh.
Terminal dan loji mengekalkan tahap prestasi dan operasi keselamatan, kesihatan dan alam sekitar yang tinggi. PDR dan 3 terminal pengedaran berjaya menyempurnakan operasi selama 10 tahun berterusan tanpa mengalami sebarang kecederaan bagi kakitangan dan telah memenangi beberapa anugerah emas dari Malaysian Society for Occupational Safety and Health. Syarikat juga telah menjalankan kerja pembersihan mendapan di PDR bagi mempertingkatkan kualiti efluen buangan.
Syarikat juga telah terus berusaha untuk mempelbagaikan campuran minyak mentah dan feedstok bagi terus mempertingkatkan operasi PDR dan mengurangkan kos. Usaha juga diteruskan bagi penggunaan proses kawalan berautomasi dan lain-lain kelengkapan serta peningkatan proses untuk terus menaikkan pulangan produk bernilai tinggi.
Urusniaga pemasaran runcit memberi prestasi operasi yang kukuh pada tahun 2006, dengan 8% pertumbuhan jualan didalam sektor produk petroliam terkawal mencerminkan manfaat yang telah dicapai berikutan dari beberapa inisiatif jualan runcit seperti "Smiles Driver Reward" dan program kad fleet disel dan kad diskaun disel.
Keputusan Kewangan 2006
Ulasan Operasi
Liam M. MallonPengerusi
5
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6 ESSO MALAYSIA BERHAD
Program Smiles Driver Rewards memberi banyak kemudahan dan nilai hebat. Mata ganjaran boleh ditebus segera untuk pelbagai jenis produk di stesen servis Esso ataupun untuk rangkaian ganjaran eksklusif dari katalog Smiles.
Syarikat terus mengembangkan rangkaian jualan runcit dengan membina stesen servis baru di kawasan pertumbuhan tinggi.
Syarikat juga telah menyelesaikan perundingan dan menandatangani perjanjian lesen yang baru, bagi stesen servis milikan syarikat yang dibawah operasi pengusaha, yang menggabungkan peningkatan penggunaan langkah-langkah berasaskan prestasi. Syarikat juga terus mengembangkan, secara terpilih, rangkaian jualan runcit dengan melaburkan RM38 juta bagi memperolehi tapak-tapak baru dan membina stesen servis baru di kawasan pertumbuhan tinggi.
Urusniaga minyak pelincir dan produk khas Syarikat memberi keuntungan apabila mencatatkan penambahan jualan yang ketara lebih dari 60% berbanding tahun 2005, mencerminkan bekalan asphalt yang lebih stabil. Walaubagaimanapun, sektor minyak pelincir telah terjejas oleh permintaan yang lembap dan persaingan yang sengit. Persaingan juga terus sengit didalam urusniaga bahanapi industrial dan LPG. Urusniaga LPG juga turut merasai impak kos silinder yang lebih mahal akibat harga besi keluli yang terus meningkat.
Syarikat terus memberi fokus dalam pengurusan kos operasi dan pada tahun 2006 telah menjalankan beberapa inisiatif untuk mengoptimumkan struktur kos dan organisasi dan mengimbang semula model-model pengedaran dan penghantaran dalam pelbagai urusniaga. Usaha-usaha untuk mengimbang-semula portfolio dan fokus Syarikat dalam segmen urusniaga yang lebih menguntungkan juga terus diambil.
Syarikat juga terus mengekalkan komitmen untuk mencarum kepada komuniti tempatan di kawasan-kawasan dimana Syarikat beroperasi. Syarikat telah memberi sokongan terhadap program pendidikan bagi mempromosi kecemerlangan akademik dalam bidang sains, mempertingkatkan penggunaan bahasa Inggeris dan mengiktiraf atlit-atlit muda yang ulung. Biasiswa telah dianugerahkan kepada pelajar-pelajar sekolah rendah dan menengah melalui "ExxonMobil Education and Scholarship Fund". Sumbangan kewangan telah diberi bagi membantu organisasi-organisasi seperti perpustakaan awam dan kumpulan-kumpulan komuniti. Sekali lagi, Syarikat berbangga dengan kakitangan-kakitangannya yang telah menunjukkan semangat sukarelawan dan menerajui serta mengambil bahagian dengan aktif dalam Program Projek-Projek Komuniti, Program Penglibatan Kakitangan dan Program Entreprenur Muda ExxonMobil.
Prospek ekonomi Malaysia bagi 2007 dan seterusnya kekal positif, dan permintaan bagi produk-produk petroliam dijangka akan terus kukuh. Namun begitu, potensi masih kekal bagi pendapatan yang volatil dan persaingan hebat akan berterusan. Dalam persekitaran demikian, Syarikat akan berusaha untuk terus mempelbagaikan feedstok PDR bagi menambah fleksibiliti operasi dan mengurangkan kos minyak mentah, mengembangkan rangkaian jualan runcit secara terpilih dan mengekalkan fokus keatas kualiti produk dan perkhidmatan, operasi yang bebas dari sebarang kecacatan dan mengawal kos.
Prospek Perniagaan
6
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
Dividen bagi Tahun Kewangan 2006
Perihal Lembaga Pengarah
Pihak Pengurusan terus berkeyakinan dengan prestasi urusniaga Syarikat dan kebolehan daya saing Syarikat didalam ekonomi yang terus berkembang. Oleh itu dan mengambil kira hasrat Syarikat untuk memberi satu pulangan yang berterusan kepada pemegang saham, Lembaga Pengarah mencadangkan dividen sejumlah 12 sen, ditolak cukai pendapatan sebanyak 27% bagi setiap saham, bagi tahun berakhir 31 Disember 2006. Kadar dividen tersebut adalah setanding dengan kadar dividen bagi tahun 2005.
Y.Bhg. Dato' Rob Fisher meletak jawatan dari Lembaga Pengarah pada 14 September 2006 untuk menjawat jawatan sebagai Naib Presiden, ExxonMobil Development Company di Houston, Texas. Saya ingin merakamkan penghargaan kepada Dato' Rob diatas sumbangan-sumbangan beliau sebagai Pengerusi Syarikat. Lembaga Pengarah telah melantik saya sebagai Pengarah dan Pengerusi berkuatkuasa tarikh yang sama. Saya mengalu-alukan peluang bekerja dengan lebih rapat lagi dengan ahli-ahli Lembaga Pengarah dan rakan sekerja didalam jawatan baru ini.
Encik Justin Chow meletak jawatan sebagai Setiausaha Bersama Syarikat, berkuatkuasa pada 25 Mei 2006. Lembaga Pengarah telah melantik Encik Manoj Devadasan sebagai Setiausaha Bersama Syarikat berkuatkuasa tarikh yang sama. Saya mengucapkan terima kasih kepada Justin diatas sumbangan-sumbangan beliau sebagai Setiausaha Bersama Syarikat dan mengalu-alukan peluang bekerja dengan Manoj sebagai Setiausaha Bersama Syarikat.
Bagi pihak Lembaga Pengarah, saya juga ingin mengucapkan terima kasih kepada semua kakitangan kami diatas usaha gigih dan dedikasi mereka yang berterusan. Urusniaga penapisan dan pemasaran terus mencabar dan kejayaan Syarikat bergantung sepenuhnya kepada kemahiran, keupayaan dan komitmen setiap kakitangan bagi mengatasi cabaran-cabaran tersebut. Saya juga ingin merakamkan penghargaan kepada pemegang-pemegang saham, pengedar-pengedar, pengusaha-pengusaha stesen minyak, dan pelanggan-pelanggan diatas sokongan yang berterusan kepada Esso Malaysia Berhad.
Liam M. MallonPengerusi
26 Februari 2007
Di Loji Penapisan Port Dickson, kerja pembersihan mendapan di lagun sisa air telah mempertingkatkan kualiti efluen buangan.
Penglibatan kakitangan yang aktif adalah salah satu kunci kepada rekod keselamatan yang cemerlang di Loji Penapisan Port Dickson. Kami memegang pekerja kontrak kami kepada piawai keselamatan tinggi yang sama seperti kakitangan kami sendiri.
7
Loji Penapisan Port Dickson dan terminal pengedaran kami berjaya mencatatkan rekod keselamatan yang baik dengan operasi selama 10 tahun berterusan tanpa mengalami sebarang kecederaan bagi kakitangan.
ESSO MALAYSIA BERHADA
NN
UA
L R
EP
OR
T &
AC
CO
UN
TS
20
06
Five-Year Summary Charts
SALES VOLUMETHOUSANDS OF BARRELSPER CALENDAR DAY
2002 2003 2004 2005 20060
20
40
60
80
THOUSANDS OF BARRELSPER CALENDAR DAY
REFINERY THROUGHPUT
2003 2004 200520020
20
40
60
80
100
2006
8
97100
6,198
4,000
4,774
8,269
9398 97 98
71
807475
2002 2003 2004 2005 20060
2000
6000
4000
2002 2003 2004 20062005
9,336
REVENUES(NET OF GOVERNMENT DUTIES)RM MILLION
RM MILLION
PROFIT AFTER TAX
76
8000
10000
5760
11
20
7
ESSO MALAYSIA BERHAD
20
40
60
80
0
SHAREHOLDERS’ INFORMATION
2002 2003 2004 2005 2006
Earnings per ordinary stock unit (sen) 22.2 21.0 4.0 7.3 2.6
Gross dividend per ordinary stock unit (sen) 10 12 12 12 12
Dividend yield (%) 4.2 5.6 4.6 4.7 4.3
Share price (RM) - Highest 2.89 2.52 2.93 2.82 3.76- Lowest 1.90 1.78 2.33 2.32 2.34- Average 2.37 2.14 2.59 2.56 2.78
Number of employees at year-end 500 488 422 352 327
RM MILLIONFinanced by:
TOTAL ASSETS EMPLOYED
500
2002 2003 2004 2005 2006
Shareholders’ funds
1000
2500
1500
CAPITAL EXPENDITURERM MILLION
2002 2003 2004 2005 20060
20
40
60
80
AN
NU
AL R
EP
OR
T &
AC
CO
UN
TS
20
06
73
54
62
55
38
2000 1,936 1,9762,1232,160
Taxes payable, provisions and others
Trade payables
Notes payable and bank borrowings
2,006
9
Y. Bhg. Dato’ Robert FisherChairman / PengerusiResigned w.e.f.September 14, 2006Meletak jawatan berkuatkuasa 14 September 2006
SEATED FROM LEFT TO RIGHTDUDUK DARI KIRI KE KANANY. Bhg. Tan Sri Dato’ Dr. Syed JalaludinSyed SalimMr. Liam M. MallonChairman / PengerusiY. Bhg. Tan Sri Abdul Halim AliY. Bhg. Dato’ Zainal Abidin Putih
STANDING FROM LEFT TO RIGHTBERDIRI DARI KIRI KE KANANMr. Lam Foo KeongExecutive Treasury Director / Pengarah Eksekutif PerbendaharaanEncik Zain C. WilloughbyExecutive Financial Director / Pengarah Eksekutif KewanganPuan Faridah AliExecutive Retail Business Director /Pengarah Eksekutif PerniagaanJualan Runcit
Puan Sri Junaidah Mohd SaidMr. Manoj DevadasanJoint Company Secretaries / Setiausaha-setiausaha Bersama Syarikat
Board of Directors / Lembaga Pengarah
10 11
ESSO MALAYSIA BERHADA
NN
UA
L R
EP
OR
T &
AC
CO
UN
TS
20
06
Encik Abu Bakar Siddik Che Embi Executive Refinery Director /Pengarah Eksekutif PenapisanAbsent during photo sessionTidak hadir pada sessipenggambaran
Mr. Justin ChowJoint Company Secretary /Setiausaha Bersama SyarikatResigned w.e.f.May 25, 2006Meletak jawatan berkuatkuasa 25 Mei 2006
Profile of Directors
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
Mr. Liam M. Mallon
Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim
Y. Bhg. Tan Sri Abdul Halim Ali
Y. Bhg. Dato' Zainal Abidin Putih
ChairmanB.Sc.(Hons.) Mechanical Engineering, Trinity College, Dublin, Ireland;M.Sc (Hons.) in Petroleum Engineering, Heriot-Watt University, Edinburgh, Scotland.
Mr. Liam M. Mallon, aged 44, an Irish citizen, was appointed Director and Chairman of the Company on September 14, 2006. He started his career with Mobil in 1990 (when he joined the company after 4 years with British Petroleum and a year with the Chinese National Oil Corporation) and over an 8 year period with Mobil, held a variety of progressively senior positions with the company where he had opportunity to develop his technical and supervisory capabilities. From 1998 to 2000, he was the Operations Manager of Mobil Producing Nigeria Unlimited from where he moved to ExxonMobil in Australia, in the same capacity, until 2003. From 2003 until 2004 he was based in Houston, Texas as the Global Planning Manager of ExxonMobil Production Company. In December 2004 he was appointed the President/Lead Country Manager of ExxonMobil Canada Ltd; a position he held until his appointment as the Lead Country Manager for Malaysia in 2006.
Independent Non- Executive Director and Alternate Member to Y.Bhg. Tan Sri Abdul Halim Ali and Y.Bhg. Dato' Zainal Abidin Putih on 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., Honoris Causa, Soka University, JapanD.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 63, a Malaysian and a national science laureate, as well as a founder fellow of the Academy of Sciences Malaysia, was appointed Director of the Company on February 15, 2000. He had a long illustrious academic career in both University Malaya and University Putra Malaysia (UPM) before retiring as Vice Chancellor of UPM in 2001. He was responsible for transforming UPM to become one of the leading centres of higher education. As an accomplished academician, he has helped found many academic societies and associations, and has published over 350 papers in journals and proceedings in the fields of animal science, university management and education. For his meritorious career and services, he has received numerous awards, 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, Kejuteraan Samudra Timur Berhad and Ecofirst Consolidated Berhad, and a Director of TAFI Industries Berhad. He is also the Chairman of Halal Industry Development Corporation.
Independent 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 63, a Malaysian, was appointed Director of the Company on May 22, 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 Permanent Representative to the United Nations in 1979. He was appointed Ambassador to Vietnam in 1982 and returned to Malaysia in 1985 to be Deputy Secretary General in the Ministry of Foreign Affairs before being appointed Ambassador to Austria. In 1991, he again returned to Malaysia to be Deputy Secretary General I in the Ministry of Foreign Affairs and in 1996 he was promoted to Secretary General. In July 1998, he was appointed Chief Secretary to the Government, the highest ranking civil service post in the country 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 the Chairman of the Multimedia Development Corporation, and he is also a Director of Cycle & Carriage Bintang Berhad, Malaysia Building Society Berhad, Malakoff Berhad and LCL Corporation Berhad.
Independent Non-Executive Director and Chairman of the Board Audit CommitteeD.S.N.S., FCA (ICAEW), CA (M), CPA (M)
Y. Bhg. Dato' Zainal Abidin Putih, aged 61, a Malaysian, was appointed Director of the Company on March 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 has extensive 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 also has a good working knowledge of taxation matters and management consultancy, especially in the areas of acquisitions, takeovers, amalgamations, restructuring and public listing of companies. He plays an active role in the community and the corporate world being the Past President of the Malaysian Institute of Certified Public Accountants. He was also a member of the Malaysian Communication & Multimedia Commission, a body set up by the Malaysian government to oversee the orderly development of the Multimedia and Telecommunication industry in Malaysia. He was the Chairman of Pengurusan Danaharta Nasional Berhad and is the Chairman of the Malaysian Accounting Standards Board (MASB). He is currently a director of Tenaga Nasional Berhad and a director of Bumiputra-Commerce Holdings Berhad, including its subsidiaries CIMB Bank Berhad and CIMB Investment Bank Berhad. He also acts as a Trustee of the National Heart Institute Foundation.
12
ESSO MALAYSIA BERHAD
Zain C. Willoughby
Abu Bakar Siddik Che Embi
Faridah Ali
Lam Foo Keong
Executive Financial Director and Member of the Board Audit CommitteeB.Sc. (Hons.) Physics, King's College, University of London
Encik Zain C. Willoughby, aged 47, a Malaysian, was appointed Financial Director of the Company on August 10, 2004. He started his career in ExxonMobil when he joined Esso Malaysia Berhad as a Systems Analyst in 1985. During his career, he has held a number of staff and managerial positions within ExxonMobil's Information Services, Exploration, Controller's, Audit, Treasurer's and Tax organisations. In 1996, he was assigned to Exxon Mobil Corporation's headquarters in Irving, Texas, as Senior Financial Analyst. His last assignment in the U.S.A. prior to returning to Malaysia as Treasurer, was as Financial Advisor to ExxonMobil affiliates in several countries in the Asia-Pacific. He is also presently the Tax Manager of the ExxonMobil Subsidiaries in Malaysia.
Executive Refinery DirectorB.Sc. (Hons.) Chemical Engineering, Leeds University, United Kingdom
Encik Abu Bakar Siddik Che Embi, aged 54, a Malaysian, was appointed Refinery Director of the Company on September 1, 2003. He started his career with the Port Dickson Refinery in 1976 and held various technical, operational and supervisory positions in the Refinery until 1990, when he was assigned to the Baytown Refinery, Exxon U.S.A., for about three years. In this assignment, he held the position of Technical Advisor and a number of leadership roles in the Process Department. Following that, he spent six months with Exxon Company International’s Refinery Dept. in Florham Park, New Jersey as Refinery Advisor. In 1994, he returned to Malaysia and assumed the position of Deputy Manufacturing Manager of the Port Dickson Refinery. In 1995, he was promoted to Manufacturing Manager and held this position until 2003, when he was appointed Refinery Director.
Executive Retail Business Director B.Sc. (Hons) Accounting, University of East Anglia, Norwich, ACA (England & Wales)
Puan Faridah Ali, aged 42, a Malaysian, was appointed Retail Business Director of the Company on June 13, 2005. She began her career in ExxonMobil Malaysia Sdn Bhd, and over a period of 15 years, held supervisory roles in various functions including financial accounting, costing, planning, financial analysis, human resources and retail business. In 2000, after the merger of Exxon Corporation and Mobil Corporation in the United States of America, she assumed the position of Marketing Support Manager and subsequently South East Asia Business Analysis and Reporting Manager before assuming her current position.
Executive Treasury Director and Alternate Member to Encik Zain C. Willoughby on the Board Audit CommitteeB. Econs. (Hons.), University of Malaya
Mr. Lam Foo Keong, aged 56, a Malaysian, was appointed Treasury Director of the Company on April 1, 2006. Upon graduation from the University of Malaya he joined Kassim Chan/Deloitte as an auditor in 1974. He started his career with Esso Malaysia Berhad in 1975 in Controller's. During his career he has held a number of supervisory and managerial positions of increasing responsibility in various departments including as Downstream Financial Reporting Manager, Downstream Controller, Offshore Accounting Manager, Corporate Finance Manager, Finance & Planning Manager, and Area Business Support Centre Manager. Lam has also completed overseas assignments with Esso Eastern Inc and Exxon Company, USA Controller's in Houston and New Orleans and with ExxonMobil Asia Pacific Pte. Ltd.’s Chemical Complex Project in Singapore. He was appointed Treasurer of the ExxonMobil Subsidiaries in Malaysia on April 1, 2006.
13
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
Corporate Citizenship Highlights
ESSO MALAYSIA BERHAD
14
2006 Esso Malaysia Berhad Corporate Citizenship Highlights
At Esso Malaysia Berhad, we believe that a company that takes a systematic, results-oriented approach to promoting and protecting employees, communities and the environment is likely to be a company that will succeed over the long term.
To us, corporate citizenship means serving the needs of millions of Malaysians by supplying reliable and affordable petroleum products in an environmentally and socially responsible manner.
This section illustrates our commitment to citizenship and presents some examples of how Esso Malaysia Berhad and the ExxonMobil Subsidiaries in Malaysia translate our values into action.
MeetingMalaysia’senergy needs
15
Integrity in our operations
The way we conduct our business is as important as the results themselves and we employ rigorous controls to ensure the highest levels of performance in all aspects of corporate governance and accountability. lOur Standards of Business Conduct form the
framework by which Esso Malaysia Berhad and other ExxonMobil affiliates operate in nearly 200 countries and territories around the globe.
l Our Controls Integrity Management System is a framework for ongoing controls integrity in our day-to-day business, providing the key attributes of a highly effective system designed to enable us to fully comply with regulatory requirements and maintain our high standards of business ethics.
l Our Operations Integrity Management System (OIMS) provides the framework for managing safety, health, security and environmental risks at all our facilities. Lloyd’s Register Quality Assurance attested in 2004 that OIMS meets all requirements of the ISO 14001 and monitors on-going performance annually.
Environmental performance
We are committed to conducting our business with respect and care for the environment. Our focus is on continuously improving the environmental performance of our operations and products we sell. Central to this approach is our emphasis on identifying and controlling risks to the environment. Our environmental performance and initiatives include:lWe reinforced the leadership-driven initiative called
“Protect Tomorrow. Today” with the goal to continue improvements in our environmental performance.
lOur Port Dickson Refinery applied our Global Energy Management System Best Practices to sustain high energy efficiency and further reduced carbon dioxide and greenhouse gas (GHG) emissions at the plant. Since 2000, our GHG emissions have reduced more than 20 per cent. Although not regulated, the Refinery also worked to further reduce its Volatile Organic Compound (VOCs) emissions.
lThe Refinery also undertook major desludging work on its wastewater lagoon to improve effluent water quality and further reduce Chemical Oxygen Demand levels.
lSince 2001, we have put in place a programme to upgrade our service stations in Malaysia to reflect ExxonMobil's global standards for environmental protection. This includes the installation of early leak detect ion system and underground r isk management system which includes tanks and pipelines.
We are committed to maintaining high standards of safety, product quality and environmental care. We continued to enhance our facility integrity management and execution programmes to manage risks and help prevent all types of incidents.
Every day, tank trucks deliver about 400 loads of petroleum products to almost 300 EMB service stations across Peninsular Malaysia.
ESSO MALAYSIA BERHAD
16
Workplace performance
lNothing is more important to us than the safety and health of our employees, contractors, customers and neighbours. We strive for an incident-free workplace where Nobody Gets Hurt. We are also committed to providing our workforce with the best career opportunities in our industry in a healthy workplace, free from any kind of discrimination and harrassment.
lWe maintained our industry leading position in safety and health performance. All injuries and "near misses" were fully investigated and lessons learned were widely communicated and implemented to prevent similar incidents in the future.
lPort Dickson Refinery and our three distribution terminals completed 10 years of continuous operations without an employee lost time injury and won several gold awards from the Malaysian Society for Occupational Safety and Health.
lWe expanded the use of IMPACT, a reporting system which enables us to collect and analyse information on health, safety and environmental incidents.
lWe sustained the behaviour-based safety approach such as job observation and intervention programmes to strengthen safety responsibility and to identify and eliminate unsafe behaviours.
lWe updated the Workplace Flexibility Programme to enhance employees' ability to achieve an effective work-life balance.
lWe continued to offer our employees development opportunities abroad. At the end of 2006, EMB employees were among 140 Malaysians on international assignments within ExxonMobil.
As part of our commitment to high operational standards, we apply a rigorous and consistent approach to test and monitor product safety and health factors.
Unde r t he ExxonMob i l Young Entrepreneur Programme, students from participating schools such as SM Tinggi Port Dickson learn about free enterprise under the guidance of our employees and develop leadership skills that prepare them for future careers.
17
EMB employees from Port Dickson Refinery and Kuala Lumpur were active participants of the Company’s “Touching Lives Together” community projects programme last year. Together with their families, they made a difference in many ways including sprucing up the Ulu Bendol Recreational Forest, treating underprivileged children in a “Wishes Come True” dinner and washing cars to raise funds for Hospis Malaysia.
EMB has provided scholarships and best student awards to primary and secondary students in Negeri Sembilan through its ExxonMobil Education and Scholarship Fund for the past 20 years.
Community and social performance
We have a long tradition of investing in the community. We have always considered this an important part of our responsibility as a good corporate citizen. Our goal is to participate in and support activities that improve the quality of life for people living in the communities in which we live and operate. Beyond the Company's direct monetary contributions to public and community groups, employees and their families contribute many personal hours to their communities through employee volunteer programmes such as "Touching Lives Together", ExxonMobil Young Entrepreneur Programme and ExxonMobil Employee Involvement Programmme. In 2006, the ExxonMobil Subsidiaries in Malaysia contributed towards 110 recipient organisations to support programmes that benefit society in the key areas of the community, education, health, environment and the arts. Some of the highlights of EMB's contributions include:
lFunded various educational programmes to promote academic excellence in science, to improve the use of English and to recognise outstanding young athletes.
lAwarded scholarships and best student awards to primary and secondary students in Negeri Sembilan under the ExxonMobil Education and Scholarship Fund Programme. Scholarships were also presented to children of employees, dealers and resellers.
lEMB employees were among 40 recipients under the Employee Involvement Programme Awards who each received RM1,500 for the civic organisations they serve. A total of RM60,000 in grants were received by the community.
lEMB employees and their family displayed their volunteerism spirit in ExxonMobil's "Touching Lives Together" Community Projects Programme where more than 1,500 employees and their family members devoted time and energy to carry out 19 projects to benefit the local community.
Directors Mr. Liam M. Mallon(Chairman)
Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim(Independent Non-Executive Director)
Y. Bhg. Tan Sri Abdul Halim Ali(Independent Non-Executive Director)
Y. Bhg. Dato' Zainal Abidin Putih(Independent Non-Executive Director)
Encik Zain C. Willoughby(Executive Financial Director)
Encik Abu Bakar Siddik Che Embi(Executive Refinery Director)
Puan Faridah Ali(Executive Retail Business Director)
Mr. Lam Foo Keong(Executive Treasury Director)
Joint SecretariesPuan Sri Junaidah Mohd Said(LS 0008614)
Mr. Manoj Devadasan(LS 0006885)
Share RegistrarTenaga Koperat Sdn. Bhd. (118401-V)
th20 Floor, Plaza PermataJalan Kampar, off Jalan Tun Razak50400 Kuala LumpurTel: 03-40416522 Fax: 03-40426352
AuditorsPricewaterhouseCoopers (No. AF-1146)Chartered AccountantsKuala Lumpur
Stock Exchange ListingMain Board of Bursa Malaysia Securities Berhad
SolicitorsMessrs. Raja, Darryl & Loh, Kuala LumpurMessrs. Azman, Davidson & Co, Kuala LumpurMessrs. Skrine, Kuala LumpurMessrs. Lee Hishammuddin Allen & Gledhill, Kuala LumpurMessrs. Shearn Delamore & Co, Kuala LumpurMessrs. Zaid Ibrahim & Co, Kuala Lumpur
Registered OfficeEMB Company Secretary's OfficeLevel 29, Menara ExxonMobilKuala Lumpur City Centre50088 Kuala LumpurTel: 03-20533000 Fax: 03-23803473
Corporate Information
AN
NU
AL R
EP
OR
T &
AC
CO
UN
TS
20
06
18
ESSO MALAYSIA BERHAD
Corporate Governance
19
The Board of Directors of Esso Malaysia Berhad is committed to ensuring that the highest standards of corporate governance are practised throughout the Company. The Board views this as a fundamental part of its responsibilities to protect and enhance shareholder value. Accordingly, the Board fully supports the principles laid out in the Malaysian Code on Corporate Governance.
Exxon Mobil Corporation, as the Company's ultimate holding company, has developed a series of policies and management systems that are designed to create and support a strong system of corporate governance. The policies and 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 strictly enforced. The core policies include Business Ethics, Conflicts of Interest, Antitrust, Alcohol and Drug Use, Gifts and Entertainment, Harassment in the Workplace and Outside Directorships. The management systems are designed to achieve high standards of performance in the areas of safety, operations integrity, internal control and legal and environmental compliance.
The Board and the Board Audit Committee ensure that the policies and the management systems are fully implemented and consistently enforced. They are supported in these regard 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 resolved by way of Circular Resolutions as and when necessary. Each Non-Executive Director is independent and brings invaluable judgment to bear on issues of strategy, performance, resource allocation, risk management and standards of conduct.
For the year ended December 31, 2006, four Board and four Board Audit Committee meetings were held. Details of the Directors' attendance at these meetings are summarised below:
The Board
Directors Number of Board Number of BoardMeetings Audit Committee Meetings
Held Attended Held Attended
Y. Bhg. Dato’ Robert Fisher 3* 3* Non- Non-(Resigned as Chairman on September 14, 2006) member member
Mr. Liam M. Mallon 1* 1* Non- Non-(Appointed as Chairman with effect from September 14, 2006) member member
Y. Bhg. Tan Sri Dato’ Dr. Syed Jalaludin Syed Salim 4 4 - -(Alternate member to Y. Bhg. Tan Sri Abdul Halim Aliand Y. Bhg. Dato’ Zainal Abidin Putih on the Board Audit Committee)
Y. Bhg. Tan Sri Abdul Halim Ali 4 4 4 4
Y. Bhg. Dato’ Zainal Abidin Putih 4 4 4 4
Encik Zain C. Willoughby 4 4 4 4
Encik Abu Bakar Siddik Che Embi 4 4 Non- Non-member member
Puan Faridah Ali 4 4 Non- Non-(Resigned as alternate member to Encik Zain C. Willoughby member memberon the Board Audit Committee on May 25, 2006)
Mr. Lam Foo Keong 3* 3* - -(Appointed as Executive Treasury Director with effect from April 1, 2006)(Alternate member to Encik Zain C. Willoughby on the Board Audit Committee – appointed with effect from May 25, 2006)
* Reflects the number of meetings held during the time the Director held office.
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
20
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
Board Membership
Supply of Information
Appointment and Re-election of Directors
Remuneration Committee
The Board had 8 members in 2006, with 3 Independent Non-Executive Directors and 5 Executive Directors (including the Chairman). Y. Bhg. Dato' Robert Fisher accepted an assignment in Houston, Texas, U.S.A. as Vice President, ExxonMobil Development Company, and resigned as Director and Chairman on September 14, 2006. The Board appointed Mr. Liam M. Mallon as Director and Chairman to succeed Y. Bhg. Dato' Fisher, effective the same date.
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 decision making process. There is a clear division of responsibilities between the Chairman and each of the other Executive Directors namely the Financial Director, the Retail Business Director, the Refinery Director and the Treasury Director.
Balance in the Board is achieved and maintained with the composition of both Executive and Independent Non-Executive Directors. In recognition that the Independent Non-Executive Directors have a primary role in providing unbiased and independent views, the Company has selectively appointed highly qualified individuals of integrity and character, with broad 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 the Company. Shareholders are at liberty to approach Y.Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim, or any of the other Independent 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's management and staff and by the Company's independent auditors. Towards meeting this objective, Board meetings are structured 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 Board Audit 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 each meeting. The Board, in addition to having full access to the advice and services of the Company Secretaries, has the authority to retain such outside advisors, including accountants, legal counsel, and other experts, as it deems appropriate. 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 it is deemed necessary. However, consistent with the best practices of the code on corporate governance, the Nominating 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 he will be subject to election by the shareholders. An election of Directors takes place every year, with each Director retiring from office at least once every three 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 the Non-Executive Directors, for the Board's consideration and decision.
The current members of the Remuneration Committee are as follows:1. Mr. Liam M. Mallon (Executive Director) - Chairman
* Encik Zain C. Willoughby (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)
ESSO MALAYSIA BERHAD
Corporate Governance (Continued)
21
Directors' Remuneration
Nominating Committee
The remuneration received by the Non-Executive Directors in 2006 was recommended by the Board as a whole and approved by the stockholders at the Annual General Meeting on May 25, 2006.
With the recommendation of the Remuneration Committee, the Board has adopted Exxon Mobil Corporation's compensation system to set the remuneration of Executive Directors. The compensation system took into account the performance of each Executive Director and the competitive environment in which the Company operates. The Executive Directors took no part in deciding their own remuneration.
An analysis of the aggregate Directors' remuneration incurred by the Company for the year ended December 31, 2006 as prescribed under Appendix 9C Part A Item 10(a) of the Listing Requirements of the Bursa Malaysia Securities Berhad (“BMSB”) is set out below :
FEES VALUE OF REMUNERATION TOTAL(RM) AND OTHERS (RM) (RM)
EXECUTIVE DIRECTORS - 1,449,954 1,449,954NON-EXECUTIVE DIRECTORS 90,000 14,000 104,000
REMUNERATION (RM) NUMBER OF EXECUTIVE NUMBER OF NON-DIRECTORS EXECUTIVE DIRECTORS
An analysis of the number of Directors whose remuneration, incurred by the Company, falls in successive bands of RM50,000 as prescribed under Appendix 9C Part A Item 10(b) of the Listing Requirements of the BMSB is set out below:
Less than 50,000 350,001 -100,000 1100,001-150,000 1150,001-200,000 2200,001-250,000 1250,001-300,000300,001-350,000350,001-400,000400,001-450,000450,001-500,000500,001-550,000550,001-600,000 1
The Company has opted not to disclose each Director's remuneration as the Board considers the information to be sensitive and proprietary.
The Nominating Committee is responsible for the recommendation of candidates for Non-Executive Directors and Executive Directors and the recommendation of Directors for committees, for the Board's consideration and decision. The Committee is also responsible for the assessment of the effectiveness of individual Directors and the overall Board on an ongoing basis.
The current members of the Committee are as follows:1. Mr. Liam M. Mallon (Executive Director) - Chairman
* Encik Zain C. Willoughby (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)
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
Corporate Governance (Continued)
22
Nominating Committee (Continued)
The Committee recommended the appointment of Mr. Lam Foo Keong as Executive Treasury Director with effect from April 1, 2006 and as the alternate to Encik Zain C. Willoughby on the Board Audit Committee with effect from May 25, 2006, in place of Puan Faridah Ali. The Committee further recommended the appointment of Mr. Liam M. Mallon as a Director and Chairman to succeed Y. Bhg. Dato' Robert Fisher with effect from September 14, 2006.
Directors' Training
Dialogue between the Company and Investors
Annual General Meeting
Accountability and Audit
Internal Control
As required under the Listing Requirements of the BMSB, Mr. Liam M. Mallon and Mr. Lam Foo Keong attended the Mandatory Accreditation Programme (MAP) within the prescribed time following their respective appointments.
The Board places great emphasis on continuous education for Directors. In this regard, the status of each Director's continuous education was regularly monitored and reviewed by the Board. The Board in 2006, adopted the ‘Principles for 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.
All Directors on the Board had received or undergone relevant training in 2006.
The Company reimburses Directors for costs incurred in attending the MAP and other continuous education programmes.
The Directors are also briefed at quarterly board meetings on any significant changes in laws and regulations that are relevant to the Company's operations.
The Board values and encourages dialogue with the shareholders to establish better understanding of the Company's objectives and performance. The Annual General Meeting provides an appropriate forum for the shareholders to dialogue with the Board. Additionally, the Company has a Public Affairs Department, which deals with queries from investors and potential investors. The Company also holds open discussions with investors and analysts upon request. In this regard, the Company disseminates information in strict adherence to the disclosure requirements of the Listing Requirements of the BMSB. Material information relating to the Company is disclosed to the public by way of announcements to the BMSB, as required by the Listing Requirements of the BMSB.
At the Annual General Meeting, the Chairman of the Board reviews the progress and performance of the Company with the shareholders. A question and answer session is also conducted to allow shareholders the opportunity to question Management on the Company's business and the proposed resolutions. The Chairman, the Board members and the external 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 Board endeavours 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 and operating activities with the objective of safeguarding the shareholders' investment and the Company's assets. The internal control system has clear management support, including the involvement of the Board, and is designed to meet the risks to which the Company is exposed. The Board is satisfied with the design of the control system and believes that there is compliance with all of the requirements.
ESSO MALAYSIA BERHADA
NN
UA
L R
EP
OR
T &
AC
CO
UN
TS
20
06
Corporate Governance (Continued)
Internal Control (Continued)
Key elements of the Company's internal control system include:
1. a comprehensive and clearly documented System of Management Control Standards Manual that
establishes the core requirements for good controls within the Company. The Manual not only identifies the
principal risks faced by the Company, but also prescribes the appropriate systems to manage these risks.
The Manual also specifies the overall 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
various levels of management and any major concerns are raised to senior management and the Board
Audit Committee,
4. key policies covering Business Ethics, Conflict of Interest, Antitrust, Alcohol and Drug Use, Gift and
Business Entertainment, Harassment in the Workplace and Outside Directorships. They include
requirements to comply with 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 of controls,
6. a yearly representation of compliance to the internal control system and key policies by the managers of
each business unit in the Company. Managers are required to document any outstanding control
concerns and the planned corrective action steps.
It should be noted that systems of internal control and risk management are designed to manage rather than
eliminate the risk of failure to achieve business objectives, and any system can only provide
reasonable and not absolute assurance against material misstatement or loss.
The Directors are required by the Companies Act, 1965 and the Listing Requirements of the BMSB to confirm
that the financial statements for each financial year have been made out in accordance with the applicable
approved accounting standards and that they give a true and fair view of the results of the business and state of
affairs of the Company for the financial year.
The Directors have carried out their responsibilities by:
selecting suitable accounting policies and applying them consistently;
making judgements 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,
after having made due enquiries, that the Company has adequate resources to continue in operational
existence for the foreseeable 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 comply with the Companies Act, 1965 and to safeguard the assets of the Company.
Statement of Directors' Responsibility for Preparing the Financial Statements
l
l
l
l
23
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
Corporate Governance (Continued)
24
ESSO MALAYSIA BERHAD
Relationship with Auditors
The Board has established a formal and transparent relationship with the auditors of the Company. The role of the Board Audit Committee in relation to the internal and external auditors is described on page 25 of this Annual Report.
Material Contracts
Non-Audit Fees
Other Information
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 business involving its major shareholders' interests during the year.
The amount of non-audit fees paid or payable to the external auditors, PricewaterhouseCoopers, by the Company for the financial year ended December 31, 2006 is RM2,291.
i) Family Relationship
None of the Directors have any family relationship with any other Director and/or major shareholder of the Company.
ii) Conflict of Interest
None of the Directors have any conflicts of interest with the Company.
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, by the relevant regulatory bodies.
This Statement is made in accordance with the Board of Directors' resolution dated February 26, 2007.
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
Corporate Governance (Continued)
MEMBERSHIP AND MEETINGS
SUMMARY OF ACTIVITIES
INTERNAL AUDIT
TERMS OF REFERENCE OF THE BOARD AUDIT COMMITTEE
Membership
Meetings and Minutes
The Committee comprises two Independent Non-Executive Directors, and one Executive Director. The following are the Committee members:
1. Y. Bhg. Dato' Zainal Abidin Putih, an Independent Non-Executive Director, who has been elected as the Chairman of the Committee. His alternate is Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim, an Independent Non-Executive Director.
2. Y. Bhg. Tan Sri Abdul Halim Ali, an Independent Non-Executive Director, whose alternate is Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim, an Independent Non-Executive Director .
3. Encik Zain C. Willoughby, an Executive Director, whose alternate is Mr. Lam Foo Keong, who is also an Executive Director.
A detailed profile of the Committee members can be found on pages 12 and 13.
The Secretary to the Committee is the Controller of the Company.
The Committee had 4 meetings during the last financial year. The details of attendance of each Committee member have been tabulated under the Corporate Governance Statements section, which can be found on page 19. Other Directors of the Company and relevant personnel attended some of the Committee meetings by invitation.
During the last financial year, the Committee discharged its functions and carried out its duties as set out in the Terms of Reference below.
The Company is subject to independent regular and systematic audit reviews of its system of internal controls. This is to provide reasonable assurance that such systems are operating effectively. The basic framework of the Company's system of internal controls is described under the Corporate Governance Statements section, which can be found on pages 22 and 23. The internal audit process covers the audit of all the Company's units and operations and the annual review with the Committee of audit results and audit plans for the subsequent year.
The internal audit function is undertaken by a regional internal audit group, ultimately taking functional guidance from Exxon Mobil Corporation. This structure allows the Company to benefit from the application of global audit best practices and assures the Company of internal audit independence.
The Committee members shall:
lbe appointed from members of the Board of Directors (the Board);lconsist of not less than three in number;lcomprise, in the majority, independent Directors;lelect a Chairman from among their number, who is an independent Director; andlnot be an alternate Director.
Meetings of the Committee shall be held regularly, and as often as necessary. Other Directors of the Company and relevant personnel may only attend the meetings at the invitation of the Committee. If required, the presence of the external auditors at the meetings of the Committee may be requested. The auditors, both internal and external, may request the Committee to convene a meeting if one is necessary, to consider any matter which any of the auditors believe should be brought to the attention of the Directors and/or shareholders of the Company.
25
Board Audit Committee Report
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
26
ESSO MALAYSIA BERHAD
Meetings and Minutes (Continued)
Authority
Duties
The Secretary to the Committee shall be appointed by the Committee. The Secretary shall be responsible for the timely issuance of meeting notices together with meeting agenda and any supporting documents in advance of such meeting, for recording, keeping and distributing the minutes of meetings and any other duties ordinarily discharged by a secretary of such Committee.
The Committee is authorised by the Board:
lto investigate any matter within its terms of reference;lto have the resources which are required to perform its duties;lto have full and unrestricted access to any information pertaining to the Company;lto have unrestricted access to and communication with the external auditors of the Company and internal
auditors;lto obtain external legal or other independent professional advice as necessary; andlto convene meetings with the external auditors of the Company, without the attendance of the executive
members of the 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, the respective auditors' evaluation of the Company's system of internal accounting controls and the audit report, the external 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 the Company and internal auditors;
to review and report to the Board the adequacy of the scope, functions and resources of the internal audit 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 audit programme, processes, or investigation undertaken, and whether or not appropriate action has been taken on the recommendations of the internal audit ;
to review and report to the Board the quarterly results and year end financial statements, including the balance sheet and 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 within the Company;
to review and report to the Board any removal, resignation, appointment and audit fee of the Company's external auditors;
to review and report to the Board whether there is reason (supported by grounds) to believe that the Company's external 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 Board which have not been satisfactorily resolved resulting in a breach of the 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 26, 2007.
l
l
l
l
l
l
l
l
l
l
l
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
Board Audit Committee Report (Continued)
27
Report of the Directors
The Directors are pleased to submit the annual report together with the audited financial statements of the Company for the year ended December 31, 2006.
The Company is a public company incorporated in Malaysia under the Companies Act, 1965 and is listed on the Bursa Malaysia Securities Berhad. The Company's principal activities are the manufacturing and marketing of petroleum products in Peninsular Malaysia. There has been no significant change in the nature of the Company's activities during the year.
RM'000
Net profit attributable to shareholders 7,063Retained profits brought forward 507,072Profits available for appropriation 514,135Dividend paid less income tax at 28% (23,328)Retained profits carried forward 490,807
The amount of dividends paid since December 31, 2005 are as follows:RM'000
In respect of the year ended December 31, 2005:
Final dividend per stock unit, paid on June 20, 2006:Ordinary - 12 sen gross less income tax at 28% 23,328
The Directors propose that a final dividend of 12 sen less income tax at 27% per ordinary stock unit, amounting to RM23,652,000 be paid for the year ended December 31, 2006.
All material transfers to or from reserves and provisions during the year are shown in the financial statements.
Before the income statement and balance sheet were completed, the Directors took reasonable steps:
1. to satisfy themselves that all receivables had been properly analysed, that bad debts had been written off where appropriate 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 written down 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 financial statements 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 or inappropriate.
PRINCIPAL ACTIVITIES
FINANCIAL RESULTS
DIVIDENDS
RESERVES AND PROVISIONS
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (Continued)
No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the year which, in the opinion of the Directors, will or may affect the ability of the Company to meet its obligations when they fall due.
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 any other 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 financial statements 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 event of 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 of a material and unusual nature likely to affect substantially the results of the operations of the Company for the year in which this report is made.
The Directors who have held office during the period since the date of the last report are as follows:
Mr. Liam M. Mallon (appointed w.e.f. September 14, 2006)Y.Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed SalimY.Bhg. Tan Sri Abdul Halim AliY.Bhg. Dato' Zainal Abidin PutihEncik Zain C. WilloughbyEncik Abu Bakar Siddik Che EmbiPuan Faridah AliMr.Lam Foo Keong (appointed w.e.f. April 1, 2006)Y. Bhg. Dato' Robert Fisher (resigned w.e.f. September 14, 2006)
Since the end of the previous year, no Director has entered into or received or become entitled to receive a benefit (other than benefits disclosed in notes 8 and 9 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest. All transactions between the Company or a related corporation and companies in which Directors have interests are conducted 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 section 169(6)(f) of the Companies Act, 1965, which would have enabled any of the Directors to acquire benefits through the acquisition of shares in or debentures of the Company or any other body corporate.
DIRECTORS
DIRECTORS' BENEFITS
ESSO MALAYSIA BERHAD
28
Report of the Directors (Continued)
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
29
DIRECTORS' INTERESTS IN SHARES
DIRECTORATE
ULTIMATE HOLDING COMPANY
AUDITORS
According to the register of Directors' shareholdings, the interests of Directors who held office at the end of the year in the share capital of the Company and its related corporations are as follows:
As at01.01.06or date of As at
appointment Acquired Sold 31.12.06
Exxon Mobil Corporation (Ultimate holding company) - Number of common stock without par value
held by the following Directors:
Mr. Liam M. Mallon 8,350 6,960 (3,960) 11,350 Encik Zain C. Willoughby 1,550 7,350 (6,000) 2,900
Encik Abu Bakar Siddik Che Embi - 2,400 (2,400) -Puan Faridah Ali 70 70 - 140Mr. Lam Foo Keong - 2,000 (2,000) -
No other Director in office at the end of the year held any interest in the share capital of the Company or its related corporations during the year.
In accordance with Article 104 and Article 105 of the Company's Articles of Association, En. Abu Bakar Siddik retires at the forthcoming Annual General Meeting and, being eligible, offers himself for re-election.
In accordance with Article 109 of the Company's Articles of Association, Mr. Liam M. Mallon retires at the forthcoming Annual General Meeting and, being eligible, offers himself for re-election.
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.
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
In accordance with a resolution of the Board of Directors dated February 26, 2007.
...............................Liam M. MallonChairman
...............................Zain C. WilloughbyFinancial Director
Kuala Lumpur,February 26, 2007
Report of the Directors (Continued)
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
Report of the Auditors
TO THE MEMBERS OF ESSO MALAYSIA BERHAD (Company Number 3927-V)
We have audited the financial statements set out on pages 31 to 51. These financial statements are the responsibility of the Company's Directors. It is our responsibility to form an independent opinion, based on our audit, on these financial statements and to report our opinion to you, as a body, in accordance with section 174 of the Companies Act 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report.
We conducted our audit in accordance with approved Auditing Standards in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Directors, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion:
(a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and MASB approved accounting standards in Malaysia so as to give a true and fair view of:
(i) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and
(ii) the state of affairs of the Company as at December 31, 2006 and of the results and cash flows of the Company for the year ended on that date;
and
(b) the accounting and other records and the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.
PRICEWATERHOUSECOOPERS(No. AF-1146)Chartered Accountants
DATO’ AHMAD JOHAN BIN MOHAMMAD RASLANNo.1867/09/08(J)Partner of the firm
Kuala LumpurFebruary 26, 2007
ESSO MALAYSIA BERHAD
30
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
FOR THE YEAR ENDED DECEMBER 31, 2006
Note 2006 2005RM'000 RM'000
REVENUES 5 9,336,444 8,269,287
COST OF SALES (8,958,242) (7,873,459)
GROSS PROFIT 378,202 395,828
OTHER INCOME 21,372 22,192
OPERATING EXPENSES (309,480) (295,538)
ADMINISTRATIVE AND OTHER EXPENSES (54,608) (64,137)
FINANCE COST 6 (28,264) (24,195)
PROFIT BEFORE TAX 7 7,222 34,150
TAX EXPENSE 10 (159) (14,422)
NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS 7,063 19,728
Earnings per ordinary stock unit (sen) 11 2.6 7.3
Proposed final gross dividend less income tax at 27% (2005: 28%) per ordinary stock unit (sen) 12.0 12.0
Income Statement
31
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
32
AS AT DECEMBER 31, 2006
Note 2006 2005
RM'000 RM'000
NON CURRENT ASSETS
Property, plant and equipment 12 886,952 931,729
Long term assets and receivables 13 332,295 324,930
Intangible assets - software 14 4,731 5,680
TOTAL NON CURRENT ASSETS 1,223,978 1,262,339
CURRENT ASSETS
Inventories 15 384,522 459,863
Assets held for sale 16 - 3,033
Receivables 17 97,860 112,666
Amounts due from related corporations 21 233,520 262,902
Deposit, cash and bank balances 16,787 19,740
Taxation 49,453 2,815
TOTAL CURRENT ASSETS 782,142 861,019
CURRENT LIABILITIES
Payables 18 188,918 162,318
Provision 19 - 2,402
Retirement benefits obligations 20 260 1,198
Amounts due to related corporations 21 398,591 404,740
Borrowings (unsecured) 22 633,778 743,545
TOTAL CURRENT LIABILITIES 1,221,547 1,314,203
NET CURRENT LIABILITIES (439,405) (453,184)
LESS: NON CURRENT LIABILITIES
Retirement benefits obligations 20 49,258 49,510
Deferred taxation 23 101,508 109,573
150,766 159,083
TOTAL NET ASSETS EMPLOYED 633,807 650,072
FINANCED BY:
SHARE CAPITAL 24 135,000 135,000
RESERVES 25 8,000 8,000
RETAINED PROFITS 25 490,807 507,072
SHAREHOLDERS' EQUITY 633,807 650,072
ESSO MALAYSIA BERHAD
Balance Sheet
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
FOR THE YEAR ENDED DECEMBER 31, 2006
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
At January 1, 2005 270,000 135,000 8,000 510,672 653,672
Net profit - - - 19,728 19,728
Dividends for the year endedDecember 31, 2004 (final) - - - (23,328) (23,328)
At December 31, 2005 270,000 135,000 8,000 507,072 650,072
At January 1, 2006 270,000 135,000 8,000 507,072 650,072
Net profit - - - 7,063 7,063
Dividends for the year endedDecember 31, 2005 (final) - - - (23,328) (23,328)
At December 31, 2006 270,000 135,000 8,000 490,807 633,807
Statement of Changes in Equity
33
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
34
Statement of Cash Flows
FOR THE YEAR ENDED DECEMBER 31, 2006
Note 2006 2005
RM'000 RM'000
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit attributable to shareholders 7,063 19,728
Adjustments for:
Depreciation on property, plant and equipment 66,108 69,092
Amortisation of intangible assets 1,907 1,652
Taxation 159 14,422
Interest income (1,076) (144)
Interest expense / commercial papers profit elements incurred 28,264 24,195
Retirement / separation benefits cost 3,153 10,696
(Gain) / Loss on disposal of property, plant and equipment - 1,150
Write-off of property, plant and equipment 2,212 8,303
Unrealised foreign exchange (gain) / loss (2,521) (647)
Changes in:
(Increase) / decrease in inventories 75,341 (150,700)
(Increase) / decrease in assets held for sale 2,118 -
(Increase) / decrease in receivables 14,819 167,432
(Increase) / decrease in amounts due from related corporations 29,382 (44,507)
Increase / (decrease) in amounts due to related corporations (6,458) 82,361
Increase / (decrease) in payables and provisions 14,696 (84,496)
Cash generated from operations 235,167 118,537
Interest / commercial papers profit elements paid (28,277) (24,429)
Interest received 1,076 144
Income taxes paid (53,481) (25,446)
Income taxes refund 10,454 11,627
Retirement / separation benefits paid (4,034) (16,468)
Net cash from operating activities 160,905 63,965
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (26,548) (49,198)
Purchase of intangible assets (973) (1,904)
(Increase) / decrease in long term assets and receivables (3,554) 910
Proceeds from disposal of property, plant and equipment 124 7,696
Net cash used in investing activities (30,951) (42,496)
CASH FLOWS FROM FINANCING ACTIVITIES
(Repayment of) / proceeds from borrowings - net (109,767) (22,455)
Dividends paid to shareholders (23,328) (23,328)
Net cash used in financing activities (133,095) (45,783)
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,141) (24,314)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 12,930 37,244
CASH AND CASH EQUIVALENTS AT END OF YEAR 26 9,789 12,930
ESSO MALAYSIA BERHADA
NN
UA
L R
EP
OR
T &
AC
CO
UN
TS
20
06
34
Notes to the Financial Statements
1. BASIS OF PREPARATION
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company are prepared under the historical cost convention except as disclosed in the summary of significant accounting policies in Note 2. The financial statements comply with the Financial Reporting Standards (FRS) approved by the Malaysian Accounting Standards Board (MASB) and the provisions of the Companies Act, 1965.
The preparation of financial statements in conformity with the MASB approved accounting standards in Malaysia and the provisions of the Companies Act, 1965 requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. These are disclosed in Note 2.
In 2006, the Company adopted the following FRS that are relevant to its operations:
FRS 2 Share-based Payment FRS 117 LeasesFRS 124 Related Party Disclosures
The adoption of FRS 117 has resulted in a change in the accounting policy as disclosed in Note 4 to the financial statements. The Directors are of the opinion that any share-based compensation arising under FRS 2 is not material to the financial statements.
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.
The Directors have applied the transitional provisions of FRS 116 on Property, Plant and Equipment when MASB first issued the standard in 2000, which allowed property, plant and equipment to be stated at their prevailing valuations less depreciation. The valuation 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 and plant and equipment are depreciated on a straight-line basis to write off the cost or valuation of the assets to their residual values, over the term of their estimated service lives. The residual values and service lives are reviewed at each 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 are capitalised.
35
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
ESSO MALAYSIA BERHAD
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(a) Property, plant and equipment (Continued)
Included in the respective property, plant and equipment classifications, is the Company's proportionate share of its interest in the joint venture assets of the Multi Product Pipeline System and related distribution terminal facilities (MPP). The Company has a 20% participating interest in these facilities. The accounting policy adopted for these jointly controlled assets is consistent with those adopted for the Company's 100% owned property, plant and equipment.
(b) Intangible assets - software
Intangible assets are stated at cost less accumulated amortisation. Computer software costs are amortised on a straight-line basis over the estimated useful life of the software, which normally falls within a range of 10 to 15 years.
(c) Impairment of assets
The carrying amounts of assets, are reviewed annually to determine whether there is any indication that the carrying amounts may not be recoverable. If such an indication of impairment exists, the carrying amount of the asset is assessed and written down immediately to its recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and value in use and is determined for the cash generating unit to which the 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.
(d) Assets held for sale
Non-current assets or disposal group are classified as being held for sale if their carrying amount is recovered principally through a sale transaction rather than through continuing use. These assets are measured at the lower of carrying amount and fair value less costs to sell upon execution of a binding sale agreement.
(e) Operating leases
Leases of assets under which a significant portion of risks and benefits of ownership over the economic life of the assets is effectively retained by the lessor are classified as operating leases. Prepaid lease rentals on service station sites made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. Payments for all other operating leases are charged to the income statement in the year to which they relate.
(f) Inventories
Crude oil and petroleum product inventories are valued at the lower of cost and net realisable value. Cost includes all applicable purchase costs and production overheads and is determined on the first-in first-out (FIFO) basis. Materials and supplies are valued at cost, determined on a weighted average basis, and a deduction is made for obsolete and slow moving stocks.
36
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(g) Trade receivables
Trade receivables are carried at anticipated realisable value less provision for impairment. Bad debts are written off in the year in which they are identified. A provision for impairment of trade receivables is made based on a review of all outstanding amounts at year end.
(h) Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents include bank balances, deposits held at call with 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.
(i) Provisions
Provisions are recognised when it is probable that an outflow of resources will be required to settle a present obligation, and when a reliable estimate of the amount can be made. The provisions are reviewed at year end and adjusted to reflect the current best estimate.
(j) 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 planThe Company's contribution to the national defined contribution plan, the Employees Provident Fund, is recognised in the income statement as incurred.
(b) Retirement benefitsThe Company operates an unfunded defined benefit retirement plan for its regular national employees. The liability for employees' retirement benefits is determined based on a periodic independent actuarial reappraisal of the plan assumptions. This is based on the schedule of benefits stipulated in the Company's retirement benefits plan. The most recent reappraisal was carried out in November 2006. The projected unit credit method is used to calculate the actuarial plan benefits based on the estimated years of service and employees' projected compensation during their last year of employment. The liability recognised in the balance sheet represents the present value of the defined 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 life of employees expected to receive the plan benefits.
(iii) Separation benefits
Separation benefits are payments due to employees as a result of the separation of employment before the normal retirement age. The liability for separation benefits is recogised when the Company's commitment is confirmed without any realistic possibility of withdrawal.
37
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
38
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(k) Share capital
Ordinary stock units with discretionary dividends are classified as equity.
(l) Dividends
Dividends on ordinary stock units are recognised as liabilities when the dividends are approved for payment.
(m) Borrowings
Borrowings are recognised based on the principal amounts expected to be repaid upon maturity. 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 term facilities are amortised over the facility period.
(n) Taxation
The taxation charge in the income statement comprises current and deferred taxes. Current taxes are calculated by applying 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 bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available to absorb the deductible temporary differences. Tax rates enacted or substantively enacted by the balance sheet date are used to calculate deferred taxes.
(o) 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 on land and buildings are recognised on an accrual basis.
(p) Research and development
Expenditures on research and development are recognised as expense except when there is sufficient certainty that the development efforts will result in future economic benefits for the Company, in which case these costs are capitalised.
(q) Foreign currencies
The functional currency of the Company is Ringgit Malaysia. Transactions arising in foreign currencies are translated into Ringgit Malaysia at the approximate rates of exchange on the transaction dates. Transactions uncompleted at the balance sheet date are translated at the closing exchange rates. Foreign currency exchange gains and losses resulting from the translation and settlement of foreign currency transactions are included in the income statement.
ESSO MALAYSIA BERHADA
NN
UA
L R
EP
OR
T &
AC
CO
UN
TS
20
06
39
3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
4. CHANGES IN ACCOUNTING POLICIES AND PRIOR YEAR ADJUSTMENTS
The Company's financial results can be significantly affected from time to time by volatility in the market
prices for crude oil and petroleum products. Since international crude oil and petroleum product prices are
denominated in US Dollars, the Company's results can also be affected by fluctuations in foreign exchange
rates. In addition, the Company can be affected by fluctuations in market interest rates as the Company's
operations are financed through a mixture of retained profits and borrowings. The borrowings are generally
based on floating interest rates unless opportunities arise for competitive fixed rate financing.
Given its large size and the long-term nature of its business, we expect that the Company's exposure
to these risks will be moderated over time. As such, the Company discourages the use of financial
derivative instruments to manage these risks. The Company believes that the administrative and financial
costs to execute and control the use of derivatives typically outweigh the potential benefits. Any derivative
transaction would require senior management approval and periodic review. Speculative derivative activity
is strictly prohibited.
As a result of the above policies, the Company's purchase and sales transactions and foreign
exchange transactions are generally based on market prices and exchange rates in effect on the day
of each transaction. Interest rates on Company borrowings generally move with daily changes in the
applicable market interest rates.
In addition to the above, the Company is also exposed to credit risk from its trade receivables from
customers. The Company manages this risk by strict adherence to a set of credit policies and
procedures whereby customers are thoroughly assessed and risk rated. Daily credit monitoring is an
integral part of the credit management process that is administered within the Company's financial and
operating computer system.
The Company is consistently in a net current liability position as retail sales to service stations are on
cash terms whilst purchases, which are mostly intercompany in nature, are on credit terms. This
improves the Company's return on capital employed by effectively reducing its exposure to
uncollected trade receivables.
In addition, the Company continues to optimise the mix in its borrowing facilities to maximize financing
flexibility whilst reducing financing cost. These facilities are short term in nature unless opportunities
arise to secure favourable longer term borrowing facilities. A significant component of these short term
borrowings are available to the Company on a long term basis as described in Note 22.
(a) Change in Accounting Policy
The adoption of FRS 117 Leases has resulted in the reclassification of leasehold land from
Property, Plant and Equipment to Prepaid Lease Rentals. In accordance with the standard's
transitional provision, the Company has adopted this standard retrospectively and has retained the
unamortised revalued amount as the carrying amount in the books, for the leasehold lands that had
been previously revalued. The last revaluation was conducted in 1982.
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
4. CHANGES IN ACCOUNTING POLICIES AND PRIOR YEAR ADJUSTMENTS (Continued)
5 . REVENUES
6. FINANCE COST
b) Prior Year Adjustment
The comparative financial statements were restated as follows, consistent with the retrospective application of FRS 117:
As previously Effects ofreported FRS 117 As restated
RM'000 RM'000 RM'000
Balance Sheet as at31 December 2004Property, plant and equipment 1,090,092 (118,375) 971,717Long term assets and receivables 207,596 118,375 325,971
Income statement for the year ended31 December 2005Depreciation on property, plant and equipment 70,782 (1,690) 69,092Rental expense for land and buildings 22,407 1,690 24,097Loss on disposal of property, plant and equipment 2,328 (1,178) 1,150
Balance Sheet as at31 December 2005Property, plant and equipment 1,048,559 (116,830) 931,729Long term assets and receivables 208,100 116,830 324,930
2006 2005RM'000 RM'000
Related corporations sales 4,572,199 4,227,421Third party sales 4,749,015 4,027,468Turnover 9,321,214 8,254,889
Interest income 851 144Interest income from related parties 225 -Licence fees on land and buildings 14,154 14,254
9,336,444 8,269,287
Turnover represents the value of goods sold net of Government duties and taxes of RM31,082,000(2005: RM6,212,000).
2006 2005RM'000 RM'000
Interest and profit elements on borrowings (Note 22) 13,565 18,080Interest on borrowings from related parties 14,699 6,115
28,264 24,195
ESSO MALAYSIA BERHAD
40
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
7. PROFIT BEFORE TAX
8. EMPLOYEE BENEFITS EXPENSE
9. DIRECTORS' REMUNERATION
2006 2005RM'000 RM'000
The profit before tax is arrived at aftercharging/(crediting) the following items:
Depreciation on property, plant and equipment 66,108 69,092Amortisation of intangible assets 1,907 1,652Auditors' remuneration:
Current year 157 117Underprovision in prior year 68 -
Write-back of provision for customer loyalty programmes (2,402) (610)Inventory write-down to net realisable value 252 4,983Cost of inventories recognised as an expense 8,958,242 7,873,459Provision for impairment and write-off
of receivables 1,425 1,662Bad debts recovered (15) (99)Foreign exchange (other than on borrowings)
Realised foreign exchange gain (15,243) (212)Unrealised foreign exchange (gain)/loss (2,521) (647)
Rental expense for land and buildings 20,889 24,097Hire of plant and machinery 282 270Research and development expense 4,222 3,532Loss on disposal of property, plant and
equipment - 1,150
2006 2005RM'000 RM'000
Wages, salaries and bonus 33,795 38,914Defined contribution retirement plan -
Employees Provident Fund 4,006 4,708Provision for retirement benefits -
Defined benefit retirement plan (Note 20) 2,679 2,860Separation benefits 474 7,836Other employee benefits
45,115 58,363
2006 2005RM'000 RM'000
Non-Executive Directors:Fees 90 90
Executive Directors:Short-term employee benefits 1,190 1,081Retirement benefits 231 219Benefits-in-kind 29 34
1,540 1,424
Included in the above is the Company's allocation of remuneration of Executive Directors employed by related corporations amounting to RM659,000 (2005: RM490,000). The balance represents remuneration for Directors employed by the Company included in Note 8.
4,161 4,045
41
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
10. TAX EXPENSE
11. EARNINGS PER ORDINARY STOCK UNIT
2006 2005RM'000 RM'000
Current taxation 8,205 16,750(Over) / under accrual in prior years (30) (133)Real Property Gains Tax 49 -
Deferred taxation (Note 23)Origination and reversal of temporary differences (513) (2,195)Reduction in statutory tax rate (7,552) -
159 14,422
The Company's effective tax rate differs from the statutory tax rate and is reconciled as follows:
2006 2005% %
Statutory tax rate 28 28Expenses not deductible for tax purposes 77 16Real Property Gains Tax 3 -Effect on deferred tax of reduction in statutory
tax rate (105) -Reversal of temporary differences no
longer required - (1)3 43
Impact from settling prior year taxesthat were under provided (1) (1)
Effective tax rate 2 42
In December 2006, the government gazetted a reduction in the statutory tax rate to 27% for the year ended December 31, 2007. The tax rate reduction to 26% from 2008 that was included in the budget speech has not been gazetted yet, but is considered substantially enacted. The effects on deferred taxation of these reductions have been included in the financial statements ended December 31, 2006.
Effective tax rates on non-deductible expenses primarily reflect the varying relationship of the non-deductible expenses (which are relatively fixed over time) to changing levels of profit or loss from period to period.
Earnings per ordinary stock unit is calculated by dividing the net profit or loss attributable to shareholders by the number of ordinary stock units in issue during the year.
2006 2005
Net profit attributable to shareholders (RM'000) 7,063 19,728Number of ordinary stock units in issue ('000) 270,000 270,000Basic earnings per stock unit (sen) 2.6 7.3
ESSO MALAYSIA BERHAD
42
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
43
12. PROPERTY, PLANT AND EQUIPMENT
Buildings Plant CapitalFreehold and and project land improvements equipment in-progress TotalRM'000 RM'000 RM'000 RM'000 RM'000
Net book valueAt January 1, 2006 205,947 157,734 544,866 23,182 931,729Additions - 2,963 6,551 16,988 26,502Transfers from affiliated
companies - - 46 - 46Reclassify from intangible
assets - - - 15 15Write-offs - (296) (1,911) (5) (2,212)Transfers to affiliated
companies - - (124) - (124)Reclassify to assets
held for sale (716) - (500) - (1,216)Reclassify to prepaid
lease rentals (1,680) - - - (1,680)Reclassifications - 7,821 11,237 (19,058) -Depreciation charged to
income statement - (13,636) (52,472) - (66,108)
Net book valueAt December 31, 2006 203,551 154,586 507,693 21,122 886,952
At December 31, 2006Valuation-1982 57,278 15,893 - - 73,171Cost-Post 1982 net additions 146,273 285,154 1,210,507 21,122 1,663,056Accumulated depreciation - (146,461) (702,814) - (849,275)
Net book value 203,551 154,586 507,693 21,122 886,952
Net book value atDecember 31, 2006 if assetshad been carried at cost less depreciation: 153,457 154,586 507,694 21,122 836,859
At December 31, 2005Valuation-1982 57,994 16,289 - - 74,283Cost-Post 1982 net additions 147,953 275,309 1,209,389 23,182 1,655,833Accumulated depreciation - (133,864) (664,523) - (798,387)
Net book value 205,947 157,734 544,866 23,182 931,729
Net book value atDecember 31, 2005 if assetshad been carried at cost less depreciation: 155,254 157,725 544,866 23,182 881,027
Included in the above Property, Plant and Equipment is the net book value for the Company's 20% participating interest in the joint venture assets of MPP amounting to RM73,571,000 (2005: RM76,748,000).
43
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
13. LONG TERM ASSETS AND RECEIVABLES
14. INTANGIBLE ASSETS - SOFTWARE
15. INVENTORIES
16. ASSETS HELD FOR SALE
2006 2005RM'000 RM'000
Prepaid lease rentals and deposits 318,047 309,864Loans to dealers 4,019 4,657Employee receivables 1,386 1,491Others 8,843 8,918
332,295 324,930
Included in the above prepaid lease rentals are leasehold lands amounting to RM21,918,000 (2005: RM22,153,000) for the Company's 20% participating interest in the joint venture assets of MPP.
2006 2005RM'000 RM'000
Net book value at January 1 5,680 5,428Additions 973 1,904Reclassify to property, plant and equipment (15) -Amortisation charged to income statement (1,907) (1,652)Net book value at December 31 4,731 5,680
At December 31Cost 11,070 10,112Accumulated amortisation (6,339) (4,432)Net book value 4,731 5,680
The Company has undertaken major projects to upgrade and integrate its computer systems. The development and software costs for completed projects have been capitalised.
2006 2005RM'000 RM'000
Crude oil 158,638 209,806Petroleum products 217,592 241,911Materials and supplies 8,292 8,146
384,522 459,863
2006 2005RM'000 RM'000
Freehold land - 902Leasehold land - 2,131
- 3,033
During the year, the sale of assets amounting to RM2,131,000 was aborted and the assets were reclassified to prepaid lease rentals.
ESSO MALAYSIA BERHAD
44
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
17. RECEIVABLES
18. PAYABLES
2006 2005RM'000 RM'000
Trade receivables 89,559 81,051Less: Provision for impairment of receivables (4,105) (4,223)
85,454 76,828Others 12,406 35,838
97,860 112,666
Credit terms of trade receivables range from payment in advance to 90 days. All the receivables are in Ringgit Malaysia.
At the balance sheet date, the concentration of credit risk with respect to trade receivables is mainly from Industrial and Lubricants customers. The provision for impairment is considered sufficient to cover collection losses.
Other receivables are generally those of a non-trade nature. There were no subsidies receivable fromthe Government of Malaysia under the Automatic Pricing Mechanism as at December 31, 2006 (2005: RM18,913,000).
2006 2005RM'000 RM'000
Trade payables 128,119 118,480Other payables 60,799 43,838
188,918 162,318
The currency exposure profile of trade payables is as follows:
Ringgit Malaysia 126,497 118,372US Dollar 1,622 108
128,119 118,480
The credit terms for the Company's trade and other payables are generally 30 days.
Other payables are generally those of a non-trade nature that arose from other than the purchase of crude and petroleum products. Included in other payables is an amount of RM1,207,000 (2005: RM1,115,000) for payroll liabilities.
45
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
ESSO MALAYSIA BERHAD
46
19. PROVISION
20. RETIREMENT BENEFITS OBLIGATIONS
This comprises customer loyalty programme liability as follows:2006 2005
RM'000 RM'000
At January 1 2,402 3,012Net (credit) / charge to the income statement (2,402) (610)At December 31 - 2,402
Customers participating in the programme are awarded points for purchases at participating service stations and these points are redeemable for the Company's products or gift vouchers. A provision has been made for the unredeemed and unexpired loyalty points based on past redemption experience.
The Company introduced a new loyalty programme called Smiles Driver Rewards in June 2005. This new programme is operated by a related corporation and enables participating customers to earn and redeem loyalty points at both the Esso and Mobil service stations. The cost of the programme is charged to the Company as intercompany charges.
The previous loyalty programme ceased in February 2006 and the provision associated with the unredeemed points was reversed.
The Company operates an unfunded defined benefit retirement plan for its regular national employees. The plan assumptions are reappraised by an independent actuary every three years. The latest actuarial reappraisal was carried out in November 2006 and this exercise showed that the book provision is sufficient to meet the actuarially determined value of plan benefits.
The changes in the provision for retirement benefits under the defined benefit plan during the year were as follows:
2006 2005RM'000 RM'000
At January 1 50,708 55,508Net expense charged to the income statement 2,679 2,860Payments to separating employees and retirees (3,560) (7,362)Employees transferred to affiliated companies (309) (298)At December 31 49,518 50,708
The amounts recognised in the balance sheet are reconciled as follows:
Present value of unfunded obligations 35,323 34,869Unrecognised actuarial gains 14,195 15,839Net liability 49,518 50,708
Reflected on the balance sheet as:Current 260 1,198Non-current 49,258 49,510
49,518 50,708
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
20. RETIREMENT BENEFITS OBLIGATIONS (Continued)
21. AMOUNTS DUE FROM/(TO) RELATED CORPORATIONS
22. BORROWINGS (UNSECURED)
The expense recognised in the income statement is as follows:2006 2005
RM'000 RM'000
Current service cost 1,624 1,722Interest cost 2,289 2,501Net actuarial gains recognised (1,234) (1,363)Total, included in employee benefits expense (Note 8) 2,679 2,860
The charge to the income statement is included in the operating expenses and administrative and other expenses.
The principal actuarial assumptions used were as follows:2006 2005
% %
Discount rate 6.3 6.3Expected rate of salary increases 5.2 4.7
The discount rate used is based on investment grade private debt securities with tenure approximating the tenure of the pension liability. The salary growth rate takes into account market factors such as inflation rate.
A 1% higher (lower) discount rate would decrease (increase) the pension liability by RM200,000 (RM300,000).
A 1% higher (lower) salary growth rate would increase (decrease) the pension liability by RM800,000 (RM700,000).
The currency exposure profile of amounts due from related corporations is as follows:
2006 2005RM'000 RM'000
Ringgit Malaysia 193,198 262,475US Dollar 40,322 427
233,520 262,902
The currency exposure profile of amounts due to related corporations is as follows:
Ringgit Malaysia (1,943) (4,574)US Dollar (396,648) (400,166)
(398,591) (404,740)
These balances are unsecured and are generally settled within one month.
2006 2005RM'000 RM'000
Floating interest rate loans from related corporations 333,778 323,545Short-term notes 300,000 300,000Bankers acceptances - 120,000
633,778 743,545
47
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
22. BORROWINGS (UNSECURED) (Continued)
23. DEFERRED TAXATION
The floating interest rate loans from related corporations comprise the following :
(i) A US$100 Million facility secured with ExxonMobil Services (Labuan) Limited. This is a one-year facility with an option for annual rollover at each year-end that could extend the facility until 2011. The Company has rolled-over the US$80 Million (2005: US$50 Million) drawndown on this loan for another year to December 31, 2007. The principal outstanding in Ringgit Malaysia is fixed at the time of loan draw down thereby insulating the Company against foreign currency fluctuations.
(ii) A RM185 Million loan/deposit facility secured in 2005 with ExxonMobil Exploration and Production Malaysia Inc. (EMEPMI). The facility allows the Company to borrow short-term loans or place short-term deposits with EMEPMI to better manage cash surpluses and shortages. This is a one-year facility with an option for annual renewal of the facility at each year-end.
In September 2006, EMEPMI assigned its rights and benefits thereunder to ExxonMobil Malaysia Sdn. Bhd. The Company has renewed the facility for another year to December 31, 2007.
The short-term notes were issued under a RM300 Million 7-year Islamic Commercial Papers (ICP) Programme based on the principles of Bai' Inah. The ICP Programme which is available until May 2011, allows for the Company to issue short-term notes of between 14 days and 12 months tenure through competitive tender by the tender panel members or through private placement.
Interest rates and profit elements for the Company's borrowings and deposit placements depend on the lenders' cost of funds, and generally vary with the Kuala Lumpur interbank rates. The interest rates/profit elements on loans and deposits ranged from 2.9% to 4.0% per annum during the year (2005: 2.7% to 4.1%).
2006 2005
RM'000 RM'000
At January 1 109,573 111,768Credited to the income statement (Note 10) (8,065) (2,195)At December 31 101,508 109,573
The components of deferred tax amounts after appropriate offsetting are as follows:
Deferred tax liabilities:subject to income tax 99,003 107,038subject to real property gains tax 2,505 2,535
101,508 109,573
The components of deferred tax assets and liabilities prior to offsetting are as follows:
Subject to income taxDeferred tax assets:Provision for retirement benefits (8,004) (8,964)Others (171) (862)
(8,175) (9,826)
Deferred tax liabilities:Excess of capital allowances over depreciation 106,497 116,683Others 681 181
107,178 116,864
Subject to real property gains taxDeferred tax liabilities:Property, plant and equipment 2,505 2,535
ESSO MALAYSIA BERHAD
48
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
23. DEFERRED TAXATION (Continued)
24. SHARE CAPITAL
25. RESERVES
26. CASH AND CASH EQUIVALENTS
27. SIGNIFICANT RELATED PARTY DISCLOSURES
At year end 2006, the Company applied the tax rate of 27% on the temporary differences that are expected to be reversed in 2007, and 26% on the balance of the temporary differences.
2006 2005
RM'000 RM'000Authorised:300,000,000 ordinary shares of RM0.50 each 150,000 150,000
Issued and fully paid:270,000,000 ordinary stock units of RM0.50 each 135,000 135,000
2006 2005
RM'000 RM'000
Capital redemption reserve (non-distributable) 8,000 8,000Retained profits (distributable) 490,807 507,072
498,807 515,072
The Company has sufficient tax credits under Section 108 of the Income Tax Act, 1967 to frank up to approximately RM422,954,000 (2005: RM335,767,000) of the retained profits as at December 31, 2006 if paid out as dividends. Additionally, subject to the approval of the tax authorities, the Company has a tax exempt account available to frank tax exempt dividends up to approximately RM208,000,000 (2005: RM207,000,000).
2006 2005
RM'000 RM'000
Deposit, cash and bank balances 16,787 19,740Less: Deposit with a licensed bank included in the above (6,998) (6,810)
9,789 12,930
Deposit with a licensed bank represents monies held in accordance with the sale and purchase agreement relating to the Company's purchase of a participating interest in the MPP. The amount will be utilised for payment to the Inland Revenue Board in respect of the vendors' real property gains taxes.
The Company is a subsidiary of ExxonMobil International Holdings Incorporated, whose ultimate holding company is Exxon Mobil Corporation. Both corporations are incorporated in the United States of America. Exxon Mobil Corporation is regarded by the Directors as the ultimate holding company of the Company. Therefore, Exxon Mobil Corporation and its other subsidiaries are considered as related parties to the Company.
In the normal course of business, the Company undertakes, on an arms-length basis, a variety of transactions with these related parties. Such transactions include the sales and purchases of products and the sharing of services and facilities at cost apportioned on a mutually agreed basis.
In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions. These were transacted with Exxon Mobil Corporation's other subsidiaries.
49
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
27. SIGNIFICANT RELATED PARTY DISCLOSURES (Continued)
28. COMMITMENTS FOR CAPITAL EXPENDITURES
29. CONTINGENT LIABILITIES (UNSECURED)
2006 2005RM'000 RM'000
Purchases of crude oil from ExxonMobil Exploration and Production Malaysia Inc. 5,599,786 5,862,083
Purchases of petroleum products from: ExxonMobil Asia Pacific Pte. Ltd. 1,843,785 1,318,219ExxonMobil Malaysia Sdn. Bhd. 704,167 581,664Others 37,661 -
Sales of petroleum products to:ExxonMobil Asia Pacific Pte. Ltd. 1,756,307 1,936,348ExxonMobil Malaysia Sdn. Bhd. 2,406,775 1,804,725ExxonMobil Borneo Sdn. Bhd. 384,753 482,746Others 24,364 -
Central management, shared facilities and services costsmainly between ExxonMobil Asia Pacific Pte. Ltd., ExxonMobil Business Support Centre Malaysia Sdn. Bhd.and ExxonMobil Exploration and Production Malaysia Inc.
Charged from: 82,122 81,127Charged to: (1,506) (16,746)
80,616 64,381
At year end 2006 and 2005 respectively, the amounts due to and from related corporations are mainly in relation to the above described transactions.
Directors of the Company who are the key management personnel are also considered as related parties to the Company. Their compensation are disclosed in Note 9 to the financial statements.
2006 2005RM'000 RM'000
Commitments for the purchase of property, plantand equipment authorised by the Directors butnot provided for in the financial statements:
Contracted 11,497 12,522Not contracted 1,471 2,407
12,968 14,929
Included in the above are contracted commitments for the joint venture assets of the MPP amounting to RM5,424,000 (2005: RM8,008,000).
2006 2005RM'000 RM'000
Guarantees to third parties to secure housing andcar loans for employees under the Company'sbenefits plan - 1
Litigation and other claims against the Company 323 150323 151
ESSO MALAYSIA BERHAD
50
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
29. CONTINGENT LIABILITIES (UNSECURED) (Continued)
30. LEASING COMMITMENTS
31. COMPARATIVE FIGURES
32. APPROVAL OF FINANCIAL STATEMENTS
Litigation and other claims against the Company in 2006 comprise a court case filed by a vendor on a dispute over a land deal. In 2005, the amount included a court case filed by a haulage contractor for alleged damages in relation to a contract termination.
In addition to the above, EMB's sister affiliate, ExxonMobil Exploration and Production Malaysia Inc. (EMEPMI), has been in litigation with the Malaysian Inland Revenue Board (MIRB) since 1999.The litigation primarily involves disallowed income tax deductions for withholding tax payments on services provided to EMEPMI by other Exxon Mobil affiliates during the tax years 1983 to 1991. The Company agreed in 1999 with the MIRB to be bound by the final outcome of the litigation between EMEPMI and MIRB as the issues and facts are similar. In 2003, the High Court, sitting as an appellate court, dismissed EMEPMI's appeal on the matters. EMEPMI subsequently filed a notice of appeal to, and is currently awaiting a hearing before the Court of Appeal. The amount of the contingent liability in relation to this case is not disclosed as it is still a subject to be determined by the Court and such diclosure may be prejudicial to the Company's dispute on the subject matter. In the event that the Court of Appeal were to rule against EMEPMI, such ruling is not expected to have a materially adverse effect on the Company's operations or financial condition.
Litigation and other claims are reviewed by legal experts to assess the likelihood of the Company's liability.
2006 2005RM'000 RM'000
As at balance sheet date, leasing commitments under non-cancellable operating leases are as follows:
Within 1 year 12,854 10,034After 1 year but within 5 years 41,480 24,304After 5 years 2,531 7,950
56,865 42,288
Leasing commitments where milestone payments are dependent upon approvals from relevant authoritiesor the occurrence of events as specified under the said lease agreements 17,130 40,690
The 2005 financial statements have been restated upon adoption of the FRS as indicated in Note 1 to ensure comparability with the 2006 financial year.
The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on February 26, 2007.
51
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
STATEMENT BY DIRECTORS PURSUANT TOSECTION 169(15) OF THE COMPANIES ACT, 1965
We, Liam M. Mallon and Dato' Zainal Abidin Putih, two of the Directors of Esso Malaysia Berhad, state that in the opinion of the Directors, the financial statements set out on pages 31 to 51 are drawn up so as to give a true and fair view of the state of affairs of the Company as at December 31, 2006 and of the results of the Company and its cash flows for the year ended on that date in accordance with MASB approved accounting standards in Malaysia and the provisions of the Companies Act, 1965.
In accordance with a resolution of the Board of Directors dated February 26, 2007.
...............................Liam M. Mallon
.........................................................Y.Bhg. Dato' Zainal Abidin Putih
Kuala Lumpur,February 26, 2007
STATUTORY DECLARATION PURSUANT TOSECTION 169(16) OF THE COMPANIES ACT, 1965
I, Zain C. Willoughby, the Director primarily responsible for the financial management of Esso Malaysia Berhad, do solemnly and sincerely declare that the financial statements set out on pages 31 to 51, are to the best of my knowledge and belief correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.
.......................................Zain C. Willoughby
Subscribed and solemnly declared by the above named Zain C. Willoughby at Kuala Lumpur in Malaysia on February 26, 2007 before me,
.......................................Commissioner for OathsKuala Lumpur
ESSO MALAYSIA BERHAD
52
AN
NU
AL
RE
PO
RT
& A
CC
OU
NT
S 2
00
6
Information on Stockholdings As at March 19, 2007
Class of stocks: Ordinary stock unit (RM0.50)Voting right: One vote per stock unit
Size of No. of % of Number of % of Issued Holdings Stockholders Stockholders Units Held Capital
Less than 100 292 2.5554 15,024 0.0056100 - 1,000 3,956 34.6198 3,712,793 1.3751
1,001 - 10,000 6,041 52.8660 24,025,549 8.8984
10,001 - 100,000 1,071 9.3725 28,201,440 10.4450100,001 - 13,499,999 66 0.5776 38,545,194 14.2760
13,500,000 and above 1 0.0088 175,500,000 65.0000
TOTAL 11,427 100.00 270,000,000 100.0000
THIRTY LARGEST STOCKHOLDERSAs at March 19, 2007
Name No. of % of IssuedUnits Held Capital
1. ExxonMobil International Holdings Inc. 175,500,000 65.0000
2. Employees Provident Fund Board 10,028,400 3.71423. Mayban Securities Nominees (Tempatan) Sdn Bhd 3,282,700 1.2158
(UOB-Kay Hian Pte Ltd for Deva Dassan Solomon)
4. Amanah Raya Nominees (Tempatan) Sdn Bhd 2,312,000 0.8563(Skim Amanah Saham Bumiputera)
5. Johan Enterprise Sdn Bhd 1,660,000 0.6148
6. Kumpulan Wang Amanah Pencen 1,510,000 0.55927. Universiti Malaya 1,330,000 0.49268. CIMSEC Nominees (Asing) Sdn Bhd 1,143,204 0.4234
(Exempt AN for CIMB-GK Securities Pte Ltd (Retail Clients))
9. Permodalan Nasional Berhad 1,075,000 0.3981
10. Citigroup Nominees (Asing) Sdn Bhd 881,500 0.3265
(CBNY for DFA Emerging Markets Fund)
11. Tham Tatt Yow @ Tham Ah Chye 850,000 0.3148
12. Chen Chin Peng 825,500 0.305713. Chen Chin Peng 807,000 0.298914. RHB Nominees (Tempatan) Sdn Bhd 673,900 0.2496
(RHB Asset Management Sdn Bhd for Pertubuhan Kebangsaan Melayu Bersatu atau UMNO)
15. Asia Life (M) Berhad 660,000 0.2444
(As beneficial owner (PF))
16. Yim Why Meng @ Zen Why Meng 500,000 0.185217. Quarry Lane Sdn Bhd 500,000 0.1852
18. Eng Guan Chan Sdn Bhd 488,800 0.181019. HLG Nominees (Asing) Sdn Bhd 473,270 0.1753
(Exempt AN for UOB-Kay Hian Pte Ltd (A/C Clients))
20. Yeoh Kean Hua 450,000 0.166721. Citigroup Nominees (Asing) Sdn Bhd 354,900 0.1314
(CBNY for DFA Emerging Markets Small Caps Series)
22. Asia Life (M) Berhad 347,000 0.1285(As beneficial owner (NPF))
23. Neoh Choo Ee & Company Sdn Bhd 340,000 0.1259
24. Citigroup Nominees (Asing) Sdn Bhd 315,400 0.1168(Exempt AN for Merrill Lynch Pierce Fenner & Smith Incorporated (Foreign))
25. HDM Nominees (Asing) Sdn Bhd 313,640 0.1162(UOB-Kay Hian Pte Ltd for Ong Yoke Khee)
26. Kim Poh Holdings Sdn Bhd 300,000 0.1111
27. OSK Nominees (Tempatan) Sdn Bhd 298,100 0.1104(Pledged Securities Account for Goh Sin Bong)
28. New Tong Fong Plywood Sdn Bhd 280,000 0.1037
29. Citigroup Nominees (Asing) Sdn Bhd 273,000 0.1011(Pledged Securities Account for Deva Dassan Solomon (473163))
30. Ong Boo Goh 265,000 0.0981208,038,314 77.0512
SUBSTANTIAL STOCKHOLDER
As at March 19, 2007
1. ExxonMobil International Holdings Inc 175,500,000 65.0000
53
30
ESSO MALAYSIA BERHAD
54
FEDERAL TERRITORY Tenure L.A. (sq m) Description of Properties Acquisition Date Expiry Date Age
Lot 18113 Mukim Petaling, Kuala Lumpur (EWLINK) F 2,974 Service Station 01.01.2004 3 6,433,359
Lot 26494, Mukim Petaling, Wilayah Persekutuan F 5,669 Service Station 01.05.1995 12 6,025,748
Lot 199 & 200, Section 96, Kuala Lumpur F 2,017 Service Station 01.08.1993 14 5,352,813
SELANGOR
HSD 72700 & 72701 MK Sg. Buloh, Esso Meru 2 F 3,697 Service Station 30.04.2002 5 5,389,331
Esso Jln Kebun South Bound, Batu 3 Puchong,
Shah Alam L 2,787 Service Station 31.12.2001 30.06.2099 11 6,394,623
Esso Puncak Jalil H.S.D(D) 201983
P.T.62357 Mukim & District of Petaling, Selangor L 4,047 Service Station 06.01.2004 09.06.2103 3 6,392,032
PENANG
Lots 95-125, 128, Lot 2328-2338, Bagan Luar F 43,780 Storage & Dist. Plant 01.12.1962 45 11,309,559
Esso Jalan Jelawat L 3,693 Service Station 01.07.2003 18.08.2073 4 7,017,441
NEGERI SEMBILAN
Lots 2645 & 2647, Mukim of Port Dickson
(Lot 2646 & 2648), 1926-1930, 1593-1595, 1805,
1838, 1803, 1836, 1757, 2278 & 1222,
Mukim Port Dickson F 1,631,970 Refinery 01.06.1984 23 11,170,079
MPP and KVDT L 784,000 MPP/KVDT Facilities 01.03.2001 01.02.2100 6 19,544,529
Net Book Value
List of Major Properties Owned
NOTICE IS HEREBY GIVEN that the forty-eighth Annual General Meeting of the Company will be held at the TRAINING CENTRE, LEVEL 18, MENARA EXXONMOBIL, KUALA LUMPUR CITY CENTRE, 50088 KUALA LUMPUR on Wednesday, May 23, 2007 at 10:30a.m. for the purpose of transacting the following business:
1. To receive and adopt the Company's Audited Accounts for the year ended December 31, 2006 and the Directors' and Auditors' Reports thereon.
2. To approve the declaration of a final dividend of 12 sen less Malaysian Income Tax at 27% per ordinary stock unit of 50 sen each for the year ended December 31, 2006.
3. To re-elect Encik Abu Bakar Siddik, a Director retiring in accordance with Articles 104 and 105 of the Company's Articles of Association.
4. To re-elect Mr. Liam M. Mallon, a Director retiring in accordance with Article 109 of the Company's Articles of Association.
5. To approve the payment of Directors’ fees for the Independent Non-Executive Directors.
6. To re-appoint Messrs. PricewaterhouseCoopers as Auditors of the Company and to authorise the Directors to determine their remuneration.
7. To transact any other ordinary business of the Company.
NOTICE OF BOOK CLOSURE
NOTICE IS HEREBY GIVEN that stockholders who are registered in the Register of Members and Record of Depositors as at the close of business on June 1, 2007, shall be entitled to the final dividend which, if approved, will be paid on June 20, 2007.
A depositor shall qualify for entitlement only in respect of:
a) Securities transferred to the Depositor’s Securities Account before 4.00p.m. on June 1, 2007 in respect of transfers;
b) Securities deposited into the Depositor's Securities Account before 12:30p.m. on May 30, 2007 in respect of securities which are exempted from mandatory deposit; and
c) Securities bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad.
By order of the Board Puan Sri Junaidah Mohd Said (LS0008614)Manoj Devadasan (LS0006885)
Joint Company Secretaries
Kuala LumpurApril 23, 2007
Note:A member of the Company entitled to attend and vote at the general meeting is entitled to appoint a proxy to attend and vote instead of the member. A proxy need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965, shall not apply to the Company. Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary stock units of the Company, standing to the credit of the said securities account. The instrument appointing a proxy must be deposited at the Share Registrar's office at Tenaga Koperat Sdn Bhd, 20th Floor, Plaza Permata (formerly known as IGB Plaza), Jalan Kampar, off Jalan Tun Razak, 50400 Kuala Lumpur, not less than 48 hours before the time set for the meeting.
On the day of the Annual General Meeting:
1. Registration counters (located at the Ground Floor of Menara ExxonMobil) will be opened from 9:00 a.m. and will close at 10:20 a.m.
2. Refreshments will be served before the Annual General Meeting at the Eatery located on Level 6 of Menara ExxonMobil, from 9:00 a.m. to 10:20 a.m.
55
Notice of Annual General Meeting
STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING
1. Directors standing for re-election
(i) Encik Abu Bakar Siddik retires by rotation and is eligible for re-election pursuant to Articles 104 and 105 of the Company's Articles of Association.
(ii) Mr. Liam M. Mallon appointed since the last Annual General Meeting, retires, and is eligible for re-election pursuant to Article 109 of the Company's Articles of Association.
2. Details of Directors standing for re-election
(i) Profiles
The profiles of the Directors standing for re-election are set out in pages 12 and 13 of this Annual Report.
(ii) Statement of shareholdings
None of the Directors standing for re-election held shares in the Company.
(iii) Family relationship
None of the Directors standing for re-election have any family relationship with any Director and/or major shareholder of the Company.
(iv) Conflict of interest
None of the Directors standing for re-election have any conflict of interest with the Company.
(v) Conviction for offences (excluding traffic offences)
None of the Directors standing for re-election have been convicted for offences within the past 10 years.
56
ESSO MALAYSIA BERHAD
ADALAH DENGAN INI DIBERITAHU bahawa Mesyuarat Agung Tahunan yang ke-empat puluh lapan bagi Esso Malaysia Berhad akan diadakan di PUSAT LATIHAN, ARAS 18, MENARA EXXONMOBIL, KUALA LUMPUR CITY CENTER, 50088 KUALA LUMPUR pada hari Rabu, 23 Mei 2007 jam 10:30 pagi dengan tujuan mengendalikan urusan-urusan berikut:
1. Menerima dan meluluskan akaun-akaun Syarikat yang telah diaudit bagi tahun berakhir 31 Disember 2006, Lapuran Pengarah serta Lapuran Juruaudit mengenainya.
2. Meluluskan pengisytiharan dividen akhir sebanyak 12 sen tertakluk kepada cukai pendapatan Malaysia pada kadar 27% untuk setiap unit stok biasa yang bernilai 50 sen seunit bagi tahun berakhir 31 Disember 2006.
3. Memilih semula Encik Abu Bakar Siddik, Pengarah yang bersara mengikut Artikel 104 dan Artikel 105 Tataurusan Pertubuhan Syarikat.
4. Memilih semula Encik Liam M. Mallon, Pengarah yang bersara mengikut Artikel 109 Tataurusan
Pertubuhan Syarikat.
5. Meluluskan ganjaran Pengarah-pengarah Bebas bukan Eksekutif.
6. Melantik semula Tetuan PricewaterhouseCoopers sebagai Juruaudit Syarikat dan memberi kuasa kepada Pengarah-pengarah untuk menetapkan imbuhan mereka.
7. Menguruskan lain-lain urusan biasa Syarikat.
NOTIS PENUTUPAN BUKU-BUKU
DENGAN INI DIBERITAHU bahawa pemegang-pemegang saham yang berdaftar di buku daftar ahli Syarikat dan Rekod Pendeposit pada akhir perniagaan, 1 Jun 2007, adalah layak untuk menerima dividen akhir dimana, jika diluluskan, akan dibayar pada 20 Jun 2007.
Seseorang pendeposit hanya layak menerima dividen berhubung dengan:
a) Sekuriti-sekuriti yang dipindahkan kepada Akaun Sekuriti Pendeposit sebelum 4:00 petang pada 1 Jun 2007 bagi pemindahan biasa;
b) Sekuriti-sekuriti yang didepositkan di dalam Akaun Sekuriti Pendeposit sebelum 12:30 petang pada 30 Mei 2007 bagi sekuriti-sekuriti yang dikecualikan dari deposit mandatory; dan
c) Sekuriti-sekuriti yang dibeli di Bursa Malaysia Securities Berhad berserta hak kelayakan menurut Peraturan Bursa Malaysia Securities Berhad.
Dengan Perintah Lembaga Pengarah Puan Sri Junaidah Mohd Said (LS 0008614)
Manoj Devadasan (LS0006885) Setiausaha-setiausaha Bersama Syarikat
Kuala Lumpur23 April 2007
Nota:Seorang ahli Syarikat yang berhak hadir dan mengundi di mesyuarat agung adalah berhak melantik seorang proksi untuk hadir bagi pihak ahli. Proksi itu tidak semestinya seorang ahli Syarikat dan peruntukan Seksyen 149(1)(b) Akta Syarikat 1965 tidak berkenaan ke atas Syarikat. Seorang ahli yang juga nomini yang sah seperti yang didefinisikan di bawah Securities Industry (Central Depositories) Act 1991 boleh melantik sekurang-kurangnya seorang proksi untuk setiap akaun sekuriti yang dipegang dengan unit stok biasa Syarikat, yang dikreditkan di dalam akaun sekuriti tersebut. Surat perlantikan proksi hendaklah diserahkan di pejabat pendaftar saham iaitu di Tenaga Koperat Sdn. Bhd., Tingkat 20, Plaza Permata (dahulu dikenali sebagai IGB Plaza), Jalan Kampar, off Jalan Tun Razak, 50400 Kuala Lumpur tidak lewat dari 48 jam sebelum waktu mesyuarat yang telah ditetapkan.
Pada hari Mesyuarat Agung Tahunan:
1. Kaunter pendaftaran (bertempat di Aras Bawah, Menara ExxonMobil) akan dibuka bermula pada jam 9:00 pagi dan ditutup pada jam 10:20 pagi.
2. Jamuan akan disediakan sebelum Mesyuarat Agung Tahunan bertempat di Dewan Makan, Aras 6, Menara ExxonMobil bermula pada jam 9:00 pagi hingga jam 10:20 pagi.
5757
Notis Mesyuarat Agung Tahunan
PENYATA YANG DILAMPIRKAN BERSAMA NOTIS MESYUARAT AGUNG TAHUNAN
1. Pengarah-pengarah yang bersedia untuk dipilih semula
(i) Encik Abu Bakar Siddik bersara megikut giliran dan layak untuk dipilih semula menurut Artikel 104 dan Artikel 105 Tataurusan Pertubuhan Syarikat.
(ii) Encik Liam M. Mallon, dilantik semenjak Mesyuarat Agung Tahunan yang lepas, akan bersara, dan layak untuk dipilih semula menurut Artikel 109 Tataurusan Pertubuhan Syarikat.
2. Butir-butir lanjut mengenai Pengarah-pengarah yang bersedia untuk dipilih semula
(i) Profil
Butir-butir lanjut mengenail Pengarah-pengarah yang bersedia untuk dipilih semula tercatat di mukasurat 12 dan 13 Lapuran Tahunan ini.
(ii) Penyata pemegangan saham
Pengarah-pengarah yang bersedia untuk dipilih semula tidak mempunyai sebarang saham di dalam Syarikat.
(iii) Hubungan kekeluargaan
Pengarah-pengarah yang bersedia untuk dipilih semula tidak mempunyai hubungan kekeluargaan sesama Pengarah-pengarah yang lain atau pemegang saham terbesar Syarikat.
(iv) Percanggahan kepentingan
Pengarah-pengarah yang bersedia untuk dipilih semula tidak mempunyai percanggahan kepentingan di dalam Syarikat.
(v) Kesalahan-kesalahan yang disabitkan (selain daripada kesalahan lalulintas)
Pengarah-pengarah yang bersedia untuk dipilih semula tidak disabitkan kesalahan-kesalahan dalam tempoh 10 tahun yang lepas.
58
ESSO MALAYSIA BERHAD
ESSO MALAYSIA BERHAD( Company No. 3927-V )
( Incorporated in Malaysia )
P R O X Y F O R M
CDS account no. of auhorised nominee
I / We _________________________________________________ (name of stockholders per NRIC,in capital letters)
IC No./ID No./Company No.______________________________ (new)________________________________ (old)
of ________________________________________________________________________________(full address)
being a member(s) of the abovenamed Company, hereby appoint __________________________________________
(name of proxy as per NRIC in capital letters) IC No. _______________________(new)_____________________(old)
of ________________________________________________________________________________(full address)
or failing him/her __________________________________________________(name of proxy as per NRIC in capital
letters) IC No. ________________________________(new)___________________________(old) of ____________
_____________________________________________________________________(full address) or failing him/her
the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the 48th Annual General Meeting
of the Company to be held at the Training Centre, Level 18, Menara ExxonMobil, Kuala Lumpur City Centre, 50088
Kuala Lumpur at 10.30 a.m on Wednesday, May 23, 2007 and at each and every adjournment thereof.
My /our proxy is to vote as indicated below:
Agenda Item For Against
1. To receive and adopt the Company's Audited Accounts for Resolution 1 the year ended December 31, 2006
2. To approve the declaration of final dividends Resolution 2
3. Re-elect Encik Abu Bakar Siddik as Director Resolution 3
4. Re-elect Mr. Liam M. Mallon as Director Resolution 4
5. Approve payment of Directors' fees for Independent Resolution 5 Non-Executive Directors
6. Re-appoint Messrs. PricewaterhouseCoopers as Auditors and Resolution 6 authorise the Directors to determine their remuneration
(Please indicate with an “X” in the spaces provided how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain from voting at his / her discretion)
__________________________Signature / Common Seal
Number of stocks held : _________________________________
Date : _________________________________
NotesThe instrument appointing a proxy must be deposited at the Registrars Office at Tenaga Koperat Sdn Bhd, 20th Floor Plaza Permata (formerly known as IGB Plaza), Jalan Kampar off Jalan Tun Razak, 50400 Kuala Lumpur, not less than forty eight (48) hours before the time fixed for the meeting.
THE REST OF THE NOTES ARE SUBJECT TO COMPANY'S MEMORANDUM AND ARTICLES OF ASSOCIATION
The Share RegistrarsTENAGA KOPERAT SDN. BHD. (118401-V)20th Floor, Plaza Permata (Formerly known as IGB Plaza)Jalan Kampar, Off Jalan Tun Razak,50400 Kuala LumpurP.O. Box 12216, 50770 Kuala Lumpur
Then fold here
AFFIX STAMP
1st fold here
Fold this flap for sealing
ESSO MALAYSIA BERHAD (Company No.3927-V)
(Incorporated in Malaysia) An ExxonMobil Subsidiary in Malaysia