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Cover Picture:Esso Malaysia Berhad meets the daily energy needs of Malaysians by providing high quality products and services.
Contents
Financial Highlights
Chairman’s Statement
Penyata Pengerusi
Five-Year Summary Charts
Board of Directors /Lembaga Pengarah
Profile of Directors
Corporate Citizenship Highlights
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
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2007 2006 %RM Million RM Million Change
Revenues 9,740 9,336 4
Profit after tax 57 7 714
Earnings per ordinary stock unit (sen) 21.2 2.6 715
Gross dividend per ordinary stock unit (sen) 12 12 -
Total assets employed 2,700 2,006 35
Total shareholders’ funds 667 634 5
Sales volume 94 93 1(thousands of barrels per calendar day)
FINANCIAL HIGHLIGHTS
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Last year’s Annual General Meeting provided shareholdersthe opportunity to interact with EMB Directors and seek clarification on the Company’s operations and performance
ESSO MALAYSIA BERHADA
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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, 2007.
The Company recorded an after tax profit of RM57 million for 2007, compared to RM7 million earned in 2006. Revenues in 2007 were RM9.7 billion, an increase of 4% over the prior year, reflecting higher product prices.
The Company turned in a profitable year despite a tough business environment. Refining margins were impacted by rising crude prices, but the impact was offset by continued strength in the controlled products sector.
Operating performance for the year was strong. Our plants and terminals continued to record excellent operations, and maintained high levels of safety, health and environmental performance. Port Dickson Refinery completed 11 years of continuous operations without an employee lost time injury and won a Grand Award from the Malaysian Society for Occupational Safety and Health (MSOSH). The Company's three distribution terminals won MSOSH Gold Awards.
Crude throughput at the refinery averaged 70 thousand barrels a day. A number of new crudes were successfully introduced to diversify the crude diet and reduce feedstock costs. Other self-help measures and initiatives were undertaken during the year, including blending optimization in motor gasoline and diesel production.
Competition remained intense in the retail business. The Company maintained our strategy of keeping pace with industry, opening six new service stations and investing RM37 million mainly in retail site acquisitions and construction of service stations in high growth areas. Competitive retail promotional programmes were conducted during the year to increase brand awareness and loyalty card penetration.
We grew sales volumes and captured market share in the industrial fuels, and our liquefied petroleum gas business remained profitable although somewhat impacted by the high cost of cylinders due to rising steel prices.
2007 Financial Results
Review of Operations
Chairman’s Statement
EMB and her sister companies swept a total of seven MSOSH Awards for safety performance in 2007.
Liam M. MallonChairman
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EMB offers convenience, quality and value to customers on the move at our retail service stations.
At the LPG botting plant in Port Dickson, Essogas cylinders are filled before being sent to customers across the country.
In the intensely competitive and high-margin lubricants business, the Company launched a major initiative to optimize and rebrand our range of product offerings under the strong Mobil brand. In the specialties business we recorded healthy growth during the year from a return to more stable supplies of asphalt.
The Company maintained its long standing commitment to contribute to the local community in the areas where it operates. We funded programmes aimed at promoting academic excellence in science and engineering, improving the use of English and enhancing computer literacy. Scholarships were awarded to primary and secondary students through the ExxonMobil Education and Scholarship Fund. Our employees and their families continued to contribute their personal time and effort through a number of employee volunteer programmes.
The expected continued growth of the Malaysian economy in 2008 will fuel increasing demand for petroleum products. However competition will remain intense and market price volatility will continue to put pressure on product margins. In this environment, our strategy remains focused on product and service quality, flawless and safe operations, and cost control. The Company will continue efforts to enhance operating efficiency and grow our retail network through selective investment in high growth areas.
Business Outlook
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Dividends for Financial Year 2007
Board Matters
In consideration of the Company's business performance and our objective of continuing to provide a steady return to shareholders, the Board proposes a dividend for the year ended December 31, 2007 of 12 sen less Malaysian income tax at 26% per ordinary stock unit. This matches the dividend for the 2006 financial year.
There were no changes in the Board composition during the year.
On behalf of the Board, I would 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 highly 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
March 28, 2008
EMB continues to expand its service station network and Smiles Driver Rewards programme to bring greater value to customers.
At the Port Dickson Refinery, a technician conducts safety checks as part of our unrelenting focus on flawless operations.
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Bagi pihak Lembaga Pengarah, dengan sukacitanya, saya melaporkan prestasi kewangan dan operasi Syarikat bagi tahun berakhir 31
Disember, 2007.
Syarikat telah mencatatkan keuntungan selepas cukai sebanyak RM57 juta pada tahun 2007, berbanding RM7 juta pada tahun 2006. Hasil bagi tahun 2007 yang berjumlah RM9.7 bilion, peningkatan sebanyak 4% berbanding tahun sebelumnya, mencerminkan harga produk yang lebih tinggi.
Syarikat juga telah berjaya mencatat keuntungan walaupun di dalam persekitaran urus niaga yang sukar. Margin penapisan telah menerima impak dari harga minyak mentah yang terus meningkat, tetapi impak tersebut telah dapat diimbangkan oleh kemantapan berterusan dalam sektor produk petroliam berkawal.
Prestasi operasi bagi tahun semasa adalah kukuh. Terminal dan loji penapisan terus mencatatkan tahap operasi yang cemerlang, dan mengekalkan tahap prestasi yang tinggi dalam operasi keselamatan, kesihatan dan alam sekitar. Loji Penapisan Port Dickson berjaya menyempurnakan 11 tahun operasi yang berterusan tanpa sebarang kecederaan bagi kakitangan dan telah memenangi Grand Award daripada Malaysian Society for Occupational Health (MSOSH). Tiga terminal pengedaran Syarikat juga telah memenangi Anugerah Emas MSOSH.
Secara purata, kuantiti minyak mentah yang telah diproses di loji penapisan adalah sebanyak 70 ribu tong sehari (kbd). Beberapa jenis minyak mentah baru telah diperkenalkan dengan jayanya sebagai langkah mempelbagaikan jenis minyak mentah yang digunakan dan mengurangkan kos bahan mentah. Langkah-langkah dan inisiatif lain juga telah diambil pada tahun 2007, termasuk mengoptimumkan pencampuran di dalam pengeluaran minyak disel dan gasolin.
Persaingan terus sengit di dalam sektor urus niaga runcit. Syarikat telah dapat mengekalkan strategi untuk terus bersaing rapat dengan industri, dengan membuka enam stesen servis baru dan melabur RM37 juta terutamanya untuk memperolehi tapak-tapak dan membina stesen servis yang baru di kawasan pertumbuhan tinggi. Program promosi yang kompetitif bagi urus niaga runcit juga telah dijalankan pada tahun 2007 bagi meningkatkan lagi kesedaran terhadap jenama dan menembus pasaran kad loyalti.
Keputusan Kewangan 2007
Ulasan Operasi
Liam M. MallonPengerusi
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Penyata Pengerusi
Di On the Run Café, pelanggan boleh menikmati sajian yang berkhasiat seperti ayam panggang yang enak serta snek panas.
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Syarikat terus mengembangkan rangkaian jualan runcit dengan membina stesen servis baru di kawasan pertumbuhan tinggi.
EMB menyediakan produk dan perkhidmatan berkualiti tinggi seperti sistem bahanapi synergy, dan On the Run café di kedai serbaneka On the Run dan stesen servis Esso.
Syarikat juga telah berjaya menambah kuantiti jualan dan menawan sebahagian pasaran urus niaga bahanapi industrial. Urus niaga petroliam gas cecair terus mencatatkan keuntungan walaupun telah menerima impak dari kos silinder yang tinggi akibat dari harga besi keluli yang terus meningkat. Bidang urus niaga minyak pelincir bermargin tinggi menunjukkan persaingan sengit. Syarikat telah mengambil langkah untuk melancarkan satu inisiatif utama bagi mengoptimumkan dan menjenama semula produk-produk yang ditawarkan kepada jenama Mobil yang sememangnya mantap. Dalam urus niaga produk khas, Syarikat telah mencatatkan satu pertumbuhan yang sihat pada tahun 2007 dengan adanya bekalan asfalt yang lebih stabil.
Syarikat juga terus mengekalkan komitmen untuk terus memberi sumbangan kepada masyarakat tempatan di kawasan-kawasan di mana Syarikat beroperasi. Syarikat telah memberi sokongan kewangan kepada program-program yang bertujuan menggalakkan kecemerlangan akademik dalam bidang sains dan kejuruteraan, mempertingkatkan lagi penggunaan Bahasa Inggeris dan celik-huruf komputer. Biasiswa juga telah dianugerahkan kepada pelajar-pelajar sekolah rendah dan menengah melalui "ExxonMobil Education and Scholarship Fund". Kakitangan-kakitangan Syarikat dan keluarga mereka terus menyumbangkan usaha dan masa peribadi mereka di dalam beberapa program-program sukarela.
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Prospek Perniagaan
Dividen bagi Tahun Kewangan 2007
Perihal Lembaga Pengarah
Ekonomi Malaysia yang dijangka terus bertumbuh pada tahun 2008 akan terus menyemarakkan peningkatan permintaan bagi produk-produk petroliam. Walau bagaimanapun, persaingan sengit akan berterusan dan harga pasaran yang bergolak akan terus memberi tekanan ke atas margin bagi produk-produk. Dalam persekitaran sedemikian, strategi Syarikat akan terus bertumpu kepada kualiti produk dan servis, operasi yang cemerlang dan selamat, dan mengawal kos. Syarikat juga akan meneruskan segala usaha untuk memperhebatkan lagi kecekapan operasi dan mengembangkan rangkaian urus niaga runcit melalui pelaburan secara terpilih di kawasan-kawasan pertumbuhan tinggi.
Berdasarkan prestasi urus niaga Syarikat dan objektif untuk terus memberi pulangan yang tetap kepada p e m e g a n g s a h a m , L e m b a g a P e n g a r a h mencadangkan dividen sejumlah 12 sen, ditolak cukai pendapatan sebanyak 26% bagi setiap satu unit saham, bagi tahun berakhir 31 Disember 2007. Kadar dividen tersebut adalah setanding dengan kadar dividen yang telah dibayar bagi tahun kewangan 2006.
Tiada sebarang perubahan di dalam komposisi Lembaga Pengarah pada tahun 2007.
Bagi pihak Lembaga Pengarah, saya ingin mengucapkan terima kasih kepada semua kakitangan Syarikat di atas usaha gigih dan dedikasi mereka yang berterusan. Urus niaga penapisan dan pemasaran terus kekal 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, dealers, dan pelanggan-pelanggan di atas sokongan yang berterusan kepada Esso Malaysia Berhad.
Liam M. MallonPengerusi
28 Mac, 2008
Di Loji Penapisan Port Dickson, juruteknik syarikat membuat pemeriksaan keselamatan bagi memastikan operasi yang cemerlang.
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Loji Penapisan Port Dickson dan terminal pengedaran kami berjaya mencatatkan rekod keselamatan yang baik dengan operasi selama 11 tahun berterusan tanpa sebarang kecederaan bagi kakitangan.
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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 45, an Irish citizen, was appointed Director and Chairman of the Company on September 14, 2006. He started his career in the industry in 1984 and spent the first 6 years with British Petroleum in Aberdeen, Scotland and with Expro International Limited in China. Mr. Mallon joined Mobil in 1990 and, over a period of 8 years, held a variety of progressively senior positions 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 Planning Manager of ExxonMobil Production Company. In December 2004 he was appointed the President of ExxonMobil Canada Ltd; a position he held until his appointment in 2006 as the Chairman of the ExxonMobil Subsidiaries in Malaysia.
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. D.Sc, 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 64, 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 carrier 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, Ecofirst Consolidated Berhad, Taylor’s Education Berhad and Halal Industry Development Corporation. He is also a Director of TAFI Industries Berhad.
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 64, 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 Malaysia Building Society Berhad, Malakoff Corporation Berhad, Zelan Berhad, IJM Corporation 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 62, 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 the 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.
ESSO MALAYSIA BERHAD
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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 48, 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, Treasurers’ 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 was also the Tax Manager for the ExxonMobil Subsidiaries in Malaysia prior to his appointment in 2007 as the In-country Controller of the ExxonMobil Subsidiaries in Malaysia.
Executive Refinery DirectorB.Sc. (Hons.) Chemical Engineering, Leeds University, United Kingdom
Encik Abu Bakar Siddik Che Embi, aged 55, 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 43, 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 57, 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, Upstream 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.
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Corporate Citizenship Highlights
ESSO MALAYSIA BERHAD
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As corporate citizens in the global energy community, we are
mindful of the importance of the resources we develop and
deliver, and the products we manufacture. We are committed
to being a good neighbour, by promoting and protecting
employees, communities and the environment which is critical
in ensuring long term sustainability and value for our business.
At Esso Malaysia Berhad, we apply a rigorous approach to
corporate citizenship in all aspects of our businesses in order to
deliver our main responsibility of meeting the nation's energy
demand in a manner that is reliable, safe, socially as well as
environmentally responsible.
This section describes how Esso Malaysia Berhad and the
ExxonMobil Subsidiaries in Malaysia translate our commitment
to good corporate citizenship into action.
Integrity in our operations
We believe that the methods employed to attain the results are as important as the results themselves. By implementing a range of proven management systems, we are able to ensure the highest level of ethical standards and operations integrity in all aspects of our business activities.
Our Standards of Business Conduct forms the foundation for the conduct of the businesses of Esso Malaysia Berhad and other ExxonMobil affiliates worldwide.Our Controls Integrity Management System is a framework for ongoing controls integrity in our day-to-day business and effectively enables full compliance with regulations, laws and policies.Our Operations Integrity Management System provides a consistent and disciplined framework in identifying, controlling and managing safety, security, health and environmental risks. This rigorous and systematic framework meets the requirements of the International Organisation for Standardisation's standard for environmental management systems (ISO 14001).
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We are committed to operations excellence in all areas of our business
Our globally implemented management systems provide a framework for proactively managing risk and move us further towards our goal of zero safety incidents.
Workplace performance
The well-being of our employees, contractors, customers and neighbours are at the top of our priorities. During all aspects of our operations, we enforce strict compliance with safety procedures and management systems to create an incident-free workplace and to ultimately achieve our goal where Nobody Gets Hurt. We are also committed to provide the best work environment and career advancement opportunities for our workforce.
lwithout an employee lost time injury (LTI) and continued to receive recognitions for its outstanding safety performance. The Refinery was presented with the Grand Award from the Malaysian Society for Occupational Safety and Health (MSOSH) and the Asia Pacific Refinery & Services Regional Director's Silver Award in 2007. The Company’s three distribution terminals also won gold awards from MSOSH.
lWe maintained our pacesetting safety and health performance within the industry. All incidents including 'near misses' were thoroughly investigated and lessons learned are shared throughout the business to prevent any reoccurrences.
lIn recognition for being one of the more energy efficient refineries within ExxonMobil, Port Dickson Refinery was presented with the Refining Energy Efficiency Award.
lOur Malaysian Distribution function was recognised with a Gold Award from the Regional Distribution Leadership Team for achieving four years of flawless operations.
lWe broadened the use of our incident reporting system known as IMPACT to capture and quickly share learnings globally. We also started the use of our Incident Risk Assessment Tool to focus on minor incidents or near-misses which could potentially lead to major incidents.
lWe reinforced safety practices and responsibilities through the behaviour based safety approach which includes work observations and intervention programmes. The approach has further been improved with a more user friendly process.
lWe uphold a set of policies that reflects our commitment in providing equal opportunity and a positive workplace. We have zero tolerance for all forms of discrimination and harassment and our Workplace Flexibility Programme helps employees achieve an effective work-life balance.
lOur employees have the opportunity to develop their careers abroad. At the end of 2007, EMB employees were among the 149 Malaysians on international assignments within ExxonMobil.
Port Dickson Refinery completed 11 years of continuous operations
Our Port Dickson Refinery and distribution terminals continued to receive recognition for outstanding safety performance.
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EMB provides focused training and education to foster individual growth and achievement of career goals.
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Environmental performance
We are committed to operating in an environmentally responsible manner everywhere we do business. We are committed to our environmental initiative - Protect Tomorrow. Today. We continuously strive to improve energy efficiency, prevent environmental incidents and deliver our commitment for a superior environmental performance. Various systems and initiatives are practised to maintain our high standards of environmental care:
lWe leveraged on our global and regional refinery networks to expedite learning and continuously enhance our environmental performance.
lEsso Port Dickson Refinery sustained high levels of energy efficiency, contributing to reduced greenhouse gas (GHG) emissions at the plant by applying our Global Energy Management System best practices. We have significantly reduced our GHG gas emission by 20 percent since 2000. The Refinery also voluntarily reduced its emission of Volatile Organic Compound although emission of the compound is not regulated.
lThe Refinery has improved effluent water quality with Chemical Oxygen Demand reduced well below the regulatory level of 100 ppm due to major desludging work on its wastewater lagoon in 2006.
lWe have upgraded our service stations through a programme in practice since 2001. The upgrades ensure the highest standards of environmental protection and include the installation of an early leak detection system and underground risk management system.
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ESSO MALAYSIA BERHAD
The Port Dickson Refinery has sustained high levels of energy efficiency and reduced emissions by applying our Global Energy Management System best practices.
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Community and social performance
We have a tradition of investing in the community. Wherever we operate, we are dedicated to making a lasting positive impact on the local communities. We believe that supporting the needs of the communities is part of our responsibility as a good corporate citizen, and we undertake this responsibility seriously through our long-standing tradition of corporate giving and employee volunteerism.
Through our corporate contributions programme, we support a range of educational, welfare, health, environmental and arts projects that directly benefit the people. Beyond these investments, our employees also offer their expertise and personal time to their local communities through our employee volunteer programmes. These include the ExxonMobil Community Projects programme, ExxonMobil Young Entrepreneur Programme and ExxonMobil Employee Involvement Programme.
In 2007, the ExxonMobil Subsidiaries in Malaysia contributed to about 100 non-profit organisations. Some of the highlights of EMB's contributions include:
lFunding of educational programmes to promote English and science education, improve computer literacy among youth from the rural areas, and recognise outstanding young athletes.
lScholarships and best student awards for deserving students from secondary and primary schools in Negeri Sembilan under the ExxonMobil Education and Scholarship Fund.
lSupport for health facilities and equipment upgrades such as the children's specialist clinic and facilities at the Port Dickson Hospital.
lEmployees participated in the ExxonMobil Young Entrepreneur Programme where they volunteered two hours a week over a period of seven months to help 180 secondary students learn entrepreneurial skills.
lUnder the Employee Involvement Programme, 43 employees received RM1,500 each to assist the civic organisations that they served. A total of RM64,500 in grants were distributed to the community.
lEmployees and their families continued to devote their time and energy in community projects that benefit the local community. In 2007, about 1,200 employees and their family members volunteered for the annual ExxonMobil Community Projects Programme.
The Company continued to make positive contributions to the community through its support of various social and community-based projects as well as its employee volunteer programmes.
Directors
Joint Secretaries
Share Registrar
Auditors
Stock Exchange Listing
Solicitors
Registered Office
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)
Puan Sri Junaidah Mohd Said(LS0008614)
Mr. Manoj Devadasan(LS0006885)
Tenaga Koperat Sdn. Bhd. (118401-V)th
20 Floor, Plaza PermataJalan Kampar, off Jalan Tun Razak50400 Kuala LumpurTel: 03-40473883 Fax: 03-40426352
PricewaterhouseCoopers (No. AF-1146)Chartered AccountantsKuala Lumpur
Main Board of Bursa Malaysia Securities Berhad
Messrs. 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
EMB Company Secretary's OfficeLevel 29, Menara ExxonMobilKuala Lumpur City Centre50088 Kuala LumpurTel: 03-20533000 Fax: 03-23803473
Corporate Information
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Corporate Governance
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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 (“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 Foundation 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, 2007, 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
Mr. Liam M. Mallon 4 4 Non- Non-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 3 Non- Non-member member
Puan Faridah Ali 4 4 Non- Non-member member
Mr. Lam Foo Keong 4 4 - - (Alternate member to Encik Zain C. Willoughby on the Board Audit Committee)
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Corporate Governance (Continued)
Board Membership
Supply of Information
Appointment and Re-election of Directors
Remuneration Committee
The Board had 8 members in 2007, with 3 Independent Non-Executive Directors and 5 Executive Directors (including the Chairman). Together, the Directors form the mind and management of the Company.
The functional organisation of the Company provides a system and structure of checks and balances in the 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 the candidate 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 Independent 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)
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Corporate Governance (Continued)
Directors' Remuneration
Nominating Committee
The remuneration received by the Independent Non-Executive Directors in 2007 was recommended by the Board as a whole (with the Independent Non-Executive Directors abstaining from participation in the discussion and voting on the matter) and approved by the stockholders at the Annual General Meeting on May 23, 2007.
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, 2007 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 - 1,430,242 1,430,242INDEPENDENT NON-EXECUTIVEDIRECTORS 108,000 13,500 121,500
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 -100,000100,001-150,000 1150,001-200,000 1200,001-250,000 2250,001-300,000300,001-350,000350,001-400,000400,001-450,000450,001-500,000500,001-550,000550,001-600,000600,001-650,000 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 Independent Non-Executive Directors and Executive Directors and the recommendation of Directors for Committees, for the Board's consideration and decision.
The Nominating Committee is also responsible for the assessment of the effectiveness of individual Directors, Board Committees and the overall Board on an ongoing basis. These assessments, based on a combination of qualitative and quantitative factors, were carried out by the Nominating Committee in 2007. The findings and results of these assessments by the Nominating Committee were reported to the Board.
The current members of the Nominating 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)
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Corporate Governance (Continued)
Nominating Committee (Continued)
The Board when setting up the Nominating Committee in 2003 formed the view, which it still holds today, that the
Chairman of the Company, being an Executive Director, should be a member and Chairman of the Nominating
Committee. While the composition of the Nominating Committee departs from the Best Practices as outlined in
the Code on Corporate Governance, compliance with which is not compulsory, the Board is of the view that the
inclusion of the Chairman of the Company provides the Nominating Committee with invaluable perspective on
the business and operational needs of the Company. Such input is needed in the selection and
recommendation of suitable candidates for appointment by the Board, as well as in assessing the performance
of the Board, Directors and Committees.
Apart from the Chairman, the Nominating Committee members are all Independent Non-Executive Directors.
Directors' Training
Dialogue between the Company and Investors
Annual General Meeting
Accountability and Audit
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 had 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. These same principles were applied by the Board in determining the relevant training for Directors of
the Company in 2007.
All Directors on the Board had received or undergone relevant training in 2007. Further details of the training
programmes attended by the Directors in 2007 are as set out in pages 25 to 26.
The Company reimburses Directors for costs incurred in attending continuous education programmes.
The Directors are also briefed at quarterly Board meetings on any significant changes in laws and regulations
that are relevant to the Company's operations.
The Board values and encourages dialogue with the stockholders to establish better understanding of the
Company's objectives and performance. The Annual General Meeting provides an appropriate forum for the
stockholders 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 BMSB. Material information relating to the
Company is disclosed to the public by way of announcements to BMSB, as required by the Listing
Requirements of BMSB.
At the Annual General Meeting, the Chairman of the Board reviews the progress and performance of the
Company with the stockholders. A question and answer session is also conducted to allow stockholders 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 stockholders 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.
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Corporate Governance (Continued)
Internal Control
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 stockholders' 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.
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 among others, Business Ethics, Conflict of Interest, Antitrust, Alcohol and Drug Use, Gifts and 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 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; andbasing 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
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Corporate Governance (Continued)
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 pages 27 and 28.
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, 2007 is RM3,104.
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 20, 2008.
Training Programmes Attended By Directors
1. Mr. Liam M. Mallon
lUpdates to Listing Requirements February 26, 2007lOverview - Safety, Health and Environment Operations February 26, 2007l12th Asia Oil & Gas Conference (Panel Member) June 11-12, 2007lDialogue with Future Diplomats (Speaker) August 1, 2007lOverview - Industrial & Wholesale Business August 22, 2007lSustainable Energy in Malaysia (Speaker) November 5, 2007lUpdates to Listing Requirements/Code on Corporate Governance November 21, 2007
2. Y. Bhg. Tan Sri Dato’ Dr. Syed Jalaludin Syed Salim
lUpdates to Listing Requirements February 26, 2007lOverview - Safety, Health and Environment Operations February 26, 2007lDiscovering Dominant Drivers of Board Work July 13, 2007lStrategic Marketing Seminar August 13, 2007lOverview - Industrial & Wholesale Business August 22, 2007lMINDA Chairman’s Forum October 22, 2007lUpdates to Listing Requirements/Code on Corporate Governance November 21, 2007
3. Y. Bhg. Tan Sri Abdul Halim Ali
lUpdates to Listing Requirements February 26, 2007lOverview - Safety, Health and Environment Operations February 26, 2007lOverview - Industrial & Wholesale Business August 22, 2007lCompanies (Amendment) Act 2007 - New Direction in Directors Duties
and Liabilities November 1, 2007lUpdates to Listing Requirements/Code on Corporate Governance November 21, 2007lAsset Protection, Estate and Tax Planning using Off-shore Structures December 13, 2007
4. Y. Bhg. Dato’ Zainal Abidin Putih
lAnti-Money Laundering Act 2001 January 22, 2007lUpdates to Listing Requirements February 26, 2007lOverview - Safety, Health and Environment Operations February 26, 2007lRisk Based Supervisory Framework June 11-12, 2007lBusiness Roundtable - ‘Making the leap towards greater competitiveness’ July 9, 2007lStrategic Reputation Management / Stakeholder Communication July 9-10, 2007lOverview - Industrial & Wholesale Business August 22, 2007lBuilding Tomorrow’s Mind - Today August 29, 2007lMalaysia 2057 November 1, 2007lUpdates to Listing Requirements/Code on Corporate Governance November 21, 2007
5. En. Zain C. Willoughby
lCompanies and Securities Law January 8-9, 2007lUpdates to Listing Requirements February 26, 2007lOverview - Safety, Health and Environment Operations February 26, 2007lGlobal Leader Forum April 11 - 18, 2007l12th Asia Oil & Gas Conference June 11 - 12, 2007lOverview - Industrial & Wholesale Business August 22, 2007lEnhancing Integrity, Effective Implementation and Quality Service
(Speaker) September 4, 2007lEmergency Management - Command & Control November 16, 2007lUpdates to Listing Requirements/Code on Corporate Governance November 21, 2007
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Corporate Governance (Continued)
Training Programmes Attended By Directors (Continued)
6. En. Abu Bakar Siddik
lImproving Board Performance, Leadership and Governance January 25, 2007lUpdates to Listing Requirements February 26, 2007lOverview - Safety, Health and Environment Operations February 26, 2007lOverview - Industrial & Wholesale Business August 22, 2007lUpdates to Listing Requirements/Code on Corporate Governance November 21, 2007
7. Pn. Faridah Ali
lTM3 - Leading Site Execution January 16 - 18, 2007lUpdates to Listing Requirements February 26, 2007lOverview - Safety, Health and Environment Operations February 26, 2007lSpeakers Coalition Training May 24, 2007lOverview - Industrial & Wholesale Business August 22, 2007lUpdates to Listing Requirements/Code on Corporate Governance November 21, 2007
8. Mr. Lam Foo Keong
lInternational Accounting Standards 39 - P&L and Balance SheetImplications February 6, 2007
lUpdates to Listing Requirements February 26, 2007lOverview - Safety, Health and Environment Operations February 26, 2007lIslamic Finance Forum March 27 - 29, 2007l12th Asia Oil & Gas Conference June 11 - 12, 2007lOverview - Industrial & Wholesale Business August 22, 2007lUpdates to Listing Requirements/Code on Corporate Governance November 21, 2007
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Corporate Governance (Continued)
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Board Audit Committee Report
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.
In conjunction with the issuance of the amendments to the Bursa Listing Requirements, the Committee’s Charter has been amended on February 20, 2008. The Company is in the process of changing the composition of the Committee to comprise fully Non-Executive Directors.
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 internal audit function undertakes independent regular and systematic audit reviews of the Company’s 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 page 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 Company’s internal audit function is undertaken by an internal audit group based in Kuala Lumpur that also undertakes audit work for other ExxonMobil companies in the region. The internal audit group which reports directly to the Committee, also takes 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 cost incurred for internal audit in 2007 was RM496,000 (2006: RM279,000).
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.
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Board Audit Committee Report (Continued)
Meetings and Minutes (Continued)
Authority
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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:
to investigate any matter within its terms of reference;to have the resources which are required to perform its duties;to have full and unrestricted access to any information pertaining to the Company;to have unrestricted access to and communication with the external auditors of the Company and internal auditors;to obtain external legal or other independent professional advice as necessary; andto 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, competency 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 20, 2008.
29
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, 2007.
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 57,172Retained profits brought forward 490,807Profits available for appropriation 547,979Dividend paid less income tax at 27% (23,652)Retained profits carried forward 524,327
The amount of dividends paid since December 31, 2006 are as follows:RM'000
In respect of the year ended December 31, 2006:
Final dividend per stock unit, paid on June 20, 2007:Ordinary - 12 sen gross less income tax at 27% 23,652
The Directors propose that a final dividend of 12 sen less income tax at 26% per ordinary stock unit, amounting to RM23,976,000 be paid for the year ended December 31, 2007.
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
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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 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
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 7 and 8 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
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Report of the Directors (Continued)
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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 at As at 01.01.07 Acquired Sold 31.12.07
Exxon Mobil Corporation (Ultimate holding company) - Number of common stock without par value
held by the following Directors:
Mr. Liam M. Mallon 11,350 10,560 (8,448) 13,462 Encik Zain C. Willoughby 2,900 4,035 (2,000) 4,935
Puan Faridah Ali 140 77 - 217
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, Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim, Y. Bhg. Tan Sri Abdul Halim Ali and Encik Zain C. Willoughby retire at the forthcoming Annual General Meeting and, being eligible, offer themselves 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 20, 2008.
.............................Liam M. MallonChairman
..............................Zain C. WilloughbyFinancial Director
Kuala Lumpur,February 20, 2008
Report of the Directors (Continued)
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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 33 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 for entities other than private entities 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, 2007 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
ERIC OOI LIP AUNNo.1517/06/08(J)Partner of the firm
Kuala LumpurFebruary 20, 2008
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FOR THE YEAR ENDED DECEMBER 31, 2007
Note 2007 2006RM'000 RM'000
REVENUES 4 9,740,487 9,336,444
COST OF SALES (9,281,190) (8,958,242)
GROSS PROFIT
OTHER INCOME 20,993 21,372
OPERATING EXPENSES (323,684) (309,480)
ADMINISTRATIVE AND OTHER EXPENSES (50,546) (54,608)
FINANCE COST 5 (29,909) (28,264)
PROFIT BEFORE TAX 6 76,151 7,222
TAX EXPENSE 9 (18,979) (159)
NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS 57,172 7,063
Earnings per ordinary stock unit (sen) 10 21.2 2.6
Proposed final gross dividend less income tax at 26%(2006: 27%) per ordinary stock unit (sen) 12.0 12.0
459,297 378,202
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Income Statement
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AS AT DECEMBER 31, 2007
Note 2007 2006
RM'000 RM'000
NON CURRENT ASSETS
Property, plant and equipment 11 844,935 886,952
Long term assets and receivables 12 325,497 332,295
Intangible assets - software 13 2,748 4,731
TOTAL NON CURRENT ASSETS 1,173,180 1,223,978
CURRENT ASSETS
Inventories 14 662,242 384,522
Asset held for sale - leasehold land 1,820 -
Receivables 15 429,888 97,860
Amounts due from related corporations 18 366,477 233,520
Deposit, cash and bank balances 17,913 16,787
Taxation 48,607 49,453
TOTAL CURRENT ASSETS 1,526,947 782,142
CURRENT LIABILITIES
Payables 16 265,931 188,918
Retirement benefits obligations 17 1,722 260
Amounts due to related corporations 18 618,661 398,591
Borrowings (unsecured) 19 1,008,279 633,778
TOTAL CURRENT LIABILITIES 1,894,593 1,221,547
NET CURRENT LIABILITIES (367,646) (439,405)
LESS: NON CURRENT LIABILITIES
Retirement benefits obligations 17 49,537 49,258
Deferred taxation 20 88,670 101,508
138,207 150,766
TOTAL NET ASSETS EMPLOYED 667,327 633,807
FINANCED BY:
SHARE CAPITAL 21 135,000 135,000
RESERVES 22 8,000 8,000
RETAINED PROFITS 22 524,327 490,807
SHAREHOLDERS' EQUITY 667,327 633,807
ESSO MALAYSIA BERHAD
Balance Sheet
FOR THE YEAR ENDED DECEMBER 31, 2007
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, 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
At January 1, 2007 270,000 135,000 8,000 490,807 633,807
Net profit - - - 57,172 57,172
Dividends for the year endedDecember 31, 2006 (final) - - - (23,652) (23,652)
At December 31, 2007 270,000 135,000 8,000 524,327 667,327
Statement of Changes in Equity
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Statement of Cash Flows
FOR THE YEAR ENDED DECEMBER 31, 2007
Note 2007 2006
RM'000 RM'000
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit attributable to shareholders 57,172 7,063
Adjustments for:
Depreciation on property, plant and equipment 63,629 66,108
Amortisation of intangible assets 1,983 1,907
Taxation 18,979 159
Interest income (730) (1,076)
Interest expense / commercial papers profit elements incurred 29,909 28,264
Retirement / separation benefits cost 2,931 3,153
Provision for impairment of assets held for sale 3,559 -
(Gain) / loss on disposal of property, plant and equipment (622) -
Write-off of property, plant and equipment 2,487 2,212
Unrealised foreign exchange (gain) / loss (1,304) (2,521)
Changes in:
(Increase) / decrease in inventories (277,720) 75,341
(Increase) / decrease in assets held for sale 1,696 2,118
(Increase) / decrease in receivables (337,651) 14,819
(Increase) / decrease in amounts due from related corporations (132,957) 29,382
Increase / (decrease) in amounts due to related corporations 221,154 (6,458)
Increase / (decrease) in payables and provisions 88,611 14,696
Cash (used in) / generated from operations (258,874) 235,167
Interest / commercial papers profit elements paid (29,701) (28,277)
Interest received 730 1,076
Income taxes paid (40,265) (53,481)
Income taxes refund 2,900 10,454
Retirement / separation benefits paid (970) (4,034)
Net cash (used in) / from operating activities (326,180) 160,905
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (27,811) (26,548)
Purchase of intangible assets - (973)
(Increase) / decrease in long term assets and receivables 2,783 (3,554)
Proceeds from disposal of property, plant and equipment 1,274 124
Net cash used in investing activities (23,754) (30,951)
CASH FLOWS FROM FINANCING ACTIVITIES
(Repayment of) / proceeds from borrowings - net 374,501 (109,767)
Dividends paid to shareholders (23,652) (23,328)
Net cash from / (used in) financing activities 350,849 (133,095)
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 915 (3,141)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9,789 12,930
CASH AND CASH EQUIVALENTS AT END OF YEAR 23 10,704 9,789
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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) for entities other than private entities and the provisions of the Companies Act, 1965.
The preparation of financial statements in conformity with the MASB approved accounting standards in Malaysia for entities other than private entities 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.
(a) FRS effective and adopted by the Company
Amended FRS 119 Employee Benefits effective from January 1, 2007. The additional disclosure requirements are included in Note 17.
(b) Revised standards that are applicable to the Company, but not yet effective and have not been early adopted
FRS 107 Cash Flow StatementsFRS 112 Income Taxes FRS 118 Revenue FRS 134 Interim Financial ReportingFRS 137 Provisions, Contingent Liabilities and Contingent Assets
The Directors are of the opinion that the adoption of all the standards above are not expected to have any material impact on the financial position of the Company.
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 valuations were determined by independent professional valuers on the following bases:
Land - Open market value based on existing useBuildings - Depreciated replacement cost
No depreciation is provided on freehold land and capital projects that are in progress. Buildings and improvements 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.
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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.
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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 recognised when the
Company's commitment is confirmed without any realistic possibility of withdrawal.
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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.
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3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
4 . REVENUES
5. FINANCE COST
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 19.
2007 2006RM'000 RM'000
Related corporations sales 4,625,179 4,572,199Third party sales 5,096,576 4,749,015Turnover 9,721,755 9,321,214
Interest income Related parties 155 225
Others 575 851Licence fees on land and buildings 18,002 14,154
9,740,487 9,336,444
Turnover represents the value of goods sold inclusive of subsidies and net of Government duties and taxes.
2007 2006RM'000 RM'000
Interest and profit elements on borrowings (Note 19)Related parties 16,308 14,699Others 13,601 13,565
29,909 28,264
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6. PROFIT BEFORE TAX
7. EMPLOYEE BENEFITS EXPENSE
8. DIRECTORS' REMUNERATION
2007 2006RM'000 RM'000
The profit before tax is arrived at aftercharging/(crediting) the following items:
Depreciation on property, plant and equipment 63,629 66,108Amortisation of intangible assets 1,983 1,907Auditors' remuneration
Current year 157 157Underprovision in prior year - 68
Write-back of provision for customer loyalty programmes - (2,402)Inventory write-down to net realisable value 1,521 252Cost of inventories recognised as an expense 9,281,190 8,958,242Provision for impairment and write-off
of receivables 3,855 1,425Bad debts recovered (60) (15)Foreign exchange (other than on borrowings)
Realised foreign exchange (gain) / loss (26,962) (15,243)Unrealised foreign exchange (gain) / loss (1,304) (2,521)
Rental expense for land and buildings 20,483 20,889Hire of plant and machinery 233 282Research and development expense 3,535 4,222Gain on disposal of property, plant and
equipment (622) -
2007 2006RM'000 RM'000
Wages, salaries and bonus 34,176 33,795Defined contribution retirement plan -
Employees Provident Fund 4,038 4,006Provision for retirement benefits -
Defined benefit retirement plan (Note 17) 2,876 2,679Separation benefits 55 474Other employee benefits
44,454 45,115
2007 2006RM'000 RM'000
Non-Executive Directors:Fees 108 90
Executive Directors:Short-term employee benefits 1,140 1,190Retirement benefits 249 231Benefits-in-kind 41 29
1,538 1,540
Included in the above is the remuneration of Executive Directors employed by related corporations allocated to the Company amounting to RM591,000 (2006: RM659,000). The balance represents remuneration for Directors employed by the Company included in Note 7.
3,309 4,161
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9. TAX EXPENSE
10. EARNINGS PER ORDINARY STOCK UNIT
2007 2006RM'000 RM'000
Current taxation 32,038 8,205(Over) / under accrual in prior years (190) (30)Real Property Gains Tax (31) 49
Deferred taxation (Note 20)Origination and reversal of temporary differences (9,032) (513)Reduction in statutory tax rate (3,806) (7,552)
18,979 159
The Company's effective tax rate differs from the statutory tax rate and is reconciled as follows:
2007 2006% %
Statutory tax rate 27 28Expenses not deductible for tax purposes 7 77Real Property Gains Tax - 3Effect on deferred tax of reduction in statutory
tax rate (9) (105)25 3
Impact from settling prior year taxesthat were under provided - (1)
Effective tax rate 25 2
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 not gazetted at the time, was considered substantially enacted. In December 2007, the Government gazetted further reduction in the statutory tax rate to 25% from 2009. The effects on deferred taxation of these reductions have been included in the financial statements ended December 31, 2007 and 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.
2007 2006
Net profit attributable to shareholders (RM'000) 57,172 7,063Number of ordinary stock units in issue ('000) 270,000 270,000Basic earnings per stock unit (sen) 21.2 2.6
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11. 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, 2007 203,551 154,586 507,693 21,122 886,952Additions - 4,545 6,316 16,950 27,811Disposals (10) - (642) - (652)Write-offs - (16) (1,110) (1,361) (2,487)Reclassify to assets
held for sale (1,148) - - - (1,148)Reclassify to long
term assets - - (1,912) - (1,912)Reclassifications - 4,153 9,989 (14,142) -Depreciation charged to
income statement - (13,941) (49,688) - (63,629)
Net book valueAt December 31, 2007 202,393 149,327 470,646 22,569 844,935
At December 31, 2007Valuation-1982 57,278 15,851 - - 73,129Cost-Post 1982 net additions 145,115 293,683 1,205,149 22,569 1,666,516Accumulated depreciation - (160,207) (734,503) - (894,710)
Net book value 202,393 149,327 470,646 22,569 844,935
Net book value atDecember 31, 2007 if assetshad been carried at cost less depreciation: 152,299 149,327 470,646 22,569 794,841
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
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 RM72,346,000 (2006: RM73,571,000).
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12. LONG TERM ASSETS AND RECEIVABLES
13. INTANGIBLE ASSETS - SOFTWARE
14. INVENTORIES
15. RECEIVABLES
2007 2006 RM'000 RM'000
Prepaid lease rentals and deposits 308,300 318,047Loans to dealers 6,451 4,019Employee receivables 1,155 1,386Others 9,591 8,843
325,497 332,295
Included in the above prepaid lease rentals are leasehold land amounting to RM21,682,000 (2006: RM21,918,000) for the Company's 20% participating interest in the joint venture assets of MPP.
2007 2006RM'000 RM'000
At December 31Cost 11,070 11,070Accumulated amortisation (8,322) (6,339)Net book value 2,748 4,731
2007 2006RM'000 RM'000
Crude oil 328,705 158,638Petroleum products 325,020 217,592Materials and supplies 8,517 8,292
662,242 384,522
2007 2006RM'000 RM'000
Trade receivables 111,001 89,559Less: Provision for impairment of receivables (4,119) (4,105)
106,882 85,454Others 323,006 12,406
429,888 97,860
Credit terms of trade receivables range from payment in advance to generally 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. Included in the current year balance is an amount of RM312,667,000 (2006: Nil) for subsidies receivable from the Government of Malaysia under the Automatic Pricing Mechanism.
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16. PAYABLES
17. RETIREMENT BENEFITS OBLIGATIONS
2007 2006RM'000 RM'000
Trade payables 206,841 128,119Other payables 59,090 60,799
265,931 188,918
The currency exposure profile of trade payables is as follows:
Ringgit Malaysia 205,356 126,497US Dollar 1,485 1,622
206,841 128,119
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 RM866,000 (2006: RM1,207,000) for payroll liabilities.
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:
2007 2006RM'000 RM'000
At January 1 49,518 50,708Net expense charged to the income statement 2,876 2,679Payments to separating employees and retirees (915) (3,560)Employees transferred to affiliated companies (220) (309)At December 31 51,259 49,518
The amounts recognised in the balance sheet are reconciled as follows:
Present value of unfunded obligations 36,882 35,323Unrecognised actuarial gains 14,377 14,195Net liability 51,259 49,518
Reflected on the balance sheet as:Current 1,722 260Non-current 49,537 49,258
51,259 49,518
The movement in the present value of unfunded obligations are as follows:
At January 1 35,323 34,869Current service cost 1,686 1,624Interest cost 2,147 2,289Actuarial (gains) / losses (1,139) 410Benefits paid (915) (3,560)Intercompany transfers (220) (309)At December 31 36,882 35,323
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17. RETIREMENT BENEFITS OBLIGATIONS (Continued)
18. AMOUNTS DUE FROM / (TO) RELATED CORPORATIONS
The expense recognised in the income statement is as follows:2007 2006
RM'000 RM'000
Current service cost 1,686 1,624Interest cost 2,147 2,289Net actuarial gains recognised (957) (1,234)Total, included in employee benefits expense (Note 7) 2,876 2,679
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: 2007 2006
% %
Discount rate 6.0 6.3Expected rate of salary increases 5.5 5.2
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 RM300,000 (RM300,000).
A 1% higher (lower) salary growth rate would increase (decrease) the pension liability by RM800,000 (RM700,000).
2007 2006RM'000 RM'000
Present value of unfunded obligations 36,882 35,323Experience (gain)/loss adjustments on plan liabilities (1,139) 410
The currency exposure profile of amounts due from related corporations is as follows: 2007 2006
RM'000 RM'000
Ringgit Malaysia 240,874 193,198US Dollar 125,603 40,322
366,477 233,520
The currency exposure profile of amounts due to related corporations is as follows:
2007 2006RM'000 RM'000
Ringgit Malaysia (1,238) (1,943)US Dollar (617,423) (396,648)
(618,661) (398,591)
These balances are unsecured and are generally settled within one month.
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19. BORROWINGS (UNSECURED)
20. DEFERRED TAXATION
2007 2006RM'000 RM'000
Floating interest rate loans from related corporations 462,279 333,778Short-term notes 300,000 300,000Revolving credits 246,000 -
1,008,279 633,778
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 drawndown on this loan for another year to December 31, 2008. 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, 2008.
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 3.0% to 3.9% per annum during the year (2006: 2.9% to 4.0%).
2007 2006RM'000 RM'000
At January 1 101,508 109,573Credited to the income statement (Note 9) (12,838) (8,065)At December 31 88,670 101,508
The components of deferred tax amounts after appropriate offsetting are as follows:
Deferred tax liabilities:subject to income tax 88,670 99,003subject to real property gains tax - 2,505
88,670 101,508
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ESSO MALAYSIA BERHAD
20. DEFERRED TAXATION (Continued)
21. SHARE CAPITAL
22. RESERVES
2007 2006 RM'000 RM'000
Subject to income taxDeferred tax assets:Provision for retirement benefits (7,420) (8,004)Others (150) (171)
(7,570) (8,175)
Deferred tax liabilities:Excess of capital allowances over depreciation 95,901 106,497Others 339 681
96,240 107,178
Subject to real property gains taxDeferred tax liabilities:Property, plant and equipment - 2,505
At year end 2007, the Company applied the tax rate of 26% on the temporary differences that are expected to be reversed in 2008, and 25% on the balance of the temporary differences (2006: tax rate of 27% for 2007, and 26% on the balance of the temporary differences).
2007 2006RM'000 RM'000
Authorised: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
2007 2006RM'000 RM'000
Capital redemption reserve (non-distributable) 8,000 8,000Retained profits (distributable) 524,327 490,807
532,327 498,807
The Company has sufficient tax credits under Section 108 of the Income Tax Act, 1967 (ITA) to frank up to approximately RM401,387,000 (2006: RM422,954,000) of the retained profits as at December 31, 2007 if paid out as dividends in 2008. These tax credits are available for distribution of franked dividends under Section 108 of ITA by December 31, 2013. 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 RM209,000,000 (2006: RM208,000,000).
The components of deferred tax assets and liabilities prior to offsetting are as follows:
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23. CASH AND CASH EQUIVALENTS
24. SIGNIFICANT RELATED PARTY DISCLOSURES
2007 2006RM'000 RM'000
Deposit, cash and bank balances 17,913 16,787Less: Deposit with a licenced bank included in the above (7,209) (6,998)
10,704 9,789
Deposit with a licenced 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.
2007 2006RM'000 RM'000
Purchases of crude oil from ExxonMobil Exploration and Production Malaysia Inc. 6,187,728 5,599,786
Purchases of petroleum products from: ExxonMobil Asia Pacific Pte. Ltd. 1,671,056 1,843,785ExxonMobil Malaysia Sdn. Bhd. 695,187 704,167Others 53,479 37,661
Sales of petroleum products to:ExxonMobil Asia Pacific Pte. Ltd. 2,100,385 1,756,307ExxonMobil Malaysia Sdn. Bhd. 2,138,988 2,406,775ExxonMobil Borneo Sdn. Bhd. 361,523 384,753Others 24,283 24,364
Central management, shared facilities and services costsmainly with ExxonMobil Asia Pacific Pte. Ltd., ExxonMobil Business Support Centre Malaysia Sdn. Bhd.and ExxonMobil Exploration and Production Malaysia Inc.
Charged from: 90,077 82,122Charged to: (2,423) (1,506)
87,654 80,616
At year end 2007 and 2006 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 8 to the financial statements.
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25. COMMITMENTS FOR CAPITAL EXPENDITURES
26. CONTINGENT LIABILITIES (UNSECURED)
27. LEASING COMMITMENTS
28. APPROVAL OF FINANCIAL STATEMENTS
2007 2006RM'000 RM'000
Commitments for the purchase of property, plantand equipment authorised by the Directors butnot provided for in the financial statements:
Contracted 9,147 11,497Not contracted 4,620 1,471
13,767 12,968
Included in the above are contracted commitments for the joint venture assets of the MPP amounting to RM2,542,000 (2006: RM5,424,000).
2007 2006RM'000 RM'000
Litigation and other claims against the Company - 323
Litigation and other claims against the Company comprise potential liability on a dispute over a land deal.
In addition to the above, the Company'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 disclosure 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.
2007 2006RM'000 RM'000
As at balance sheet date, leasing commitments under non-cancellable operating leases are as follows:
Within 1 year 17,776 12,854After 1 year but within 5 years 32,390 41,480After 5 years 1,542 2,531
51,708 56,865Leasing commitments where milestone payments are dependent upon approvals from relevant authoritiesor the occurrence of events as specified under the said lease agreements 4,640 17,130
The financial statements have been approved for issue in accordance with a resolution of the Board of Directors dated February 20, 2008.
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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 33 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, 2007 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 for entities other than privates entities and the provisions of the Companies Act, 1965.
In accordance with a resolution of the Board of Directors dated February 20, 2008.
...............................Liam M. Mallon
.........................................................Y.Bhg. Dato' Zainal Abidin Putih
Kuala Lumpur,February 20, 2008
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 33 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 20, 2008 before me,
.......................................Commissioner for OathsKuala Lumpur
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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 4 6,353,592
Lot 26494, Mukim Petaling, Wilayah Persekutuan F 5,669 Service Station 01.05.1995 13 5,872,707
SELANGOR
HSD 72700 & 72701 MK Sg. Buloh, Esso Meru 2 F 3,697 Service Station 30.04.2002 6 5,347,072
Esso Jln Kebun South Bound, Batu 3 Puchong,
Shah Alam L 2,787 Service Station 01.12.1996 30.06.2099 12 6,235,299
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 4 6,315,770
PENANG
RevaluedLots 95-125, 128, Lot 2328-2338, Bagan Luar F 43,780 Storage & Dist. Plant in1982 48 11,094,000
HSM 414 Lot 2779 MK4 Seberang Perai Tengah,P.P
Esso Hussen Onn F 8,196 Service Station 01.03.1999 9 5,258,146
Esso Jalan Jelawat L 3,693 Service Station 01.07.2003 18.08.2073 5 6,855,423
NEGERI SEMBILAN
Lots 2645 & 2647, Mukim of Port Dickson
(Lot 2646 & 2648), 1926-1930, 1593-1595, 1805,
1838, 1803, 1836, 1757, 2278 & 1222, Revalued
Mukim Port Dickson F 1,631,970 Refinery in 1982 48 10,641,825
MPP and KVDT L 784,000 MPP/KVDT Facilities 01.03.2001 01.02.2100 7 20,219,173
Net Book Value
List of Major Properties Owned
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NOTICE IS HEREBY GIVEN that the forty-ninth 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 28, 2008 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, 2007 and the Directors' and Auditors' Reports thereon. (Resolution 1)
2. To approve the declaration of final dividend of 12 sen less Malaysian income tax at 26% per ordinary stock unit of 50 sen each for the year ended December 31, 2007. (Resolution 2)
3. To re-elect the following Directors retiring in accordance with Articles 104 and 105 of the Company's Articles of Association:
a. Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin bin Syed Salim (Resolution 3a) b. Y. Bhg. Tan Sri Abdul Halim bin Ali (Resolution 3b) c. Encik Zain C. Willoughby (Resolution 3c)
4. To approve the payment of Directors' Fees for the Independent Non-Executive Directors. (Resolution 4)
5. To re-appoint Messrs. PricewaterhouseCoopers as Auditors of the Company and to authorise the Directors to determine their remuneration. (Resolution 5)
6. As Special Business, to consider and, if thought fit, pass the following resolution as a Special Resolution:-
“That the alterations, modifications, variations and additions to the Memorandum and Articles of Association of the Company as set out per Appendix A attached to the Circular to the Stockholders dated April 28, 2008 (“Proposed Amendments”) be and are hereby approved; and
That the Board of Directors of the Company be and are hereby authorised to do all such acts, deeds and things as are necessary in order to give full effect to the Proposed Amendments, with full power to assent to any conditions, modifications and/or amendments as may be required by any relevant authorities.” (Resolution 6)
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 2, 2008, shall be entitled to the final dividend which, if approved, will be paid on June 20, 2008.
A stockholder shall qualify for entitlement only in respect of:
a) Securities transferred to the Depositors' Securities Account before 4.00p.m.on June 2, 2008 in respect of transfers;
b) Securities deposited into the Depositor's Securities Account before 12:30p.m. on May 29, 2008 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 28, 2008.
Note:A member of the Company entitled to attend and vote at the Annual 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 provisions 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 its 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., G-01, Ground 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 Annual General Meeting.
On the day of the Annual General Meeting:
1. Registration counters (located at the Ground Floor of Menara ExxonMobil) will be opened from 9.00a.m. and will close at 10.20a.m.
2. Refreshments will be served at the 'Eatery' located on Level 6 of Menara ExxonMobil, from 9.00a.m. to 10.20a.m.
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Notice of Annual General Meeting
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1. Directors standing for re-election
lY. Bhg. Tan Sri Dato' Dr. Syed Jalaludin bin Syed Salim retires by rotation and is eligible for re-election pursuant to Articles 104 and 105 of the Company's Articles of Association.
lY. Bhg. Tan Sri Abdul Halim bin Ali retires by rotation and is eligible for re-election pursuant to Articles 104 and 105 of the Company's Articles of Association.
lEncik Zain C. Willoughby retires by rotation and is eligible for re-election pursuant to Articles 104 and 105 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.
3. Special Business
The proposed amendments to the Memorandum and Articles of Association of the Company (“M&A”) are made to bring the M&A in line with amendments to the Listing Requirements of Bursa Malaysia Securities Berhad and to enhance clarity to existing provisions in the M&A. Please refer to the Circular to the Stockholders dated April 28, 2008 for further details. The proposed amendments to the M&A shall take effect if the Special Resolution (Resolution 6) is passed by a majority of not less than three-fourths of such members who are entitled to vote in person or by proxy at the Company's 49th Annual General Meeting.
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Statement Accompanying Notice of Annual GeneralMeeting
ADALAH DENGAN INI DIBERITAHU bahawa Mesyuarat Agung Tahunan yang ke-empat puluh sembilan bagi Esso Malaysia Berhad akan diadakan di PUSAT LATIHAN, ARAS 18, MENARA EXXONMOBIL, KUALA LUMPUR CITY CENTRE, 50088 KUALA LUMPUR pada hari Rabu, 28hb Mei 2008 jam 10:30 pagi dengan tujuan mengendalikan urusan-urusan berikut:
1. Menerima dan meluluskan akaun-akaun Syarikat yang telah diaudit bagi tahun berakhir 31hb Disember 2007, Laporan Pengarah serta Laporan Juruaudit mengenainya. (Resolusi 1)
2. Meluluskan pengisytiharan dividen muktamad sebanyak 12 sen tertakluk kepada cukai pendapatan Malaysia pada kadar 26% untuk setiap unit stok biasa yang bernilai 50 sen seunit bagi tahun berakhir 31hb Disember 2007. (Resolusi 2)
3. Memilih semula Pengarah-pengarah Syarikat berikut yang bersara mengikut Artikel 104 dan Artikel 105 Tataurusan Pertubuhan Syarikat:-
a. Y. Bhg. Tan Sri Dato' Dr Syed Jalaludin bin Syed Salim (Resolusi 3a) b. Y. Bhg. Tan Sri Abdul Halim bin Ali (Resolusi 3b) c. Encik Zain C. Willoughby (Resolusi 3c)
4. Meluluskan ganjaran Pengarah-pengarah Bebas bukan Eksekutif. (Resolusi 4)
5. Melantik semula Tetuan PricewaterhouseCoopers sebagai Juruaudit Syarikat dan memberi kuasa kepada Pengarah-pengarah untuk menetapkan imbuhan mereka. (Resolusi 5)
6. Sebagai Urusan Khas, menimbang dan sekiranya diterima, meluluskan resolusi berikut sebagai Resolusi Khas:-
“Bahawa pemindaan, pengubahsuaian, perubahan atau penambahan kepada Memorandum dan Tataurusan Pertubuhan Syarikat seperti dinyatakan dalam Lampiran A yang dikepil kepada Surat Pekeliling kepada Pemegang-pemegang Stok bertarikh 28hb April 2008 (“Pindaan Yang Dicadang”), dengan ini diluluskan; dan
Bahawa Lembaga Pengarah Syarikat dengan ini diberi kuasa melakukan apa-apa perkara yang sewajarnya dan perlu untuk melaksanakan Pindaan Yang Dicadang tersebut, dengan kuasa sepenuhnya untuk menerima dan menyetujui mana-mana syarat, perubahan dan/atau pindaan kepada Pindaan Yang Dicadang, sepertimana yang dikehendaki oleh pihak berkuasa yang berkenaan.” (Resolusi 6)
7. Menguruskan lain-lain urusan biasa Syarikat.
NOTIS PENUTUPAN BUKU-BUKU
DENGAN INI DIBERITAHU bahawa pemegang-pemegang stok yang berdaftar di dalam buku daftar ahli Syarikat dan Rekod Pendeposit pada waktu tutup urusniaga pada 2hb Jun 2008, adalah layak untuk menerima dividen muktamad dimana, jika diluluskan, akan dibayar pada 20hb Jun 2008.
Seseorang pemegang stok hanya layak menerima dividen berhubung dengan:
a) Sekuriti-sekuriti yang dipindahkan kepada Akaun Sekuriti Pendeposit sebelum jam 4:00 petang pada 2hb Jun 2008 bagi pemindahan biasa;
b) Sekuriti-sekuriti yang didepositkan di dalam Akaun Sekuriti Pendeposit sebelum jam 12:30 petang pada 29hb Mei 2008 bagi sekuriti-sekuriti yang dikecualikan dari deposit mandatori; 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 (LS0008614)
Manoj Devadasan (LS0006885) Setiausaha-setiausaha Bersama Syarikat
Kuala Lumpur28hb April 2008.
Nota:Seorang ahli Syarikat yang berhak hadir dan mengundi di Mesyuarat Agung Tahunan 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 terpakai ke atas Syarikat. Seorang ahli yang juga nomini yang sah seperti yang didefinisikan di bawah Akta Perindustrian Sekuriti (Depositori Pusat) 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., G-01, Tingkat Bawah, Plaza Permata (dahulu dikenali sebagai IGB Plaza), Jalan Kampar, off Jalan Tun Razak, 50400 Kuala Lumpur tidak lewat dari 48 jam sebelum waktu yang telah ditetapkan bagi mesyuarat.
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 di Dewan Makan, Aras 6, Menara ExxonMobil bermula pada jam 9:00 pagi hingga jam 10:20 pagi.
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Notis Mesyuarat Agung Tahunan
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1. Pengarah-pengarah yang bersedia untuk dipilih semula
l Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin bin Syed Salim bersara megikut giliran dan layak untuk dipilih semula menurut Artikel 104 dan Artikel 105 Tataurusan Pertubuhan Syarikat
lY. Bhg. Tan Sri Abdul Halim bin Ali bersara megikut giliran dan layak untuk dipilih semula menurut Artikel 104 dan Artikel 105 Tataurusan Pertubuhan Syarikat
lEncik Zain C. Willoughby bersara megikut giliran dan layak untuk dipilih semula menurut Artikel 104 dan Artikel 105 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 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 lalulilntas)
Pengarah-pengarah yang bersedia untuk dipilih semula tidak disabitkan kesalahan-kesalahan dalam tempoh 10 tahun yang lepas.
3. Urusan Khas
Pindaan-pindaan pada Memorandum dan Tataurusan Pertubuhan Syarikat (“M&A”) adalah bertujuan untuk menyelaraskan M&A sempena pindaan-pindaan yang telah dibuat pada 'Listing Requirements' Bursa Malaysia Securities Berhad dan untuk menjelaskan beberapa peruntukan yang sedia ada dalam M&A. Sila rujuk kepada Surat Pekeliling kepada Pemegang-pemegang Stok bertarikh 28hb April 2008 untuk keterangan lanjut. Pindaan-pindaan kepada M&A hanya akan berkuatkuasa sekiranya Resolusi Khas (Resolusi 6) berkenaan diluluskan oleh majoriti yang tidak kurang daripada tiga-perempat ahli syarikat yang layak mengundi secara sendiri ataupun oleh proksi di Mesyuarat Agung Tahunan Syarikat yang ke 49.
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ESSO MALAYSIA BERHAD
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Penyata yang Dilampirkan Bersama Notis MesyuaratAgung Tahunan
P R O X Y F O R M
CDS Account No. of Authorized Nominee
I / We ______________________________________________________(full name in Block Capitals as per NRIC)
NRIC / Company No.______________________________________(new)______________________________(old)
of ________________________________________________________________________________(full address)
being a member / members of the Company, hereby appoint ______________________________________________
(name of proxy as per NRIC) NRIC/Company No. _________________________(new)_____________________(old)
of ________________________________________________________________________________(full address)
or failing whom ______________________________________________________(full name in Block Capitals as per
NRIC) NRIC / Company No. _________________________________(new)___________________________(old) of
__________________________________________________________________________________(full address) as my/our Proxy to attend and vote for me / us on my / our behalf at the Annual General Meeting of the Company to be
held on Wednesday, May 28, 2008 at 10:30a.m and at any adjournment thereof.
My instruction to my / our proxy is as follows:
Resolutions: For Against
1. Receive and adopt Company's Audited Accounts
2. Approve the declaration of dividend
3. (a) Re-elect Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin bin Syed Salim
(b) Re-elect Y. Bhg Tan Sri Abdul Halim bin Ali
(c) Re-elect Encik Zain C. Willoughby
4. Approve payment of Directors' fees for Independent Non- Executive Directors
5. Re-appoint PricewaterhouseCoopers as Auditors and authorize the Directors to determine their remuneration
6. Amendments to the Memorandum and Articles of Association
7. Any other business
(Please indicate an “X” in the spaces provided on how you wish your vote to be cast. If you do not, the proxy will vote or abstain from voting at his / her discretion)
__________________________Signature / Common Seal
Number of stocks held : _________________________________
Date : _________________________________
Notes:lA member of the Company entitled to attend and vote at the Annual 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 provisions 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 stocks units of the Company, standing to its credit of the said securities account.
lThe instrument appointing a proxy must be deposited at the Share Registrar's office at Tenaga Koperat Sdn Bhd, G-01, Ground 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.
ESSO MALAYSIA BERHAD( Company No. 3927-V )
( Incorporated in Malaysia )
AFFIX STAMP
The Share Registrars,TENAGA KOPERAT SDN. BHD (118401-V),G-01, Ground Floor,Plaza Permata (formerly known as IGB Plaza),Jalan Kampar, off Jalan Tun Razak,50400 Kuala Lumpur
P.O. Box 12216, 50770 Kuala Lumpur.
1st fold here
Then fold here
Fold this flap for sealing
ESSO MALAYSIA BERHAD (Company No.3927-V)
(Incorporated in Malaysia) An ExxonMobil Subsidiary in Malaysia
