Read Cover, inside cover & pg1.cdr text version

ESSO MALAYSIA BERHAD

Profile of Directors

Hugh W. Thompson Chairman B. Sc. (Hons.) Geology, University of Aberdeen, Scotland M.Eng (Petroleum Engineering), Heriot-Watt University, Edinburgh, Scotland Mr. Hugh W. Thompson, aged 48, a citizen of the United Kingdom, was appointed a Director and Chairman of the Company on June 4, 2009. He joined ExxonMobil in 1988 and over the past 22 years has held positions of increasing responsibility in assignments ranging from Engineering and Operations Management, major project management and strategic business planning. He has spent the majority of his career with ExxonMobil in international assignments and has worked in Aberdeen and London in the United Kingdom as well as in Louisiana, Texas and California in the United States of America. He was the Planning Manager (Planning and Business Analysis) with ExxonMobil Production Company in Houston, Texas, United States of America before being appointed the Global Planning Manager for the ExxonMobil Production Company; a position he held until his appointment in 2009 as the Chairman of the ExxonMobil Subsidiaries in Malaysia.

Fatimah Merican Executive Business Services Director Higher National Diploma, Polytechnic of Central London (now University of Westminster) (1976) Puan Fatimah Merican, aged 56, a Malaysian, was appointed Business Services Director of the Company on December 1, 2008. She joined ExxonMobil Exploration and Production Malaysia Inc. (EMEPMI) in 1977. Over her career with the Company she has held various professional and managerial positions in the local and global Information Technology organisations of ExxonMobil. Fatimah has also completed a rotational assignment in EMEPMI Public Affairs, and foreign assignments with ExxonMobil Asia Pacific Pte. Ltd., Singapore and ExxonMobil Limited, Thailand. Prior to October 1, 2008, Fatimah Merican was Manager, Downstream/Chemical Applications, Business Line Applications, Information Technology, ExxonMobil Business Support Centre Malaysia Sdn. Bhd. in Kuala Lumpur. Effective October 1, 2008, she was transferred to Upstream Business Services and thereafter appointed Business Services Director. In addition, on October 1, 2010, Fatimah was also appointed the Tax Manager of ExxonMobil Subsidiaries in Malaysia; that includes Esso Malaysia Berhad.

Abu Bakar Siddik Che Embi Executive Refinery Director B.Sc. (Hons.) Chemical Engineering, Leeds University, United Kingdom Encik Abu Bakar Siddik Che Embi, aged 58, 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 Department 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.

Faridah Ali Executive Retail Business Director B.Sc. (Hons.) Accounting, University of East Anglia, Norwich, ACA (England & Wales) Puan Faridah Ali, aged 46, 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 the 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 Business Analysis and Reporting Manager before assuming her current position.

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Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim Independent / Non-Executive Director and Member of the Board Audit Committee P.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, Japan, D.Agriculture Technology, Honoris Causa, Thaksin University, Thailand, D.Sc., Honoris Causa, Open University Malaysia. Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim, aged 67, a Malaysian and a national 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 of 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, Kejuruteraan Samudra Timur Berhad, Taylor's Education Berhad and Halal Industry Development Corporation. He is a Director of TAFI Industries Berhad and is also the Chancellor of Taylor's University.

Y. Bhg. Tan Sri Abdul Halim Ali Independent / Non-Executive Director and Member of the Board Audit Committee P.M.N., P.J.N., S.P.M.S., S.I.M.P., D.G.S.M., D.H.M.S., D.S.D.K., J.S.M., K.M.N. B.A. (Hons.), University of Malaya Y. Bhg. Tan Sri Abdul Halim Ali, aged 67, a Malaysian, was appointed Director of the Company on 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 Malaysia Building Society Berhad and he is also a Director of Malakoff Corporation Berhad and IJM Corporation Berhad.

Y. Bhg. Dato' Zainal Abidin Putih Independent / Non-Executive Director and Chairman of the Board Audit Committee D.S.N.S., J.P., FCA (ICAEW), CA (M), CPA (M) Y. Bhg. Dato' Zainal Abidin Putih, aged 65, a Malaysian, was appointed Director of the Company 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 a 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 as well as the Malaysian Accounting Standards Board (MASB). He is currently the Chairman of Dutch Lady Milk Industries Berhad and Land & General Berhad. He is also a Director of Tenaga Nasional Berhad and a Director of CIMB Group Holdings Berhad, including its subsidiaries CIMB Bank Berhad and CIMB Investment Bank Berhad. He is also Chairman of CIMB Group's subsidiary Southeast Asia Special Asset Management Berhad. He also acts as a Trustee of the National Heart Institute Foundation.

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Corporate Citizenship - Highlights

EMB emerged as a double winner at the STARBiz-ICR Malaysia Corporate Responsibility Award 2010 in the `Workplace' and `Community' categories. It was one of 21 finalists selected from a shortlist of companies listed on Bursa Malaysia and was the only company among the finalists with market capitalisation below RM1 billion to win in two categories.

orporate citizenship has long been an integral part of our approach as we conduct our business of providing efficient, affordable and environmentally responsible energy to Malaysia. Being a good corporate citizen is embedded in every facet of our operations; from ensuring the highest standards in safety and health, to protecting the environment, operating with the highest business integrity and contributing to the communities where we work. This section describes the corporate citizenship efforts and accomplishments of EMB and the other subsidiaries of ExxonMobil in Malaysia.

Upholding Standards In Corporate Governance and Business Integrity Our efforts to be a good corporate citizen are demonstrated on many fronts, but none is more fundamental than setting and meeting the highest ethical standards for the way we do business. We support transparency, oppose corruption and are committed to honest and ethical behaviour wherever we operate.

Our philosophy on business ethics is enshrined in our Standards of Business Conduct which serves as a guide toward the highest standards of integrity in all our dealings and every aspect of our operations. These are further strengthened by each employee's annual affirmation of their familiarity with the policies and on-going reviews to assess compliance and identify areas for improvement. Our Operations Integrity Management System provides a disciplined framework for controlling and managing safety, health, security and environmental risks at all our facilities. It is designed to help minimise operational incidents and meets the requirements of the International Organisation for Standardisation's standard for environmental management systems (ISO 14001). In 2010, we conducted refresher training for employees on our business practices to ensure they fully understand company expectations. Controls clinics were organised to encourage dialogue on the application of guidelines and policies. We also conducted training for employees who interact with government officials or may do so in the future to ensure they understand expectations of ethical and honest dealings with governments and obligations to comply with competition laws and anti-trust legislation of the United States.

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Safety Excellence - The Number One Priority We are committed to maintaining the highest standards of safety and security in our day-to-day operations in order to protect the welfare of our employees, contractors, customers and the public. Our goal is Hurt-Free, Every Site, Every Day. We enforce strict compliance with safety procedures and management systems to achieve this vision. While these systems provide a valuable framework for achieving safety excellence, active employee involvement is crucial to maintaining this performance. Safety programmes such as U-See U-Act, Job Safety Analysis and a Loss Prevention System reinforce the message of personal accountability towards mitigating risks in our operations. These programmes are extended to our contractors and third-party workers to ensure a common approach to safety.

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

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

EMB's construction services provider, which services ExxonMobil's Asia Pacific retail business, celebrated eight years and five million manhours without LTI. In addition, EMB together with ExxonMobil's retail businesses in the Asia Pacific region, received the ExxonMobil Fuels Marketing President's Safety Award, which recognised them for exceptional overall security, safety, health and environmental performance as well as continuous improvement over time. For a number of years, ExxonMobil's Asia Pacific retail sales group has consistently achieved the lowest total recordable incident rate for a retail business. Showing relentless attention to SSH&E, the team posted best-in-class employee and contractor recordable rates, a nearly 70% improvement in employee incident rates since 2008, and zero environmental incidents in the past two years.

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Environmental Performance - Protect Tomorrow. Today. We are committed to operating our business in an environmentally responsible manner that balances the environmental and economic needs of the communities in which we operate. In addition to strict compliance with applicable environmental legislation and regulations, we continuously seek ways to understand and mitigate the impact of our business on the environment. As part of our Protect Tomorrow. Today. initiative, we take active measures at all our facilities to reduce emissions, improve energy efficiency, prevent environmental incidents and minimise our environmental footprint.

Protect Tomorrow Today

Port Dickson Refinery achieved exemplary performance in flare reduction with 55

percent improvement compared to 2009. The site also sustained zero reportable spills in 2010 for the second year running.

Port Dickson Refinery is also a pace setter in energy conservation through its energy

efficiency measures, resulting in some RM5 million in cost savings. The Refinery ranks in second place among all ExxonMobil refineries throughout Asia Pacific for energy efficiency.

All our distribution terminal storage tanks for gasoline products are equipped with an

internal floating roof to reduce the release of Volatile Organic Compounds (VOCs) into the atmosphere. At the same time, we operate a robust Preventive Maintenance Programme for all storage tanks and pipelines to ensure their integrity is maintained, all with the goal of zero leaks or spills to the environment.

Product Safety & Stewardship We are dedicated to minimising the risks and impacts associated with the manufacture and use of our products, from development through to their end use and ultimate disposal. We have processes in place to ensure the quality and high standards of our products. We ensure our products are safely delivered to our customers in all sectors and conduct regular safety checks of all our equipment. We provide up-to-date product specifications and safe handling procedures of the products we sell. Our service station dealers are trained in preventive and responsive safety and environmental procedures to ensure safety at all our sites and to minimise the impact of any security or environmental incident that may occur. Supporting Sustainability We are committed to supporting our customers' sustainability efforts by developing innovative, high-performance products and services that deliver both business and sustainability related benefits.

In 2010, our Lubricants & Specialties business ran a communications campaign with its

distributors to highlight the measures we are taking on sustainability in our business. Specific initiatives include:

A focus on helping to extend equipment life, and increase efficiencies and productivity in order to benefit equipment manufacturers and users alike. Working with engine manufacturers to boost fuel economy and lower emissions. This also enables marine/truck fleet operators to reduce oil consumption and thus resulting in cost savings. Our formulations are also designed with increased fuel economy as a primary goal. Extending the performance and protection of vehicle engines by developing longer lasting lubricants. Our longer lasting synthetic motor oils also cut down on used oil volumes. Reducing the use of materials through package design enhancements. Using fully recyclable road bitumen to conserve building materials. Reducing marine fleet oil consumption with a feed rate optimisation programme.

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A Healthy Workplace, A Healthy Business We know that the success of our business lies fundamentally in the personal well-being and professional growth of our employees. During the year, we ran a number of occupational health programmes and initiatives to reduce the risk of occupational injury or illness and to raise awareness of the importance of health among employees, contractors and others involved in our operations.

The Ergo Lead / Ergo Contact Network continued its stewardship of the Office Ergonomics programme with regular assessment and reviews to ensure that potential injury and illness among employees related to ergonomic factors were minimised. An Ergo Resource Centre was also opened during the year to help employees learn more about preventing illness and injury in the workplace and at home. A Health Week was organised for employees featuring a series of talks on health topics with demonstrations and presentations on maintaining a healthy lifestyle.

Nurturing Talent - We recognised the importance of attracting and retaining top performers from the broadest possible talent pool to meet our business requirements. We put in place fair and responsive succession plans and opportunities for advancement, keeping pace with our employees' progress and achievements in order to identify areas in which they can contribute and grow. We encourage a healthy work-life balance, and instill respect for this philosophy among our employees and management. Equal Treatment - Employees are treated equally regardless of race, religion, gender, sexual orientation or impairment due to health conditions. We adopt policies that encourage diversity in the work place and practice zero tolerance of all forms of harassment in the workplace. Developing Potential - We strive to provide our employees with the best career opportunities in our industry, including assignments abroad to help foster individual growth and achievement. During 2010, a number of EMB employees were among the 100 Malaysians on international assignments within ExxonMobil. Active In The Community ExxonMobil has a long tradition of community involvement via employee volunteerism and financial contributions. We work with government and non-government bodies and community leaders to identify areas of need and make positive contributions through projects that bring sustainable, long-term benefits in the areas of human capital development, health and safety, energy literacy and corporate governance. In 2010, about RM1.3 million was contributed by EMB and other ExxonMobil subsidiaries to some 35 organisations to support a number of human capital development, environment, safety and health projects. Some of our contributions include:

ExxonMobil Education & Scholarship Fund for deserving students in Negeri Sembilan. Sports award to recognise outstanding young athletes under the Majlis Sukan Sekolah-Sekolah Negeri Sembilan (MSSNS) programme.

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

ExxonMobil Community Projects Programme: In 2010, EMB employees were part of about 650 employees and family members who carried out a total of 14 community projects at various locations. These included arranging a shopping expedition for children from a local orphanage to help them prepare for the new school year; and working with children from poor urban communities to help generate an understanding of what makes strong families and to build their self worth. At Rumah Alam Darul Aminan Orphanage in Senawang, Port Dickson Refinery employees and their families carried out a project to upgrade the orphanage buildings and gardens and organised a day of activities with the resident children. In total, RM220,000 was spent for the year's programme.

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CORPORATE GOVERNANCE

The Board of Directors of Esso Malaysia Berhad is committed to ensuring that the highest standards of corporate governance are practised throughout the Company. The Board views this as a fundamental part of its responsibilities to protect and enhance shareholder value. Accordingly, the Board fully supports the principles laid out in the Malaysian Code on Corporate Governance. Exxon Mobil Corporation, as the Company's ultimate holding company, has developed a series of policies and management systems that are designed to create and support a strong system of corporate governance. The policies and management systems have been adopted by the Board and are communicated to the Company's employees, contractors and vendors, so that each has a clear understanding of the Company's expectations. The policies, which are set out in a Standards of Business Conduct booklet, and the management systems are strictly enforced. The 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 by an internal Management Committee and an Audit and Controls Committee, both led by the Chairman. The Board 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, 2010, four Board and four Board Audit Committee meetings were held. Details of the Directors' attendance at these meetings are summarised below: Directors Number of Board Meetings Held Attended 4 4 4 4 4 4 4 4 4 4 4 4 3 4 Number of Board Audit Committee Meetings Held Attended Non-member 4 4 4 Non-member Non-member Non-member Non-member 4 4 4 Non-member Non-member Non-member

Mr. Hugh W. Thompson Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim Y. Bhg. Tan Sri Abdul Halim Ali Y. Bhg. Dato' Zainal Abidin Putih Puan Fatimah Merican Encik Abu Bakar Siddik Che Embi Puan Faridah Ali

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CORPORATE GOVERNANCE (Continued)

Board Membership The Board had 7 members as at the end of 2010, with 3 Independent Non-Executive Directors and 4 Executive Directors (including the Chairman). Together, the Directors form the mind and management of the Company. The functional organisation of the Company provides a system and structure of checks and balances in the decision making process. There is a clear division of responsibilities between the Chairman and each of the other Executive Directors. 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. Supply of Information 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 Secretary, has the authority to retain such outside advisors, including accountants, legal counsels, and other experts, as it deems appropriate. The fees and expenses of any such advisors will be paid by the Company. Appointment and Re-election of Directors 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 Malaysian 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. Remuneration Committee 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. Hugh W. Thompson (Executive Director) - Chairman Puan Fatimah Merican (Executive Director) - Alternate Chairman 2. 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) Directors' Remuneration The remuneration received by the Independent Non-Executive Directors in 2010 was recommended by the Board as a whole (with the Independent Non-Executive Directors abstaining from participation in the discussions and voting on the matter) and approved by the shareholders at the Annual General Meeting on May 25, 2010. With the recommendation of the Remuneration Committee, the Board has adopted Exxon Mobil Corporation'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.

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CORPORATE GOVERNANCE (Continued)

An analysis of the aggregate Directors' remuneration incurred by the Company for the year ended December 31, 2010 as prescribed under Appendix 9C Part A Item 11(a) of the Main Market 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 INDEPENDENT NON-EXECUTIVE DIRECTORS 126,000 1,359,779 33,000 1,359,779 159,000

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 11(b) of the Main Market Listing Requirements of the BMSB is set out below: Remuneration (RM) Number of Executive Number of Non-Executive Directors Directors Less than 50,000 50,001 - 100,000 3 100,001 - 150,000 1 150,001 - 200,000 200,001 - 250,000 1 250,001- 300,000 300,001 - 350,000 1 350,001 - 400,000 400,001 - 450,000 450,000 - 500,000 500,001 - 550,000 550,001 - 600,000 600,001 - 650,000 650,001 - 700,000 1 The Company has opted not to disclose each Director's remuneration as the Board considers the information to be sensitive and proprietary. Nominating Committee 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 2010. 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. Hugh W. Thompson (Executive Director) - Chairman Puan Fatimah Merican (Executive Director) - Alternate Chairman 2. Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim (Independent Non-Executive Director) 3. Y. Bhg. Tan Sri Abdul Halim Ali (Independent Non-Executive Director) The Board when setting up the Nominating Committee in 2003 formed the view, which it still holds today, that the 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 Malaysian 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.

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CORPORATE GOVERNANCE (Continued)

Directors' Training 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 2010. All Directors on the Board had received or undergone relevant training in 2010. Further details of the training programmes attended by the Directors in 2010 are as set out in pages 24 to 26. The Company reimburses Directors for costs incurred in attending continuous education programmes. The Directors are also briefed at quarterly Board meetings on any significant changes in laws and regulations that are relevant to the Company's operations. Dialogue between the Company and Investors The Board values and encourages dialogue with the shareholders to establish better understanding of the Company's objectives and performance. The Annual General Meeting provides an appropriate forum for the shareholders to dialogue with the Board. Additionally, queries from investors and potential investors are dealt with by our Investor Relations. The Company also has its own website with contact details of a dedicated officer for such purpose. The Company 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 Main Market Listing Requirements of the BMSB. Material information relating to the Company is disclosed to the public by way of announcements to the BMSB, as required by the Main Market Listing Requirements of the BMSB. Annual General Meeting At the Annual General Meeting, the Chairman of the Board reviews the progress and performance of the Company with the shareholders. A question and answer session is also conducted to allow shareholders the opportunity to question Management on the Company's business and the proposed resolutions. The Chairman, the Board members and the external auditors are available at the Annual General Meeting to respond to questions. Accountability and Audit In announcing the quarterly, semi-annual and annual financial statements to the shareholders and the public, the Board endeavours to present a balanced and understandable assessment of the Company's financial position and prospects. The Board Audit Committee assists the Board by ensuring the accuracy and adequacy of the information announced. 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 shareholders' investment and the Company's assets. The internal control system has clear management support, including the involvement of the Board, and is designed to meet the risks to which the Company is exposed. The Board is satisfied with the design of the control system and believes that there is compliance with all of the requirements. 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, a clearly defined organisational structure with clear lines of accountability and delegation of authority for each level, 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,

2. 3.

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CORPORATE GOVERNANCE (Continued)

Internal Control (Continued) 4. key policies covering, among others, Business Ethics, Conflicts 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, a Controls Integrity Management System to assess and sustain the effectiveness of the organisation's system of controls; and 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.

5. 6.

It should be noted that systems of internal controls 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. Statement of Directors' Responsibility for Preparing the Financial Statements The Directors are required by the Companies Act, 1965 and the Main Market Listing Requirements of the BMSB to confirm that the financial statements for each financial year have been made out in accordance with the applicable approved accounting standards and that they give a true and fair view of the results of the business and state of affairs of the Company for the financial year.

The Directors have carried out their responsibilities by: selecting suitable accounting policies and applying them consistently; making judgments and estimates that are reasonable and prudent; ensuring that all applicable accounting standards have been adhered to; and basing the financial statements on a going-concern basis, as the Directors have a reasonable expectation, 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. 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 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. Non-Audit Fees No non-audit fees were paid or are payable to the external auditors, PricewaterhouseCoopers, by the Company for the financial year ended December 31, 2010. Other Information i) Family Relationship None of the Directors have any family relationship with any other Director and/or major shareholder(s) of the Company. ii) Conflicts of Interest None of the Directors have any conflicts of interest with the Company.

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ESSO MALAYSIA BERHAD

CORPORATE GOVERNANCE (Continued)

Other Information(Continued) iii) Conviction for offences (excluding traffic offences) None of the Directors have been convicted for any offences within the past 10 years. iv) Sanctions and/or penalties No sanction or penalty has been imposed on the Company, or the Directors or the Management, by the relevant regulatory bodies. This Statement is made in accordance with the Board of Directors' resolution dated February 25, 2011.

Training Attended by Directors in 2010

Directors / Training

Hugh W. Thompson

Date in 2010

Organiser

Upstream Working Group Offsite Strategy Planning Operations - ALT Effectiveness Workshop ESG Drill Production Leadership Team Conference Annual Safety Forum Data Privacy Laws Offsite Strategy Meeting - PUL Alignment Workshop Asia Oil & Gas Conference - Panel Chairman " The Roundtable Carbon Agenda" Upstream Working Group Visiting Senior Executive Programme Offsite External Engagement Strategy Conference - 1 Advanced ESG Training Offsite External Engagement Strategy Conference - 2 Upstream Oil & Gas Business in Malaysia Upstream Working Group Economic Transformation Programme Roadmap Leadership Offsite - Safety

Feb 22 Mar 2 Mar 16 Apr 1 Apr 12-15 Apr 19 May 20 May 26 Jun 7-8 Jun 21 Jun 30 Jul 6 Jul 19-21 Jul 28 Aug 27 Oct 4 Oct 24 Nov 25

PETRONAS ExxonMobil ExxonMobil ExxonMobil ExxonMobil Houston, USA ExxonMobil ExxonMobil ExxonMobil PETRONAS PETRONAS Thunderbirds ExxonMobil ExxonMobil ExxonMobil ExxonMobil PETRONAS Govt of Malaysia ExxonMobil

Tan Sri Dato' Dr. Syed Jalaludin Syed Salim

Data Privacy Laws Banking Insight Programme - Prof. Nabil Upstream Oil & Gas Business in Malaysia

May 20 Jun 8-9 Aug 27

ExxonMobil Bank Negara Malaysia ExxonMobil

24

ANNUAL REPORT & ACCOUNTS 2010

CORPORATE GOVERNANCE (Continued) Training Attended by Directors in 2010 (Continued)

Directors / Training

Tan Sri Abdul Halim Ali

Enhancing Protection for Directors and Officers

Date in 2010

Organiser

in an Escalating Risk Environment

Jan 26 Mar 16-17 May 20 Mar 25 Jul 13 Aug 5 Sep 30 Aug 27

IJM Corporation Bhd Malaysia Building Society Berhad ExxonMobil MSWG Ministry of Higher Education Rahmat Lim & Partners IJM Corporation Bhd ExxonMobil

Financial Instruments Seminar Data Privacy Laws

- FRS 101, 139, 132, 7 and IFRIC 15

Corporate Governance Seminar Leaders building Leaders Seminar of Competition Bill 2010 A Contrarian View of Corporate Governance by John Zinkin Upstream Oil & Gas Business in Malaysia

Dato' Zainal Abidin Putih

Talk on Managing Risks in Mortgage Financing Forum on "The Challenges of Implementing FRS 139" Building Organisational Capability for Strategic

Jan 13 Jan 21 May 4 May 20 May 20-21 Jun 8-9 Jun 21-22 Aug 2-5 Oct 4-5 Aug 27 Nov 3 Nov 26-27

Bank Negara Malaysia & Cagamas Berhad Bursa Malaysia Bank Negara Malaysia ExxonMobil Bank Negara Malaysia Bank Negara Malaysia Bank Negara Malaysia IBC Asia - Singapore Khazanah Nasional ExxonMobil Bank Negara Malaysia CIMB

Transformation - Prof. Dave Ulrich

Data Privacy Laws Building Audit Committees for Tomorrow

- David Brown (Brown Governance)

Banking Insight Programme - Prof. Nabil Advance Risk Management Programme - David Bobker Capitalize Investment Opportunity

- Nuclear Energy Sector in Asia

Khazanah Megatrend Forum 2010 Upstream Oil & Gas Business in Malaysia BNM Financial Industry Conference 2010 Annual Management Dialogue

Faridah Ali

Data Privacy Laws Work-Life Balance Seminar Antitrust Briefing Upstream Oil & Gas Business in Malaysia Professional Development - Supervisors' Training Defensive Driving Retail Investments Basis Seminar Project Management Workshop Business Practices Review DOSS NTI Workshop

May 20 Jul 8 Jul 23 Aug 27 Sep 22-23 Oct 6 Oct 14 Oct 20-21 Oct 29 Dec 2

ExxonMobil ExxonMobil ExxonMobil ExxonMobil ExxonMobil ExxonMobil/SAMP ExxonMobil ExxonMobil ExxonMobil ExxonMobil

ANNUAL REPORT & ACCOUNTS 2010 25

ESSO MALAYSIA BERHAD

CORPORATE GOVERNANCE (Continued) Training Attended by Directors in 2010 (Continued)

Directors / Training

Fatimah Merican

SH+E Leadership Workshop by John Gelland Speakers Coalition Media Training by Ray Thompson ESG Drill NIEW Gender Series: Women and New Economic Model

Date in 2010

Organiser

Feb 4 Mar 18 Apr 1 Apr 9 May 20 May 26 Jun 7-8 Jul 6 Jul 28 Aug 27 Oct 1 Oct 14 Nov 22 Nov 25

ExxonMobil ExxonMobil ExxonMobil Ministry of Women, Family and Community Development ExxonMobil ExxonMobil PETRONAS ExxonMobil ExxonMobil ExxonMobil Govt of Malaysia US Embassy David S Reed & ExxonMobil ExxonMobil

Data Privacy Laws Offsite Strategy Meeting

- PUL Alignment Workshop

Asia Oil & Gas Conference Offsite External Engagement Strategy Conference - 1 Offsite External Engagement Strategy Conference - 2 Upstream Oil & Gas Business in Malaysia First Ladies Summit 2010 US Security Briefing Energy Outlook Leadership Offsite - Safety

Abu Bakar Siddik Che Embi

Data Privacy Laws Upstream Oil & Gas Business in Malaysia

May 20 Aug 27

ExxonMobil ExxonMobil

26

ANNUAL REPORT & ACCOUNTS 2010

ESSO MALAYSIA BERHAD

Board Audit Committee Report (Continued)

Meetings and Minutes (Continued) 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. Authority The Committee is authorised by the Board: to investigate any matter within its terms of reference; to have the resources which are required to perform its duties; to have full and unrestricted access to any information pertaining to the Company; to have unrestricted access to and communication with the external auditors of the Company and internal auditors; to obtain external legal or other independent professional advice as necessary; and to convene meetings with the external auditors of the Company, without the attendance of the executive members of the Committee, whenever deemed necessary.

Duties 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 Main Market Listing Requirements of BMSB ; and to perform such other functions as may be agreed to by the Committee and the Board.

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

28 ANNUAL REPORT & ACCOUNTS 2010

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, 2010. PRINCIPAL ACTIVITIES 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. FINANCIAL RESULTS Net profit attributable to shareholders Retained profits brought forward Profits available for appropriation Dividends paid less income tax at 25% Retained profits carried forward DIVIDENDS The amount of dividends paid since December 31, 2009 are as follows: In respect of the year ended December 31, 2009: Final dividend per stock unit, paid on June 21, 2010: Ordinary ­ 12 sen gross less income tax at 25% 24,300 RM'000

RM'000 268,579 370,243 638,822 (24,300) 614,522

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

RESERVES AND PROVISIONS All material transfers to or from reserves and provisions during the year are shown in the financial statements. STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS Before the statement of comprehensive income and statement of financial position were completed, the Directors took reasonable steps: 1. 2. 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 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. 2. 3. 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 which would make the values attributed to current assets in the financial statements of the Company misleading; or which would make adherence to the existing method of valuation of assets or liabilities of the Company misleading or inappropriate.

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.

ANNUAL REPORT & ACCOUNTS 2010

29

ESSO MALAYSIA BERHAD

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (Continued) At the date of this report, there does not exist: 1. 2. 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 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. 2. 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 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.

DIRECTORS The Directors who have held office during the period since the date of the last report are as follows: Mr. Hugh W. Thompson Y. Bhg. Tan Sri Dato' Dr. Syed Jalaludin Syed Salim Y. Bhg. Tan Sri Abdul Halim Ali Y. Bhg. Dato' Zainal Abidin Putih Puan Fatimah Merican Encik Abu Bakar Siddik Che Embi Puan Faridah Ali DIRECTORS' BENEFITS Since the end of the previous year, no Director has entered into or received or become entitled to receive a benefit (other than benefits disclosed in notes 8 and 9 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest. All transactions between the Company or a related corporation and companies in which Directors have interests are conducted on an arms-length, commercial basis in the ordinary course of business. The Company was not a party to any contract or arrangement during the year and at the end of the year, as envisaged by section 169(6)(f) of the Companies Act, 1965, which would have enabled any of the Directors to acquire benefits through the acquisition of shares in or debentures of the Company or any other body corporate.

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ANNUAL REPORT & ACCOUNTS 2010

DIRECTORS' INTERESTS IN SHARES According to the register of Directors' shareholdings, the interests of Directors who held office at the end of the year in the share capital of the Company and its related corporations are as follows: As at 01.01.10 Exxon Mobil Corporation (Ultimate holding company) - Number of common stock without par value held by the following Directors: Mr. Hugh W. Thompson Puan Fatimah Merican Puan Faridah Ali 5,041 9,852 437 6,018 6,550 570 (3,308) (400) 11,059 13,094 607 As at 31.12.10

Acquired

Sold

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. ULTIMATE HOLDING COMPANY The Directors regard Exxon Mobil Corporation, a corporation incorporated in the state of New Jersey, United States of America, as the ultimate holding company of the Company. AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.

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

............................... Hugh W. Thompson Chairman

............................... Fatimah Merican Director Kuala Lumpur, February 25, 2011

ANNUAL REPORT & ACCOUNTS 2010

31

ESSO MALAYSIA BERHAD

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED DECEMBER 31, 2010 Note REVENUES COST OF SALES GROSS PROFIT OTHER INCOME OPERATING EXPENSES ADMINISTRATIVE AND OTHER EXPENSES FINANCE COST PROFIT/(LOSS) BEFORE TAX TAX (EXPENSE)/BENEFIT NET PROFIT/(LOSS) ATTRIBUTABLE TO SHAREHOLDERS OTHER COMPREHENSIVE INCOME TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO SHAREHOLDERS 6 7 10 5 2010 RM'000 8,427,445 (7,650,829) 776,616 22,229 (344,645) (65,311) (20,432) 368,457 (99,878) 268,579 268,579 2009 RM'000 8,032,440 (7,429,880) 602,560 22,946 (334,522) (67,793) (22,195) 200,996 (55,478) 145,518 145,518

Earnings/(Loss) per ordinary stock unit (sen)

11

99.5

53.9

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

14.0

12.0

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

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ANNUAL REPORT & ACCOUNTS 2010

STATEMENT OF FINANCIAL POSITION

AS AT DECEMBER 31, 2010 Note NON-CURRENT ASSETS Property, plant and equipment Long-term assets Intangible assets - software TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories Assets held for sale ­ leasehold land Receivables Amounts due from related corporations Deposit, cash and bank balances Taxation TOTAL CURRENT ASSETS CURRENT LIABILITIES Payables Retirement benefits obligations Amounts due to related corporations Borrowings (unsecured) Taxation TOTAL CURRENT LIABILITIES NET CURRENT LIABILITIES LESS: NON-CURRENT LIABILITIES Retirement benefits obligations Deferred taxation 2010 RM'000 830,244 308,714 148 1,139,106 2009 RM'000 806,203 315,310 671 1,122,184

12 13 14

15 16 19

468,109 243,830 140,417 102,261 954,617

456,380 2,552 143,924 181,699 75,869 35,234 895,658

17 18 19 20

142,327 1,006 396,907 616,307 54,257 1,210,804 (256,187)

135,467 2,721 443,040 807,950 1,389,178 (493,520)

18 21

50,383 75,014 125,397 757,522

48,449 66,972 115,421 513,243

TOTAL NET ASSETS EMPLOYED FINANCED BY: SHARE CAPITAL RESERVES RETAINED PROFITS SHAREHOLDERS' EQUITY

22 23 23

135,000 8,000 614,522 757,522

135,000 8,000 370,243 513,243

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

ANNUAL REPORT & ACCOUNTS 2010

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ESSO MALAYSIA BERHAD

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2010 Issued and fully paid ordinary stock of RM0.50 each Number of ordinary Nominal stock unit value '000 RM'000

Non-distributable capital redemption reserves RM'000

Distributable retained profits RM'000

Total RM'000

At January 1, 2009 Net profit Dividends for the year ended December 31, 2008 (final)

270,000 -

135,000 -

8,000 -

249,025 145,518 (24,300)

392,025 145,518 (24,300)

At December 31, 2009

270,000

135,000

8,000

370,243

513,243

At January 1, 2010 Net profit Dividends for the year ended December 31, 2009 (final)

270,000 -

135,000 -

8,000 -

370,243 268,579

513,243 268,579

-

-

-

(24,300)

(24,300)

At December 31, 2010

270,000

135,000

8,000

614,522

757,522

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

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ANNUAL REPORT & ACCOUNTS 2010

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2010 Note CASH FLOWS FROM OPERATING ACTIVITIES Net profit / (loss) attributable to shareholders Adjustments for: Depreciation on property, plant and equipment Amortisation of intangible assets Tax expense / (benefit) Interest income Interest expense / commercial papers profit elements incurred Retirement / separation benefits cost (Gain) / loss on disposal of assets held for sale (Gain) / loss on disposal of property, plant and equipment Write-off of property, plant and equipment Unrealised foreign exchange (gain) / loss Changes in: (Increase) / decrease in inventories (Increase) / decrease in assets held for sale (Increase) / decrease in receivables (Increase) / decrease in amounts due from related corporations Increase / (decrease) in amounts due to related corporations Increase / (decrease) in payables and provisions Cash generated from operations Interest / commercial papers profit elements paid Interest received Income taxes paid Income taxes refunded Retirement / separation benefits paid Net cash from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (Increase) / decrease in long-term assets Proceeds from disposal of property, plant and equipment Proceeds from disposal of assets held for sale Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings ­ net Dividends paid to shareholders Net cash used in financing activities NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR 24 2010 RM'000 268,579 58,767 523 99,878 (2,691) 20,432 3,995 (659) 109 3,976 (7,813) (11,729) (99,843) 41,282 (38,430) 6,682 343,058 (20,495) 2,691 (37,580) 35,235 (3,666) 319,243 (87,853) 6,596 960 3,211 (77,086) (191,643) (24,300) (215,943) 26,214 68,358 94,572 2009 RM'000 145,518 60,505 845 55,478 (581) 22,195 4,848 (769) (294) 2,763 10,997 (158,336) (2,552) (88,800) (7,960) 199,698 (106,254) 137,301 (23,596) 581 (3,943) 110,343 (47,096) 30,982 992 5,874 (9,248) (17,058) (24,300) (41,358) 59,737 8,621 68,358

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

ANNUAL REPORT & ACCOUNTS 2010

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ESSO MALAYSIA BERHAD

NOTES TO THE FINANCIAL STATEMENTS

1.

BASIS OF PREPARATION The financial statements of the Company are prepared under the historical cost convention except as disclosed in the summary of significant accounting policies in Note 2. The financial statements comply with the Financial Reporting Standards (FRS) in Malaysia and the provisions of the Companies Act, 1965. The preparation of financial statements in conformity with the FRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. It also requires the Directors to make judgements that affect the application of the Company's accounting policies. Although these estimates and judgements are based on the Directors' best knowledge of current events and actions, actual results may differ. The financial statements have been approved for issues in accordance with a resolution of the Board of Directors dated February 25, 2011. a) Standards, amendments to published standards and interpretations that are applicable to the Company and are effective The new accounting standards, amendments to published standards and interpretations to existing standards effective for the financial period beginning January 1, 2010 and applicable to the Company are as follows:

Amendment to FRS 1 First Time Adoption of Financial Reporting Standards Amendments to FRS 2 Share-Based Payment Vesting Conditions and Cancellations FRS 8 Operating Segments and Amendment to FRS 8 Operating Segments FRS 101 (Revised) Presentation of Financial Statements FRS 123 (Revised) Borrowing Costs Amendment to FRS 127 Consolidated and Separate Financial Statements Amendments to FRS 132 Financial Instruments: Presentation Amendments to FRS 132 Financial Instruments: Presentation (paragraphs 95A, 97AA and 97AB) relating to classification of the compound financial instrument into its liability and equity elements when the entity first applies FRS 139 Financial Instruments: Recognition and Measurement Amendments to FRSs contained in the document entitled "Improvements to FRSs (2009)". The improvements contain amendments to twenty two FRSs which involves changes to presentation, recognition, or measurement and some are changes to terminology with little effect on accounting IC Interpretation 9 and Amendment to IC Interpretation 9: Reassessment of Embedded Derivatives IC Interpretation 10: Interim Financial Reporting and Impairment IC Interpretation 11: FRS 2 Group and Treasury Share Transaction IC Interpretation 13: Customer Loyalty Programmes IC Interpretation 14: FRS 119 The Limit of a Defined Benefit Asset, Minimum Funding Requirements and their Interaction FRS 7 Financial Instruments: Disclosures and Amendment to FRS 7 Financial Instruments: Disclosures FRS 139 Financial Instruments: Recognition and Measurement and Amendment to FRS 139 Financial Instruments: Recognition and Measurement.

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ANNUAL REPORT & ACCOUNTS 2010

1.

BASIS OF PREPARATION (Continued) a) Standards, amendments to published standards and interpretations that are applicable to the Company and are effective (Continued) The adoption of all the standards and interpretations above do not have any material impact on the financial position of the Company. All changes in accounting policies have been made in accordance with the adoption of all the standards which do not result in significant changes in accounting policies and disclosures, except as disclosed below:

FRS 8 Operating Segments and Amendment to FRS 8 Operating Segments. FRS 8 replaces FRS 1142004 Segment Reporting. The new standard requires a `management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. The amendment to the standard clarifies that entities that do not provide information about segment assets to the chief operating decision-maker will no longer need to report this information. The Company determined that the operating segment was unchanged as previously identified under 1142004 and additional disclosures about the segment is shown in Note 25. Comparative information has been presented in conformity with the transitional requirements of such standard. FRS 101 (Revised) Presentation of Financial Statements. It prohibits the presentation of items of income and expenses (non-owner changes in equity) in the statement of changes in equity. `Non-owner changes in equity' are to be presented separately from owner changes in equity in a statement of comprehensive income. FRS 123 (Revised) Borrowing Costs. The new standard requires an entity to capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. Previously the Company immediately recognised all borrowing costs as an expense. FRS 139 Financial Instruments: Recognition and Measurement and Amendment to FRS 139 Financial Instruments: Recognition and Measurement. On adoption of FRS 139, the Company measures financial assets and financial liabilities initially at fair value and subsequently carried at amortised cost using the effective interest rate method.

The remaining standards and interpretations that are effective for financial period beginning January 1, 2010 are not applicable to the Company's operations. b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Company but not yet effective The new standards, amendments to published standards and interpretations to existing standards applicable to the Company that will be effective but have not been early adopted by the Company, are as follows: i) Standards effective from March 1, 2010

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

ii)

Standards effective from July 1, 2010

FRS 1 First-time Adoption of Financial Reporting Standards. This is a revision to the existing FRS 1 merely to improve the structure of the standard. FRS 127 Consolidated and Separate Financial Statements. The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. IC Interpretation 17: Distributions of Non-cash Assets to Owners. It provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. Amendments to FRS 2 Share-based Payment. It clarifies that contributions of a business on formation of a joint venture and common control transactions are outside the scope of FRS 2. Amendments to FRS 5 Non-current Assets Held for Sale and Discontinued Operations. It clarifies that all of a subsidiary's assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control.

ANNUAL REPORT & ACCOUNTS 2010

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ESSO MALAYSIA BERHAD

1.

BASIS OF PREPARATION (Continued) b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Company but not yet are effective (Continued) ii) Standards effective from July 1, 2010 (Continued)

Amendment to FRS 138 Intangible Assets. It clarifies that a group of complementary intangible assets acquired in a business combination is recognised as a single asset if the individual asset has similar useful lives. Amendment to IC 9:Reassessment of Embedded Derivatives. The amendments clarify that the Interpretation does not apply to embedded derivatives in contracts acquired in a business combination, businesses under common control or the formation of a joint venture.

iii)

Standards effective from January 1, 2011

Amendment to FRS 1 (Limited Exemption from Comparative FRS 7 Disclosures for First-time Adopters) relieves first-time adopters of FRS from providing the additional disclosures required from the amendments to FRS 7. Amendments to FRS 7 (Improving Disclosures about Financial Instruments) reinforce existing principles for disclosures about liquidity risk and require enhance disclosures about fair value measurements. Amendment to FRS 1 (Additional Exemptions for First-time Adopters) exempts oil and gas entities using the full cost method from retrospective application of FRS for its oil and gas assets. Amendments to FRS 2 (Group Cash-Settled Share-based Payment Transactions) clarify that an entity must account for goods or services received in a share-based payment arrangement regardless of which entity in the group settles the transaction and whether the settlement is in shares or cash. Amendment to IC Interpretation 4: Determining whether an Arrangement contains a Lease clarifies that although an arrangement does not take the legal form of a lease, it is a lease when the fulfilment of the arrangement is dependent on the use of a specific asset and the arrangement to convey a right to use the asset. Amendment to IC Interpretation 18: Transfers of Assets from Customers clarifies that if an entity receives property, plant and equipment (PPE) and such PPE meet the definition of an asset, it shall recognise it in accordance with FRS 116 Property, Plant and Equipment.

The Company will apply the above standards, amendments and interpretations from financial period beginning January 1, 2011. The adoptions of these standards are not expected to have a material impact on the financial position of the Company. The remaining standards and interpretations that are issued but not yet effective are not applicable to the Company's operations. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unless otherwise stated, the following accounting policies adopted by the Company are consistent with those adopted in previous years: (a) Property, plant and equipment Property, plant and equipment are stated at cost or 1982 valuation less accumulated depreciation and impairment. No valuation has been conducted since 1982.

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ANNUAL REPORT & ACCOUNTS 2010

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (a) Property, plant and equipment (Continued) The Directors applied the transitional provisions of FRS 116 on Property, Plant and Equipment when MASB first 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 Buildings Open market value based on existing use 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 Plant and equipment 3% - 5% 4% - 10%

Maintenance and repairs are charged to the income statement as incurred. Major renewals and improvements are capitalised. Included in the respective property, plant and equipment classifications, is the Company's proportionate share in the joint venture assets of the Multi Product Pipeline System and related distribution terminal facilities (MPP). The Company has a 20% participating interest in the MPP. 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) Financial assets The Company's financial assets are loans and receivables. The Company has loans and receivables which are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for financial assets with maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. Such assets are recognised initially at fair value and subsequently at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise trade and other receivables, amount due from related corporations and cash and cash equivalents (Note 2 (f)). (c) Impairment of assets (i) Non-financial assets The carrying amounts of assets are reviewed annually to determine whether there is any indication that 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. (ii) Financial assets carried at amortised cost A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired includes significant financial difficulty of the issuer or obligor, a breach of contract, such as a default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise and indications that a debtor will enter bankruptcy or receivership.

ANNUAL REPORT & ACCOUNTS 2010

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ESSO MALAYSIA BERHAD

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(d) Operating leases Leases of assets under which a significant portion of risks and benefits of ownership over the economic life of the assets are 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. (e) 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. (f) 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. (g) Provisions Provisions are recognised when it is probable that an outflow of resources will be required to settle a present legal or constructive 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. (h) Employee / separation benefits (i) Short-term employee benefits Wages, salaries, bonuses, and non-monetary benefits are accrued in the year in which the associated services are rendered by employees of the Company. (ii) Retirement benefits (a) Defined contribution retirement plan The Company's contribution to the national defined contribution plan, the Employees Provident Fund, is recognised in the income statement as incurred. (b) Retirement benefits The Company operates an unfunded defined benefit retirement plan for its regular 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 December 2009. 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 from 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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ANNUAL REPORT & ACCOUNTS 2010

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (i) Share capital Ordinary stock units with discretionary dividends are classified as equity. (j) Dividends Dividends on ordinary stock units are recognised as liabilities when the dividends are approved for payment. (k) Trade and other payables Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are recognised initially at fair value and subsequently at amortised cost using the effective interest method. (l) Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred, and are subsequently carried at amotised cost. All interest, profit elements on Islamic Commercial Papers (ICP) Programme and other costs incurred in connection with borrowings are expensed as incurred, except that up-front costs incurred in establishing long-term facilities are amortised over the facility period. With the adoption of FRS 123 Borrowing Costs, borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after January 1, 2010, should be capitalised. The change had no material impact on the financial position of the Company. (m) Taxation The taxation charge in the income statement comprises current and deferred taxes. Current taxes are calculated 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 and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on either the taxable entity, or different taxable entity where there is an intention to settle the balances on a net basis. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available to absorb the deductible temporary differences. Tax rates enacted or substantively enacted by the balance sheet date are used to calculate deferred taxes. (n) Revenue recognition Income from the sale of goods is recognised upon delivery of goods and acceptance by customers net of returns, discounts and allowances, in accordance with the terms of sale. Interest and other income are recognised on an accrual basis. (o) 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. (p) 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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2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (q) Segment reporting Segment reporting is consistent with the internal reporting to the Company's chief operating decision maker, represented by a committee responsible for allocating resources and assessing performance of the operating segment. (r) Fair value estimation The carrying amount of current receivables and payables, carried at amortised cost, approximate their fair values.

3.

CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS The Company makes accounting estimates and assumptions concerning the future which may differ from actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are: (a) Estimated useful lives and residual values of property, plant and equipment Property, plant and equipment are depreciated on a straight line basis over the term of their useful service lives taking into account residual values where appropriate. The estimated useful lives of these assets should be reflective of factors such as service life experience on the facilities and their maintenance programmes. The useful lives and residual values of assets are reviewed, and adjusted if appropriate, at each balance sheet date. The significant accounting policy for property, plant and equipment is disclosed in Note 2. (b) Retirement Benefits Obligations The present value of the retirement benefits obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining net cost (income) for the retirement benefits include the discount rate used to determine the present value of estimated cash outflows expected to be required to settle the retirement benefits obligations, and salary growth rate. Any changes in these assumptions will impact the carrying amount of retirement benefits obligations. Refer to Note 18 for the sensitivity of the overall pension liability to changes in the discount rate and salary growth rate.

4.

FINANCIAL RISK MANAGEMENT a) Market Risk Given the size and long-term nature of its business, the Company expects that exposure to market risk arising from changes in currency rate and interest rate 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. (i) Currency risk The Company's activities are exposed to currency risk primarily arising from US dollar denominated crude purchases. A strengthening of the Ringgit would result in a favorable impact to profitability due to credit terms for payments for crude purchases. The Company has no other significant short-term or long-term transactions denominated in foreign currencies as at December 31, 2010. A 10% depreciation / appreciation of the USD against the Ringgit would result in an approximate decrease / increase in pre-tax profit of RM39 million (2009: RM41 million) with all other variables held constant.

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ANNUAL REPORT & ACCOUNTS 2010

4.

FINANCIAL RISK MANAGEMENT (Continued) a) Market Risk (Continued) (ii) Interest rate risk The Company is exposed to 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. The Company's financing arrangements are typically tracked against the Overnight Policy Rate (OPR) or Kuala Lumpur Interbank Offered Rate (KLIBOR). A rise in the major benchmark rates would result in a higher interest expense and vice versa. The impact of a 10-basis-point change in interest rate affecting the Company's borrowing would not be material to the Company's financial statements. b) Credit Risk Credit risk primarily arises from cash and cash equivalents, and credit exposures to trade customers. The Company places its surplus cash with a sister affiliate, ExxonMobil Malaysia Sdn. Bhd., which has been assessed as low risk due to overall strength of ExxonMobil group. From time to time, the Company has deposit placement with independently rated banks with a minimum rating of AAA by local rating agency, or equivalent. The Company manages credit exposure to trade customers 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 system. Risk evaluations are performed internally including reviews of financial positions, business success indicators, past experience and other factors. Individual risk limits are set based on the internal ratings in accordance with guidelines set by management. Risk categories are established for individual customers based on internal credit guidelines ranging from very low to very high risk. The risk categories are intended to reflect the risk of payment default by a customer and are similar to the rating scales established by external rating agencies. 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. c) Liquidity Risk The Company manages liquidity risk by maintaining sufficient cash and cash equivalent balance, third party borrowing facilities and inter-company financing arrangements. The Company reviews its revolving credit facilities on a periodic basis and continues to receive support from both local and foreign financial institutions. The existing Islamic Commercial Paper Program has continued enjoying competitive rates relative to other available arrangements. In addition, the Company has subscribed to the fund pooling arrangements made available by its sister affiliate, ExxonMobil Malaysia Sdn. Bhd. This inter-company financing arrangement allows the Company to either draw cash from the pool in the event of a shortfall, or place cash into the pool in the event of excess, at competitive interest rates on a daily basis. The Company continues to optimise the mix of its borrowing facilities to maximise financing flexibility whilst reducing financing cost. These facilities are short-term in nature unless opportunities arise to secure favorable longer term borrowing facilities. Liquidity risk may also arise if debtors are not able to settle obligations to the Company within the normal credit term. To manage this risk, the Company periodically assesses the financial viability of debtors and may require certain debtors to provide bank guarantees or other security. d) Capital Risk The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern in order to provide returns to shareholders and benefits to other stakeholders. In the future, in order to maintain an appropriate capital structure, the Company may consider adjusting the amount of dividends paid to shareholders, returning capital to shareholders, issuing new shares or selling assets to reduce debt. There were no changes in the Company's approach to capital management during the year.

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5.

REVENUES 2010 RM'000 Related corporations sales Third party sales Turnover Interest income Related parties Others Licence fees 3,145,708 5,252,842 8,398,550 2,579 112 26,204 8,427,445

2009 RM'000 3,443,027 4,563,919 8,006,946 579 2 24,913 8,032,440

Turnover represents the value of goods sold inclusive of subsidies and net of Government duties and taxes. 6. FINANCE COST 2010 RM'000 Interest and profit elements on borrowings (Note 20) Related parties Others 7. PROFIT/(LOSS) BEFORE TAX 2010 RM'000 The profit/(loss) before tax is arrived at after (crediting)/charging the following items: Depreciation on property, plant and equipment Amortisation of intangible assets Auditors' remuneration - Current - Non-recurring Inventory write-down to net realisable value Cost of inventories recognised as an expense Provision for impairment and write-off of receivables Reversal of provision for impairment of receivables Foreign exchange (other than on borrowings) Realised foreign exchange (gain)/loss Unrealised foreign exchange (gain)/loss Rental expense for land and buildings Hire of plant and machinery Research and development expense (Gain)/Loss on disposal of property, plant and equipment (Gain)/Loss on disposal of assets held for sale 8. EMPLOYEE BENEFITS EXPENSE 2010 RM'000 Wages, salaries and bonus Defined contribution retirement plan Employees Provident Fund Provision for retirement benefits Defined benefit retirement plan (Note 18) Separation benefits Other employee benefits 39,056 4,791 3,937 58 5,105 52,947 58,767 523 164 25 7,687,855 234 (47) (34,668) (7,813) 16,612 184 2,250 109 (659) 60,505 845 164 1,560 7,429,880 488 (127) (12,809) 10,997 15,991 355 4,289 (294) (769) 13,293 7,139 20,432

2009 RM'000 14,318 7,877 22,195 2009 RM'000

2009 RM'000 39,112 4,778 3,803 1,045 6,406 55,144

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ANNUAL REPORT & ACCOUNTS 2010

9.

DIRECTORS' REMUNERATION 2010 RM'000 Non-Executive Directors: Fees Executive Directors: Short-term employee benefits Retirement benefits Benefits-in-kind 126 1,048 273 39 1,486

2009 RM'000 108 1,156 282 49 1,595

Included in the above is the remuneration of Executive Directors employed by related corporations allocated to the Company amounting to RM351,000 (2009: RM487,000). The balance represents remuneration for Directors employed by the Company included in Note 8. 10. TAX EXPENSE/(BENEFIT) 2010 RM'000 Current taxation (Over) / under accrual in prior years - Income tax - Real Property Gains Tax Deferred taxation (Note 21) Origination and reversal of temporary differences The Company's effective tax rate differs from the statutory tax rate and is reconciled as follows: 2010 % Statutory tax rate Expenses not deductible for tax purposes Effective tax rate 25 2 27 2009 % 25 3 28 91,837 (1) 8,042 99,878

2009 RM'000 (115) (120) 55,713 55,478

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. 11. EARNINGS/(LOSS) PER ORDINARY STOCK UNIT 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. 2010 Net profit/(loss) attributable to shareholders (RM'000) Number of ordinary stock units in issue ('000) Basic and diluted earnings/(loss) per stock unit (sen) 268,579 270,000 99.5 2009 145,518 270,000 53.9

ANNUAL REPORT & ACCOUNTS 2010

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ESSO MALAYSIA BERHAD

12.

PROPERTY, PLANT AND EQUIPMENT Freehold land RM'000 Net book value At January 1, 2010 Additions Disposals Write-offs Transfer to affiliate Reclassifications Depreciation charged to income statement Net book value At December 31, 2010 At December 31, 2010 Valuation-1982 Cost-Post 1982 net additions Accumulated depreciation Net book value Net book value at December 31, 2010 if assets had been carried at cost less depreciation: Net book value At January 1, 2009 Additions Disposals Write-offs Reclassify to assets held for sales Transfer to affiliate Reclassifications Depreciation charged to income statement Net book value At December 31, 2009 At December 31, 2009 Valuation-1982 Cost-Post 1982 net additions Accumulated depreciation Net book value Net book value at December 31, 2009 if assets had been carried at cost less depreciation: 203,184 (52) 203,132 57,267 145,865 203,132

Buildings and improvements RM'000 144,057 9,341 (55) (1,046) 16,132 (15,542) 152,887 15,361 335,528 (198,002) 152,887

Plant and equipment RM'000 409,717 19,031 (805) (2,876) (157) 26,702 (43,225) 408,387 1,101,186 (692,799) 408,387

Capital project in-progress RM'000 49,245 59,481 (54) (42,834) 65,838 65,838 65,838

Total RM'000 806,203 87,853 (912) (3,976) (157) (58,767) 830,244 72,628 1,648,417 (890,801) 830,244

153,303

152,887

408,387

65,838

780,415

206,084 (118) (2,782) 203,184

141,230 4,618 (386) (1,437) 14,638 (14,606) 144,057

440,203 2,415 (60) (2,377) (886) (520) 16,841 (45,899) 409,717

40,661 40,063 (31,479) 49,245

828,178 47,096 (178) (2,763) (5,105) (520) (60,505) 806,203

57,267 145,917 203,184

15,770 312,600 (184,313) 144,057

1,215,105 (805,388) 409,717

49,245 49,245

73,037 1,722,867 (989,701) 806,203

153,355

144,057

409,717

49,245

756,374

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 RM63,576,000 (2009: RM67,705,000).

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ANNUAL REPORT & ACCOUNTS 2010

13.

LONG-TERM ASSETS 2010 RM'000 Prepaid lease rentals Deposits Loans and marketing assistance to dealers Others 273,677 1,706 28,339 4,992 308,714

2009 RM'000 278,446 2,210 27,922 6,732 315,310

Included in the above prepaid lease rentals are leasehold land amounting to RM20,741,000 (2009: RM20,977,000) for the Company's 20% participating interest in the joint venture assets of MPP. 14. INTANGIBLE ASSETS - SOFTWARE 2010 RM'000 At December 31 Cost Accumulated amortisation Net book value 11,070 (10,922) 148

2009 RM'000 11,070 (10,399) 671

15.

INVENTORIES 2010 RM'000 Crude oil Petroleum products Materials and supplies Total inventories at lower of cost and net realisable value 166,333 293,238 8,538 468,109

2009 RM'000 197,205 250,940 8,235 456,380

16.

RECEIVABLES 2010 RM'000 Trade receivables Less: Provision for impairment of receivables Others 75,546 (3,163) 72,383 171,447 243,830

2009 RM'000 68,883 (3,023) 65,860 78,064 143,924

Credit terms of trade receivables range from payment in advance to generally up to 90 days. All the receivables are in Ringgit Malaysia. At the balance sheet date, the concentration of credit risk with respect to trade receivables is mainly from Supply and Industrial customers. The provision for impairment of receivables s 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 RM152,939,651 (2009: RM59,573,178) for subsidies receivable from the Government of Malaysia under the Automatic Pricing Mechanism.

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ESSO MALAYSIA BERHAD

16.

RECEIVABLES (Continued) The ageing analysis of these trade receivables is as follows: 2010 RM'000 Current Overdue and not impaired: Less than 3 months 3 to 6 months 6 to 12 months Over 12 months Overdue and impaired: Over 12 months Less: Provision for impairment of receivables 71,863 362 96 62 3,163 75,546 (3,163) 72,383 2009 RM'000 65,727 35 54 44 3,023 68,883 (3,023) 65,860

As at December 31, 2010, provisions were made for impaired trade receivables of RM3,163,000 (2009: RM3,023,000). These primarily relate to a few industrial customers which are in financial difficulty, and represent the amount in excess of value of collaterals which have been claimed. The Company believes that the unimpaired amounts are still collectable, based on historic payment behaviour and customers' credit ratings. Movements of the provision for impairment of receivables are as follows: 2010 RM'000 At 1 January Provision for impairment Receivables written off during the year Reversal of provision for impairment At 31 December 3,023 222 (35) (47) 3,163 2009 RM'000 3,182 (32) (127) 3,023

The maximum exposure to credit risk at the reporting date is the carrying value of receivables mentioned above. The Company holds collaterals in the form of bank guarantees, letters of credit, cash deposits and other credit enhancements such as corporate guarantees and registered charges over lands to secure most of these trade receivables. The Company believes that apart from the above, no impairment is necessary in respect of trade receivables that are not past due, which relates to customers with good payment records with the Company. 17. PAYABLES 2010 RM'000 Trade payables Other payables The currency exposure profile of trade payables is as follows: Ringgit Malaysia US Dollar 73,555 619 74,174 72,633 506 73,139 74,174 68,153 142,327

2009 RM'000 73,139 62,328 135,467

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 transactions other than the purchase of crude and petroleum products. Included in other payables is an amount of RM1,277,000 (2009: RM1,261,000) for payroll liabilities.

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ANNUAL REPORT & ACCOUNTS 2010

18.

RETIREMENT BENEFITS OBLIGATIONS 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 December 2009. The changes in the provision for retirement benefits under the defined benefit plan during the year were as follows: 2010 RM'000 At January 1 Net expense charged to the income statement Payments to separating employees and retirees Employees transferred to affiliated companies At December 31 The amounts recognised in the balance sheet are reconciled as follows: Present value of unfunded obligations Unrecognised actuarial gains Net liability Reflected on the balance sheet as: Current Non-current 1,006 50,383 51,389 2,721 48,449 51,170 43,459 7,930 51,389 40,613 10,557 51,170 51,170 3,937 (3,608) (110) 51,389 2009 RM'000 50,931 3,803 (2,898) (666) 51,170

The movement in the present value of unfunded obligations are as follows: 2010 RM'000 At January 1 Current service cost Interest cost Actuarial (gain)/loss Benefits paid Intercompany transfers At December 31 The expense recognised in the income statement is as follows: Current service cost Interest cost Net actuarial gains recognised Total, included in employee benefits expense (Note 8) 1,918 2,534 (515) 3,937 1,943 2,570 (710) 3,803 40,613 1,918 2,534 2,112 (3,608) (110) 43,459 2009 RM'000 40,461 1,943 2,570 (797) (2,898) (666) 40,613

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: 2010 % Discount rate Expected rate of salary increases 6.3 5.2 2009 % 6.3 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.

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ESSO MALAYSIA BERHAD

18.

RETIREMENT BENEFITS OBLIGATIONS (Continued) A 1% higher (lower) discount rate would decrease (increase) the pension liability by approximately RM300,000 (RM300,000). A 1% higher (lower) salary growth rate would increase (decrease) the pension liability by approximately RM900,000 (RM800,000). 2010 RM'000 Present value of unfunded obligations Experience (gain)/loss adjustments on plan liabilities 43,459 2,112 2009 RM'000 40,613 (797)

19.

AMOUNTS DUE FROM/(TO) RELATED CORPORATIONS The currency exposure profile of amounts due from related corporations is as follows: 2010 RM'000 Ringgit Malaysia US Dollar 140,253 164 140,417 2009 RM'000 156,760 24,939 181,699

The currency exposure profile of amounts due to related corporations is as follows: 2010 RM'000 Ringgit Malaysia US Dollar These balances are unsecured and are generally settled within one month. (4,145) (392,762) (396,907) 2009 RM'000 (11,312) (431,728) (443,040)

20.

BORROWINGS (UNSECURED) 2010 RM'000 Floating interest rate loans from related corporations Short-term notes 366,307 250,000 616,307

2009 RM'000 507,950 300,000 807,950

The floating interest rate loans from related corporations comprise the following: (i) Two US$100 Million facilities with ExxonMobil Services (Labuan) Limited. Each of these facilities 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 total of US$200 Million on these two facilities, including US$100 Million drawdown to-date, for another year to December 31, 2011. The repayment of this loan is in Ringgit equivalent at the time of the loan drawdown. A RM285 Million loan/deposit facility with ExxonMobil Malaysia Sdn. Bhd. (EMMSB). In 2005, a RM185 Million loan/deposit facility was obtained from 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 yearend. In September 2006, EMEPMI assigned its rights and benefits thereunder to EMMSB. In December 2008, the loan/deposit principal was increased to RM285 Million. The Company has renewed the facility for another year to December 31, 2011.

(ii)

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ANNUAL REPORT & ACCOUNTS 2010

20.

BORROWINGS (UNSECURED)(Continued) 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 shortterm notes of between 14 days and 12 months tenure through competitive tender by the tender panel members or through private placement. Interest rates and profit elements for the Company's borrowings and deposit placements depend on the lenders' cost of funds, and generally vary with the Kuala Lumpur interbank rates. The interest rates/profit elements on loans and deposits ranged from 2.0% to 3.2% per annum during the year (2009: 1.8% to 3.7%).

21.

DEFERRED TAXATION 2010 RM'000 At January 1 Charged/(Credited) to the income statement (Note 10) At December 31 The components of deferred tax amounts after appropriate offsetting are as follows: Deferred tax liabilities: subject to income tax The components of deferred tax assets and liabilities prior to offsetting are as follows: Subject to income tax Deferred tax assets: Provision for retirement benefits Tax losses Others Deferred tax liabilities: Property, plant and equipment Others 75,014 66,972 8,042 75,014

2009 RM'000 11,259 55,713 66,972

66,972

(5,947) (5,947) 79,391 1,570 80,961

(6,291) (9,452) (533) (16,276) 83,248 83,248

At year end 2010, the Company applied the tax rate of 25% on the temporary differences (2009: 25%).

22.

SHARE CAPITAL 2010 RM'000 Authorised: 300,000,000 ordinary shares of RM0.50 each Issued and fully paid: 270,000,000 ordinary stock units of RM0.50 each 150,000

2009 RM'000 150,000

135,000

135,000

ANNUAL REPORT & ACCOUNTS 2010

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ESSO MALAYSIA BERHAD

23.

RESERVES 2010 RM'000 Capital redemption reserve (non-distributable) Retained profits (distributable) 8,000 614,522 622,522

2009 RM'000 8,000 370,243 378,243

The Company has sufficient tax credits under Section 108 of the Income Tax Act, 1967 (ITA) to frank approximately RM321,631,335 (2009: RM345,931,335) of the retained profits as at December 31, 2010 if paid out as dividends in 2011. The Finance Act 2007 introduced a single tier company income tax system which took effect from year of assessment 2008. Under the single tier system, tax on company profits is a final tax, and dividends distributed to shareholders will be exempted from tax. All companies will automatically move to the single tier tax system on January 1, 2014 even if they still have a credit balance in the Section 108 account as at December 31, 2013. As such, the Section 108 tax credit as at December 31, 2010 is available to the Company until such time the credit is fully utilised or upon expiry of the five-year period on December 31, 2013, whichever is earlier. 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 (2009: RM209,000,000). 24. CASH AND CASH EQUIVALENTS 2010 RM'000 Deposit with a related corporation (Note 20) Deposit, cash and bank balances Less: Deposit with a licensed bank included in the above 82,651 19,610 (7,689) 94,572

2009 RM'000 61,344 14,525 (7,511) 68,358

Deposit with a licensed bank represents monies held in accordance with the sale and purchase agreement relating to the Company's purchase of a participating interest in the MPP. The amount will be utilised for payment to the Inland Revenue Board in respect of the vendors' real property gains taxes. 25. SEGMENTAL INFORMATION The Company is organised as one integrated business segment which operates to manufacture and sell petroleum products. These integrated activities are known across the petroleum industry as the Downstream segment. As such, the assets and liabilities are disclosed within the financial statements as one segment. Revenues are mainly derived from the sale of petroleum products to domestic customers including its affiliates and competitors, and sales to ExxonMobil Asia Pacific Pte. Ltd. (EMAPPL), Singapore. A breakdown of the revenues by geographical location is as follows: 2010 RM'000 Singapore Domestic Total External Revenues 1,344,114 7,083,331 8,427,445 2009 RM'000 1,559,337 6,473,103 8,032,440

Approximately RM3,095,359,000 (2009: RM3,215,303,000) of the revenues are derived from two major customers whom are the related parties to the Company. All non-current assets of the Company are located in Malaysia. 26. SIGNIFICANT RELATED PARTY DISCLOSURES 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.

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ANNUAL REPORT & ACCOUNTS 2010

26. SIGNIFICANT RELATED PARTY DISCLOSURES (Continued) 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. 2010 RM'000 3,867,192 2,491,655 837,486 77,836 1,344,114 1,751,245 50,349 2009 RM'000 4,839,305 1,527,356 773,952 79,757 1,559,337 1,655,966 212,808 14,916

Purchases of crude oil from ExxonMobil Exploration and Production Malaysia Inc. Purchases of petroleum products from: ExxonMobil Asia Pacific Pte. Ltd. ExxonMobil Malaysia Sdn. Bhd. Others Sales of petroleum products to: ExxonMobil Asia Pacific Pte. Ltd. ExxonMobil Malaysia Sdn. Bhd. ExxonMobil Borneo Sdn. Bhd. Others Central management, shared facilities and services costs mainly with ExxonMobil Asia Pacific Pte. Ltd., ExxonMobil Business Support Centre Malaysia Sdn. Bhd. and ExxonMobil Exploration and Production Malaysia Inc. Charged from: Charged to:

114,658 (2,151) 112,507

114,683 (2,318) 112,365

At year end 2010 and 2009 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 is disclosed in Note 9 to the financial statements.

27. COMMITMENTS FOR CAPITAL EXPENDITURES 2010 RM'000 Commitments for the purchase of property, plant and equipment authorised by the Directors but not provided for in the financial statements: Contracted Not contracted

2009 RM'000

13,261 9,082 22,343

15,316 9,098 24,414

Included in the above are contracted commitments for the joint venture assets of the MPP amounting to RM2,656,889 (2009: RM2,758,620).

28.

LEASING COMMITMENTS 2010 RM'000 As at balance sheet date, leasing commitments under non-cancellable operating leases are as follows: Within 1 year After 1 year but within 5 years After 5 years 12,576 5,021 1,451 19,048

2009 RM'000

20,314 8,649 180 29,143

ANNUAL REPORT & ACCOUNTS 2010

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ESSO MALAYSIA BERHAD

29.

SUPPLEMENTARY INFORMATION DISCLOSED PURSUANT TO BURSA MALAYSIA SECURITIES BERHAD LISTING REQUIREMENTS The following analysis of realised and unrealised retained profits at the legal entity level is prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants whilst the disclosure is based on the prescribed format by the Bursa Malaysia Securities Berhad. 2010 RM'000 Total retained profits: - realised - unrealised Total retained profits 681,723 (67,201) 614,522

The disclosure of realised and unrealised profits/(losses) above is solely for compliance with the directive issued by the Bursa Malaysia Securities Berhad and should not be used for any other purpose.

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ANNUAL REPORT & ACCOUNTS 2010

STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965 We, Hugh W. Thompson 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 32 to 53 are drawn up so as to give a true and fair view of the state of affairs of the Company as at December 31, 2010 and of the results of the Company and its cash flows for the year ended on that date in accordance with Financial Reporting Standards in Malaysia and the provisions of the Companies Act, 1965. In accordance with a resolution of the Board of Directors dated February 25, 2011.

............................... Hugh W. Thompson

......................................................... Y. Bhg. Dato' Zainal Abidin Putih Kuala Lumpur, February 25, 2011

STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965 I, Naili Akmal Mohamad, the officer primarily responsible for the financial management of Esso Malaysia Berhad, do solemnly and sincerely declare that the financial statements set out on pages 32 to 53, 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.

.......................................

Naili Akmal Mohamad Subscribed and solemnly declared by the above named Naili Akmal Mohamad at Kuala Lumpur in Malaysia on February 25, 2011 before me,

....................................... Commissioner for Oaths Kuala Lumpur

ANNUAL REPORT & ACCOUNTS 2010

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ESSO MALAYSIA BERHAD

INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ESSO MALAYSIA BERHAD (Company Number 3927V) REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of Esso Malaysia Berhad, on pages 32 to 53 which comprise the statement of financial position as at 31 December 2010, and the statements of comprehensive income, changes in equity and cash flow for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Notes 1 to 28. Directors' Responsibility for the Financial Statements The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards in Malaysia and the Companies Act, 1965. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards in Malaysia and the Companies Act, 1965 so as to give a true and fair view of the financial position of the Company as of 31 December 2010 and of its financial performance and cash flows for the year then ended. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that, in our opinion, 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. OTHER REPORTING RESPONSIBILITIES The supplementary information on Note 29 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ("MIA Guidance") and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. OTHER MATTERS This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

PRICEWATERHOUSECOOPERS (No. AF: 1146) Chartered Accountants Kuala Lumpur February 25, 2011

Eric Ooi Lip Aun No. 1517/06/12(J) Chartered Accountant

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ANNUAL REPORT & ACCOUNTS 2010

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