PETRONAS Dagangan Berhad (PDB) - INSPIRING... PETRONAS Dagangan Berhad (88222-D)Level 30-33, Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre, 50088 Kuala Lumpur Tel: (03) 2051

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PETRONAS Dagangan Berhad (88222-D)

Level 30-33, Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre, 50088 Kuala LumpurTel: (03) 2051 5000 • Fax: (03) 2026 5505

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ANNUAL REPORT 2015 PETRONAS Dagangan Berhad

I N S P I R I N G

2015 was a year of change for PETRONAS Dagangan Berhad. Inspired by our aspiration to become the ”Brand of 1st

Choice”, we embarked on a holistic journey towards delivering change across our organisation through a roll-out

of a culture change programme. This initiative focuses on changing the way we operate and the way we work.

Our proactive philosophy will focus on changes that will further empower our workforce with solutions to help

us achieve our targets. Ultimately, we trust these changes will reflect our commitment to our stakeholders as we

strive to become the “Brand of 1st Choice”.

The icons on the cover reflect the operations, business and technology components that are essential to facilitate

the delivery of effective change in PETRONAS Dagangan Berhad.

CO

ST O

PT

IMIS

AT

ION

WIN

NIN

G

FOR

MU

LA

HSE CULTURE IMPROVEMENTS

INSPIRENEW PETRONAS PRIMAX 97WITH ADVANCED ENERGY FORMULA

SUSTAINABLEV

AL

UE

-DR

IVE

N

E X P A N D I N G R E A C HINNOVATION PLATFORM

IMPROVED CUSTOMER EXPERIENCE

OPERATIONAL EXCELLENCE

ASS

UR

AN

CE

A

LIG

NM

EN

T

BELIEF AND MINDSET

IMPROVE VALUE DELIVERY

BRAND OF 1ST CHOICE

VALUE CREATION

TRUSTED

SUPERIOR PRODUCT QUALITY

iiPETRONAS DAGANGAN BERHAD

(continued)

KEY MESSAGES

CORPORATE DISCLOSURES

BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

INSPIRING CHANGE

WHAT’SINSIDE

P E T R O N A S D A G A N G A N B E R H A D

KEY MESSAGES002 Our Visions

002 Our Mission

003 Shared Values

004 Business Highlights

005 Financial Highlights

006 Chairman’s Statement

012 MD/CEO’s Statement

CORPORATE DISCLOSURES020 About Us

022 Business Model

023 Key Business Entities

024 Our Products & Services

026 Areas of Operation

030 Key Milestones

032 Corporate Information

034 Group Corporate Structure

035 Group Organisation Structure

BUSINESS STRATEGIES036 Strategic Objectives

037 Strategic Initiatives

038 Strategic Priorities

039 Strategic Alliances

040 Code of Ethics and Business Conduct

040 Corporate Integrity

041 Key Risks and Opportunities

LEADERSHIP042 Board of Directors

044 Profile of Directors

052 Management Committee

054 Management Committee Member’s Profile

FINANCIAL REVIEW058 Group Financial Review

060 Five-Year Group Financial Highlights

061 Five-Year Group Financial Summary

062 Simplified Group Statement

of Financial Position

063 Segmental Analysis

063 Group Quarterly Financial Performance

064 Statement of Value Added

065 Distribution of Value Added

066 Financial Calendar

067 Investor Relations

073 Share Performance

075 Market Capitalisation

ACHIEVEMENTS076 PDB in the News

078 Significant Events

084 Awards and Recognitions

085 Past Awards

BUSINESS OVERVIEW086 Retail

096 Commercial

104 LPG

110 Lubricants

116 Supply and Distribution

122 Crude Oil and Petroleum

Products Price Trends

123 Economic Outlook and

Prospects

SUSTAINABILITY REPORT126 Overview

128 Health, Safety and

Environment

132 Building a High

Performance Culture

138 Driving Innovation

142 Customer

144 Corporate Responsibility and

Key Initiatives

144 Marketplace

146 Workplace

154 Environment

158 Community

ACCOUNTABILITY162 Statement on Corporate

Governance

174 Additional Compliance

Information

176 Board Charter

179 Statement on Risk Management

and Internal Control

187 Board Audit Committee Report

191 Board Audit Committee Term

of Reference

193 Statement on Internal Audit

Function

194 Nomination and Remuneration

Committee Report

198 Nomination and Remuneration

Committee Terms of Reference

202 Statement of Directors’

Responsibility

203 Business Continuity

Management

FINANCIAL STATEMENTS206 Directors’ Report

211 Statement by Directors

212 Statutory Declaration

213 Consolidated Statement

of Financial Position


of Profit or Loss and Other

Comprehensive Income


of Changes in Equity


of Cash Flows

218 Statement of Financial Position

219 Statement of Profit or Loss and

Other Comprehensive Income

220 Statement of Changes in Equity

221 Statement of Cash Flows

222 Notes to the Financial

Statements

284 Independent Auditors’ Report

to the Members

SHAREHOLDER’S INFORMATION286 Stakeholder Management

Communication

289 Authorised and Issued

Share Capital

289 Analysis of Shareholdings

292 List of Thirty Largest

Shareholders

294 Net Book Value of Land and

Buildings of PDB Company

295 Usage of Land Properties

296 List of Top 10 Landed

Properties

297 Notice of Annual General

Meeting

300 Statement Accompanying

Notice of Annual General

Meeting

301 Administrative Details

302 Corporate Directory

303 Glossary

• Proxy Form

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006CHAIRMAN’S STATEMENT

012MD/CEO’S STATEMENT

042BOARD OF DIRECTORS

086BUSINESS OVERVIEW

WHAT DOES IT MEAN?

“Brand of 1st Choice” drives the core essence of what PETRONAS Dagangan Berhad (PDB) stands for in terms of delivering quality, innovation, excellence and differentiating experience for petroleum products and services in Malaysia.

Given its wide range of innovative products and differentiated services, PDB is driven to ensure that customers will continue to recognise, endorse and recommend PETRONAS as their foremost preferred brand in the downstream oil and gas sector.

HOW PDB ACHIEVES THIS

Supported by a strong delivery network, PDB offers a wide

spectrum of innovative petroleum products and differentiated

services to meet the specific needs of its customers. These

high quality products and services were developed based on

continuous research and development as well as in

partnerships with the best in class brands and companies.

More importantly, PDB has integrated this vision into its

people, processes and procedures to make this aspiration a

reality for each of its core businesses and across all levels

of the Company.

OURVISIONB R A N D O F 1 S T C H O I C E

OUR MISSIONVALUE DRIVEN FUELS MARKETING WITH MARKET LEADERSHIP IN MALAYSIA

To be the “Brand of 1st Choice“ we are committed to deliver quality fuel products and reliable services to our consumers

nationwide via our reliable network of facilities and business partners. This market leadership is achieved by focusing on

value; driving a high performance culture; ensuring operational and HSE excellence; as well as prudent risk and corporate

governance practices.

The people at PDB fully embrace this vision and are

committed to translate it into a reality for customers and

stakeholders.

With aggressive plans for market penetration and renewed

commitment towards customer service excellence, PDB has

clearly set the platform for its next stage of growth. The

Company is poised to challenge the market paradigm and

continue being the industry trendsetter. This in turn

will clearly reinforce PETRONAS’ position as the “Brand of

1st Choice”.

SHARED VALUES

PROFESSIONALISMStrive for excellence

COHESIVENESSUnited, trust and respect for each other

INTEGRITYHonest and upright

LOYALTYLoyal to corporation

004PETRONAS DAGANGAN BERHAD

KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

For further information visit

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RETAIL• Launched the new PETRONAS Primax 97 with Advanced

Energy Formula with Euro 4M specification

• A vast network of more than 1,000 PETRONAS stations and

more than 760 Kedai Mesra

LPG• Sustained market leadership

• Enhanced operational excellence

COMMERCIAL• Sustained market leadership

• Preferred partner in the Aviation industry

• Introduced new products namely Petroleum Coke and Sulphur

LUBRICANTS• Consolidation of lubricants business into one entity that is PDB's subsidiary,

Lub Dagangan Sdn Bhd, which was then renamed as PETRONAS

LUBRICANTS MARKETING (MALAYSIA) SDN BHD

• Extended the Route-To-Market implementation in Sabah and Sarawak to

drive growth and establish its position as a market leader

BUSINESS HIGHLIGHTS

005

ANNUAL REPORT 2015

BUSINESS OVERVIEW

SUSTAINABILITY REPORT

ACCOUNTABILITY

FINANCIAL STATEMENTS

SHAREHOLDERS’ INFORMATION

INSPIRING CHANGE

TOTAL ASSETS PROFIT BEFORE TAX MARKET CAPITALISATION

8,070.6MILLION

RM

Wednesday, 20 April 2016 at 10.00 a.m., Sapphire Ballroom, Level 1, Mandarin Oriental Kuala Lumpur, Kuala Lumpur City Centre, 50088 Kuala Lumpur, Malaysia.

PETRONAS DAGANGAN BERHAD

Annual General Meeting

34th

as at 31 December 2015

FINANCIAL HIGHLIGHTS

1,084.6MILLION

RM

24,697.3MILLION

RM


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

Md Arif Mahmood, a Malaysian,

aged 53, is a Chairman and

Non-Independent Non-Executive Director

of PETRONAS Dagangan Berhad.

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CHAIRMAN’SSTATEMENT

DESPITE THE CHALLENGING MARKET ENVIRONMENT, WE

HAD RESPONDED SWIFTLY TO CUSHION OUR EXPOSURE

FROM THE OIL PRICE VOLATILITY.

On behalf of the Board of Directors, I am

pleased to present the Annual Report of PDB

for the financial year ended 31 December 2015.

ECONOMIC AND BUSINESS ENVIRONMENT REVIEW

Malaysia’s economy expanded at a moderate

pace of 5.0% in 2015, driven by private

consumption and investment. However, consumer

spending patterns remained cautious as

households began to adjust to the implementation

of the Goods and Services Tax in April 2015.

In 2014, the industry witnessed Dated Brent

reaching its peak for the year at USD112.00/bbl

in June, only to have it fall sharply to conclude

at USD62.00/bbl in December. This downward

trend persisted throughout the year in review,

to average at USD52.00/bbl, and this steep

decline in price had significantly impacted our

inventory value. Moreover, as the global

economy continue to weaken, we witnessed a

declining trend in demand despite the low

crude price environment.

In Malaysia, the previously subsidised prices for

Mogas RON95 and Diesel have been on a

managed float system effective 1 December

2014. The average pump prices for 2015 were

RM1.96/litre for RON95 and RM1.91/litre for

Diesel – around 9.0% and 7.0% lower

respectively, compared to subsidised prices

during the corresponding year under review.

Again, despite lower prices, consumer

sentiment and spending remained cautious.


CHAIRMAN’SSTATEMENT (continued)

KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

FINANCIAL PERFORMANCE AND DIVIDENDS

For PDB, against the backdrop of declined average selling

prices and cautious consumers’ spending, it has been a

challenge to maintain sales volume. For the year under

review, we recorded a 4.0% decline in volume sold and

22.2% decrease in revenue, compared to corresponding

year under review.

Despite the challenging market environment, we had

responded swiftly to cushion our exposure from the oil

price volatility. A concerted effort and commitment from all

business lines had resulted in a reduction of inventory days

from an average of nine days in Quarter 4 2014, to an

average of five days in 2015. Due to the effective inventory

management, PDB had successfully mitigated the lag loss

resulting from the decline in MOPS. This has been a major

contributor for PDB to register stronger performance and

profits throughout the year. We recorded an impressive

52.9% increase in Group Profit Before Tax at RM1.1 billion

for 2015, as compared to 2014.

In reaffirming our commitment to continuously deliver

value to our shareholders, I am pleased to announce that

the Company declared a total dividend for the year of

60.0 sen per ordinary share, which represents a payout

ratio of 79.0%.

KEY HIGHLIGHTS

Despite the gloomy outlook surrounding the industry, PDB

continued to thrive and I am delighted to share some of

our highlights achieved during the year.

Driven by our aim to deliver quality fuels and convenience to

customers in well situated locations, we have invested in an

extensive retail distribution network of over 1,000 PETRONAS

stations nationwide, supplemented with more than 760 Kedai

Mesra. On 19 August 2015, we were also the first in the

country to launch the RON97 fuel that met the Euro 4M

specifications, ahead of the gazetted implementation timeline

of 1 September. This product is locally produced at PETRONAS

refineries, which had earlier been upgraded and reconfigured

to employ advanced sulphur removal technology to meet

the Euro 4M specifications.

The Commercial Business marked a milestone when its first

commercial fuel station began operations in Pengerang,

Johor in October 2015. With a capacity of 360,000 litres,

the station will provide sufficient Diesel supply to the

contractors’ vehicles located on site in the development of

Project RAPID and the associated facilities within the

integrated complex. Owned by Koperasi Pengerang Johor

Jaya Berhad – a business entity representing the majority of

local residents – the station is also meant to provide a

steady stream of income to the cooperative while at the

same time, realising PETRONAS’ objectives in increasing

local content and empowering communities wherever we

operate in.

60.0 SEN PER ORDINARY SHARE

TOTAL DIVIDEND FOR THE YEAR

IN REAFFIRMING OUR COMMITMENT TO CONTINUOUSLY DELIVER VALUE TO OUR SHAREHOLDERS, I AM PLEASED TO ANNOUNCE THAT THE COMPANY DECLARED A TOTAL DIVIDEND FOR THE YEAR OF 60.0 SEN PER ORDINARY SHARE.

009

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

PDB’S FOCUS AND COMMITMENT TOWARDS SUSTAINABLE PRACTICES THAT INSTIL A HIGH PERFORMANCE CULTURE HAS BEEN BASED ON THE PETRONAS CULTURAL BELIEF.

We have also retained our position as Malaysia’s No. 1

Cooking Gas as we continue to focus on high margin

segments and effective cost optimisation.

In addition to our fuel, PETRONAS Lubricants with

ºCoolTech™ technology that fights excessive engine heat

has been instrumental in contributing towards the Mercedes

AMG PETRONAS F1™ team winning its double consecutive

title of World Constructors’ Championship in 2014 and

2015, respectively. Our F1 experience is meant to be enjoyed

by everyday drivers too, leading to the decision to open 16

new LubeXpert outlets – fully branded PETRONAS

workshops for passenger cars and motorcycles – making it

to a total of 67 LubeXpert outlets that offer a complete

range of PETRONAS Lubricants products nationwide. In

addition, PETRONAS LUBRICANTS MARKETING (MALAYSIA)

SDN BHD, a fully owned subsidiary of PDB, was established

on 11 May 2015 to house our domestic lubricants and

marketing operations under one roof as we strive to ensure

long term growth and sustainability in this segment.

OTHER HIGHLIGHTS

It is also heartening to report that PDB has again been

recognised with the Putra Brand Award for the Automotive

Fuel and Lubricants category in 2015. This marks our sixth

consecutive win in the category, thus acknowledging

PETRONAS’ strong brand presence and recognition of the

PETRONAS name amongst the Malaysian public.

PDB’s Sustainability agenda continues to demonstrate our

commitment for sustainable practices across all of our

operations, in line with the efforts and focus of the PETRONAS

Group of Companies. I am pleased to report that for the year

under review, we witnessed a reduction in both our Minor

and Major Fire incidences, all when compared to the

corresponding year under review, further cementing our

commitment to Health, Safety and Environment.

In addition to enhancing disclosure and reporting, I am

delighted that PDB is one of the 34 public listed companies

that are constituents of the FTSE4Good Bursa Malaysia


CHAIRMAN’SSTATEMENT (continued)

KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

PDB HAD SUCCESSFULLY IMPROVED ITS RATING IN THE ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) INDEX BY DEMONSTRATING GOOD ESG PRACTICES AND DISCLOSURE, OVER AND ABOVE OUR REPUTABLE FINANCIAL PERFORMANCE.

Index. This was achieved on the back of an improved

position in the Environmental, Social and Governance (ESG)

Index, recognising that PDB has demonstrated good ESG

practices and disclosure, over and above our reputable

financial performance.

Internally, PDB’s focus and commitment towards sustainable

practices that instil a high performance culture has been

based on the PETRONAS Cultural Belief. Essentially, the

focus remains on inculcating a culture of accountability

that drives result oriented performance through focused

execution, aimed at encouraging synergistic collaboration

and shared success within the PETRONAS Group.

On a related note, I am also happy to report that PDB has

made significant strides in supporting PETRONAS in its

existing efforts to enhance the Group’s corporate

governance practices, which is underlined by strict principles

of integrity. Not only did we adopt the PETRONAS Integrity

Compliance Framework, PETRONAS Anti-Bribery and

Corruption Manual and PETRONAS Code of Conduct and

Business Ethics, a key milestone was achieved during the

year when PDB and two other listed entities, PETRONAS

Chemicals Group Berhad and PETRONAS Gas Berhad,

together with our key business partners signed the

PETRONAS Contractor Integrity Pledge to seal the joint

commitment in implementing anti-corruption measures in

their respective organisations.

011

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

ACKNOWLEDGEMENT

I would like to place on record of my appreciation to my

predecessor, YBhg Datuk Wan Zulkiflee Wan Ariffin for his

leadership throughout his tenure as Chairman of this Board.

A special thanks also to Mohd Farid Mohd Adnan for his

numerous contributions as a member of the Board. We

would also like to welcome Ir Mohd Firouz Asnan to the

Board, and we look forward to leverage on his extensive

experience in the oil and gas industry for more holistic

deliberations and decision making.

My warmest gratitude to our shareholders and stakeholders

for your continued support and confidence in PDB especially

in this challenging environment.

I would also like to put on record my appreciation to the

PDB Board of Directors for their invaluable contribution and

the PDB Management Committee for their effective

stewardship. Sincerest gratitude also goes out to the PDB

employees who have demonstrated dedication and hard

work throughout the year under review.

As PDB gears up its momentum and continue to inspire

change, I look forward to your continued support in our

journey towards our Vision of being the “Brand of 1st Choice”.

MD ARIF BIN MAHMOOD

Chairman


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

MD/CEO’SSTATEMENT

OVERVIEW

At PDB, we are focused on realising our vision to

be the ”Brand of 1st Choice”. Throughout 2015,

we navigated through a challenging environment

but this did not deter us from our desire to serve

our customers’ needs better.

FINANCIAL PERFORMANCE

For the year under review, we witnessed a

slowing of demand in the domestic economy.

Malaysian economy grew at a slower rate of

5.0% as compared to the 6.0% achieved during

the corresponding year under review as lower

commodity prices continued to drag down

growth. Crude oil price continued to be volatile

as it went from a high of USD66.65/bbl in May

2015 to a new low of USD36.00/bbl by the end

of 2015.

Anxieties over the uncertainties of both the global

and domestic market continued to cloud over

private consumption as we saw further cautious

consumer spending for the year under review.

The consumer sentiments index continued to

decline since Quarter 2 2014 to a new record

low of 63.8 points in Quarter 4 2015.

Amidst these challenges, PDB’s ability to adapt

and change our Business and Operations’

approach resulted in a Group Profit Before Tax of

RM1.1 billion, an increase of 52.9% as compared

to the corresponding year under review.

Earnings per share increased from 50.5 sen as

at 31 December 2014 to 79.5 sen as at

31 December 2015 as a result of higher profits

for the year under review. Meanwhile, total

assets as at 31 December 2015 was RM8,070.6

million, a decrease from the previous year’s

RM9,540.5 million.

As a testament to PDB’s commitment to

delivering strong shareholder value, PDB

declared a total dividend of 60.0 sen per

ordinary share during the year under review

amounting to a total of RM596.1 million.

AMIDST THESE CHALLENGES, PDB’S ABILITY TO ADAPT AND CHANGE

OUR BUSINESS AND OPERATIONS’ APPROACH RESULTED IN A GROUP

PROFIT BEFORE TAX OF RM1.1 BILLION, AN INCREASE OF 52.9% AS

COMPARED TO THE CORRESPONDING YEAR UNDER REVIEW.

Mohd Ibrahimnuddin Mohd Yunus, a Malaysian

aged 52, was appointed as the Managing Director

and Chief Executive Officer of PETRONAS

Dagangan Berhad on 1 February 2014.


MD/CEO’SSTATEMENT (continued)

KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

BUSINESS PERFORMANCE OVERVIEW

Rising above the challenging market environment, our

sustainability is attributed to our ability to change our business

approach and adapt effectively, thus resulting in the strong

financial performance for the year under review.

The Retail Business segment witnessed significant changes

in consumption behaviour, marked by cautious consumer

spending. Furthermore, the implementation of managed

float pricing mechanism effective 1 December 2014 resulted

in pump price changes, in tandem with MOPS. This has in

turn, dampened the retail industry demand for both Diesel

and Mogas. The narrowing price differential between RON95

and RON97 had also resulted in customers switching

between the two products. Meeting the changing needs of

our customers, the Retail Business focused on innovative

products and differentiated services to deliver better value

for money.

Our product innovation leveraged on our Mercedes AMG

PETRONAS Formula One™ partnership where PETRONAS’

superior fluid technology has propelled the team to win the

015

ANNUAL REPORT 2015

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ACCOUNTABILITY



INSPIRING CHANGE

2014 and 2015 Formula One™ Constructors Championship.

This winning formula was engineered in collaboration with

PETRONAS Technical Performance Consultant and Mercedes

AMG PETRONAS Formula One™ world champion, Lewis

Hamilton, working with our team of engineers and chemists.

It was also tested at the laboratories, engine and vehicle

testing facilities in Malaysia, Europe and USA.

These PETRONAS Fluid Technology Solutions learnings were

subsequently transferred from the Formula One™ tracks to

the everyday motorists via enhancements in PETRONAS

Primax fuels.

Riding on the momentum achieved through the launch of the

newly enhanced PETRONAS Primax 95 in 2014, Retail Business

further strengthened the PETRONAS Primax brand via the

introduction of the new PETRONAS Primax 97 with Advanced

Energy Formula. The Euro 4M compliant new PETRONAS

Primax 97 with Advanced Energy Formula was launched on 19

August 2015, ahead of the gazetted Euro 4M RON97

implementation timeline.

Our innovative PETRONAS Primax and PETRONAS Dynamic

Diesel fuel offerings were complemented by our

differentiated services at our network of over 1,000

PETRONAS stations nationwide. We are committed to

deliver under one roof convenience to our customers

through our network of more than 760 full fledged Kedai

Mesra, more than 1,500 Automated Teller Machine (ATM)

terminals, over 800 Touch ‘n Go reload terminals, over

1,000 cashless payment terminals and close to 100 Quick

Serve Restaurants.

In response to a tougher cost environment, both our

Commercial and LPG Businesses focused on higher yield

segments for better value delivery, thus resulting in delivering

better margin performance as compared to the

corresponding year under review.

Supported by an extensive and reliable network of 17 fuel and

13 aviation terminals across Malaysia, the Commercial Business

further diversified our product portfolio to include the latest

addition of products, namely Petroleum Coke and Sulphur.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

We further created new value through new Jet A-1 contracts

with Turkish Airlines, British Airways and Lufthansa. The

Commercial Business was also able to capture new

opportunities arising from major infrastructure projects namely

the Mass Rapid Transit construction as well as Pengerang

development resulting in significant demand for Bitumen.

Despite the slight volume reduction for subsidised household

cylinders and commercial segments, LPG Business recorded

a better margin performance. As Malaysia’s No. 1 Cooking

Gas, we have eight domestic LPG bottling plants nationwide

to cater to the huge demand. To further unlock value of this

segment, cost optimisation effort at the distribution facilities,

including better cylinder management, resulted in lower

operating expenditure and enhanced profitability.

The Lubricants Business’ key financial and business performance

indicators were adversely impacted by cautious consumer

spending and aggressive competition. To grow the business in

this competitive landscape, Lubricants Business embarked on

a transformation journey to consolidate our domestic

Lubricants Businesses into Lub Dagangan Sdn Bhd which was

subsequently renamed to PETRONAS Lubricants Marketing

(Malaysia) Sdn Bhd (PLM(M)SB). The consolidation enabled

further synergies thus achieving improved speed to market.

During the year under review, PLM(M)SB continued to drive

the implementation of our Route-to-Market (RTM) initiatives

which aims to improve market penetration of our extensive

range of lubricant products, targeting Passenger Vehicles,

Motorcycles, Commercial Vehicles, as well as Industrial and

Marine segments. PLM(M)SB also focused on supply chain

efficiency, business solutions reliability and development of

our marketing capability.

We had also introduced the new PETRONAS Syntium with

ºCoolTech™, an upgraded formulation of base oils and

additives that fight excessive engine heat. This product is

available both locally and abroad.

Our regional business also underwent a portfolio review to

address the changing market environment.

As a result of the review, we have announced PDB

(Netherlands) B.V will divest our businesses in Vietnam. With

the divestment expected to be completed by 2016,

PETRONAS (Vietnam) Co. Ltd. and Thang Long LPG

Company, Ltd. will cease to be indirect subsidiaries of PDB.

For our regional business in the Philippines, PETRONAS

Energy Philippines Incorporated (PEPI) achieved better gross

margin performance as compared to the corresponding

year under review due to our focus in the higher margin

Visayas and Mindanao markets. For the year under review,

PETRONAS International Marketing (Thailand) Company

Limited continued to focus on brand building through

intensive marketing and promotional programmes.

AS MALAYSIA’S NO. 1 COOKING GAS, WE HAVE EIGHT DOMESTIC LPG

BOTTLING PLANTS NATIONWIDE TO CATER TO THE HUGE DEMAND.

TO FURTHER UNLOCK VALUE OF THIS SEGMENT, COST OPTIMISATION

EFFORT AT THE DISTRIBUTION FACILITIES, INCLUDING BETTER

CYLINDER MANAGEMENT, WHICH RESULTED IN LOWER OPERATING

EXPENDITURE AND ENHANCED PROFITABILITY

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Effective change in our operations’ approach is key to our short term sustainability in this

challenging environment.

To mitigate the downside risks arising from the volatile oil price environment, PDB focused

on the implementation of our Integrated Inventory Management Strategy. Through this

strategy, we achieved lower inventory days of four to five days in 2015 as compared to eight

to nine days in 2014. This was achieved on the back of higher frequency of inventory

replenishment and close monitoring of inventory days.

On top of the inventory optimisation, we also further improved supply and distribution efficiency

as well as cost optimisation efforts. Our primary and secondary distribution efficiency was

further enhanced through smaller parcel deliveries via ship and road tanker rezoning. Our cost

optimisation efforts include prudent spending, review and consolidation of contracts, utilisation

of in house experts as well as adoption of alternative and innovative ideas.

To ensure long term sustainability, we are committed to invest in our assets to ensure high

performance thus translating into operational excellence and realisation of our vision to be

the ”Brand of 1st Choice”.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

For the year under review, we continued to improve our

HSE capabilities and communication, as well as enhance

HSE risk management. We also have in place procedures to

ensure effective incident management and emergency

preparedness. Independent HSE assurance is also carried

out to monitor our HSEMS effectiveness.

Our efforts in enhancing our HSE practices has been

recognised by the Malaysian Society for Occupational

Safety & Health (MSOSH) as PDB achieved yet another

success story in 2015 by sweeping six Gold Awards at the

MSOSH 2014 Award after securing two Gold Awards the

previous year.

BUSINESS OUTLOOK FOR 2016

Despite the foreseeable challenging environment, PDB is

committed to our vision of being ”Brand of 1st Choice”. To

ensure sustainability in the current environment, PDB will

continue to adapt and change our business strategies and

operations’ approach in an effective and timely manner to

ensure better value delivery across PDB.

To capitalise on the changes in the consumers’ market, both

the Retail and Lubricants Businesses will drive our brand

building activities which anchors on quality products,

customer-centric and reliable services and convenient access

to our network. Leveraging on the Mercedes AMG PETRONAS

Formula One™ partnership, both Businesses will work

together with our business partners to deliver the right

PETRONAS brand experience.

For the year under review, we further enhanced our supply

and distribution facilities nationwide through the upgrade of

our Miri Fuel Terminal and introduction of the low profile

low flow rate dispenser at the KLIA aviation terminal.

Through enhancements at our LPG terminals which includes

the operationalisation of the Flexspeed facility at our Prai

LPG Terminal, we saw our Overall Equipment Efficiency

improved from 81.0% to 89.0% as compared to same

corresponding year under review. We also continued to

rejuvenate our PETRONAS stations nationwide to better

serve our customers.

Recognising people in the organisation as the most

important asset in PDB, we embarked on a Groupwide

initiative to inculcate accountability, thus optimising our

pool of talents. The initiative included effective engagements

at all levels and enhancements of existing capability and

leadership development programmes.

OCCUPATIONAL SAFETY, HEALTH AND ENVIRONMENT

PDB is committed to ensuring the safety and health of our

assets as well as our surrounding communities. We

continued to improve our Health, Safety and Environment

Management System (HSEMS) through enhancement of our

controls in systems, resources, business processes and

culture as guided by the PETRONAS Mandatory Control

Framework and PETRONAS Technical Standards.

019

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

With the cost environment expected to remain challenging

in the short term, both our Commercial and LPG Business

will focus on value driven growth and nurture sustainable

long term partnerships. Cost optimisation across our supply

chain remains a key focus area to ensure competitiveness

and sustainable profitability.

To further improve our responsiveness to changes in future

environment, we will continue to protect and enhance our

key assets for both facilities and people. We will build on

the momentum inspired by the changes introduced during

the year under review to further enhance value.

ACKNOWLEDGEMENTS

On behalf of PDB management and staff, I would like to

express my deepest appreciation to the Board of Directors

for your invaluable guidance during this challenging year.

To our valued customers, business partners, regulatory

bodies and agencies, and our parent company, PETRONAS,

thank you for your unwavering support as well as feedback

on our efforts.

I would also like to take this opportunity to thank the

Management Committee as well as the employees of PDB

for your commitment to excellence. It is my pleasure to

welcome onboard to the Management Committee, Ruziah

Azdi Abd Rahman as the new Head of Corporate and

Marketing Communications as well as Tariq Ashra Sulaiman

as the new Head of Corporate Health, Safety and

Environment.

In conclusion, we are inspired by the results we have achieved

from the changes implemented. The positive experiences

gained from these tangible results as well as during the

change process itself will go on to inspire further enhancements

that will form an intricate symphony of transformations thus

moving us to become the ”Brand of 1st Choice”.

MOHD IBRAHIMNUDDIN BIN MOHD YUNUS

Managing Director/Chief Executive Officer

ABOUT USIncorporated on 5 August 1982 and listed on the Main

Board of Bursa Malaysia on 8 March 1994, PDB is the

principal marketing arm of PETRONAS. It has since

established itself as Malaysia’s leading retailer and marketer

of downstream oil and gas products. PDB is committed to

continuously deliver innovative products and differentiated

services in its four core businesses of Retail, Commercial,

LPG and Lubricants.

In pursuit of its growth agenda, PDB leverages on

PETRONAS’ extensive investment in R&D to ensure that it

continues to offer world class quality petroleum products

including Motor Gasoline (Mogas), Aviation Fuel, Diesel, Fuel

Oil, LPG, Kerosene and Bitumen.

An overall market leader in the downstream petroleum

industry, PDB continues to be the market leader in the

Commercial and LPG sectors while the Lubricants Business

has sustained its performance, achieving robust growth

over the years. PDB’s Retail Business has not only retained

its strong performance but has emerged as Malaysia’s

largest petroleum retail network operator with over 1,000

stations and more than 760 Kedai Mesra throughout the

country. Committed to delivering enhanced customer

experience, PDB has forged ahead in expanding its network

of its retail stations, incorporating the one-stop convenience

centre concept of fuelling, dining, shopping, banking, car

spa and other services, all under one roof, making it the

preferred choice of Malaysian motorists. On the product

technology front, PDB is focused on accelerating the

growth of innovative and niche products via the PETRONAS

Fluid Technology Solutions™ – a technology that was

developed resulting from the Company’s years of experience

from the dynamic international partnerships with the various

Formula One™ teams including its current partner,

MERCEDES AMG. This partnership has brought tremendous

results with the MERCEDES AMG PETRONAS Formula One™

Team winning the FIA Formula One World Constructors’

Championship for two consecutive years.

KEY MESSAGES

BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

020


INSPIRING CHANGE


TODAY, PDB IS PROUD THAT ITS ACHIEVEMENTS OVER THE PAST 34 YEARS HAVE BEEN BACKED BY THE CORE EXPERTISE OF ITS HIGHLY SKILLED WORKFORCE THAT CONSISTS OF MORE THAN 1,900 EMPLOYEES. THE COMPANY STRONGLY BELIEVES IN NURTURING AND GROWING TOGETHER WITH ITS PEOPLE AS IT PROVIDES A STRONG FOUNDATION TO CLEARLY POSITION ITSELF AS THE “BRAND OF 1ST

CHOICE” FOR ALL STAKEHOLDERS.

Over the years, the Company has built an extensive logistics

and distribution system that has remained a key pillar of

PDB’s strength. The comprehensive network of bulk and

aviation depots, bunkering facilities as well as LPG bottling

plants ensure a reliable supply of products at all times.

Furthermore, PDB’s enhanced fleet of road tankers completes

the value chain in ensuring a seamless delivery of its

products to customers and dealers throughout Malaysia.

Having expanded its presence internationally, PDB operates

three downstream companies beyond Malaysian shores

namely, PETRONAS ENERGY PHILIPPINES, INC (PEPI) in

Philippines, PETRONAS (VIETNAM) CO.LTD (PVL) and THANG

LONG LPG COMPANY LIMITED (TLLCL) in Vietnam, and

PETRONAS INTERNATIONAL MARKETING (THAILAND) CO.,

LTD (PIM(T)CL) in Thailand. These companies are involved in

the LPG and Lubricants businesses.

2015 F1 WO6 HYBRID

021

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

ANNUAL REPORT 2015

“TO BE THE “BRAND OF 1ST CHOICE“, WE ARE COMMITTED TO DELIVER SUSTAINABLE AND BALANCED GROWTH TO

OUR SHAREHOLDERS AND CUSTOMERS”

Business Savvy with Excellent Competencies to

Deliver Value

Robust Risk Management Practices and Sound

Internal Controls

Superior Performing Assets with continuous HSE, Operational and

ICT Excellence

Performance Driven Culture and Customer

Focused Mindset

Adheres to High Standards of Corporate

Governance and Best Practices

Continuous Cost Optimisation Initiatives and Responsible

Practices

To be the “Brand of 1st Choice”

VALUE DRIVEN

GO

VE

RN

AN

CE S

US

TA

INA

BLE


Shareholder Returns

Delivers Balanced Growth and

Di�erentiated Customer Experience


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

BUSINESSMODEL

PDB is a listed entity with subsidiaries incorporated in Malaysia, Thailand, Vietnam and Philippines.

PDB’s major operating subsidiaries in Malaysia are PETRONAS LUBRICANTS MARKETING (MALAYSIA) SDN BHD (Formerly

known as Lub Dagangan Sdn Bhd) and PETRONAS AVIATION SDN BHD.

PDB (Netherlands) B.V., a wholly owned subsidiary of PDB is an investment holding company for its international subsidiaries,

namely PETRONAS ENERGY PHILIPPINES, INC., PETRONAS INTERNATIONAL MARKETING (THAILAND) CO., LTD., PETRONAS

(VIETNAM) CO., LTD. and THANG LONG LPG COMPANY LIMITED.

PDB’S DOMESTIC MAJOR SUBSIDIARIES

1. PETRONAS LUBRICANTS MARKETING (MALAYSIA) SDN

BHD (Formerly known as Lub Dagangan Sdn Bhd)

PLM(M)SB’s key business activities are marketing and

distribution of lubricant products in Malaysia.

2. PETRONAS AVIATION SDN BHD

PAVSB’s key business activities are marketing of aviation

fuel and technical consultancy services.

PDB’S INTERNATIONAL SUBSIDIARIES

1. PDB (Netherlands) B.V.

PDBN’s is an investment holding company for

international subsidiaries.

2. PETRONAS ENERGY PHILIPPINES, INC.

PEPI’s key business activities are bottling and distribution

of LPG and marketing of lubricant products in

Philippines.

3. PETRONAS INTERNATIONAL MARKETING (THAILAND)

CO., LTD.

PIM(T)CL’s key business activities are marketing of

lubricant products in Thailand.

4. PETRONAS (VIETNAM) CO., LTD.

PVL’s key business activities are bottling and distribution

of LPG in Vietnam.

5. THANG LONG LPG COMPANY LIMITED

TLLCL’s key business activities are storage and bottling

of LPG and lease of a jetty in Vietnam.

023

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

KEY BUSINESSENTITIES

RETAIL COMMERCIAL

1. Fuels• RON95 – PETRONAS Primax 95 with Advanced

Energy Formula

• RON97 – PETRONAS Primax 97 with Advanced

Energy Formula

• Diesel – PETRONAS Dynamic Diesel

2. Convenience Stores• Kedai Mesra

• Quick Serve Restaurants

• Banking Facilities

• Terminal Services

• Courier Services

• Others

3. Cards• Loyalty card – PETRONAS Mesra Loyalty Programme

• Fleet card – PETRONAS SmartPay

• Co-Branded card – CIMB and Maybank Credit Cards

• Gift card – PETRONAS Gift Card

Product Usage

Gasoline Fuel for bulk transportation

Jet Fuel Aviation fuel for turbine engine aircrafts

Kerosene Fuel for heating, lighting, cooking and small

stationary internal combustion engine

Diesel Suitable for industrial purposes especially

for direct burning, i.e. boiler, furnace,

dryer and etc

Fuel Oil For boilers, furnaces, ovens and bunker

fired engines

Bitumen Widely used as a construction material in

road construction, water proofing and

insulation

Sulphur Widely used across many industries

including fibre, pharmaceutical, personal

care products, steel pickling and water

treatment system

Petroleum

Coke

Normally used as a source of energy or

source of carbon for industrial applications


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

OUR PRODUCTS& SERVICES

LPG LUBRICANTSHousehold/Domestic• 12kg Cylinders• 14kg Cylinders

Industrial/Commercial• 50kg Cylinders• Bulk LPG

LPG Distribution Channel

Passenger Car Motor Oils• Premium Synthetic• Full and Semi Synthetic• Mineral• OEM Genuine Oils

Motorcycle Oils (4T and 2T)• Premium Synthetic• Full and Semi Synthetic• Mineral• OEM Genuine Oils

Commercial Vehicle Lubricants• Heavy Duty Diesel

Engine Oil• Long Drain Full

Synthetic • Premium Full Synthetic• Semi Synthetic and

Mineral

Automotive Functional Fluids• Auto Transmission Fluids

and Gear Oils• Greases • Radiator Coolant• Brake Fluids

Industrial & Marine Lubricants• Hydraulic Oils• Compressor Oils• Turbine Oils• Agriculture Oils• Marine Oils• Metal Working Fluids• Fishing Boat Oils• Industrial Gear Oils

Fully Branded Outlets• PETRONAS LubeXperts

LPG Bottling Plants LPG Bottling Plants

DealersDirect Commercial

Customers

Customers

LPG BulkLPG Cylinders

025

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

OUR PRODUCTS& SERVICES

MALAYSIA

JV depots and facilities are:

1. PS Pipeline Sendirian Berhad/KVDT Fuel Terminal

2. PS Terminal Sendirian Berhad (Tawau and Bintulu)

3. Kuala Lumpur Aviation Fuelling System Sdn Bhd

4. IOT Management Sdn Bhd

5. Tanjung Manis Oil Terminal Management Sdn Bhd

6. Asian Supply Base Sdn Bhd

BayanLepas

Prai

Pulau Langkawi

Kuala Lumpur

Lumut

Subang

Kuala LumpurInternational

Airport

Melaka

Senai

Johor Bahru

PasirGudang

Kuantan

Kertih

Kuala Terengganu

Kota Bharu

Dengkil


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

AREAS OFOPERATION(Domestic)

LPG:

1. Prai2. Melaka3. Pasir Gudang4. Kertih5. Kuching (JV)6. Bintulu7. Sepangar Bay8. Tawau (JV)

Aviation:

1. Langkawi2. Bayan Lepas3. Subang4. KLIA5. Senai6. Kertih7. Kuala Terengganu8. Kuching9. Sibu10. Bintulu11. Miri12. Kota Kinabalu13. Sandakan

Fuel:

1. Langkawi2. Prai3. Lumut4. KVDT (JV)5. Melaka (Refinery)6. Pasir Gudang7. Kuantan8. Kertih (Refinery)9. Kuching (JV)10. Tanjung Manis (JV)11. Bintulu (JV)12. Miri13. ASB Labuan (JV)14. Labuan15. Sepangar Bay16. Sandakan17. Tawau (JV)

Bottling Plant

Aviation Depot

Fuel Terminal

Office

Bunkering Facilities

Multi Product Pipeline

Kota Kinabalu

Labuan

Miri

Bintulu

Sibu

Tanjung Manis

Kuching

Sandakan

Tawau

Sepangar Bay

027

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

Office

Bottling Plant

LPG

i. Iloiloii. Iliganiii. Naga

Naga

Makati

Iloilo

Iligan

Davao

GenSan

iv. Davaov. GenSanvi. Makati

PHILIPPINES


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

AREAS OFOPERATION( International)

Bottling Plant

OfficeLPG

i. Hanoiii. Hai Phongiii. Go Dauiv. Ho Chi Minh

LUBRICANTS

i. Bangkok

Lubricants Warehouse

Go Dau

Ho Chi Minh

Hai Phong

Bangkok

Hanoi

VIETNAM THAILAND

029

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

1981

1982

1985

1992

1994

1996

1987

2001

2000

2004

2006

2009

2010

2015

2011

2014

2013

2012

2002

• Operated its first service station at Taman Tun Dr. Ismail

• PDSB launched its first unleaded fuel, PRIMAS

• Converted to a public

company on 21 August

• Listed on the KLSE

• Launched PRIMAS PX2

• PDB offers Kad

Mesra, Real Rewards,

Loyalty Programme

to its customers

• Mesralink officially launched

• Station reimaging and establishment of Kedai Mesra

• Launched new unleaded petrol, PETRONAS Primax

• Introduced www.mesra.com.my website to establish online presence

• Introduction

of PETRONAS

LUBRAM in

the market,

the first

PETRONAS

Lubricants

• Incorporated as PDSB

on 5 August


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

KEYMILESTONES

1981

1982

1985

1992

1994

1996

1987

2001

2000

2004

2006

2009

2010

2015

2011

2014

2013

2012

2002

• Introduced PETRONAS Primax Baru

• Launched new fuel, PETRONAS

Primax 3

• Introduced PETRONAS Urania, PETRONAS Primax 95 and PETRONAS Dynamic Diesel

• Introduced PETRONAS Primax 97

• Launched PETRONAS Primax 95 Xtra

• Official launch of 1001st PETRONAS station at Wangsa Maju

• Launched the Gas PETRONAS Home Delivery

• Launched first-of-its-kind twin stations namely, PETRONAS Solaris Serdang and PETRONAS Solaris Putra

• Regional expansion to the Philippines and Thailand

• Official launch of the first fully branded automobile workshop, PETRONAS LubeXperts

• Rollout of PDB’s Corporate Social Responsibility programme, “Water For Life”

• Unveiled the improved PETRONAS SmartPay Chip Card

• Completed the LPG Flexspeed facility in Melaka

• Launched PETRONAS Syntium °CoolTech™

• Introduced Euro 5 PETRONAS Dynamic Diesel in Johor

• Launched the new Euro 4M compliant PETRONAS Primax 97 with Advanced Energy Formula ahead of the government’s gazetted implementation date

• The PETRONAS MERCEDES AMG Formula One™ Team wins the Formula One Constructors Championship for two consecutive years

• Launched first-of-its-kind LPLFRD in Southeast Asia at LIMA’15

• Completed the LPG Flexspeed facility in Prai

• Consolidation of lubricants business into one entity that is PDB’s subsidiary, Lub Dagangan Sdn Bhd, which was then renamed as PETRONAS LUBRICANTS MARKETING (MALAYSIA) SDN BHD

• Introduced PETRONAS Syntium 7000 lubricant

• Launched PETRONAS Pr imax 95 with Advanced Energy Formula

• Appointed Lewis Hamilton, the driver of the MERCEDES AMG PETRONAS Formula One™ Team as the Technical Performance Consultant for PETRONAS Primax range of fuels and PETRONAS Syntium range of lubricants

• The PETRONAS MERCEDES AMG Formula, One™ Team wins the Formula One Constructors Championship

031

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

DIRECTORS

Md Arif bin Mahmood(Chairman)

Mohd Ibrahimnuddin bin Mohd Yunus(MD/CEO)

Vimala a/p V. R. MenonLim Beng ChoonDatuk Anuar bin AhmadErwin Miranda ElechiconNuraini binti IsmailIr Mohamed Firouz bin Asnan

BOARD AUDIT COMMITTEE

Vimala a/p V. R. Menon (Chairman)Lim Beng ChoonNuraini binti Ismail

NOMINATION AND REMUNERATION

COMMITTEE

Lim Beng Choon (Chairman)Erwin Miranda ElechiconIr Mohamed Firouz bin Asnan

COMPANY SECRETARIES

Hasnizaini binti Mohd Zain (LS 0009780)Yeap Kok Leong (MAICSA 0862549)

REGISTRAR

Symphony Share Registrars Sdn BhdLevel 6, Symphony HousePusat Dagangan Dana 1Jalan PJU 1A/4647301 Petaling JayaSelangor Darul EhsanMalaysiaTel : (+603) 7841 8000

Fax : (+603) 7841 8151/7841 8152

REGISTERED ADDRESS

Tower 1

PETRONAS Twin Towers

Kuala Lumpur City Centre

50088 Kuala Lumpur

Malaysia

Tel : (+603) 2051 5000

Fax : (+603) 2026 5505

BUSINESS ADDRESS

Level 30-33, Tower 1



50088 Kuala Lumpur

Malaysia

Tel : (+603) 2051 5000

Fax : (+603) 2026 5505

PRINCIPAL BANKERS

CIMB Bank Berhad

Malayan Banking Berhad

STOCK EXCHANGE LISTING

Main Market of

Bursa Malaysia Securities Berhad

AUDITORS

KPMG

WEBSITE

www.mymesra.com.my

CUSTOMER SERVICE CENTRE (MESRALINK)

Tel : 1-300-88-8181

E-mail : [email protected]


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

CORPORATEINFORMATION

Subsidiary

Jointly Controlled

Associate

PETRONAS Dagangan Berhad

NETHERLANDS

PDB (NETHERLANDS) B.V.

PDB: 100%Investment holding company for international subsidiaries

MALAYSIA

PETRONAS LUBRICANTS MARKETING (MALAYSIA) SDN BHD (FORMERLY KNOWN AS LUB DAGANGAN SDN BHD)

PDB: 100%Marketing and distribution of lubricants

MALAYSIA

KUALA LUMPUR AVIATION FUELLING SYSTEM SDN BHD

PDB: 65%

Malaysia Airports Holdings Berhad: 20%

Malaysia Airlines Berhad: 15%Ownership and operation of aircraft refuelling system at KLIA

MALAYSIA

PETRONAS AVIATION SDN BHD

PDB: 100%Sales and marketing of aviation fuel and technical consultancy services

PHILIPPINES

PETRONAS ENERGY PHILIPPINES, INC.

PDBN: 100%Bottling and distribution of LPG and marketing of lubricants

THAILAND

PETRONAS INTERNATIONAL MARKETING (THAILAND) CO., LTD. PDBN: 100%Marketing and distribution of lubricants

VIETNAM

PETRONAS (VIETNAM) CO., LTD. PDBN: 100%Bottling and distribution of LPG

VIETNAM

THANG LONG LPG COMPANY LIMITED

PDBN: 100%Storage and bottling of LPG and lease of a jetty

MALAYSIA

PS PIPELINE SENDIRIAN BERHAD PDB: 50%

Shell Malaysia Trading Sdn Bhd: 50%Operation of Multi-Product Pipeline and Klang Valley Distribution Terminal (MPP-KVDT)

MALAYSIA

TANJUNG MANIS OIL TERMINAL MANAGEMENT SDN BHD PDB: 20%

Shell Timur Sdn Bhd: 20%

Senari Synergy Sdn Bhd: 60%Operation of bulk fuel terminal

SAUDI ARABIA

UNITED FUEL COMPANY LIMITED LIABILITY COMPANY PAV: 40%

Asyad Holding Company for Commercial and Industrial Investment LLC: 33%

Tama International Investment LLC: 27%Sales and marketing of aviation fuel and Into – Plane Operation at King Khaled International Airport, Kingdom of Saudi Arabia

MALAYSIA

PS TERMINAL SENDIRIAN BERHAD PDB: 50%

Shell Timur Sdn Bhd: 50%Operation of joint depots and bottling plants in Tawau

MALAYSIA

IOT MANAGEMENT SDN BHD PDB: 20%

Shell Timur Sdn Bhd: 10%

Senari Synergy Sdn Bhd: 70%Operation of bulk and LPG terminal

PHILIPPINES

DUTA, INC.

PDBN: 40%

Alsons Consolidated Resources: 30%

Masaligan, Inc: 30%

Investment Holding

PHILIPPINES

KAPARANGAN, INC.

DUTA: 100%Investment Holding


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

GROUP CORPORATESTRUCTURE

MD/CEO

• Business Technology• Corporate & Marketing

Communications• Project Management Office

Board AuditCommittee

Internal Audit

Retail Business

LPG Business

Commercial Business

PAVSB

International Business

PEPIDuta

PVLTLLCL

PLM(M)SB

PIM(T)CL

LPG, Commercial and International Business

Supply & Distribution

Finance

HRM

Corporate HSE

Legal and Secretariat

035

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

GROUP ORGANISATIONSTRUCTURE


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

STRATEGICOBJECTIVES

Str

ateg

ic

Ob

ject

ives

Domestic Retail Market Leadership

Value Driven Growth in Commercial Market

Maximising Value for LPG in Domestic and Growth in Selective

Regional Markets

Domestic Lubricant Market Leadership and

Growth in Selective Regional Markets

20

15

Ach

ieve

men

ts

• Launched the new PETRONAS Primax 97 with Advanced Energy Formula with Euro 4M specification.

• A vast network of more than 1,000 PETRONAS stations and more than 760 Kedai Mesra.

• Sustained market leadership.

• Preferred partner in Aviation industry.

• Introduced new products, namely, Petroleum Coke and Sulphur.

• Sustained market leadership.

• Enhanced operational excellence.

• Consolidation of lubricants business into one entity that is PDB’s subsidiary, Lub Dagangan Sdn Bhd, which was then renamed as PETRONAS LUBRICANTS MARKETING (MALAYSIA) SDN BHD.

• Extended the RTM implementation in Sabah and Sarawak to drive growth and establish our position as a market leader.

Str

ateg

ic F

ocu

s (2

015

– 2

019

)

• Strengthen product branding and excellent customer experience.

• Efficient sweating of existing network.

• Profitable network expansion and management.

Refer to pg 86 (business review)

• Value driven growth through cost competitiveness.

• Preferred partner via differentiated and superior services.


• Maximise value in domestic and regional markets.

• Optimise cost on the back of an efficient supply and distribution network.


• Grow market share via enhanced network channels in key target segments.

• Enhance brand equity via Fluid Technology Solutions and superior product range.

• Increase cost competitiveness via efficient supply chain.


037

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

STRATEGICINITIATIVES

INTRODUCTION

During the year under review, Dated Brent touched the

highest point at USD66.65/bbl on 13 May 2015 before

gradually sliding down to a low of USD36.00/bbl towards

the end of 2015. While the decreasing oil price meant that

consumers had more purchasing power at the Stations, the

Company was exposed to lag loss effect resulting from

higher inventory costs which impacted our profitability. The

Company also recognised that the increasing operating

costs could also further squeeze margins if the appropriate

measures were not taken to address this.

PDB was impacted by the decline in global oil prices, as

reflected in the Company’s Quarter 4, 2014 financial results.

Taking immediate actions, the PDB Management instructed

each Division and Department to look into improving

processes, including implementing the initiatives on

inventory optimisation, supply and distribution efficiency as

well as continuous cost reduction efforts.

INVENTORY OPTIMISATION

A major contributor to PDB’s improved performance during

the year under review was the implementation of the

Integrated Inventory Management Strategy. Under this

Strategy, all business lines and enablers developed action

plans to minimise lag loss exposure to PDB. These action

plans were executed through rigorous efforts which

included daily and weekly monitoring of petroleum product

price trends to enable proactive actions to be taken.

As a result, PDB achieved better performance margins,

minimised the impact of oil price volatility amid lower

inventory days, from an avarage of nine days in Quarter 4

2014 to an avarage of five days in 2015.

SUPPLY & DISTRIBUTION EFFICIENCY

On top of the inventory optimisation, the Company had re-

evaluated its supply and distribution arrangements by

improving small parcel deliveries via ships and secondary

distribution rezoning.

The Prai LPG Terminal demonstrated operational

improvements due to the new LPG Flexspeed system that

not only came with automated processes but also enabled

manpower optimisation. With the introduction of this

system, the Company managed to save RM1.5 million

annually in operational expenditure.

PDB also embarked on research and development initiatives

by developing an innovative new fuel dispensing equipment

for narrow bodied aircraft named LPLFRD or also known as

“Gecko”. Through this innovation, the Company reduced

30.0% of its capital investment against its existing dispenser

and eliminated maintenance cost for the hydraulic system.

CONTINUOUS COST REDUCTION EFFORTS

PDB changed its processes and procedures to ensure

targets were achieved. The PDB Management urged all

Divisions and Departments to practise prudent spending,

review and consolidate existing contracts with customers

and vendors, utilise in house expertise, actively seek

alternative avenues and innovative ideas for the Company

to achieve more with less, without compromising on quality

or HSE standards.

RESULTS AND ACHIEVEMENTS

Based on the implementation of the above initiatives, the

Company improved its performance in 2015, as compared

to the corresponding year under review.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

STRATEGICPRIORITIES

2 STRATEGIC FOCUS

• PDB is committed to continuously deliver innovative products and differentiated services in its four core businesses of Retail, Commercial, LPG and Lubricants.

• PDB is driven to ensure our customers will continue to recognise, endorse and recommend PETRONAS as their foremost preferred brand in the petroleum retail industry.

VISION• “Brand of 1st Choice” drives the core essence of what

PDB stands for in terms of delivering quality,

innovation, excellence and differentiating experience

for petroleum products and services in Malaysia.

1

3 HUMAN CAPITAL

• PDB has integrated its vision into our people, processes

and procedures to make this aspiration a reality for

each of its core businesses and across all levels of the

Company.

• PDB has adopted six PETRONAS Cultural Beliefs for its

employees namely; Results Matter, Own It!, Focused

Execution, Nurture Trust, Tell Me and Shared Success.

4 RETURN TOSHAREHOLDERS

• PDB is consistently delivering good returns to our

shareholders as we have established strong corporate

governance practices to ensure the interests of our

shareholders are protected.

• PDB strengthened our fundamentals to ensure

continuous delivery of sustainable returns to our

shareholders.

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STRATEGICALLIANCES


KEY MESSAGES


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ACHIEVEMENTS

INSPIRING CHANGE

CORPORATEINTEGRITY

CODE OF ETHICS ANDBUSINESS CONDUCT

PDB has adopted the PETRONAS CoBE whereby it is a

general reference for use in all the countries in which

PETRONAS conducts operations. The CoBE, together with

the PETRONAS Shared Values, will serve as a guide on how

employees are expected to conduct themselves in their

work. The CoBE will not only promote legal and procedural

compliance, but it will also provide a moral compass to

ensure that employees’ individual behaviour is in line with

the PETRONAS Shared Values.

The CoBE contains detailed policy statements on the

standards of behaviour and ethical conduct expected of

each individual to whom the CoBE applies. The CoBE

applies to all employees and directors within the PETRONAS

Group worldwide. PETRONAS also expects that contractors,

subcontractors, consultants, agents, representatives and

others performing work or services for or on behalf of

PETRONAS will comply with the relevant parts of the CoBE

when performing such work or services. In particular, the

PDB has a zero tolerance policy against all forms of bribery

and corruption. To supplement the objectives of CoBE, PDB

has adhered to the PETRONAS Anti-Bribery and Corruption

Policy and Guidelines (ABC Manual) which guides employees

on matters concerning how to deal with improper

solicitation, bribery and other corrupt activities. PDB also

implemented the PETRONAS Whistleblowing Policy to

provide an opportunity for employees and members of the

public to disclose any improper conduct within the Group.

In the year under review, PDB embarked on several related

programmes to strengthen and ensure a good governance

culture exists within the Company such as adoption of CoBE

CoBE expressly prohibits improper solicitation, bribery and

other corrupt activities not only by employees and directors,

but also by third parties performing work or services for or

on behalf of companies in the PETRONAS Group.

The implementation of the CoBE is not merely to promote

proper legal compliance but also to ensure that the

individual behaviour of its employees, members of the

Board of Directors and third parties performing work or

services for and on behalf of PETRONAS Group are in line

with the PETRONAS Shared Values, namely Loyalty, Integrity,

Professionalism and Cohesiveness. The CoBE has a detailed

outline of the Company’s expectations and has incorporated

the employees’ duties that are usually an ‘implied’ part of

the employment contract as ‘expressed terms’ in the CoBE.

Since integrity is a vital part of the Company, all employees

are expected to conduct themselves accordingly with the

Company’s interests in mind.

by its International Subsidiaries, including PIM(T)CL and PEPI,

effective 31 March 2015 and 1 October 2015 respectively.

Other programmes held were five CoBE refresher sessions

for its employees; conducted several briefings on Substance

Misuse Programme; performed six random Drug Testing

sessions on 80 employees; delivered three Industrial Relations

upskilling programme for Line Managers/Superiors; organised

an Employee Education and Awareness Programme on

Integrity and Corruption in collaboration with the Chief

Integrity Officer’s office. In addition, ten of PDB’S main

contractors had also signed the Corporate Integrity Action

Pledge which signified the agreement and commitment

towards adoption of Corporate Integrity at their organisation.

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KEY RISKS ANDOPPORTUNITIES

KEY RISKS

During the year under review, oil price touched the highest

point at USD66.65/bbl on 13 May 2015 before gradually

sliding down to a low of USD36.00/bbl towards the end of

2015. The continuous fall in oil price in 2015 has increased

PDB’s exposure due to intermonth price variance leading to

lag loss effect impacting our margins.

The weakening of the Ringgit since May 2015 had also

impacted Malaysia’s economy during the year under review.

However, PDB was not materialy exposed to the fluctuation

of currency as the Company relied on domestically sourced

products, in which the transactions were Ringgit denominated.

The Malays ian Government had announced the

implementation of a managed float pricing mechanism for

Diesel and RON95 effective 1 December 2014. The possibility

of full market deregulation implementation for free float

market base pricing is also a factor that the Company

monitors closely.

OPPORTUNITIES

In view of the downward trend in oil price, the Company

has strengthened its processes to ensure effective inventory

management is conducted, especially during this critical

period.

The Government had announced the enforcement dates of

Euro 4M and Euro 5 specifications for Diesel and Mogas in

Malaysia. In light of this, PDB launched its new PETRONAS

Primax 97 with Advanced Energy Formula, the first RON97

fuel to meet the Euro 4M specifications on 19 August 2015,

two weeks ahead of the gazetted 1 September 2015

enforcement date.

Starting January 2014, all Diesel powered vehicles entering

Singapore were required to meet the permissible levels of

smoke opacity to below 40 Hartridge Smoke Unit. To

capture this opportunity, PDB had made available Euro 5

diesel at two of its stations, namely, at PS Lebuhraya Pasir

Gudang and PS Gelang Patah during the year under review.

INTRODUCTION

PDB remains a strong industrial player despite the risks and uncertainties it is facing, in particular the downward trend of oil price, weakening Ringgit and market deregulation.

042

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BOARD OF DIRECTORSfrom left:

• Nuraini binti Ismail • Datuk Anuar bin Ahmad • Vimala a/p V. R. Menon • Lim Beng Choon

• Md Arif bin Mahmood (Chairman) • Mohd Ibrahimnuddin bin Mohd Yunus (MD/CEO)

• Ir Mohamed Firouz bin Asnan • Erwin Miranda Elechicon

• Company Secretaries: Hasnizaini binti Mohd Zain • Yeap Kok Leong

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PROFILE OFDIRECTORS

Nationality Malaysian

Age/Gender/Ethnicity 53/Male/Malay

Date of Appointment 16 April 2015

MD ARIF BIN MAHMOOD

Md Arif Mahmood is the Chairman and a Non-Independent

Non-Executive Director of PETRONAS Dagangan Berhad.

He holds a Bachelor of Science in Electrical Engineering

(summa cum laude) from Boston University, USA and a

Masters of Business Administration from Massachusetts

Institute of Technology, USA.

His vast experience in the oil and gas industry spans more

than 30 years. He joined PETRONAS in 1984 and spent the

first 10 years of his career as a system/measurement

engineer covering various facets of engineering, design,

construction, commissioning, technical services and

operations. He has also held various senior positions in

PETRONAS including Senior Vice President of Corporate

Strategy, Vice President of Oil Business, Managing Director/

Chief Executive Officer of ASEAN Bintulu Fertiliser Sdn Bhd,

Senior General Manager of Retail Business Division,

PETRONAS Dagangan Berhad and General Manager (Gas

Processing – Plant B) of PETRONAS Gas Berhad.

He is currently the Executive Vice President and CEO of the

Downstream Business, PETRONAS. He is a member of

PETRONAS Board, Executive Committee, People Development

Committee and Talent Council. He chairs the Board of

PETRONAS Chemicals Group Berhad and a number of

PETRONAS’ subsidiaries. He is also a Member of PETRONAS

University of Technology Industry Advisory Panel.

On 1 May 2015, he joined the Board of PETRONAS

Chemicals Group Berhad as a Non-Independent

Non-Executive Director and Chairman.

He was appointed to the Board of PETRONAS Dagangan

Berhad on 16 April 2015. During the financial year under

review, he attended four Board meetings.

He complies with Paragraph 15.06(1) of the MMLR of

Bursa Malaysia with two directorships in the listed issuers

as follows:

(i) PETRONAS Dagangan Berhad; and

(ii) PETRONAS Chemicals Group Berhad.

He has never been charged for any offence within the

past 10 years and has no family relationship with any

Director or Major Shareholder of the Company nor any

conflict of interest with the Company.

He has completed the Mandatory Accreditation

Programme as required by Bursa Malaysia.

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Date of Appointment 1 February 2014


Mohd Ibrahimnuddin Mohd Yunus is the Managing

Director and the Chief Executive Officer (CEO) of

PETRONAS Dagangan Berhad.

He holds a Bachelor’s Degree in Economics from York

University, Ontario, Canada.

Having been with PETRONAS for over 29 years, his

professional experience spans across Marketing and

Trading, Human Resource Management as well as

Corporate Affairs. He has held several Senior Management

positions prior to his current appointment.

He was previously the CEO of PETRONAS LNG Sdn.

Bhd. and prior to that, he was the Head of Compensation

and Benefits, Human Resource Management, PETRONAS.

He was also assigned as the CEO of PT PETRONAS

Niaga Indonesia in 2007.

This is his second stint at PETRONAS Dagangan Berhad as

he led the LPG Business in 2005.

A large part of his PETRONAS career was at PETRONAS

Trading Corporation Sdn. Bhd., where he spent 13 years

and his last position there was as General Manager of LPG

and Petroleum Products Trading.

During the financial year under review, he attended five

Board meetings.

He complies with Paragraph 15.06(1) of the MMLR of Bursa

Malaysia with one directorship in the listed issuer that is


He has never been charged for any offence within the past

10 years and has no family relationship with any Director or

Major Shareholder of the Company nor any conflict of

interest with the Company.


KEY MESSAGES


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ACHIEVEMENTS

INSPIRING CHANGE

PROFILE OFDIRECTORS(continued)


Age/Gender/Ethnicity 56/Male/Chinese

Date of Appointment 13 August 2012

Lim Beng Choon is a Senior Independent Non-Executive

Director, Chairman of the Nomination and Remuneration

Committee, and a member of the Board Audit Committee of


He holds a Bachelor of Science (Hons) in Mathematics and

Computer Science from the Australian National University,

Canberra, Australia.

He was the Country Managing Director at Accenture, the

global consulting, technology and outsourcing company,

before he retired in 2009. He held various positions during

his 28-year tenure at Accenture, including that of Managing

Partner for Accenture’s Resources Industry Group (Oil and

Gas, Chemicals, Utilities and Natural Resources) in Southeast

Asia. He has attended numerous Accenture Management

Training Programmes around the globe, including the IMD

Leadership Programme in Switzerland. He also had oversight

of their Management Consulting practice across industries

for the ASEAN region.

His extensive experience in management consulting spans

strategy formulation, operational consulting and merger

integrations. He has led complex projects to deliver

transformational change for Malaysian and foreign multinational

companies. Prior to moving into management consulting, he

was in technology consulting covering Information

Technologies strategies and system integration work.

Currently, he serves as a Trustee in the ECM Libra Foundation, actively advising on their welfare initiatives. He is an Independent Non-Executive Director on the boards of PETRONAS Gas Berhad and MISC Berhad as well as a member of various board committees.

He was appointed to the Board of PETRONAS Dagangan Berhad on 13 August 2012. During the financial year under review, he attended five Board meetings, four Board Audit Committee meetings and two Nomination and Remuneration Committee meetings.

He complies with Paragraph 15.06(1) of the MMLR of Bursa Malaysia with three directorships in the listed issuers as follows:

(i) PETRONAS Dagangan Berhad;(ii) PETRONAS Gas Berhad; and (iii) MISC Berhad.

He has never been charged for any offence within the past 10 years and has no family relationship with any Director or Major Shareholder of the Company nor any conflict of interest with the Company.

LIM BENG CHOON

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Age/Gender/Ethnicity 61/Female/Indian

Date of Appointment 18 November 2011

Vimala V. R. Menon is an Independent Non-Executive

Director and the Chairman of the Board Audit Committee


She is a Chartered Accountant, a Fellow of the Institute

of Chartered Accountants in England and Wales, and a

member of the Malaysian Institute of Accountants.

She began her career at Deloitte KassimChan in 1982. In

1984, she joined Edaran Otomobil Nasional Berhad

(“EON Berhad”) and subsequently retired in 2007 as

Executive Director of Finance and Corporate Services.

She was Director of Finance and Corporate Services at

Proton Holdings Berhad from 2008 to 2009. At various

times from 1990 to 2006, she served on the boards of

EON Berhad, EON Bank Berhad, Jardine Cycle & Carriage

Limited and PT Astra International Tbk, Indonesia.

She is currently a member of the Board of Trustees of

PEMANDU Corporation and a Senior Independent Non-

Executive Director, Audit Committee Chairman and a

member of the Nomination and Remuneration Committee

of PETRONAS Chemicals Group Berhad. She is also an

Independent Non-Executive Director and Audit Committee

Chairman of Cycle & Carriage Bintang Berhad.

On 1 July 2015, she joined the Board of DiGi.Com Berhad

as Independent Non-Executive Director and member of the

Audit and Risk Committee.

She was appointed to the Board of PETRONAS Dagangan

Berhad on 18 November 2011. During the financial year

under review, she attended five Board meetings and four

Board Audit Committee meetings.

She complies with Paragraph 15.06(1) of the MMLR of Bursa

Malaysia with four directorships in the listed issuers as

follows:

(i) PETRONAS Dagangan Berhad;

(ii) PETRONAS Chemicals Group Berhad;

(iii) DiGi.Com Berhad; and

(iv) Cycle & Carriage Bintang Berhad.

She has never been charged for any offence within the past

10 years and has no family relationship with any Director or

Major Shareholder of the Company nor any conflict of


VIMALA A/P V. R. MENON


KEY MESSAGES


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INSPIRING CHANGE





Datuk Anuar Ahmad is a Non-Independent Non-Executive

Director of PETRONAS Dagangan Berhad.

He holds a Bachelor of Science (Econs) from the London

School of Economics and Political Science, University of

London, United Kingdom and attended Harvard Business

School’s Advanced Management Programme (AMP), USA.

He joined PETRONAS in 1977 and has held various senior

managerial positions in the International Marketing Division

and Corporate Planning Unit of PETRONAS Trading

Corporation Sdn Bhd and PETRONAS Dagangan Berhad,

respectively. Datuk Anuar has also held the positions of Vice

President of Oil Business, Vice President of Human Resource

Management and Executive Vice President of Gas and

Power Business, PETRONAS.

Datuk Anuar previously served PETRONAS Dagangan Berhad

as its Managing Director/Chief Executive Officer from 1 July

1998 until 1 October 2002. He was appointed as Chairman

of PETRONAS Dagangan Berhad from 3 October 2005 to 17

August 2010. He was also the Chairman of PETRONAS Gas

Berhad from 17 August 2010 to 15 May 2014.

He was a member of the PETRONAS Executive Committee,

PETRONAS Management Committee, and on the Board of

PETRONAS, until he retired from PETRONAS on 15 April 2014.

Currently, he is a Senior Independent Non-Executive

Director of E.A. Technique (M) Berhad and Independent

Non-Executive Director ENRA Group Berhad (formerly

known as Perduren (M) Berhad), both of which are

companies listed on Bursa Malaysia.

He was appointed to the Board of PETRONAS Dagangan

Berhad on 1 August 2014. During the financial year

under review, he attended five Board meetings.

He complies with Paragraph 15.06(1) of the MMLR of

Bursa Malaysia with three directorships in the listed

issuers as follows:

(i) PETRONAS Dagangan Berhad;

(ii) ENRA Group Berhad (formerly known as Perduren

(M) Berhad); and

(iii) E.A. Technique (M) Berhad.

He has never been charged for any offence within the




DATUK ANUAR BIN AHMAD

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Nationality Filipino

Age/Gender/Ethnicity 57/Male/Filipino


Erwin Miranda Elechicon is an Independent Non-Executive Director and a member of the Nomination and Remuneration Committee of PETRONAS Dagangan Berhad.

He holds a Bachelor of Arts Degree in Economics, cum laude, from the Ateneo de Manila University, Philippines. He had attended courses in Finance at Columbia Business School and in Marketing at Kellogg School of Management, USA.

He has 37 years marketing and general management experience in the consumer goods, food service, advertising and business process outsourcing industries across Asia.

He began his career at Procter & Gamble Philippines (“P&G”) in 1979, and has held positions of increasing responsibility at the world’s largest consumer goods company. In the course of his career at P&G, Erwin has lived and worked in India, Malaysia, Singapore and Vietnam, as well as the Philippines. His last role at P&G was as

Vice-President responsible for the Fabric & Home Care category in Southeast Asia, Australia/New Zealand and India until 2005.

He joined Jollibee Foods Corporation, the largest food service company in Southeast Asia, in 2006 as a member of its Corporate Management Committee. He took on leadership assignments for the next five years in Jollibee Foods’ subsidiary companies as the President and CEO of the Greenwich Pizza Company, and Fresh N’ Famous Foods, Inc. (Chowking – chinese quick service restaurant chain). He was also the Head of International Business Development of Jollibee Foods Corporation.

He is currently Chairman of Assurant BPO Solutions, Inc., a Philippine business process outsourcing company. He is also a member of the Board of Directors of U-Bix Corporation, one of the Philippines’ largest integrated office systems and service providers; and of Alliance Select Foods International, Inc., a leading canned tuna and smoked salmon manufacturer.

He was appointed to the Board of PETRONAS Dagangan Berhad on 1 August 2014 and was subsequently appointed as a member of the Nomination and Remuneration Committee on 7 August 2014. During the financial year under review, he attended four Board meetings and one Nomination and Remuneration Committee meeting.

He complies with Paragraph 15.06(1) of the MMLR of Bursa Malaysia with one directorship in the listed issuer that is PETRONAS Dagangan Berhad.

He has never been charged for any offence within the past 10 years and has no family relationship with any Director or Major Shareholder of the Company nor any conflict of


ERWIN MIRANDA ELECHICON


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Age/Gender/Ethnicity 53/Female/Malay

Date of Appointment 18 November 2011

Nuraini Ismail is a Non-Independent Non-Executive Director

and member of the Board Audit Committee of PETRONAS

Dagangan Berhad.

She is a Fellow of the Association of Chartered Certified

Accountants (ACCA), United Kingdom.

She joined PETRONAS in 1992 and is currently the Vice

President of Treasury, PETRONAS. Prior to assuming this

role, she has held various senior positions in the PETRONAS

Group including Senior General Manager, Group Treasury of

PETRONAS, General Manager, Finance and Accounts

Services and General Manager, Commercial Services of

Malaysian International Trading Corporation Sdn. Bhd.

Her work experience covers several areas including treasury,

audit, tax, corporate finance, corporate planning, methods

and systems, financial and management accounting, group

budget, group consolidation, trade finance, credit control,

loans rehabilitation, financial analyst, bank operations,

logistics and operations.

Prior to PETRONAS, she had served in various organisations

including Bank Bumiputra Malaysia Berhad, Bumiputra

Merchant Bankers and Mayban Finance Berhad.

She is also a board member and committee member of

several companies within the PETRONAS Group.

She was appointed to the Board of PETRONAS Dagangan

Berhad on 18 November 2011. During the financial year

under review, she attended four Board meetings and

four Board Audit Committee meetings.

She complies with Paragraph 15.06(1) of the MMLR of

Bursa Malaysia with one directorship in a listed issuer

that is PETRONAS Dagangan Berhad.

She has never been charged for any offence within the




NURAINI BINTI ISMAIL

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Date of Appointment 6 October 2015

Sabah and Labuan, and Head of Sabah Operations under PETRONAS Carigali Sdn Bhd. He was also the Country Chairman of PETRONAS Vietnam and General Manager of Business Development, Corporate Planning and Development Division where he was responsible for planning, identifying and evaluating new business opportunities, including mergers and acquisitions.

Between 2001 and 2003, he was seconded to the PETRONAS Dubai Office where he was responsible for identifying and developing growth opportunities for PETRONAS in the Middle East, North Africa and Central Asia Region. Prior to that, he had served in the Corporate Planning Unit as a Business Planner and later as the Business Performance Manager responsible for performance reporting for the entire PETRONAS Group. He was also part of the team working on the institutionalisation of value based management practices for PETRONAS Group.

On 1 October 2015, he joined the Board of MISC Berhad as a Non-Independent Non-Executive Director. He was appointed to the Board of PETRONAS Dagangan Berhad on 6 October 2015. During the year under review, he attended two Board meetings.

He complies with Paragraph 15.06(1) of the MMLR of Bursa Malaysia with two directorships in the listed issuers as follows:

(i) PETRONAS Dagangan Berhad; and(ii) MISC Berhad.

He has never been charged for any offence within the past 10 years and has no family relationship with any Director or Major Shareholder of the Company nor any conflict of interest with the Company.

He has completed the Mandatory Accreditation Programme on 9 and 10 December 2015 as required by Bursa Malaysia.

Ir Mohamed Firouz Asnan is a Non-Independent Non-Executive Director and a member of the Nomination and Remuneration Committee of PETRONAS Dagangan Berhad.

He holds a Bachelor of Science in Civil Engineering from University of Louisiana at Lafayette, USA in 1987 and then attained his Masters of Business Administration from Massachusetts Institute of Technology, USA as a Sloan Fellow in 2001. He is a registered professional engineer and a member of the Institution of Engineers, Malaysia.

He joined PETRONAS in 1989 and is currently the Vice President of Oil Business, a post he has held since 1 September 2015. He is responsible for managing PETRONAS Oil Business which consists of refining, trading and marketing of crude and petroleum products.

Prior to his current position, he has held a number of senior management positions within the PETRONAS Group of Companies including Chairman of PETRONAS

IR MOHAMED FIROUZ BIN ASNAN


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Mohd Ibrahimnuddin bin Mohd YunusManaging Director/Chief Executive Officer

Puteri Liza Elli SukmaChief Financial Officer

Shaharuddin bin Muhammad SidekHead, Retail Business Division

Lu Jia LihHead, LPG, Commercial and International Business Division

MANAGEMENT

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Zubair bin Abdul RazakCEO, PETRONAS LUBRICANTS MARKETING (MALAYSIA) SDN BHD(Formerly known as Lub Dagangan Sdn Bhd)

Tariq Ashra bin SulaimanHead, Corporate Health, Safety and Environment Department

Mohd Shobri bin Abu BakarHead, Supply and Distribution Division

Ruziah Azdi binti Abd RahmanHead, Corporate and Marketing Communications Department

Manisah binti ShaariHead, Human Resource Management Division

Hasnizaini binti Mohd ZainHead, Legal and Secretariat Division

COMMITTEE


KEY MESSAGES


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INSPIRING CHANGE

MANAGEMENT COMMITTEEMEMBER’S PROFILE

Managing Director/ Chief Executive Officer


Mohd Ibrahimnuddin Mohd Yunus, a

Malaysian aged 52, was appointed as

the MD/CEO of PETRONAS Dagangan

Berhad on 1 February 2014.

Having been with PETRONAS for over

29 years, his professional experience

cuts across Marketing and Trading,

Human Resource Management as well

as Corporate Affairs. He has held

several senior management positions

prior to his current appointment.

He was previously the CEO of

PETRONAS LNG Sdn Bhd and before

that, the Head of Compensation &

Benefits, Human Resource Management

of PETRONAS. He was also the CEO of

PT PETRONAS Niaga Indonesia in

2007. This is his second stint at

PETRONAS Dagangan Berhad as he

had led the LPG Business in 2005. He

spent a large part of his career attached

to PETRONAS Trading Corporation Sdn

Bhd where he spent 13 years as the

General Manager of LPG and Petroleum

Products Trading. In addition, Mohd

Ibrahimnuddin is currently a member

of Advisory Council Visa Asia Pacific.

Ibrahimnuddin holds a Bachelor’s

Degree in Economics from York

University, Ontario, Canada.

Chief Financial Officer

PUTERI LIZA ELLI SUKMA

Puteri Liza Elli Sukma, a Malaysian aged

43, was appointed as the Chief Financial

Officer of PETRONAS Dagangan Berhad

on 1 December 2013.

Starting out as an auditor at KPMG

Melbourne, Australia in 1994, Puteri Liza

joined PETRONAS Group Finance in

1997 before moving to the Planning

and Resource Allocation Unit and

subsequently, Group Strategic Planning

of PETRONAS in 2004. She then moved

to PETRONAS Gas Berhad in 2007

where she became the Senior Manager

of the Financial and Management

Accounting Department. She then went

on to head the Finance Division of

several PETRONAS Group’s subsidiaries

i n c l u d i n g P E T R O N A S T r a d i n g

Corporation Sdn Bhd prior to assuming

the position of Chief Financial Officer


Puteri Liza graduated with a Bachelor

of Commerce (Accounting) Degree

from the University of New South

Wales, Australia and is a member of the

Chartered Accountants Australia and

New Zealand.

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Head, Retail Business Division

SHAHARUDDIN BIN MUHAMMAD SIDEK

Shaharuddin Muhammad Sidek, a Malaysian aged 51, assumed the role of Head of Retail Business Division of PETRONAS Dagangan Berhad on 1 January 2014.

Shaharuddin’s career in PETRONAS began in 1985 when he joined PETRONAS Gas Sdn Bhd’s Sales and Finance Department as a trainee. After a short stint with the PETRONAS Group Strategic Planning Division, he returned to PETRONAS Gas Berhad in 1997.

In 2004, he was seconded to PETRONAS’ Corporate Strategy Division to assist in the Integrated Transition Programme and later returned to PETRONAS Gas Berhad as the Senior Manager for the Commercial Division. Later that year, he was appointed as the Head of PETRONAS Gas and Power Business Development for the Thailand market. Two years later, he joined Malaysia LNG Sdn Bhd as the General Manager of the Marketing and Trading Division for emerging markets covering China, India and Southeast Asia.

In 2008, he was entrusted to head several of PETRONAS’ special projects including the procurement of LNG for Peninsular Malaysia and Head Project Directorate Sabah Sarawak Integrated Oil & Gas Project before being appointed as the Head of Power Business, under the Infrastructure and Utilities, Gas and Power Business, PETRONAS.

Shaharuddin is an economics graduate from the University of Toledo, USA.

Head, LPG, Commercial and International Business Division

LU JIA LIH

Lu Jia Lih, a Malaysian aged 56, joined

PETRONAS Dagangan Berhad as the

Head of LPG, Commercia l and

International Business Division on

1 January 2014.

Lu started her career with PETRONAS

in 1982 as a Section Head for the IMD

where she subsequently held several

positions in Operations, Planning and

Trading in IMD for the next 15 years.

In 1997, Lu joined Malaysia LNG Tiga

Sdn Bhd as the General Manager of

Business Development in the MLNG

Tiga Project. Later in 2005, she joined

Malays ian Internat ional Trading

Corporation Sdn Bhd as the General

Manager for its polymer division and

then as the General Manager of

International Business. Thereafter, she

was assigned as PETRONAS’ Head of

Portfolio Management – Thailand in

the EVP (Downstream) Office in 2010.

In 2011, she was appointed the CEO of

PVL, a position she held until 31

December 2013.

Lu has attended senior management

and leadership programmes from the

world’s leading business schools

including INSEAD in 1999 and Harvard

Business School in 2007. She holds a

Bachelor of Economics from Universiti

Kebangsaan Malaysia.

CEO, PETRONAS LUBRICANTS MARKETING (MALAYSIA) SDN BHD(Formerly known as Lub Dagangan Sdn Bhd)

ZUBAIR BIN ABDUL RAZAK

Zubair Abdul Razak, a Malaysian aged

51, assumed his position as CEO of

PLM(M)SB on 1 January 2015.

Zubair began his career in PETRONAS

as a Project Engineer in PETRONAS

Refining and Marketing Division in 1987.

From 1989 to 2001, he served in

PETRONAS Penapisan (Melaka) Sdn

Bhd, holding various positions within

the Company.

In 2001, Zubair joined PETRONAS

Dagangan Berhad as a Manager and

was subsequently promoted as the

Senior Manager of the Engineering

Department, Supply and Distribution

Division. He assumed the position of

the General Manager of LPG Business

Division in 2009 before being appointed

as the Head of Supply and Distribution

Division in 2013.

Zubair graduated in Mechanical

Engineering from the University of

Southwestern Louisiana, USA in 1986.

MANAGEMENT COMMITTEEMEMBER’S PROFILE (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

Head, Supply and Distribution Division

MOHD SHOBRI BIN ABU BAKAR

Mohd Shobri Abu Bakar, a Malaysian

aged 55, joined PETRONAS in 1982. He

assumed the role of Head of Supply

and Distribution Division, overseeing

the Company’s end to end integrated

supply chain d is t r ibut ion s ince

1 January 2014.

Prior to his appointment as General

Manager in 2005, Mohd Shobri served

in the Supply and Distribution Division

of the Company for 23 years, during

which he held various management

positions covering project management,

maintenance, logist ics planning,

operations and distribution.

He then oversaw the expansion of

PETRONAS Lubricants Unit as its

General Manager in the Asia market. In

2007, he was appointed as the Head of

Lubricants Business Division for the

Company, a position which he held

until 31 December 2013.

An engineer by training, Mohd Shobri

graduated with a degree in Mechanical

Engineering from Universiti Teknologi

Malaysia. Mohd Shobri also serves as

Di rectors in var ious subs id iary

companies within the Group.

Head, Human Resource Management Division

MANISAH BINTI SHAARI

Manisah Shaari, a Malaysian aged 52,

joined PETRONAS Dagangan Berhad as

i t s H e a d o f H u m a n R e s o u r c e

Management Division on 1 November

2012.

Manisah began her career at PETRONAS

in 1987 and she has since served in

various Human Resource Management

functions within the PETRONAS Group

i n c l u d i n g P E T R O N A S H o l d i n g

Company , PETRONAS Mar i t ime

Services Sdn Bhd, Malaysia International

Trading Corporation Sdn Bhd and

PETRONAS Trading Corporation Sdn

Bhd. She has played an important role

in leading and driving the development

and implementation of people strategy

as well as managing the operations of

c ross d i sc ip l ine HR processes

throughout her 28-year tenure with

the Group.

Manisah obtained her degree in

Business Administration from Ohio

University, USA and holds a Masters in

Business Administration from Toledo

University, USA.

057

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

Head, Legal and Secretariat Division

HASNIZAINI BINTI MOHD ZAIN

Hasnizaini Mohd Zain, a Malaysian aged

41, was appointed as the Joint Company

Secretary of PETRONAS Dagangan

Berhad on 8 August 2014. She is also

the Company Secretary for PETRONAS

Dagangan Berhad’s subsidiaries and

joint venture companies.

Hasnizaini joined PETRONAS to manage

the Corporate Services and Technology

segment under the Legal Services Unit

in 2006. Then in 2011, she was

transferred to the Oil Business, Legal

Division where she provided legal

advisory for merger and acquisition

projects, downstream marketing,

refining and trading.

Hasnizaini graduated from the University

of Leeds, United Kingdom with a

Bachelor of Laws and also holds a

Masters in Comparative Laws from the

International Islamic University Malaysia.

Head, Corporate Health, Safety and Environment Department

TARIQ ASHRA BIN SULAIMAN

Tariq Ashra Sulaiman, a Malaysian aged

37, joined PETRONAS Dagangan Berhad

on 16 February 2015 as the Head of

C o r p o r a t e H e a l t h , S a f e t y a n d

Environment Department.

Tariq joined PETRONAS in September

2001 as a Process Engineer in

PETRONAS Chemicals Fertiliser Kedah

Sdn Bhd. In 2009, he joined PETRONAS

Group Risk Management Unit –

Corporate Services Division as the

Manager of Plant, Project & Contractor

Risk Management. He then served in

Group HSE PETRONAS as Manager and

subsequently Senior Manager, HSE

Assurance; and then as Senior Manager,

Risk and Incident Management. In 2014,

he was appointed as Principal, Technical

Professional – Operations Safety.

Tariq graduated in Chemical Engineering

from Universiti Teknologi PETRONAS,

Malaysia.

Head, Corporate and Marketing Communications Department

RUZIAH AZDI BINTI ABD RAHMAN

Ruziah Azdi Abd Rahman, a Malaysian

aged 52, was appointed as the

Head of Corporate and Marketing

Communications Department on

1 December 2015.

Ruziah has more than 25 years of

experience in retail services, advertising

a n d p r o m o t i o n s , f r a n c h i s e

development, media as wel l as

branding. She has held various senior

management pos i t ions in PDB,

PETRONAS Chemicals Group and the

E a s t C o a s t E c o n o m i c R e g i o n

Development Council.

In her current posi t ion, she is

r e s p o n s i b l e f o r t h e p l a n n i n g ,

development and implementation of

all corporate and product branding

strategies, stakeholder and reputation

management strategies for PDB as well

as overall digital presence.

Ruziah holds a Bachelor of Science in

Business Management (Economics

and Finance) from University of

Tennessee, USA.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

GROUPFINANCIAL REVIEW

As the leading domestic marketing arm of petroleum

products in Malaysia, PDB is committed to uphold the trust

of our customers by continuously providing quality products

and differentiated services, while fostering the ‘Customers

1st’ culture within the Company.

This section aims to assist stakeholders in understanding

our audited financial statements and the metrics used to

assess our business performance.

For comparability reasons, the analysis is conducted based

on the financial results for the year ended 31 December

2015, against the corresponding year under review.

SEGMENTAL ANALYSIS

Our operations consist of mainly Retail and Commercial

segments. Retail segment comprises of sales and purchases

of petroleum products in the retail sector of the Retail, LPG

and Lubricants businesses. Commercial segment comprises

of sales and purchases of petroleum products to the

remaining commercial sectors.

RETAIL SEGMENT

The Retail segment operates in a regulated environment as

the prices of petroleum products such as Diesel, Mogas,

and LPG sold in the retail sector are set by the Government.

The Malaysian Government had implemented a managed

float pricing mechanism in which the retail pump price

moves in tandem with MOPS. The APM elements remain

intact under this managed float mechanism.

RM’000

Retail Segment

FY2015 FY2014

Revenue 13,508,086 15,707,397

Operating Profit 526,357 291,367

The Retail segment’s decrease in consolidated revenue of

14.0% or RM2,199.3 million was mainly due to a decrease

in sales volume of Diesel, arising from the impact of

Managed Float implementation beginning December 2014

which has resulted in lower Retail industry demand for

Diesel.

Operating Profit however, increased by 80.6% mainly due to

lower operating expenditure, higher other income and

higher gross profit. Higher gross profit was mainly

attributable to revision in APM for LPG effective June 2015,

coupled with cost optimisation initiatives undertaken during

the year under review. These were also compounded by

last year’s lower gross profit arising from the sharp decline

in MOPS prices.

COMMERCIAL SEGMENT

The Commercial segment operates in a highly competitive

market and our performance is influenced by a number of

factors, including but not limited to, petroleum product price

(MOPS) movement, number and location of distribution

outlets, general economic condition and competitive pressure.

RM’000

Commercial Segment

FY2015 FY2014

Revenue 11,637,854 16,616,168

Operating Profit 541,828 411,243

The Commercial segment’s consolidated revenue decreased

by 30.0% or RM4,978.3 million, mainly due to a decrease in

average selling prices for Aviation, Fuel Oil and Diesel.

Operating Profit increased by 31.8%, mainly as a result of

higher gross profit, higher other income and lower operating

expenditure. Higher gross profit was mainly a result of

various efforts undertaken to improve margins. Improvement

in margins was mainly contributed by Bitumen.

059

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

OPERATING EXPENDITURES

For the financial year ended 31 December 2015, our

operating expenditures had reduced by 8.6% mainly due to

lower manpower expenses, advertising and promotion

expenses as well as higher net gain on foreign currency.

OTHER INCOME

Other income increased by 60.1% compared to the

corresponding year under review, mainly as a result of an

accounting reclassification arising from GST implementation

which has no profit impact, as well as higher interest income.

DIVIDEND

For the financial year ended 31 December 2015, the Board

of Directors has declared a total interim dividend of 60.0

sen per ordinary share, which represents a dividend payout

ratio of 79.0%. This includes a single tier interim dividend of

20.0 sen per ordinary share declared in Quarter 4, 2015.

Net Dividend Payout Ratio%

2011* 2012 2013 2014 2015

91

94

74 113

79

* Based on a nine-month financial period ended 31 December

2011.

** The above includes special dividends declared. Excluding special

dividends: PE2011: 51%, FY2012: 63%, FY2014: 71%

TOTAL ASSETS

Total assets decreased by 15.4% compared to the previous

year mainly contributed by decrease in cash and cash

equivalents by RM581.0 million arising from repayment of

IMTN amounting to RM300.0 million. Lower total assets

was also attributable to decrease in trade and other

receivables by RM469.9 million arising from lower product

prices and sales volume in FY2015 compared to FY2014,

and lower inventory balance by RM406.4 million following

effective inventory management.

TOTAL LIABILITIES

Total liabilities decreased by 35.0% from RM4,748.7 million

to RM3,086.6 million for the year ended 31 December 2015.

The decrease was mainly due to lower trade and other

payables by 35.9% in line with the decline in petroleum

product prices.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Fuel Oil 180CST

Mogas 95Diesel 0.05%S

Fuel Oil 380CST

(RM/Liter)MOPS for Jan – Dec 2014

Jan

20

14

Feb

20

14

Mar

20

14

Ap

r 2

014

May

20

14

Jun

20

14

Jul 2

014

Au

g 2

014

Sep

20

14

Oc

t 2

014

No

v 2

014

De

c 2

014

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Fuel Oil 180CST

Mogas 95Diesel 0.05%S

Fuel Oil 380CST

(RM/Liter)

Jan

20

15

Feb

20

15

Mar

20

15

Ap

r 2

015

May

20

15

Jun

20

15

Jul 2

015

Au

g 2

015

Sep

20

15

Oc

t 2

015

No

v 2

015

De

c 2

015

MOPS for Jan – Dec 2015


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

FIVE-YEAR GROUPFINANCIAL HIGHLIGHTS

PE 2011* FY2012 FY2013 FY2014 FY2015

OPERATING RESULTS (RM MILLION)

Revenue 22,268 29,515 32,342 32,341 25,171

Operating Profit 906 1,174 1,125 728 1,094

Profit before taxation 899 1,165 1,109 709 1,085

Net profit attributable to shareholders

of the Company 655 837 812 502 790

KEY BALANCE SHEET DATA (RM MILLION)

Property, plant and equipment 3,616 3,766 3,892 4,031 3,990

Total assets 9,801 9,924 10,167 9,541 8,071

Total borrowings 1,073 464 583 494 212

Total liabilities 4,989 5,078 5,338 4,749 3,087

Share capital 993 993 993 993 993

Shareholders' equity 4,779 4,810 4,790 4,752 4,952

SHARE INFORMATION

Per share (sen)

Basic earnings 65.9 sen 84.2 sen 81.7 sen 50.5 sen 79.5 sen

Gross dividend 80 sen 105 sen 70 sen 60 sen 60 sen

Share price as at financial year end (RM) 17.80 23.50 31.44 17.12 24.86

FINANCIAL RATIOS

Return on Revenue 3.0% 2.9% 2.5% 1.6% 3.2%

Return on Equity 13.7% 17.4% 16.9% 10.6% 16.0%

Return on Total Assets 6.7% 8.5% 8.1% 5.3% 9.8%

Debt to Equity Ratio 22.5% 9.6% 12.2% 10.4% 4.3%

Dividend Payout Ratio 91.3% 94.0% 74.1% 113.0% 79.0%

* Based on nine-month financial period ended 31 December 2011.

061

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

FIVE-YEAR GROUPFINANCIAL SUMMARY

* Based on nine-month financial period ended 31 December 2011.

REVENUE (RM Million)

2011* 2012 2013 2014 2015

22

,26

7.8

29

,515

.0

32

,34

1.9

32

,34

1.0

25

,17

1.2

TOTAL ASSETS (RM Million)

2011* 2012 2012 2014 2015

9,8

01.

2

9,9

23

.7

10,1

67.

3

9,5

40

.5

8,0

70

.6

TOTAL LIABILITIES (RM Million)

2011* 2012 2012 2014 2015

4,9

89

.2

5,0

78.4

5,3

37.

8

4,7

48

.7

3,0

86

.6

EARNINGS PER SHARE (Sen)

2011* 2012 2013 2014 2015

65.

9

84

.2

81.

7

50

.5

79

.5

PROFIT BEFORE TAXATION (RM Million)

2011* 2012 2013 2014 2015 8

98

.9

1,16

5.2

1,10

9.4

709

.3

1,0

84

.6

PROFIT AFTER TAXATION ATTRIBUTABLETO SHAREHOLDERS (RM Million)

2011* 2012 2013 2014 2015

65

4.5

83

6.8

811

.8

50

1.6

79

0.0

EQUITY ATTRIBUTABLE TO SHAREHOLDERS (RM Million)

2011* 2012 2013 2014 2015

4,7

78.9

4,8

10.0

4,7

90

.1

4,7

52

.2

4,9

52

.3


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

SIMPLIFIED GROUP STATEMENTOF FINANCIAL POSITION

Trade and Other Payables

Other Current Liabilities

Share Capital

Reserves

Non-Controlling Interests

Non-Current Liabilities

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

Non-Current Assets

Inventories

Trade and Other Receivables

Cash and Cash Equivalents

TOTAL ASSETS16%

20%

8%56%

19%

22%

2014

11%48%

2015

2015

4%1%

12%

31%

2%

50%

3%1%

40%

2014

10%

42%

4%

063

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

GROUP QUARTERLY FINANCIAL PERFORMANCE

SEGMENTALANALYSIS

In RM Million Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total FY2015

Revenue 6,101 6,493 6,529 6,048 25,171

Operating profit 287 376 301 131 1,095

Profit Before Tax 284 374 298 129 1,085

Earnings per share (sen) 20.7 27.5 22.0 9.3 79.5

Dividend per share (sen) 12.0 14.0 14.0 20.0 60.0

In RM Million Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total FY2014

Revenue 8,294 8,368 8,227 7,453 32,342

Operating profit 229 253 231 16 729

Profit Before Tax 223 251 224 12 710

Earnings per share (sen) 15.6 18.7 16.1 0.04 50.4

Dividend per share (sen) 12.0 14.0 12.0 22.0 60.0

Retail

Commercial

REVENUE

46%

2015

54%

51%

2014

49%


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

STATEMENT OFVALUE ADDED

Value added is defined as the value created by the activities of a business and its employees and in the case of PDB is

determined as revenue less the cost of goods and services. The value added statement reports on the calculation of value

added and its application among the stakeholders in the Group. This statement shows the total wealth created and how it

was distributed, taking into account the amounts retained and reinvested in the Group for future growth.

Group

2015RM’000

2014RM’000

Revenue 25,171,210 32,340,998

Less Purchase of goods and services (23,784,803) (31,115,241)

Value added 1,386,407 1,225,757

Other income 327,124 204,348

Financing costs (13,444) (21,009)

Share of net profit of associates 3,779 1,906

VALUE CREATED 1,703,866 1,411,002

065

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

DISTRIBUTION OFVALUE ADDED

20%

14%

2%

2014

40%

24%

VALUES DISTRIBUTION

Employees

Providers of Equity (net dividends)

Providers of debt

Government (taxation)

Retained for reinvestment and future growth

31%

17%

1%

37%

14%

2015


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

FINANCIALCALENDAR

12 FEBRUARY 2015Announcement of the audited consolidated results for the 4th quarter ended

31 December 2014

27 MARCH 2015Date of payment of the special interim dividend for the 4th quarter ended

31 December 2014

15 APRIL 2015 33rd Annual General Meeting

11 MAY 2015Announcement of the unaudited consolidated results for the 1st quarter ended

31 March 2015

25 JUNE 2015Date of payment of the interim dividend for the 1st quarter ended

31 March 2015

6 AUGUST 2015Announcement of the unaudited consolidated results for the 2nd quarter ended

30 June 2015

22 SEPTEMBER 2015Date of payment of the interim dividend for the 2nd quarter ended

30 June 2015

2 NOVEMBER 2015Announcement of the unaudited consolidated results for the 3rd quarter ended

30 September 2015

4 DECEMBER 2015Date of payment of the interim dividend for the 3rd quarter ended

30 September 2015

19 FEBRUARY 2016Announcement of the unaudited consolidated results for the 4th quarter ended

31 December 2015

17 MARCH 2016 Date of payment of the interim dividend for the 4th quarter ended

31 December 2015

22 MARCH 2016Date of Notice of 34th Annual General Meeting and date of issuance of FY2015

Annual Report

20 APRIL 2016 34th Annual General Meeting

067

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

INVESTORRELATIONS

OVERVIEW

In 2011, PDB adopted the IRPG to ensure that the Company

adheres to the best practices amongst the listed companies.

This is in line with Bursa Malaysia Corporate Disclosure

Guide 2011 which guarantees fair and timely disclosure of

information to all shareholders.

The mandate to champion the IRPG lies with the IR Unit,

and the activities are led by PDB’s MD/CEO, Mohd

Ibrahimnuddin Mohd Yunus, CFO, Puteri Liza Elli Sukma and

Head of Strategic Planning, Raja Zera Raja Zaib Shah, as

well as other senior management team members. They are

supported by the IR team.

With external developments continuing to be volatile, PDB

had intensified its IR efforts to reach out further and more

frequently to the stakeholders to ensure they were

constantly kept abreast of the Company’s latest developments

and performance.

PDB has always remained focused on value creation for its

shareholders, and continuously ensures that analysts and

key institutional investors are given the opportunity to

engage with the senior management team who actively

runs the business.

COMMITMENT TO SHAREHOLDERS

PDB recognises the importance of engaging our investors

and believes that good, clear and credible communication

will foster confidence and build understanding that will lead

to maximum shareholder value.

During the year under review, PDB continued to stay on

course in providing our investing community with

information on an equal basis, promptly and in a clear and

consistent manner. This was made possible through effective

teamwork between the IR team and various information

providers and leaders within the Company.

The strategic objective for PDB’s IR activities during the year

under review was to strengthen the coverage with investors

in the region and promote a deeper understanding of our

strategic vision, mission and business fundamentals within

the investing community in light of the changing economic

and competitive landscape.

During the year under review, in addition to the quarterly

results announcements and one-on-one meetings, PDB

participated in four Conferences and two Roadshows in

selected geographies. The selection of the Investor

Conference and Roadshows were based on a number of

factors, including the corporate investors’ representation

and alignment with our shareholder base and conference

focus. In addition to participating in the Investor Conferences

and Roadshows, PDB undertook meetings with foreign

shareholders via conference calls to ensure continued

engagement with shareholders.

INVESTORRELATIONS (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

During investor meetings and quarterly results briefings,

management shared PDB’s strategies, business and financial

performances. For the year under review, IR team had met

with a total of 153 analysts and fund managers from 74

companies, higher than the previous years due to the

interest from the investment community. The IR team

continued to actively seek feedback to ensure PDB remained

current with our shareholders expectations.

ANALYST BRIEFINGS

For the year under review, PDB conducted four briefings to

Analysts upon its quarterly financial and business

performance results. IR team ensured the analyst briefing

presentation materials are made available on PDB’s website

under the IR section, immediately after the briefings. This is

part of PDB’s continuous efforts to provide timely

information distribution of quarterly results.

The quarterly results announcement and analyst briefings for

the year under review were conducted on the following dates:

• 13 February 2015

• 12 May 2015

• 7 August 2015

• 3 November 2015

INVESTOR ENGAGEMENTS

Despite the challenging global economic landscape in 2015,

PDB saw increments in investment community meetings

with the senior management as they were sought to deliver

greater understanding and explanation on PDB’s operational,

business and financial performances. The engagement

varied from Corporate Conferences, Roadshows, One-on-

One meetings, small group meetings, and conference calls.

The Company not only participated in local conferences

and roadshows, but also conducted regional engagements

with shareholders in Hong Kong, Singapore and Japan to

share the current business performances, strategic insights

and outlook.

069

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

Some of the key events participated by the Company

in 2015 included:

Venue Event Date Organiser

Kuala

Lumpur,

Malaysia

CIMB 7th

Annual Malaysia

Corporate Day

6 Jan

2015

CIMB

Kuala

Lumpur,

Malaysia

Invest Malaysia 23-24

Apr 2015

Bursa

Malaysia &

CIMB

Hong

Kong

AllianceDBS

Non-Deal

Corporate

Roadshow

21-22

May 2015

AllianceDBS

Singapore CIMB Non-Deal

Corporate

Roadshow

4 Sept

2015

CIMB

Japan AffinHwang-

Daiwa Malaysia

Corporate Day

28-29

Sept 2015

AffinHwang-

Daiwa

INVESTMENT COMMUNITY VISIT TO PRAI TERMINAL,

PULAU PINANG

In order to foster in-depth understanding on PDB’s business

operations, the IR team had organised a visit for its investment

community comprising the institutional shareholders, fund

managers and analysts, to one of PDB’s facilities in Prai, Pulau

Pinang on 12 November 2015. The visit is an annual initiative

undertaken by the IR team since 2012 with the objective of

providing the Analysts, Fund Managers and Institutional

Shareholders first hand information to enable them to have

better valuation on PDB’s business and share value.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

NACRA 2015 – GOLD AWARD FOR BEST DESIGNED

The NACRA was established in 1985 to

promote excellence in annual corporate

br ief ing as wel l as t ransparency and

accountability in corporate reporting.

The 2015 NACRA Awards Ceremony was held

on 26 November 2015 at the Grand Ballroom,

Intercontinental Hotel, Kuala Lumpur.

For the year under review, PDB won its very

first Gold Award for Best Designed Annual

Report 2014.

ANNUAL GENERAL MEETING

PDB’s 33rd AGM was held on 15 April 2015 at

Sapphire Ballroom, Level 1, Mandarin Oriental

Kuala Lumpur. Shareholders were able to

provide feedback and raise questions to the

Board and senior management. All the

proposed resolutions were duly passed by

the shareholders.

071

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

FTSE4GOOD RATING ON ESG

Bursa Malaysia and FTSE4Good have taken various steps to

promote sustainable practices amongst the listed issuers. In

order to encourage the listed issuers in Malaysia to further

enhance their sustainability reporting, Bursa Malaysia had

launched the CSR guidelines and sustainability portal in 2015.

During the year under review, the IR and Corporate HSED

teams had jointly initiated series of engagement with Bursa

Malaysia and FTSE4Good seeking their advice on ways to

improve PDB’s ESG rating.

PDB had successfully improved its ESG’s rating and is now a

FTSE4Good constituent starting December 2015. With this

recognition from Bursa Malaysia and FTSE4Good, PDB has

proven to be a responsible corporate citizen to its shareholders.

DIVIDEND POLICY

PDB adopts a dividend policy which is based on dividend

payout ratio of around 50.0% of Profit After Tax at the

company level. However, in the past, PDB has been paying

more than 50.0% dividend payout to its shareholders.

Based on the consistent dividend payout in the past, PDB

has won two prestigious awards namely, Second Runner Up

for the Best Return to Shareholder Award by the Malaysian

Business and Most Consistent Dividend Policy Award during

the 3rd Southeast Asia Institutional Investor Corporate Award

in 2011 and 2013, respectively. The Awards received

have proven that PDB is a company with strong

business fundamentals and delivers sustainable returns

to its shareholders.

During the year under review, PDB declared a dividend of

60.0 sen per ordinary share or total dividend amounting

to RM596.1 million as a testament PDB’s assurance to

its shareholders.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

CREDIT RATING

MARC has assigned final rating of MARC-1/SAAAIS to

PDB’s Islamic Commercial Papers and IMTN Programme

(Sukuk Programme) to up to RM2.0 billion under the Islamic

principle of Murabahah with a stable outlook. The affirmed

ratings are equalised to the ratings of PETRONAS on

which MARC maintains a public information ratings of

AAA/MARC-1/Stable.

ANALYSTS COVERAGE

As at December 2015, PDB is covered by eight research

houses, reflecting strong interest by the investment

community.

No Research House

1 KAF-Seagroatt Campbell

2 TA Securities

3 CIMB

4 AllianceDBS

5 Hong Leong Investment Bank

6 MIDF Research

7 Kenanga Investment Bank

8 Macquarie Securities

WEBSITE AND FEEDBACK

The IR Unit maintains its deliverables in PDB’s corporate

website as it serves as an excellent platform to communicate

with internal and external stakeholders on the business and

financial performances. PDB’s corporate website at www.

mymesra.com.my continued to garner attention with queries

and feedback received, both locally and overseas. The IR

team continued to ensure that the IR section of the

corporate website remained up-to-date with the latest

company disclosures.

IR CONTACT

The investment community may forward their enquiries and

feedback to PDB’s IR team. The details of IR’s contact are

as follows:

1. Raja Zera Raja Zaib Shah

Head, Strategic Planning

Email: [email protected]

2. Nur Asyirin Ibrahim

Manager, Investor Relations


3. Natalia Inani Norsalehe

Executive, Investor Relations


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INSPIRING CHANGE

SHAREPERFORMANCE

0

5

10

15

20

25

30

35

PDB Stock Highest PricePDB Stock Lowest PriceTotal Volume Traded FBM KLCI

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Share Price(RM)

Total VolumeTraded(Lots)

FBM KLCI(Points)

0

400

800

1,200

1,600

2,000

De

c-0

5

De

c-0

6

De

c-0

7

De

c-0

8

De

c-0

9

De

c-10

De

c-11

De

c-12

De

c-13

De

c-14

De

c-15

OUTSTANDING shares as at 31 December 2015

993,454,000HIGHEST SHARE PRICE IN 2015

as at 25 November 2015

RM25.04LOWEST SHARE PRICE IN 2015

as at 21 January 2015

RM16.32

The Malaysian equities market experienced its ups and

down due to many factors, including the prevailing fear of

global and domestic economic uncertainties, the falling oil

prices and the weakening Ringgit.

Malaysia capital market in 2015 was generally weaker than

the preceding period under review. Nevertheless, Malaysia

appears to have managed to maneuver itself through 2015’s

course of slippery slopes and danger zones.

DESPITE THE WEAKER EQUITY MARKET IN 2015, THE COMPANY’S SHARE PRICE OUTPERFORMED THE OTHER OIL AND GAS COUNTERS IN THE COUNTRY.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

SHAREPERFORMANCE (continued)

The FBM KLCI, in particular, experienced a tumultuous year.

During the period under review, FBM KLCI stood at a year

high of 1,862.8 points in July 2015. The weak market took

over the reins shortly after, and a global sell down of

equities brought the FBM KLCI to a year low of 1,532.14

points in August 2015.

The declining trend in the FBM KLCI in the second half of

the year coincided with the continued decline in crude oil

prices that was precipitated by a supply glut and the

pressure of strengthening US Dollar. Dated Brent was

trading at over USD110.00/bbl per barrel in June of 2014,

had tumbled to a year low of USD37.00/bbl per barrel, also

its lowest since 2009. The prices of other commodities like

crude palm oil and rubber also dropped during the year

under review due to uneven global economic growth.

Crucially, the world’s second largest economy and Malaysia’s

biggest trading partner, China, experienced an economic

slowdown. This wreaked havoc on a commodity-dependent

Malaysia. The FBM KLCI closed its trading at a new high of

1,958.0 points on the last day of the period under review.

Share Price

(RM)

1Q 2Q 3Q 4Q FY2015

Price Date Price Date Price Date Price Date Price Date

High 20.00 30 Mar 22.40 28 Apr 21.96 25 Sep 25.04 25 Nov 25.04 25 NovLow 16.32 21 Jan 19.68 26 May 19.82 20 Aug 22.00 1 Oct 16.32 21 JanClose 20.00 31 Mar 20.58 30 Jun 21.82 30 Sep 24.86 31 Dec 24.86 31 Dec

Average 1Q 2Q 3Q 4Q FY2015

Price (RM) 19.05 20.63 21.37 24.12 21.29

Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Percentage (%)

Foreign

Shareholdings

5.09 5.13 5.26 5.49 5.68 5.99 6.19 6.23 6.67 6.95 7.40 7.62

The Ringgit’s dismal performance was due to external

pressures, such as uncertainties surrounding the US Federal

Reserve’s expected interest rate hike coupled with China’s

slowing growth. Nonetheless, the weaker Ringgit had

opened up an opportunity for the foreign investors to invest

in the Company’s stock.

Despite the uncertainties in the global economy during the

period under review, PDB’s share price remained resilient

hovering between RM16.00 in January 2015 to RM25.00 by

end of December 2015.

The Company’s share price movement was in line with the

FBM KLCI trending since 2005 to end-2011. However,

during the period under review, the Company’s share price

diverged from the FBM KLCI trend.

Unlike the other sectors, whilst Malaysia had been affected

by the weaker Ringgit, falling oil price and weak economic

outlook, the Company’s share price remained resilient

hovering between and average of RM19.05 in Quarter 1 2015

to and average of RM24.12 in Quarter 4 2015. The Company

hit its all-time high of RM25.04 on 25 November 2015. This

is a reflection of the Company’s strong fundamentals and

performance. The Company had also seen a rise in foreign

shareholding, which have increased by 2.5% from 5.1% in

January to 7.6% in December 2015.

075

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MARKETCAPITALISATION

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15

3,9

34

4,9

47

8,5

93

7,15

3 8,6

43 11

,62

3

17,6

83

23

,34

6

31,

23

4

17,0

08

24,697

(RM million)

Year

LOWEST MARKET CAPITALISATION (RM)

As at 31 December 2005

3,934MILLION

HIGHEST MARKET CAPITALISATION (RM)

As at 31 December 2013

31,234MILLION

Note: As at last trading day of the calendar year

OUTSTANDING shares as at 31 December 2015

993,454,000


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE


INSPIRING CHANGE

ACHIEVEMENTS

077

ANNUAL REPORT 2015


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

SIGNIFICANTEVENTS

15, 16, 20, 21 FEBRUARY 2015

PETRONAS Coffee Break in conjunction with Chinese

New Year

The PETRONAS Coffee Break is PDB’s flagship road safety

campaign that encourages motorists to stop, relax and

refresh at participating PETRONAS stations during the

festive period balik kampung exodus.

PDB distributed 150,000 limited edition festive pouches

containing canned coffee and snacks to motorists at 40

participating service stations nationwide over the four-day

campaign period, which covered 15, 16, 20 and 21 February

2015 for Chinese New Year and 15, 16, 20 and 21 July 2015

for Hari Raya Aidilfitri.

20 MARCH 2015

Launch of Low Profile Low Flat Rate Dispenser

PDB introduced its new fuel dispensing equipment for

narrow bodied aircrafts, the LPLFRD at the LIMA’15 exhibition.

This was one of the many new innovations which PDB

injected into its business operations to add value to the way

we do things. The equipment, first to be introduced in

Malaysia and Southeast Asia, has been in operation at KLIA

since April 2015.

21 MARCH 2015

VISA PETRONAS Spend and Win Contest

Lucky winner Amer Hafizi Abdul Halim from Perak received

his grand prize, a Mercedes-Benz C200, from MERCEDES

AMG PETRONAS Formula One™ Team driver Nico Rosberg

at the prize presentation ceremony for the Visa PETRONAS

Spend and Win Contest in Kuala Lumpur. The contest was

one of the many customer rewards activities held throughout

the year with business partners to engage and mutually

reward loyal customers.

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24 MARCH 2015

PETRONAS StreetSmart

MERCEDES AMG PETRONAS Formula One™ Team driver,

Lewis Hamilton paid a surprise visit to students of SMK Seri

Tanjong in Tanjung Kling, Melaka, who were participants in

the PETRONAS StreetSmart programme. Hamilton took the

opportunity to speak to students on the importance of

road safety. He also shared his experiences in the Formula

One™ races.

2 APRIL 2015

Prize presentation for Revive Isotonic-PETRONAS Match

and Win Contest

Oon Soo Ong, a pharmacist from Kuala Lumpur achieved

his dream of watching Manchester United in action live at

Old Trafford when he emerged as the grand prize winner

of the PETRONAS Match and Win Contest. The prize

presentation ceremony was held at the Penchala Link

PETRONAS station, Kuala Lumpur. The contest was a

collaboration between PDB and its business partner,

Permanis Sdn Bhd.

13 APRIL 2015

PETRONAS Ways2Win Campaign

As part of PDB’s ongoing efforts to add value and reward

its loyal customers, the launch of PETRONAS Ways2Win

Campaign gave customers the opportunity to win instant

rewards with every purchase of RM40 at PETRONAS stations.

The campaign was launched by the MDTCC Minister, YB

Dato’ Sri Hasan Malek at PETRONAS Solaris Station in

Serdang, Selangor.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

SIGNIFICANTEVENTS (continued)

15 APRIL 2015

PDB 33rd Annual General Meeting

PDB held its 33rd AGM on 15 April 2015 at the Mandarin

Oriental, Kuala Lumpur. It was attended by 573 shareholders

and proxies. The AGM was led by the Chairman of PDB’s

Board, YBhg Datuk Wan Zulkiflee Wan Ariffin.

25 MAY 2015

The Edge Billion Ringgit Club: Meet the CEO Talk at

KDU Glenmarie

PDB’s MD/CEO, Mohd Ibrahimnuddin Mohd Yunus took

time to address students from Kolej Damansara Utama at

the Edge Billion Ringgit Club: Meet the CEO Talk organised

by The Edge Financial Daily. This initiative provided university

students with a platform to engage and interact with some

of Malaysia’s top CEOs. The students also received tips,

strategies and guidance from the MD/CEO that would aid

them in their future career.

30-31 MAY 2015

KL Big Kitchen Festival 2015

No culinary adventure is complete without the presence of

Gas PETRONAS, Malaysia’s No. 1 cooking gas. PDB was one

of the main sponsors for Kuala Lumpur Big Kitchen Festival

2015, an event organised by the Kuala Lumpur City Hall and

Visit KL, in collaboration with Tourism Malaysia and the

Ministry of Tourism and Culture Malaysia. The three-day

festival at Dataran Merdeka also saw safety demonstrations

being held at the Gas PETRONAS booth as part of our

commitment to educate customers on LPG cylinder handling.

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16 JUNE 2015

Reader’s Digest Trusted Brand Awards 2015

PDB was honoured to receive the title of Best Petrol

Station, a renowned accolade awarded in the Reader’s

Digest Trusted Brand Awards 2015 that represented the

strength of the company’s reputation as a petroleum retail

marketing company.

As a trusted brand that enjoys a strong local connection,

this win further inspired us to strive to be relevant to our

consumers by staying true to our promises and delivering

excellent customer experience.

2 JULY 2015

Kombo RM5 Untuk Cuti Idaman Anda Campaign

PDB offered its Kad Mesra members a chance to win an all

expenses paid customised holiday to a destination of their

choice with the launch of the Kombo RM5 Untuk Cuti

Idaman Anda campaign. The campaign required a minimum

purchase worth RM5 of any Mesra promotion item for a

chance to win the grand prize of travel packages worth

RM20,000.00. The campaign was held from 1 July to

31 August 2015.

19 AUGUST 2015

Launch of the new PETRONAS Primax 97 with Advanced

Energy Formula

PDB created history by becoming the first oil and gas retail

company in Malaysia to launch its Euro 4M compliant

RON97 fuel, the new PETRONAS Primax 97 with Advanced

Energy Formula, two weeks ahead of the government’s

gazetted implementation date. The event was launched by

YB Dato’ Seri Hamzah Zainudin, MDTCC Minister, at the

Technology Park Malaysia PETRONAS station and witnessed

by Md Arif Mahmood, EVP and CEO, Downstream Business,

PETRONAS.

SIGNIFICANTEVENTS (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

21 AUGUST 2015

Putra Brand Awards

PDB proved its mettle as a trusted fuel brand by winning

the Putra Brand Gold Award for the sixth consecutive year

in the Automotive Fuel category and for the second

consecutive year for the Automotive Lubricant category.

The award was an honour for PETRONAS, a brand that has

consistently received gold accolades at the Putra Brand

Icon Awards. It also further reinforced the strong brand

presence and recognition of the PETRONAS brand amongst

the Malaysian public.

4 SEPTEMBER 2015

Malaysian Society for Occupational Safety and Health

Awards 2014

PDB clinched six Gold Awards at the MSOSH Awards 2014,

cementing its standing as a company that is committed to

safety and health in all aspects of its operations. As a

responsible petroleum company that has the interest of its

businesses, employees, surroundings and community close

to its heart, HSE is of utmost importance to PETRONAS.

26 NOVEMBER 2015

National Annual Corporate Report Awards

PDB emerged as the Gold Winner for Best Designed

Category at the NACRA 2015 Awards, a first for the company

in this category. The win is hoped to become an inspiration

for PDB in the coming years as we pride ourselves on being

an organisation that is committed towards promoting

excellence, transparency and accountability in our financial

reporting. NACRA is jointly organised by Bursa, Malaysia

Institute of Accountants and The Malaysia Institute of

Certified Public Accountants.

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26 NOVEMBER 2015

Launch of Kad Mesra ANGKASA at Melaka International

Trade Centre

PDB, in collaboration with ANGKASA, launched the

company’s first co-branded loyalty card for co-operative

members at an event held in conjunction with the Malaysian

Carnival of Cooperatives’ Products and Services 2015. The

event was launched by MDTCC Minister YB Dato’ Seri

Hamzah Zainudin. The new co-branded card will enable

users to claim and redeem points at any PETRONAS station

and Kedai Mesra, in addition to discounts and other benefits

from existing Kad Mesra and ANGKASA merchants.

9 DECEMBER 2015

Water For Life at Kampung Pinapak, Pitas, Sabah

About 40 PDB employees and PETRONAS station dealers

were part of the team of volunteers for the Water For Life

programme at Kampung Pinapak in Pitas, Sabah. This grass

root based CSR programme brought in facilities to help the

villagers gain access to continuous supply of clean water

for their daily use.

This year PDB also brought the Water For Life programme

to Kampung Belantik in Sik, Kedah and Kampung Runchang

in Pekan, Pahang. Together with our partner, the Malaysian

Nature Society, and volunteers from PDB’s regional offices,

the programme benefitted more than 4,000 residents from

795 families.

16 DECEMBER 2015

PDB Townhall: PDB Then, Now and Beyond

The fourth and final PDB Town Hall of 2015 was attended

by 155 staff including Managers In Charge from all regions

which took place at Hilton Sentral Kuala Lumpur. The

internal engagement aims to fulfil the objective that PDB

staff are constantly engaged and in direct communication

with each other. The MD/CEO emphasised on the

importance of staff building and upholding the vision to

become the ”Brand of 1st Choice”.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

AWARDS ANDRECOGNITIONS

* MSOSH Awards 2014 – Awards received in September 2015.

READER’S DIGEST TRUSTED BRAND

AWARDS 2015

PUTRA BRAND AWARDS 2015

NACRA AWARDS 2015

GOLD AWARD FOR BEST PETROL STATION

GOLD AWARD FOR AUTOMOTIVE – FUEL &

LUBRICANTS

GOLD AWARD FORBEST DESIGNED

Prai Fuel & LPG Terminal

Gold Class I

Kuantan Fuel Terminal

Gold Class I

Kertih Fuel & LPG Terminal

Gold Class I

Pasir Gudang Fuel & LPG Terminal

Gold Class I

Lumut Fuel Terminal

Gold Class II

Melaka Fuel & LPG Terminal

Gold Class II

MSOSH AWARDS 2014

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INSPIRING CHANGE

PASTAWARDS

AWARDS RECEIVED IN 2013

Putra Brand AwardsGold, Automotive – Fuel Category

Putra Brand Icon Award By the Association of Accredited Advertising Agents (4As) Malaysia

BrandLaureate Best Brands Awards 2012-2013Product Branding – Best Brands in Consumer Category for Car Lubricants (PETRONAS Syntium)By the Asia Pacific Brands Foundation (APBF)

Asia Pacific Award Best Regional Jet Fuel MarketerBy Armbrust Aviation Group (AAG)

Reader’s Digest Trusted Brand Awards Best Petrol Station Category

3rd Annual Southeast Asia Institutional Investor Corporate Awards Most Consistent Dividend Policy for MalaysiaBy Alpha Southeast Asia (Editorial for Global Investors)

AWARDS RECEIVED IN 2014

Putra Brand Awards Gold, Automotive – Fuel & Lubricants CategoryBy Association of Accredited Advertising Agents (4As) Malaysia

Reader’s Digest Trusted Brand Awards Best Petrol Station

Malaysian Society for Occupational Safety & Health Awards Two Gold Class 1 MSOSH Awards, Oil & Gas Sector: Prai Fuel & LPG Terminals and Kertih LPG Terminal

Asia Pacific Award Best Regional Jet Fuel MarketerBy Armbrust Aviation Group (AAG)

RETAILNETWORK EFFICIENCY

T H E F O C U S F O R 2 0 1 5 W A S T O I N C R E A S E T H E C A P A B I L I T I E S O F T H E E X I S T I N G

N E T W O R K A N D T O S W E A T T H E A S S E T S T H A T A R E A L R E A D Y I N H A N D


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

RETAIL

BUSINESS OPERATIONS

The Retail Business Division has always been at the forefront

of the Company’s businesses and is the touch point that is

constantly engaging the customers in delivering our

products and services.

The PETRONAS stations network remains the largest

throughout the nation, standing true to our brand essence

of being a trusted retailer with a passion for customers’

convenience.

The Retail Business drives the sales of fuel and non-fuel

products for the Company, providing a one-stop centre

convenience that delivers exceptional customer experience

at its stations.


In the wake of the fall in global crude oil prices, the Retail

Business remained stable despite shrinking margins and

lower revenue. For the year under review, Retail Business

contributed close to 50.0% of the Company’s overall margin

and about 40.0% of the Company’s net profit.

Facing tremendous challenges, the Retail Business continued

its pursuit of PDB’s goal to become Malaysia’s “Brand of 1st

Choice”. Adapting to the volatile market with determined

focus, the Retail Business posted a revenue of 16.0% lower

than the corresponding year under review. The lower

selling prices as a result of falling crude oil prices and

significant lower volume of Retail Diesel due to competitive

prices with commercial sector were the main factors

contributing to the lower revenue performance.

The non-fuel business segment continued to make

tremendous strides, growing from strength to strength and

holding its own, contributing more than 10.0% of Retail

Business’ total margin.

For the year under review, despite the weaker consumer

spending patterns, the Retail Business’ non fuel segment

still managed to record a 4.0% growth.

KEY PRODUCTS & SERVICES

PETRONAS Stations

The focus for 2015 was to increase the capabilities of the

existing network and to sweat the assets that are already in

hand. For the year under review, Retail Business operates

more than 1,000 stations.

Retail Business continues to shape and develop the future

of new Malaysian entrepreneurs that join the PETRONAS

Retail fraternity, either as an appointed station dealer or a

trusted business partner. In addition to this, SME businesses

are also given the opportunity to market their products

through the chain of Kedai Mesra convenience stores.

10.0% OF RETAIL BUSINESS TOTAL MARGIN

MORE THANNON-FUEL BUSINESS

Despite cautious consumer spending, the Retail Business’ non-fuel segment still managed to record a 4.0% growth.

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THE RETAIL BUSINESS DRIVES THE SALES OF FUEL AND NON-FUEL PRODUCTS FOR THE COMPANY, PROVIDING A ONE-STOP CENTRE CONVENIENCE THAT DELIVERS EXCEPTIONAL CUSTOMER EXPERIENCE AT ITS STATIONS.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

RETAIL (continued)

Complementary Business

As convenience is the primary goal for customers that frequent PETRONAS

stations, the Retail Business believes in providing customers with solutions

to their needs, all under one roof. PETRONAS stations have been further

enhanced through complementary business offerings ranging from food-

to-go items to various business partner facilities that include QSR, banking

facilities, courier services and other conveniences.

During the year under review, the Company had in place 95 QSR outlets and

more than 70 other business partners to enhance the customer experience

at the stations. This year, Kenny Rogers Roasters and Roti Boy were amongst

the latest additions to the growing list of renowned business partners.

Kedai Mesra

The PETRONAS Kedai Mesra remains the

market leader in Petrol Station Convenience

Stores with the largest network of

convenience stores at petrol stations in

Malaysia. Kedai Mesra’s total network

currently stands at more than 760

nationwide. With convenience in mind, the

PETRONAS Kedai Mesra are fully equipped

with ATMs (1,549 ATM terminals), Touch ‘n

Go facilities (871 reload terminals) and

e-Pay terminals (1,025 terminals).

>1,000OPERATING STATIONS

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MORE THAN 70 OTHER BUSINESS PARTNERS TO ENHANCE THE CUSTOMER EXPERIENCE AT THE STATIONS

Card Business

PETRONAS Mesra Loyalty Programme (Kad Mesra)

Loyalty is important in the Retail Business. Without loyal

customers that continue to patronise PETRONAS stations

for the products and services, PETRONAS would not be

where it is today. As the business continues to evolve, so

does the customer who is always looking for that

something extra.

95 QSR OUTLETS


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

RETAIL (continued)

These customers are recognised and rewarded through the

PETRONAS Mesra Loyalty Programme. This programme

allows members to earn Mesra points using their PETRONAS

Mesra Cards when fuelling up at PETRONAS stations

nationwide or when purchasing products from the Kedai

Mesra. Accumulated points can be used to redeem either

fuel or selected items from the Kedai Mesra by simply

swiping the Kad Mesra. The PETRONAS Mesra Loyalty

Programme brings further value to customers as Kad Mesra

holders are able to enjoy a wide variety of special offerings

or discounts through the ever growing stable of partners

and merchants.

For the year under review, the Company extended the

Card’s benefits and privileges through new strategic

partnerships. Recently it just established a partnership with

ANGKASA, working on the strength of their network and

members base. Existing partners and merchants are AirAsia

BIG, Automobile Association of Malaysia, Astute Xperience

(Travel Services), Pryxious.com (travel channel management),

PETRONAS Twin Towers Gift Shop, Twin Towers Fitness

Centre, PETROSAINS, San Francisco Coffee, Sunway Lost

World of Tambun, 11th Street and Zalora.

PETRONAS SmartPay

The PETRONAS SmartPay is a corporate card which offers

convenience and efficiency for companies to facilitate

greater control over their fleet management in terms of

monitoring movement and expenditure of their fleet’s fuel

utilisation. Fleet management has become even more

convenient since the introduction of our Smartpay Online

system which allows the customers to review and monitor

all transactions for all their cards and also allows for the

Fleet Manager to block or increase credit limits for any

particular card when necessary.

THE PETRONAS MESRA LOYALTY PROGRAMME BRINGS FURTHER VALUE TO CUSTOMERS AS KAD MESRA HOLDERS ARE ABLE TO ENJOY A WIDE VARIETY OF SPECIAL OFFERINGS OR DISCOUNTS THROUGH THE EVER GROWING STABLE OF PARTNERS AND MERCHANTS.

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KEY INITIATIVES

Launch of the new PETRONAS Primax 97 with Advanced

Energy Formula

On 19 August 2015, PDB introduced its new PETRONAS

Primax 97 with Advanced Energy Formula that is engineered

for superior acceleration two weeks ahead of the gazetted

implementation date. The new fuel is also the first RON97

fuel to meet the Euro 4M specification and it complements

our PETRONAS Primax 95 that gives superior efficiency. The

launch, held at PETRONAS station in Technology Park

Malaysia, was officiated by YB Dato’ Seri Hamzah Zainuddin,

Minister of MDTCC and attended by Encik Md Arif Mahmood,

Chairman of PDB, Encik Mohd Ibrahimnuddin Mohd Yunus,

MD/CEO of PDB, Ministry officials, PDB Management and

members of the media.

At present, about 60.0% of PETRONAS stations offer the

new PETRONAS Primax 97 with Advanced Energy Formula

with more to be made available in 2016.

of PETRONAS stations offer the new PETRONAS Primax 97 with Advanced Energy Formula with more to be made available in 2016.

60.0%

For the year under review, the Company continuously

engaged with potential and current customers

through various programmes such as product

showcases, fraud mitigation sessions, festive

celebrations, sporting and leisure activities.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

RETAIL (continued)

Marketing and Promotion

Promotions are an important aspect in Retail Business, especially in promoting PETRONAS Primax, PETRONAS Dynamic Diesel and Kedai Mesra offerings. To attract customers to the stations, the following promotional activities

were conducted throughout 2015:• PETRONAS Ways2Win (13 April – 14 June 2015) – with every RM40

purchased at PETRONAS stations, customers have two ways to win.

Customers can either choose a voucher for instant redemption or

to participate in the contest for a chance to win the grand prize of

three years worth of fuel.

• Bank Islam Swipe & Drive Further Campaign (15 June –

15 September 2015) – with minimum RM30 spent using their Bank

Islam card at PETRONAS stations, customers can stand a chance to

win daily prizes of RM1,000 worth of fuel and the Grand Prize of an

Umrah Package or one year worth of fuel.

• Kombo RM5 Untuk Cuti Idaman (1 July – 31 August 2015) –

Purchase any RM5 Combo in the Kedai Mesra and stand a chance

to win a dream vacation.

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• Home of Champions Merchandise Redemption

(15 September – 31 January 2016) – specially

designed merchandise with F1 theme was made

available at all PETRONAS stations for redemption.

• Spend at PETRONAS with Maybank Cards

(15 October – 15 December 2015) – customers

stood a chance to win a Mercedes Benz and

Cash Back.

Customer Relationship Management

Maintaining customer relations is without question a

primary importance in ensuring the sustainability of our

business. In our effort to improve customer experience

at our station, the Retail Business had conducted

series of CIA programmes throughout 2015. Apart

from conducting marketing activities on PETRONAS

products and services as well as acquisition of new

PETRONAS Kad Mesra members, the programme was

also used as a platform for Retail Business to engage

with customers in getting a better understanding of

their needs.

PROSPECTS

The Retail Business remains committed in growing

the business to become the domestic retail market

leader, leveraging on its extensive PETRONAS station

network nationwide. To achieve this target, the Retail

Business will continue to provide innovative products

and differentiated services, supported by improved

marketing initiatives that not only reach out to

customers, but also reward existing and potential

customers throughout Malaysia.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

COMMERCIALVALUE DRIVEN GROWTH

C O M M E R C I A L B U S I N E S S I S F U L L Y C O M M I T T E D T O S E R V E T H E N E E D S O F T H E

V A R I O U S I N D U S T R I E S T H R O U G H I T S D Y N A M I C S A L E S F O R C E A N D

D I F F E R E N T I A T E D S E R V I C E S


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

COMMERCIAL

BUSINESS OPERATIONS

The Commercial Business markets petroleum products in bulk to

various industries and market segments including manufacturing,

aviation, power, oil and gas exploration, agriculture, fisheries and

transportation. Fully ISO 9001:2008 certified since 2008, the

Commercial Business is fully integrated with a strong supply base,

logistics and extensive distribution network throughout Malaysia.

The main petroleum products marketed by Commercial Business

are Diesel, Aviation Fuel, Bitumen, Fuel Oil, Kerosene and Mogas.

In 2015, Commercial Business expanded its product range to

include Petroleum Coke and Sulphur, marketed mainly in the

domestic market. The Commercial Business is fully committed to

serve the needs of the various industries through its dynamic

sales force and differentiated services.

FOCUSED AND CONCERTED EFFORTS, SUPPORTED BY EFFECTIVE COST MANAGEMENT INITIATIVE GREATLY CONTRIBUTED TO THE COMPETITIVENESS AND GROWTH OF THIS PORTFOLIO.

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Despite the challenging external environment in 2015,

cloaked by the drastic fall of crude prices, which started in

June 2014, the weakening Ringgit and uncertainties in

economic environment, the Commercial Business overcame

these adversities and produced a commendable bottom

line. The Commercial Business initiated various initiatives

and plans to remain robust and as a result, recorded its

best performance in the last ten years in terms of profitability.

For the year in review, the Commercial Business contributed

about 40.0% of PDB’s net profit. As compared to the

previous year, the Commercial Business registered stronger

financial performance in 2015, as its sales volume increased

by about 1.0% and net profit contributed by 17.0% whilst its

revenue dipped about 29.0% against the same corresponding

year under review.

KEY PRODUCTS AND SERVICES

Diesel experienced a significant volume growth of

4.3% from 2014, despite the modest overall industry demand

growth of only 1.0% to 2.0%. Focused and concerted

efforts, supported by effective cost management initiatives

greatly contributed to the competitiveness and growth of

this portfolio. Highest growth was recorded in the dealership

segment, bunker and construction sectors whilst demand

from subsidised sectors such as fisheries and transportation

showed contractions during the year under review, a direct

result from the ongoing subsidy rationalisation efforts by

the Government. The overall industry demand for Diesel in

the power sector and natural gas connected industries also

showed contractions as a result of more stable natural gas

supply during the year. Demand from oil and gas exploration

sectors also experienced a slowdown in 2015 due to lower

exploration activities stemming from the bearish crude oil

price environment.

AWARDED

BEST REGIONALJET FUELMarketer in Asia Pacific for 2 consecutive years


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

COMMERCIAL (continued)

Jet A-1 fuel demand declined as a result of softening

demand for air travel in Malaysia as well as the ongoing

route rationalisation by Malaysia Airlines Berhad despite

some growth in the low cost sector. The result is also

attributed to the negative perception of the Malaysian

aviation industry, a consequence from the three aviation

tragedies involving Malaysia Airlines Berhad and AirAsia,

Malaysia’s two biggest home carriers and the largest

domestic customers of Jet A-1. Despite these challenges,

the Commercial Business minimised the impact through

better cost control and by securing contracts with other

domestic and foreign carriers such as Turkish Airlines,

British Airways and Lufthansa. Despite the generally

mundane performance of the aviation sector in 2015, the

industry is projected to rebound in the coming years, in line

with the expected recovery of the economy, regional boost

in tourism and cargo demands in Asia.

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Fuel Oil remains a significant portfolio for the

Commercial Business. For the inland market, closure of the

Port Klang WEBS terminal since October 2014 provided the

Commercial Business with the logistics advantage to supply

key customers from PDB’s Prai depot in Penang. However,

demand for Fuel Oil from the Power Sector was significantly

reduced as a result of sufficient piped gas supply and

cheaper coal. Despite this challenge, the Commercial

Business successfully sustained its margin performance for

Fuel Oil by optimising its inventory and reducing unit cost,

whilst ensuring continuous supply to the key sectors in

bunker and other inland industries.

Bitumen enjoyed a good year, despite operating in

a highly competitive market, during the year under review.

This segment recorded outstanding performance with sales

volume up by 33.0% in 2015 from 2014. This strong

performance was supported by the effective supply

optimisation and competitive pricing strategies implemented

at all depots throughout Peninsular Malaysia, Sabah and

Sarawak.

The Commercial Business is committed to further develop

its capabilities and resources to strengthen its position in

the domestic Bitumen market. Moving forward, the

Commercial Business will continue to aggressively

strengthen the Company’s markets position, whilst taking

advantage of several major infrastructure projects slated for

development in 2016.

From 1 January 2015, the Commercial Business started

introducing new product portfolios into its range of

offerings, namely Petroleum Coke and Sulphur. Petroleum

Coke is mainly used by industries for heating, or blending

with coal to enhance its calorific value. Sulphur, on the

other hand, is used as feedstock to produce various

chemical products including sulfuric acid and solvents. The

first year sales performance of these special products have

been very encouraging, with volume amounting to

390,000MT for Petroleum Coke and 57,000MT for Sulphur

sold. Moving forward, Commercial Business will continue to

capture the tremendous growth potential in further

developing our marketing capabilities in these products, not

just as a value added portfolio to our current product

range, but also as diversified offerings to our customers.

33.0 %This segment recorded an outstanding performance in sales volume for 2015 against corresponding year under review

BITUMENSEGMENT


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

COMMERCIAL (continued)

Providing fuel is essential for Malaysia’s growth and

development. We are involved in major infrastructure and

development projects in Malaysia. Several key projects that

were initiated in 2015, such as RAPID Pengerang, received

direct and indirect involvement from PDB.

The Commercial Business takes seriously its responsibility to

ensure customers’ satisfaction. We truly understand the

importance of ensuring continuous supply of our products

and its contribution to the bottom line of our customer’s

business. High quality products and services as well as

supply continuity to these sectors are crucial in ensuring

the sustainability and continuity of the sectors in Malaysia.

The year 2015 also marked a milestone for Commercial

Business with the commencement of operations of its first

Commercial Fuel Station in Pengerang on 1 October 2015.

The station with a capacity of 360,000 litres serves myriad

of vehicles, lorries and buses used in the RAPID project in

Pengerang.

Apart from supporting the RAPID Project development in

terms of ensuring consistent fuel supply, the Commercial

Business also provided ample business opportunities for

local entrepreneurs to venture into Commercial retailing

through various commercial dealership appointments.

KEY INITIATIVES

Aviation Technical Services Assistance

Our expertise in the aviation industry and the adoption of

PETRONAS Aviation Technical Standards are recognised and

adopted in all of PETRONAS aviation refuelling locations

worldwide. Our proven technical capabilities spearheaded

by our subsidiary, PAVSB, has allowed the Commercial

Business to extend the services wider to our valued

customers and partners in the domestic market. The

Commercial Business provides aviation technical services

which includes inspection, training as well as areas covering

HSE. In 2015, we extended our services to other small

domestic into plane service providers and individual

customers handling their own aviation fuel for their private

aircrafts and helicopters. This further reinforced the

recognition and trust towards PETRONAS as the “Brand of

1st Choice” and the preferred partner in the aviation industry.

RAPID Pengerang

The Commercial Business works to help meet the country’s

growing demand in a responsible way. This means operating

safely, reducing our impact on the environment and sharing

benefits with the communities.

For many decades, we have actively participated in the

national development agenda. PDB has a significant role to

play in the development and implementation phase.

THE YEAR 2015 ALSO MARKED A MILESTONE FOR COMMERCIAL BUSINESS WITH THE COMMENCEMENT OF OPERATIONS OF ITS FIRST COMMERCIAL FUEL STATION IN PENGERANG ON 1 OCTOBER 2015.

PROSPECTS

To sustain its market leadership in

Malaysia, the Commercial Business

will continue to provide personalised

services and differentiated offerings,

leveraging on PDB’s extensive, fully

integrated supply and logistics

strength. We believe that we are in

a strong position to add value to

the Company, further supported by

a n i n n o v a t i v e a n d d y n a m i c

workforce that is able to capitalise

on market opportunities. Despite

the prospects of a more challenging

year in 2016, maturing commercial

demand, market volatilities and

moderate economic growth, the

Commercial Business is expected

to push beyond our boundaries

and remain the key value driver to

PDB’s core strategies. At the

product portfolio level, Bitumen,

Petroleum Coke and Sulphur are

expected to maintain its growth

momentum and increase their

cont r ibu t ion to the ove ra l l

Commercial Business performance

in 2016.

LPGDELIVERING VALUE

L P G B U S I N E S S P U R S U E D A V A L U E D R I V E N G R O W T H S T R A T E G Y B Y F O C U S I N G O N C O S T O P T I M I S A T I O N A N D I M P R O V I N G E F F I C I E N C Y A C R O S S I T S V A S T D I S T R I B U T I O N N E T W O R K


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

LPG

The LPG Business has successfully reinforced its position as

Malaysia’s No. 1 Cooking Gas through its value driven

growth strategy by focusing on cost optimisation and

improving efficiency across its vast distribution network

despite a very challenging market environment in 2015. The

LPG Business continued to maximise value for the household

segment and further improved its competitive edge in the

commercial segment through superior customer services.

BUSINESS OPERATIONS

The LPG Domestic Business drives the marketing and sales

of cooking gas under the brand name of Gas PETRONAS,

currently available in four different cylinder sizes – 12kg and

14kg suitable for household use, while the 50kg and bulk

LPG (ranging from 200kg to 32,000kg tank sizes) are

suitable for both SMIs and industrial customers.

Through its ‘value driven growth’ strategy, the LPG Domestic

Business has commendably strengthened Gas PETRONAS’

position as Malaysia’s No. 1 Cooking Gas.


In its pursuit to deliver maximum value, LPG Domestic

Business successfully contributed about 20.0% to the

Company’s bottom line in 2015 compared to about 16.0%

contribution in corresponding year under review.

KEY PRODUCTS AND SERVICES

12kg and 14kg Cylinders

During the year under review, the subsidised household

segment comprising of 12kg and 14kg cylinders continued

to be the key contributor to the LPG Business. The LPG

Business leveraged on Gas PETRONAS’ vast network of

authorised dealers to sustain its market leadership while

enhancing value. Further enhancements were made through

value driven initiatives that included sweating of assets and

focusing on high cylinder turnaround areas to drive the

business to a new level of performance.

50kg Cylinders and Bulk Sales

The commercial segment recorded a slight decrease in

volume for the year under review as compared to the

corresponding year under review due to aggressive

expansion of natural gas distribution, particularly in the

Northern and Southern regions. The impact was cushioned

through the increase in C50kg sales via intensified marketing

efforts coupled with stronger enforcement by MDTCC on

illegal subsidy leakage linked to decanting activities and low

Saudi Contract Price environment in 2015.

KEY BUSINESS INITIATIVES

Cost Optimisation

The LPG Business initiated various cost optimisation

initiatives in its pursuit of achieving greater cost efficiencies

that is centred on improving contract management

performance and enhancing operational excellence, in a bid

to unlock value across its business chain.

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Governance and Internal Control

Internal and external audits were

undertaken throughout the year under

review to ensure Governance and Internal

Control was duly exercised. The LPG

Business has been ISO 9001:2008

certified since 2007, with implementation

of Quality Management System which

fulfils the requirements from processes,

procedures, compliance to governance

on marketing and sales of LPG products

to customers.

During the year under review, the LPG

Business has successfully demonstrated

its ability to maintain the ISO certification

through an audit conducted by SIRIM in

December 2015.

“12kg & 14kgCONTINUED TO BE THE KEY CONTRIBUTOR TO LPG BUSINESS”


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

LPG (continued)

INTERNATIONAL BUSINESS

The LPG Business is a key segment

of the Philippines downstream oil

industry. As a widely used fuel

commodity in the country, the LPG

Business sector is highly competitive

in a deregulated market condition.

In the Philippines, PEPI’s customer

base in Mindanao, Visayas and

Luzon is served via an established

l o g i s t i c s s u p p o r t s y s t e m ,

infrastructure and continuously

expanding network of distributors.

PEPI has the second largest market

share in the Visayas and Mindanao

regions, covering household,

THROUGH ITS ‘VALUE DRIVEN GROWTH’ STRATEGY, THE LPG DOMESTIC BUSINESS HAS COMMENDABLY STRENGTHENED GAS PETRONAS’ POSITION AS MALAYSIA’S NO.1 COOKING GAS.

NO.1COOKING GAS

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commercial, autogas and bulk industrial LPG

segments. PEPI is focused on strengthening its

growth trajectory in the high margin household

segment through prudent inventory management,

risk management and provision of differentiated

services to industrial customers.

PEPI is firmly committed towards offering quality

and safe LPG cylinders. In realising this, it has

introduced initiatives that improved operations

and supply logistic costs. Other continuous

initiatives include the enhancement of processes

and frameworks on corporate governance,

guided by the Group’s stringent policies and

guidelines.

PROSPECTS

Backed by solid foundation and dedicated

workforce, the LPG Business remains steadfast

in reinforcing its position, not only as Malaysia’s

No. 1 Cooking Gas but also as the overall leader

in the nation’s LPG industry, whilst delivering

value and continuously enhancing its services to

its loyal customers.

LUBRICANTSINNOVATING CHANGE

O U R R A N G E O F P R E M I U M A U T O M O T I V E L U B R I C A N T S P R O D U C T S C O N T I N U E T O

E V O L V E A N D I S T O D A Y R E C O G N I S E D A N D A C C R E D I T E D B Y M A J O R A U T O M O T I V E

M A N U F A C T U R E R S


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

LUBRICANTS

BUSINESS OPERATIONS

The Lubricants Business retained its market position despite a challenging and competitive industry

outlook. Driven by the Company’s aspiration to achieve market leadership in the near future, the

Lubricants Business underwent a transformation journey with the consolidation of lubricants

business into one entity that is PDB’s subsidiary, LDSB, which was then renamed as PLM(M)SB, to

undertake the sales and marketing activities of PETRONAS Lubricants Business in Malaysia.

Leveraging on the extensive range of lubricant products, the Business caters to wide markets

covering Passenger Vehicles, Motorcycles, Commercial Vehicles, Industrial and Marine segments

and specialises in the lubricant functional fluids and technical services.

2NDLARGESTlubricants market in Southeast Asia

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THE PETRONAS SYNTIUM RANGE WAS UPGRADED TO INCLUDE °COOLTECH™, A UNIQUE FORMULATION OF BASE OILS AND ADDITIVES THAT FIGHT EXCESSIVE ENGINE HEAT


In view of Malaysia’s weak economic condition during the

year under review, the Lubricants Business recorded a lower

volume against corresponding year under review due to the

cautious consumer spending.

KEY PRODUCTS & SERVICES

Passenger Car Motor Oils cater to the lubricants needs of

the Passenger Vehicle segment in the automotive industry.

PETRONAS Syntium is our flagship product which fully

complements the semi synthetic to full synthetic range.

During the year under review, the PETRONAS Syntium

range was upgraded to include °CoolTech™, a unique

formulation of base oil and additive that fights excessive

engine heat.

Key accounts using our PETRONAS Syntium range are

Perodua, PROTON, Naza KIA, Peugeot, Citroen, Mercedes

Benz, BMW and more. Our product offerings also include

PETRONAS Mach 5 premium mineral grade, PETRONAS

NGV Lube and PETRONAS M-Plus.

Motorcycle Oils cater to the requirements of the

motorcycle segment. We have two brands under this

segment, namely PETRONAS Syntium Moto and PETRONAS

Sprinta. PETRONAS Syntium Moto offers products from the

semi-synthetic to full synthetic grades while PETRONAS

Sprinta offers mineral grades.

Commercial Vehicle Lubricants cater to lubricant usage

for commercial vehicles (i.e. trucks, bus, prime-movers and

the like) that run on heavy duty diesel engines. PETRONAS

Urania is our brand for this segment and it offers products

from the mineral to the full synthetic range. To further

complement this segment, we also offer automotive gear

oil, automatic transmission fluid and specialty products such

as brake fluid and coolants.

Industrial and Marine Lubricants offer products targeted

to industrial and marine segments. We have a full range of

lubricants to meet consumer requirements from compressor,

circulation, hydraulic, turbine, gear oil and marine products.

PETRONAS LubeXperts are fully branded PETRONAS

workshops for passenger cars and motorcycles, offering a

complete range of PETRONAS Lubricants products. Initiated in

2013, it is aimed at expanding market penetration and

increasing PETRONAS Lubricants brand exposure in hightstreet

segment as well as at PETRONAS stations. The first LubeXpert

was launched at Auto Deutsch, Desa Pandan on April 2013. In

2015, 16 more new LubeXpert outlets opened, making it to

the total of 67 LubeXpert outlets currently operating nationwide

KEY INITIATIVES

Formation of PETRONAS LUBRICANTS MARKETING

(MALAYSIA) SDN BHD

Transformation Initiatives

During the year under review, the Lubricants Business went

through a transformation journey with the formation of a

single entity to undertake the sales and marketing activities of

PETRONAS Lubricants Business in Malaysia. The strategic

formation of this new entity will be a strong platform for the

Business to achieve its market leadership aspirations, due to

the enhancement of its business focus and talent management.

The transformation journey started in late August 2014, involving

the leadership teams of the Lubricants Business entities

(Lubricants Business Division in PDB and LDSB) as well as those

from PLISB. The key objective of the transformation initiatives

was to look into the redesign of PETRONAS Lubricants Business

model in Malaysia to create a unified commercial setup that will

enhance our capacity, deliver aggressive growth rates and attain

market leadership aspirations.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

LUBRICANTS (continued)

Business operations for the unified entity began on 1 January 2015 with

a series of initiatives implemented to stabilise and streamline operational

processes to cater to the compatibility integration with existing PDB and

PLISB operations as well as to ensure a seamless level of service for

customers. On 11 May 2015, the entity was officially named PLM(M)SB.

Route-To-Market in East Malaysia

The Lubricants Business cited positive growth in East Malaysia (Sabah and

Sarawak) due to the implementation of end-to-end transformation called

RTM. Initiated in Peninsular Malaysia in 2013, RTM showed double digit

volume growth in 2013 and 2014.

The objectives of extending this programme to East Malaysia was to

drive growth and establish our position as a market leader. In May 2015,

nine Market Execution Partners for East Malaysia were signed on to

extend PLM(M)SB’s reach in East Malaysia for the implementation of the

RTM programme.

The transformation journey of PLM(M)SB was continued with the

establishment of a stronger financial enterprise system, SAP ECC6, that

streamlined and integrated the supply chain practices with PLISB for

better efficiency as well as address capability development within the

new organisation.

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PROSPECTS

With stiff competition and emergence of new players in the

industry, the Lubricants Business will continue its aggressive

growth strategy and strive towards establishing its market

leadership.

As part of an overall initiative to grow PLM(M)SB business,

the transformation initiatives implemented addressed key

areas of RTM for the high street indirect business in

Peninsular Malaysia and the deployment of sales teams

managing Direct Key Accounts in their respective regions.

This has enhanced our reach and improved our level of

customer service to both customers and consumers alike.

The transformation journey continues to focus on

consolidating the indirect and direct Lubricants Businesses

of PDB into a single entity to garner synergies to achieve

an improved speed to market, focused execution and talent

development.

INTERNATIONAL SUBSIDIARIES

The lubricants market in Thailand has strived despite having

aggressive competition throughout the year. During the

year under review, the revenue for Lubricants Business in

Thailand had decreased by 5.6% as a result of lower unit

selling price.

Throughout the year under review, PIM(T)CL decided to

focus on business growth, which involved engaging their

OEMs and conducting intensive marketing and promotional

programmes. Due to the high competition experienced in

the region, PIM(T)CL focused on increasing brand awareness

via the use of digital media. Programmes for both internal

and external parties were done in order to have fully trained

distributors of the product. In pursuit of this, PIM(T)CL has

also taken the necessary steps to increase the number of

sales personnel and dealers in the region.

DELIVERING EXCELLENCE

S T R A T E G I E S H A V E A L W A Y S B E E N D R I V E N A N D I N S P I R E D B Y T H E F O U R C O R E V A L U E S ,

N A M E L Y S T A K E H O L D E R V A L U E , C U S T O M E R S A T I S F A C T I O N , O P E R A T I O N A L E X C E L L E N C E

A N D O R G A N I S A T I O N A L E F F E C T I V E N E S S

SUPPLY ANDDISTRIBUTION


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

SUPPLY ANDDISTRIBUTION

BUSINESS OPERATIONS

During the year under review, SDD focused on cost optimisation

and supply reliability. With its extensive supply chain network of

primary and secondary distribution, SDD appraised and

transformed existing processes to provide the most economical

and reliable delivery to the customers supporting other enablers

and business lines. This was done by ensuring uninterrupted

end-to-end supply chain from product sourcing right up to

delivery of the Company’s products to customers and dealers.

KEY ROLES AND RESPONSIBILITIES

SDD’s main roles and responsibilities include product sourcing,

distribution, infrastructure planning and engineering services.

These functions ensured adequate and reliable operational

facilities for business sustainability.

SDD’s strategies have always been driven and inspired by its four

core values, namely Stakeholder Value, Customer Satisfaction,

Operational Excellence and Organisational Effectiveness.

OVERALL EQUIPMENT EFFICIENCY

81.0% 89.0%through continuous operational monitoring, SDD improved its LPG bottling operations’ Overall Equipment Efficiency by reducing operational interruptions while maximising on delivery.

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KEY BUSINESS INITIATIVES

Stakeholder Value

SDD remained committed towards creating value for its

customers and business partners by improving the efficiency

of product sourcing, primary and secondary distribution as

this ensured better control and undisrupted supply. SDD

also focused on optimising its terminals’ inventory and

operating expenditure to continuously provide competitive

advantages and cost optimisation. The realignment and

optimisation of TC vessels resulted in the cost reduction of

approximately 5.0% of the total annual freight cost.

SDD also actively looked for new ventures to add more

value to the services provided. As such, SDD worked with

other oil companies on throughput arrangements, leveraging

on existing facilities and capabilities without jeopardising its

market share. This initiative not only contributed towards

additional income to the organisation and further improved

asset utilisation but also reduced the terminal’s operational

unit cost. More value added initiatives are being planned to

support business growth and sustainability.

Customer Satisfaction

SDD focused on enhancing customer satisfaction through

the delivery of quality products and differentiated services

in a timely and cost effective manner. A new process to

manage customer complaints online was developed to

ensure it adhered to the standard operating procedures to

deliver on the Company’s brand promise. Moving forward,

ongoing efforts are being carried out to ensure that these

practices becomes a norm for SDD to carry out its business.

Operational Excellence

A key factor at SDD is to ensure that products are delivered

to customers at the most competitive cost and without

operational interruptions. In pursuit of this, SDD strategised

and initiated the Integrated Inventory Management system

that minimised the intermonth price exposure variance due

to the prolonged downward trend in oil prices. Through

continuous monitoring and proactive actions taken, this

initiative resulted in a more current unit cost that reflected

current market prices. In essence, this initiative promoted

competitive pricing that allowed business lines to realise the

Company’s sales agenda.

The initiative started with daily oil prices analysis and

monitoring of variance between the Company’s product

costs vis-à-vis market price. The continuous price downward

trend triggered all parties to successively implement pre-

determined mitigation actions such as frequent and smaller

parcel products delivery to the Company’s terminals and

managed product intake from refineries to ensure better

pricing strategy. This resulted in competitive product pricing

and performance improvement.

In addition, with continuous operational monitoring, SDD

improved its LPG bottling operations Overall Equipment

Efficiency rate from 81.0% to 89.0%, reducing operational

interruptions while maximising on delivery.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

SUPPLY ANDDISTRIBUTION (continued)

BUSINESS ACHIEVEMENTS

MSOSH 2014 Award

Following the success of the Company in the MSOSH 2013

Awards in the corresponding year under review, the

Company achieved yet another success story during the

year under review by sweeping six Gold Awards for

commendable occupational safety and health performance

in the MSOSH 2014 Awards. The award recognises

companies from various sectors who have performed

exceptionally well in occupational safety and health aspects.

The award strengthened the Company’s commitment

towards occupational safety and health, while at the same

time boosting the morale and confidence of employees

towards building a safe working environment.

…THE COMPANY ACHIEVED YET ANOTHER SUCCESS STORY DURING THE YEAR UNDER REVIEW BY SWEEPING SIX GOLD AWARDS FOR COMMENDABLE OCCUPATIONAL SAFETY AND HEALTH PERFORMANCE IN THE MSOSH 2014 AWARDS.

Organisational Effectiveness

To support the Company’s business growth and sustainability,

SDD continuously conducts various studies to improve the

Company’s efficiency. To further improve organisational

effectiveness, SDD conducted several major short and long

term studies, including a study on unmanned terminal

rationalisation and terminal optimisation review which

included the implementation of Drag Reducing Agent on

Multi Product Pipeline to improve its capacity. The studies

focused on detailed review of the Company’s options for

business continuation pre-and post-2020 as well as the long

term operational requirements beyond 2020, with due

consideration given to operational limitations and advantages.

Following this, specific strategies were developed and

assessed for business growth and sustainability. In essence,

these studies have provided PDB and SDD with a firm

direction on future plans with regard to its operations, for

the benefit of all stakeholders.

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has been equipped with a new bottom loading facility, a fire

fighting system consisting of fire tank and fire pumps and

one new administration building. The facilities are able to

support long term volume growth and demand surge

during peak seasons. Low inventories have also given

significant improvement in vessel replenishment turnaround

time due to lesser load port congestion and predicted

season which affected vessel travel times.

Biodiesel Project in East Malaysia

Following the Government’s mandate of Biodiesel

implementation, SDD completed all B7 Biodiesel facilities in

Sabah and Sarawak. With this, the whole country is now

being supplied with B7 Biodiesel. The implementation of the

government initiative in East Malaysia involved the use of

additional PME by 138,000MT annually, which resulted in an

annual saving of 159.4 million litres of fossil diesel. SDD

also ensured an uninterrupted supply of PME to support the

initiatives through efficient procurement to all PS in East

Malaysia.

PROSPECTS

Moving forward, SDD will continue to focus on cost

optimisation, supply reliability and sustainability, customer

satisfaction, HSE assurance and operational excellence

towards supporting the Company’s overall aspiration of

becoming the ”Brand of 1st Choice”.

KEY PROJECTS AND INITIATIVES

LPG Flexspeed System at Prai LPG Terminal

SDD successfully commissioned the Prai LPG Flexspeed

System ahead of schedule in December 2015 as it was

completed within a duration of 12 months. The objective of

the project was to increase the Prai LPG Terminal production

capacity with a high speed production bottling capability to

a total of 5,400 cylinders per hour via two Flexspeed

lines dedicated for C12 and C14 cylinders to meet the

Company’s growth.

The project resulted in operational improvements and cost

savings via manpower optimisation with the use of the

automated processes that came with the Flexspeed system.

PDB Miri Fuel Terminal

SDD successfully commissioned its biggest fully owned fuel

terminal in Sarawak, the PDB Miri Fuel Terminal, on 15

October 2015. The project was completed two weeks

ahead of time and obtained its Certificate of Fitness to

Operate, well ahead of its contractual period of 13 months.

Due to this, the project achieved cost savings as the capital

investment was 7.0% lower than the initial budgeted amount.

The terminal, currently operating with bigger storage

capacity of 3.0 million litres in total against its initial capacity

of 1.4 million litres, comprises two new vertical tanks to

support the business growth. Apart from that, the terminal


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

CRUDE OIL AND PETROLEUMPRODUCTS PRICE TRENDS

After the drastic drop of global crude benchmark, Dated Brent, in the second half of 2014, peaking at USD115.30/bbl in June 2014 to a low of USD56.00/bbl at the end of 2014; crude oil continued its downward trend throughout the year under review. Dated Brent touched the highest point at USD66.65/bbl on 13 May 2015 before gradually sliding down to a low of USD36.00/bbl towards the end of 2015.

For the year under review, Dated Brent price averaged at USD52.80/bbl, lower by about half from 2014’s average of USD99.00/bbl. For petroleum products, the MOPS prices are the key benchmark prices in this region. Throughout 2015, RON97 ULG, RON95 ULG and Diesel 0.05% averaged at USD71.00/bbl, USD69.00/bbl and USD65.00/bbl, respectively.

The unending bearish market for both crude oil and petroleum products is attributed to the oversupply situation

Note: Average monthly prices are based on MOPS.

as OPEC persistently held on to a “no output cut” policy to claim market share leadership. Furthermore, the strong supply growth from US tight oil, and the potential lifting of sanctions on Iran led to expectations of higher oil exports from Iran. On the demand side, expectation of interest rate hike by the U.S. Federal Reserve reduced investors’ appetite for commodities including oil, coupled with lingering concerns about lower economic growth in China and emerging markets.

Moving forward, global oil market is projected to remain in an oversupply position in 2016, although the pace of global stock builds could decrease to 0.6 mil bpd from 1.7 mil bpd, as OPEC supply remains robust despite lower non-OPEC output. Demand is expected to give support as the US economy is on the road of recovery and other emerging markets including China and India are expected to continue growing, albeit at a moderate level.

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

160

170

Jan2005

Jan2006

Jan2007

Jan2008

Jan2009

Jan2010

Jan2011

Jan2012

Jan2013

Jan2014

Jan2015

Dec2015

CRUDE: Tapis CRUDE: Brent RON97 ULG RON95 ULG

JET A-1 DIESEL 0.05% DIESEL 0.25%

USD/BBL

Year

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INSPIRING CHANGE

ECONOMIC OUTLOOKAND PROSPECTS

Global economic growth was estimated at 3.1% in 2015, a

slower growth compared to 2014. Expansion in the

advanced economies continued at a modest pace, while

growth in emerging markets and developing economies

decelerated, led by the imminent slowdown in China.

Downside risks to the outlook has escalated, particularly in

emerging markets and developing economies, influenced

by low commodity prices, increase in capital outflows from

the emerging markets, combined with downward pressure

on their currencies and increasing financial market volatility.

These risks pose downward pressure on the global economy,

with their effects to be felt throughout 2016. Global

economy is expected to be fragile, with modest growth

projected to be at 3.4%.

In the Southeast Asia region, estimated growth remains

steady at 4.6% in 2015 and projected at 4.9% in 2016. For

the ASEAN-5 economies (Indonesia, Malaysia, Philippines,

Thailand, Vietnam), weaker terms of trade as a result of

currency depreciation against major currencies is expected

to contribute to a bearish growth for both Malaysia and

Indonesia in 2015. The weaker commodity prices will

further drag the growth of the commodity-exporting

economies.

For Malaysia, GDP growth for 2015 was recorded at a

moderate pace of 5.0%, largely driven by the private sector,

both consumption and investments. Net exports remained

strong on the back of weaker imports due to weakening

Malaysian Ringgit. In 2016, the uncertainty of global

economy will continue to put more downward risks. GDP

growth is forecasted to moderate at between 4.0% and

4.5% as the economy continues to experience external and

internal uncertainties.

To address the challenging economic environment, the

Company will be aligning its business strategies to sustain

its overall market leadership and shareholders’ value. PDB

remains committed towards reinforcing its market leadership

and adding value to its businesses by strengthening its

brand, building on its innovative customer-centric mindset

and focusing on its cost competitiveness – in its journey

towards becoming the ”Brand of 1st Choice”.

PDB REMAINS COMMITTED TOWARDS REINFORCING ITS MARKET LEADERSHIP AND ADDING VALUE TO ITS BUSINESSES BY STRENGTHENING ITS BRAND, BUILDING ON ITS INNOVATIVE CUSTOMER-CENTRIC MINDSET AND FOCUSING ON ITS COST COMPETITIVENESS – IN ITS JOURNEY TOWARDS BECOMING THE BRAND OF 1ST CHOICE.

SUSTAINABILITYREPORT

RESPONSIBLE CORPORATE CITIZEN

P D B C O N T I N U E S T O E M B R A C E P O L I C I E S , P R A C T I C E S A N D P R O C E D U R E S T H A T

C L E A R L Y O U T L I N E O U R C O M M I T M E N T T O D E L I V E R S U S T A I N A B L E A N D L O N G T E R M

V A L U E T O O U R S T A K E H O L D E R S


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

SUSTAINABILITYREPORT

Our approach to sustainability is guided by PETRONAS Corporate Sustainability Framework which recognise the value of sustainable growth, giving back to the community, minimising the impact to the environment, as well as maintaining safe and reliable operations.

Sustaining the Company’s profitability

through value creation, e�cient

extraction and manufacturing

processes.

Limiting emissions of greenhouse

gases into the atmosphere.

Preventing and eliminating

injuries, health hazards and damage to

property and communities,

including conserving the environment.

Promoting e�cient use of hydrocarbons and water, and supporting the

use of renewable energy.

Shar

ehol

der

Valu

e

Natu

ral R

esou

rce

Use

Clim

ate

Chan

ge

Heal

th, S

afet

y &

Envi

ronm

ent

Soci

etal

Nee

ds

Biod

iver

sity

Ensuring projects and operations

do not have significant e�ect on the diversity of animals and

plants.

Prod

uct S

tew

ards

hip Ensuring that

products conform to

quality and HSE standards

throughout the product lifecycle

and meet the needs of society.

PETRONAS CORPORATE SUSTAINABILITY FRAMEWORK

Safeguarding human rights

within our sphere of influence,

contributing to community

needs, investing in training

and education, promoting arts and sports and conducting our

business in a transparent

manner.

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The Company holds our partners, contractors and suppliers

to similar standard of conduct.

The year under review saw continued volatility in the capital

markets with the Malaysian economy facing financial

vulnerability. As a responsible corporate citizen, PDB

continues to embed sustainability in our business operations.

We engage with our stakeholders comprising our own

employees, business partners, shareholders, customers,

regulatory authorities, local communities, contractors and

suppliers.

PDB is currently refining the tools, processes and

sustainabil ity reporting mechanisms internally. By

strengthening our business practices concurrently, this will

only help propel us into the future.

On 12 December 2015, Bursa Malaysia announced that PDB

has met the globally recognised sustainability standards for

inclusion in the FTSE4Good Bursa Malaysia Index. PDB is

very pleased with the recognition and inclusion in the

FTSE4Good Bursa Malaysia Index, and as such the Company

will strengthen and continue in its efforts to integrate

sustainability into its business strategy.

PART III WORKPLACE CULTUREAND ENVIRONMENT3. SUSTAINABLE DEVELOPMENT

3.1 PETRONAS is committed to sustainable development in order to help meet the world’s growing energy needs through economical, environmental and socially responsible efforts.

3.2 You should aim to create lasting social benefits; safeguard the health and safety of employees, contractors and neighbours; minimise disruptions to the community; lower emissions; minimise impact on ecosystems and biodiversity; and use energy, water and other resources more efficiently.

Sustainability to PDB means meeting the world’s growing energy needs in a responsible and holistic manner, by balancing the

economic, environmental and social needs of our stakeholders, steered by solid governance and ethical business practices.

In addition, PETRONAS CoBE expresses our commitment to sustainable development as follows:

Source: PETRONAS CoBE.

FTSE Russell (the trading name of FTSE International

Limited and Frank Russell Company) confirms that PDB

has been independently assessed according to the

FTSE4Good criteria, and has satisfied the requirements

to become a constituent of the FTSE4Good Index

Series. Created by the global index provider FTSE

Russell, FTSE4Good is an equity index series that is

designed to facilitate investment in companies that

meet globally recognised corporate responsibility

standards. Companies in the FTSE4Good Index Series

have met stringent environmental, social and governance

criteria, and are positioned to capitalise on the benefits

of responsible business practice.

SUSTAINABILITYREPORT (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

HEALTH, SAFETY AND ENVIRONMENT

PDB is committed to safeguard the health and safety of its people, business partners, customers, surrounding communities, public and all stakeholders; and puts protecting the environment as one of its priorities in driving a sustainable business and operational excellence.

The Company views the inculcation of HSE practices as a

prerequisite in this journey, aiming at making HSE a culture

that is embedded in all aspects of its business. In exercising

this aspiration, PDB holds on to the governance of HSE

Management System, a system that has been established

and rolled out to all of the Company’s operations since its

early days.

LEADERSHIP COMMITMENT

PDB’s management demonstrates visible HSE leadership

and commitment through a set of exemplary roles in

safeguarding the health and safety of our employees. The

roles include integrating and balancing HSE aspects in

business decisions and leading the development of HSE

strategic objectives and targets. In operationalising the

commitment, PDB management drives HSE initiatives at all

levels with clear expectations, targets and objectives; with

each member of the management carrying the highest

portion of HSE KPIs. The show of accountability and

responsibility is emulated at all levels; spreading the message

that HSE is critical to each and every one of its employees.

The management’s commitment is carved in the Company’s

HSE Policy Statement; a written pledge signed off by the

Company’s highest executive officer, MD/CEO. It mandates

strict adherence to HSE regulations and requirements

across the Company, by our employees, contractors,

suppliers and joint venture partners.

HSE governance at PDB is strengthened with commitment

to adhere to PETRONAS HSE Mandatory Control Framework

and PETRONAS Technical Standards. Adopting demonstration

of As Low As Reasonably Practicable (ALARP) as the

Company’s risk appetite in managing HSE risks, PDB

establishes its HSE strategic objectives and targets to

rationalise and operationalise the intent of its HSE aspiration.

The HSE strategic objectives are incorporated into HSE

Plan, and cascaded to the respective Divisions and closely

monitored to ensure everything that has been planned is

materialised effectively and in a timely manner.

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No. of Staff Trained in HSE

2014 80

2015 375

for year in 2015375

No. of Man Hour Training Hours Days

2014 3,512 439

2015 7,680 960

hours7,680 days960

BUILDING HSE FOUNDATION

In ensuring that a HSE plan is executable and effective, PDB

provides a firm foundation that includes competent

employees, a relevant structure, practical deliberation and

decision making platforms, monetary budget and access to

critical documents of standards, legislation and other

requirements. At all levels, HSE roles and responsibilities are

clearly defined in job or position descriptions and are

documented, communicated and reviewed periodically.

HSE Committees

HSE committees focus on relevant HSE issues and provide a

platform for communication amongst and between

management and employees. The committees are utilised to:

• Stimulate effective two way communication on HSE

issues between management and employees

• Engage all staff in the implementation of HSEMS

• Provide avenue for employees’ feedback on HSE matters

• Provide HSE advisory to the management for informed

decision

• Provide a platform to monitor adequacy and effectiveness

of controls put in place to manage HSE risks.

PDB Corporate HSE Committee is chaired by the MD/CEO,

who is also a Director of the Company. Heads of Divisions

were appointed as committee members to ensure commitment

from senior management team. HSE risks, incidents and

performance are also deliberated by the PDB MC and

presented to the Board for oversight on a quarterly basis.

HSE Capability

An intent is only as good as the person executing it. PDB

gives significant emphasis in ensuring its employees and

servicing contractors are capable in implementing assigned

tasks. Appropriate training programmes are identified and

provided to ensure necessary skills and knowledge are

acquired prior to performing a job in a safe manner. Basis

of identification includes job function requirement, legislative

and standards requirements, discipline pre-set training

requirement, as well as other best practices by the industry

with similar operations and activities. Compliance to training

requirements are monitored through the implementation of

HSE Competence Assurance, a system that is able to

provide the management an effective oversight over the

status of competency of the workforce.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

HSE Communications

For the year under review, we undertook initiatives to

engage our business partners, customers as well as

contractors to strengthen HSE management in our day to

day operations. Engagement with local communities and

public is also embedded in various programmes

implemented. Our initiatives were focused on factors that

could cause incidents and how to mitigate HSE risks.

We engaged authorities such as MDTCC, DOSH, DOE and

APMM to obtain updates on the latest legal requirements

that apply to PDB facilities. Such information is disseminated

to all relevant asset owners for compliance.

RISK-BASED PLANNING AND IMPLEMENTATION

With the HSEMS, supplemented by PETRONAS Enterprise

Risk Management Framework, provides risk oversight to

PDB Board, looking into various focus risk areas including

HSE risks. With a solid foundation set by the management,

operationalisation begins with HEMP, which calls for

identification of hazards, assessment of risks, and

implementation of controls. The process not only provides

detail contents of risks but also allow intelligent risk-based

prioritisation; a crucial approach in ensuring that plans are

structurally and systematically implemented. Several risk

assessment tools and techniques are used in HEMP, each

examining different aspects of an operation or activity;

suitable for specific areas or stages of operations. Examples

include Job Hazard Analysis, Process Hazard Analysis,

Chemical Health Risk Assessment, and Environmental

Impact Assessment.

Efforts towards enhancing HEMP implementation in 2015

included a Company-wide review of the Hazards and

Effects Register, involving Subject Matter Experts from the

Fuel, LPG and Aviation Terminals, Retail and NGV Stations,

as well as LPG and Commercial storage facilities; driven by

findings from past incidents and near-misses, audit findings,

newly-introduced hazard, facility or process and any change

that may introduce new or different level of HSE risks.

Notwithstanding all efforts in preventing incidents, the

Company realises that fate do find its ways; and normally at

the least expected of situation and time. Hence, it is also one

of the Company’s priority to keep everyone on their toes,

ready for any emergency situation. PDB Crisis and Disaster

Management Manual stipulates the requirements to take

proactive steps to ensure that we are prepared for unexpected

events. The manual also specifies the emergency response

structure along with clear roles and responsibilities. The

Company conducts periodic assessments to ensure adequacy

and effectiveness of controls to manage emergency

scenarios. This includes testing of response equipment’s

adequacy and readiness; as well as response capabilities

through emergency exercises at our operating facilities.

Regardless of how unwanted an incident is, the Company

strives to find remedies through the process of learning from

incidents. All incidents are investigated in a timely manner.

Recommendations resulting from investigations which

include both corrective and preventive actions are monitored,

and their progress is reported to the management. Lessons

learnt from incidents are shared across the Company

including relevant contractors and business partners to

prevent recurrence of similar incidents; in the form of specific

action items that are monitored and tracked for closure. At

all times, lessons are not only made learnt at similar

operations, but also being extended throughout the Company.

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TIER 3 EMERGENCY RESPONSE EXERCISE FOR KERTIH FUEL AND LPG TERMINAL (EX-PETIR II)

One of the biggest scales of emergency response exercise conducted

was Tier 3 Emergency Response (Ex-Petir II) which was jointly organised

by PDB, PETRONAS Carigali Sdn Bhd Peninsular Malaysia Operations and

PP(T)SB which was successfully conducted on 21 April 2015.

The exercise was conducted to assess the capability and readiness of

our ERT, Eastern Region Emergency Management Team, PDB

Headquarters Support and Unification of Command between PP(T)SB,

Central Emergency and Fire Services and various response agencies

towards mitigation of the crisis. The exercise included full movement of

ERT and deployment of firefighting equipment during emergency with

external assistance from Kertih and Kemaman response agencies

(BOMBA, police, and hospital).

CONTINUAL IMPROVEMENT

Built around the Plan-Do-Check-Act

cycle, HSEMS requires an effective built-in

improvement system, to stay relevant,

updated and continually improving.

Internal and independent HSE Assurance

exercises are carried out, with analysis of

findings being presented to the PDB MC,

PDB Board and PETRONAS Downstream

Executive Committee. For the year under

review, PDB was subjected to HSE

Assurance by PETRONAS Group HSE. The

findings and recommended corrective

actions of this assurance exercise was

consolidated with those of the HSE

assurance conducted in previous years by

several stakeholders. Correction Action

Plans were consolidated for Company-

wide implementation and tracked for

closure; providing not only a holistic

approach in gap closures; but also ensures

sustainability of implementation.

Analysis from these Assurances; together

with other inputs from incidents, near

misses and external lessons are put

together against each sub-elements of

HSEMS, allowing identification of areas

w i t h i n t h e s y s t e m t h a t r e q u i r e

improvement. This is a formal process in

place for PDB management to review the

effectiveness of the HSEMS implementation

and ensuring continual improvement of

the system; and subsequently the

Company’s sustainability in managing HSE.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE


TOTAL EMPLOYEES

>1,900

2015

Total Training Mandays: 4,027 days

Average Training Mandays: 2.52 days

2014

Total Training Mandays: 4,380 days

Average Training Mandays: 2.74 days

LEADERSHIP DEVELOPMENT

In line with PETRONAS Leadership Vision, PDB strives to

develop leaders at all levels to uphold the PETRONAS

Shared Values and demonstrate the leadership competencies

in a high performance culture.

To build the right leaders to meet the Company’s needs

and aspirations, the PDB leadership development activities

and initiatives for employees at all levels are guided by

PETRONAS Learning and Development Framework, and Top

Talent Development Framework.

Leadership Development Programmes offered by the

PETRONAS Leadership Centre

Selected PDB executives, managers and higher management

employees participated in the wide array of high impact

leadership development programmes which were available

at PLC. The programmes held include the Senior

Management Development Programme, Management

BUILDING A HIGH PERFORMANCE CULTURE

Creating a high performance culture requires a systematic approach to managing the performance of organisations, teams and individuals. The Company is guided by PETRONAS Learning and Development Framework and Top Talent Development Framework which is grounded on the principle of continuous learning in nurturing competent workforce by strategic learning, leadership, technical knowledge and capabilities.

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INSPIRING CHANGE

Development Programme, Leadership Excellence at

PETRONAS for Senior Managers and General Managers,

Maximising Your Leadership Success, Emerging Leaders

Programme, and Foundation of Leadership.

Through these programmes, participants were equipped

with the required competencies to affect positive change in

the organisation, business acumen as well as management

and leadership skills.

PDB Managerial Development Programme

To enhance managers’ leadership competencies in leading

change, innovation and maximising business opportunities,

the PDB MDP was introduced as an in-house training

intervention. A total of 18 managers graduated from this

programme on 24 February 2015.

Throughout the seven month programme, participants

attended individual and group coaching sessions, sharing

sessions by internal and external leaders, and also a visit to

the 3M Innovation Centre. Participants also implemented

group projects that centred on innovative solutions, which

led to cost savings and improved the Company’s competitive

advantage.

Leadership that Empowers Programme

The programme was conducted with the objective of

enabling managers to acquire various leadership styles in

managing their subordinates. A total of 12 managers

attended the programme on 7 and 8 May 2015. This

programme was proven to be useful and effective through

the behavioural effectiveness survey which was conducted

several months after the training.

Succession Management

The PETRONAS Top Talent Management Value Chain was

implemented to identify top talents within the organisation,

review talent on an overall basis to determine their strengths,

areas of development, career plans and finally match them

against the critical positions within the organisation. In the

context of PDB, rigorous talent identification exercises

resulted in a 13.0% increase of its top talent pool. As for its

31 critical positions, plans were made to identify successors

for the positions to ensure uninterrupted business operations

upon employee mobility or attritions.

The increase number of experienced top talents that

resulted in a bigger pool of potential successors also

contributed towards the Ready Now Successors to PBD

critical positions ratio of 2.4:1. Annual reviews were

conducted on the succession plans to ensure its feasibility

for implementation, as and when the critical positions are

vacated.

In addition, PDB conducted succession plan reviews for its

Senior Management positions to identify suitable leaders

within PETRONAS to take over leadership positions whenever

required. The deliverables achieved served as valuable

information for PETRONAS Downstream Business in

deliberating and endorsing plans for future implementation.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

As part of the ‘Dagang Challenge’, the PDB UYP Batch 2015 launched the #FUELLINGCOMMUNITIES campaign on 28

November 2015 at Pusat Rukun Tetangga Taman Segar, Cheras.

The campaign‘s objective was to demonstrate that PETRONAS cares about the community, their wellbeing and

environment while creating a purpose for customers to spend at PETRONAS station.

The initiative was rolled out to a localised community area. Each customer who spent a minimum of RM30 on fuel

purchase at the selected PETRONAS station, will collect 1 Community Point. All accumulated points will be used for the

collective good of the entire community through charity activities.

+28,888 CPPainting and Gotong-Royong at

Pusat Rukun Tetangga Taman Segar

+88,888 CPPETRONAS StreetSmart Programmeat Sekolah Kebangsaan Taman Segar

+58,888 CPPark amenities for Pusat Rukun

Tetangga Taman Segar

PDB Unleash Your Potential Programme

The PDB UYP is a six-month programme, which kicked off on 11 August 2015 and participated by 13 PDB executives. The

objective of this programme was to develop employees’ potential on conceptual thinking, judgement and empathy. The

learning modules included a business project dubbed as the ‘Dagang Challenge’, leadership journey sharing session by the MD/

CEO, coaching sessions and an external visit to Genovasi, the only design thinking school in Malaysia.

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EXECUTIVE AND NON-EXECUTIVE CAPABILITY DEVELOPMENT

Technical Managers Capability Assessment

TMCA was rolled out to evaluate the functional capability of

Technical Managers in managing operating assets using a

set of functional skills in discharging their roles and

responsibilities effectively.

For the rollout, the functional skill set was developed in

collaboration with Technical Capability Management

PETRONAS and PDB’s discipline resource persons. The

assessment commenced from September to October 2015,

whereby 10 Terminal Managers were assessed and

development plans identified for gap closure purposes.

PDB Downstream Grounding Programme

The PDB DGP is a structured and systematic training

approach for Technical Executives under the Process

Technology/Operations Skill Group with the objective of

capitalising tacit knowledge and developing their skills in

preparing them for bigger roles in the organisation. DGP is

expected to contribute higher value creation towards

operational excellence.

PDB adopted the DGP to replace the former Management

Trainee Programme that was implemented in 2013. The

programme was adopted from Downstream Business,

PETRONAS and further customised to suit PDB’s Terminal and

Depot Operations.

In developing the modules, a working committee was

formed comprising discipline resource individuals from the

business lines, in collaboration with Downstream Capability

Unit. The team spent five months reviewing the current

DGP logbook and Competency Level and Evaluation. The

revised PDB DGP was approved on 24 September 2015. A

handing over ceremony was conducted on 8 October 2015

between Head of HR Downstream and the MD/CEO. The

programme is also seen to be able to “jumpstart” the

participants’ learning journey as evidenced from the previous

programme participants from the Downstream Business

who yielded commendable Accelerated Capabil ity

Development baseline results which thereon accelerated

their capability development in PETRONAS. The programme

is scheduled to begin in January 2016.

PDB Sales and Marketing Career Paths

Career Path is a tool which can be used by employees to

chart their career development within an organisation. At

PETRONAS, career paths are available based on the respective

skills segment with clear demarcation between enabler,

business technical and technical professional career paths.

In PDB, executives include those from technical to non-technical background, with majority coming from the non-technical pool. In view of the nature of its business, PDB-specific career paths were developed for the Sales and Marketing Executives to help them acquire the necessary skills for career progression through structured mobility.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

Career path defined seven career opportunities within PDB and relevant functions were identified for employees to acquire functional experiences to progress along the identified career ladders.

Non-Executive Non-Technical Capability

Non-Executives Learning and Development Framework

focuses on NENT employees’ functional and behavioural

capabilities.

Eligible NENT employees are required to undergo NENT

Assessments to evaluate their competencies and readiness

for their next career progression. In preparing them for the

assessment, three Microsoft Solution Programme sessions

involving participants were conducted in March, April and

October 2015. All participants passed and were considered

for promotions.

Non-Executive Technical Capability

PETRONAS Competency based Assessment System is a

structured skill assessment system introduced to PETRONAS

group wide in 2006 for NET employees.

The purpose of PECAS is to confirm the competency of our

NET (Technicians and Operators) through a structured

assessment process covering elements of knowledge, skills

and attitude against PETRONAS Occupational Skills Standard.

Three external verification sessions for the PECAS portfolio

were conducted in the year under review to certify and

recommend the competency levels of the identified

technicians through portfolio verifications. As a result, 95

technicians were certified as competent which is 82.0% of

the total eligible NET employees for the assessment.

PDB Internship Programme

The PDB Internship Programme is designed to provide

undergraduate students with practical experiences which

are related to their academic backgrounds for a duration as

specified by their academic institutions.

For the year under review, a total of 190 students underwent

the internship programme with PDB.

Skim Latihan 1Malaysia/Graduate Employability

Enhancement Scheme

The Graduate Employability Enhancement Scheme or better known as the SL1M-GEES-PETRONAS, is a soft skills training programme, developed by PETRONAS in collaboration with the Government of Malaysia to enhance the marketability and employability of Malaysian graduates under the Skim

Latihan 1Malaysia initiative.

The training programme is focused on helping unemployed

graduates acquire critical soft skills and provide them with

an experiential learning experience that equips them with a

diverse set of personal attributes in preparing them to work

in business/corporate environment. For the year under

review, 10 trainees from GEES/SL1M programme were

placed in PDB.

PDB Executives Action Team

Established in 2014, the PDBeat was designed to create

additional value to the Company. This was carried out via

operational improvements as well as activities that

strengthened the brand and improved organisational culture.

PDBeat also acts as a leadership capabilities development

platform for young executives. The club’s operating model

anchors on four key principles, namely cross organisation

participation, executive empowerment, value creation for

PDB and economical execution. Membership is open to all

PDB executives at no cost and all staff have the opportunity

to participate in any PDBeat organised activities.

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During the year under review, the initiatives held covered five key areas, namely education, sports and recreational, innovation, CSR and social events. Among the activities conducted include learning visits to Google Malaysia Office, 3M Innovation Centre and KVDT, an innovation talk, LIFE of PI Competition 2015, children’s book donation drive, and spring cleaning at Rumah Titian Kaseh Titiwangsa.

PDBeat also partnered with nine other HCU/OPUs to organise the inaugural PETRONAS YPC Sports Carnival. The club also assisted in coordinating the PETRONAS Primax Race All-Stars 2015.

LIFE of PI – Listen, Integrate and Facilitate Execution of Potential Ideas Programme

LIFE of PI was established in 2014 as a platform for staff to share their ideas directly with the MD/CEO. The programme is conducted in a casual setting to allow ideas to flow freely and motivate staff to think of innovative concepts for the Company.

In 2015, PDBeat decided to make the LIFE of PI sessions

more interesting and competitive by introducing the LIFE of

PI Competition. The competition is open to all PDB staff

nationwide. PDB Non-Executives were also required to be

part of this competition and submit at least one of their

ideas as this demonstrated their importance to the Company.

Throughout the competition, 15 creative ideas were

deliberated.

At the end of the sessions, it has increased the level of

awareness amongst PDB’s staff as it has created a platform

for them to share their ideas with PDB’s top management,

especially with the MD/CEO.

PDB Brownbag

The PDB Brownbag is a series of talks organised by the

Strategic Planning Department, Finance Division with the

objective of further enhancing the capability of the Company’s

planning fraternity. During the year under review, four PDB

Brownbag sessions were conducted, with topics ranging from

the economic outlook, embedding risk assessments in business

plans to the PETRONAS Investment and Allocation Framework.

The sessions helped participants improve their functional

capabilities as well as gain a better understanding on the

subject matter for their role as key planners of their

respective departments.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

We are committed to explore new approaches in innovation, automation and technology integration. This is to ensure continuous improvements in our products, services and processes, as well as to become a more efficient company in the current market environment.

2015 F1 WO6 HYBRID

DRIVING INNOVATION

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LAUNCH OF THE NEW PETRONAS PRIMAX 97 WITH ADVANCED ENERGY FORMULA

In August 2015, the new PETRONAS Primax 97 with Advanced Energy Formula was made available at about 60.0% of

PETRONAS stations and more to be made available in 2016.

PETRONAS PRIMAX 97 WITH ADVANCED ENERGY FORMULA DELIVERS SUPERIOR ACCELERATION WITH THE FOLLOWING THREE KEY ATTRIBUTES:

Protects the engine with the nation’s first lower sulphur gasoline: On top of its lower

sulphur content that benefits sulphur sensitive emission systems, the new formulation

also removes and prevents deposits, providing long-term protection the fuel injectors.

Provides better combustion with technology of the winning formula: The fine quality

base fuel produced by world class PETRONAS refineries in an optimised formulation

developed through our partnership with the MERCEDES BENZ AMG PETRONAS Formula

One™ Team. With better combustion, motorists can experience longer, smoother drives

with each tank of new PETRONAS Primax 97.

Improves drivability with the world’s first use of new chemistry: This new improved

chemistry ensures better friction reduction at the cylinder wall and enhances the engine

oil’s function, resulting in smoother acceleration.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

PETRONAS DYNAMIC DIESEL – IMPROVED FORMULATION

In December 2015, the newly improved PETRONAS Dynamic

Diesel was made available at all PETRONAS stations

nationwide. This enhanced PETRONAS Dynamic Diesel

cleans the engine, restores power and provides better

combustion for superior economy and reliability. The new

PETRONAS Dynamic Diesel delivers the following benefits:

• Recorded best power restoration among the Malaysian

diesel fuels tested. Testing included industry standard

common-rail direct-injection engines.

• Cleans engine: Removes and prevents internal and

external injector deposits for finer fuel spray and better

engine life.

• Restores power: Regain engine performance, efficiency

and reliability by protecting modern diesel injectors.

• Better combustion: Easier starting and better drivability

through improved combustion properties and friction

reduction.

INTRODUCTION OF PETRONAS SYNTIUM WITH °COOLTECH™

During the year under review, the Company introduced the

new PETRONAS Syntium with °CoolTech™, in Malaysia on

21 March 2015. The event was launched by PETRONAS top

management and Nico Rosberg of the MERCEDES AMG

PETRONAS F1 Team.

PETRONAS Syntium with °CoolTech™ is available both

locally and abroad. The new engine oil is an upgraded

formulation of base oils and additives that fight excessive

engine heat. The technology developed is derived from the

race track and met the requirements of other major OEMs

to provide consumers with optimum engine performance

and a trouble free driving experience across all conditions.

Downstream Continuous Improvement Convention

Awards 2015

SDD enrolled in the Downstream Continuous

Improvement Convention, jointly hosted by PETRONAS

DBE, PP(T)SB and KAPENAS.

DCIC is part of the Downstream Continuous

Improvement practices that strive to propagate

ownership and commitment, accelerate internalisation

of PETRONAS Cultural Beliefs as well as inculcate a

problem solving and innovative mind set amongst the

front-liners, in line with the theme ‘Living Cultural

Beliefs Through Continuous Improvement’. PDB won

one Gold and two Silver Awards for the following

projects:

• KLIA Aviation Terminal (Team KAiZEN) – Gold

Award; Designed and fabricated a tool that prevents

fuel splash while the JC Carter is being connected

to the aircraft adapter during the de-fuelling

process. Product spillage during de-fuelling was

avoided and through the implementation of a

Customer Satisfaction Survey, customer complaints

were reduced by 80.0%.

• Sepangar Bay Fuel Terminal (Team Sahabat Nabalu)

– Silver Award; Designed and fabricated a system

that minimised ergonomic and product loss issues

while off-loading products. The project eliminated

Unsafe Acts and Unsafe Condition aspects, reduced

off-loading time by 60.0% and in doing so,

contributed RM0.3 million in operational cost

savings annually.

• Bayan Lepas Aviation Terminal (Team BOLDS) –

Silver Award; Designed and fabricated an oil

interceptor system that improved waste oil

recovery. Work processes improved by 92.0%,

leading to a reduction in Unsafe Act and Unsafe

Condition, including operational t ime and

manpower usage.

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LOW PROFILE LOW FLOW RATE DISPENSER

By innovating on process simplification, SDD introduced its new fuel dispensing equipment for narrow

body aircraft named LPLFRD or otherwise known as “Gecko”. It is a compact, low profile, low flow rate

dispensing vehicle that is dedicated for refuelling narrow body aircrafts such as Boeing 737-400, Boeing

737-800 and Airbus A320. Through this project, SDD reduced 30.0% of its capital investment against the

existing dispenser and replaced the existing hydraulic system with a levelled platform, thereby eliminating

the need for costly maintenance for the hydraulic system. In addition, the new type of dispenser improved

operational efficiency given the faster operational turnaround from the simplified refuelling procedure by

eliminating hydraulic movements, saving time between five and 10 minutes per refuel session. The

equipment also provides safer refuelling platform with proper guard rails.

The new equipment, being used at KLIA since April 2015 has become the first of its kind in Malaysia and

Southeast Asia. Aside from the cost saving benefits, the “Gecko” also provides better ergonomic handling

of fuelling operations to narrow body aircraft due to the availability of fixed platforms.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE


ASTRO XLR8 AUTOMOTIVE FESTIVAL AT PULLMAN PUTRAJAYA LAKESIDE

For the first time ever, ASTRO XLR8 Automotive Festival,

powered by PETRONAS Primax 97 with Advanced Energy

Formula was held at the Pullman Putrajaya Lakeside. This

inaugural event hosted a total of over 20 automotive car clubs

from all over Malaysia, from vintage cars to Lamborghinis.

Activities included The King of Clubs where each car club

competed against each other in a series of challenges for the

coveted title of The King of Clubs. Other than this, the event

was also home to Asia Klasika, an automotive show displaying

over 80 classic cars and more than 20 superbikes, including

the personal collection of DYMM Sultan of Johor himself. This

marked the first time that PETRONAS came in as a title

partner. XLR8 drew a crowd of approximately 30,000

throughout the entire weekend and gave PETRONAS media

coverage worth RM22.0 million, thus increasing the brand

awareness and visibility of the newly launched PETRONAS

Primax 97 with Advanced Energy Formula.

PETRONAS DYNAMIC XPERIENCE

This is an Experience to Believe event where the Retail

Business in partnership with PETRONAS Lubricants, engaged

with 4x4 car clubs from across the country to sample

PETRONAS Dynamic Diesel and PETRONAS Urania, and

provide testimonies on their experience. In December 2015,

the PETRONAS Dynamic Xperience kicked off in Kota

Kinabalu, Sabah where a total of 40 4x4 vehicles comprising

of three different car clubs from around Kota Kinabalu, took

part in this experiential journey of discovery. Participants

who were mainly users of our competitors’ products were

given a full tank of PETRONAS Dynamic Diesel and taken

on a 150km journey around Kota Kinabalu, making pit stops

at two of our PETRONAS stations along the way. At the

stations, participants were required to complete tasks to

collect valuable points which at the end of the day would

be tabulated to select the top five winners. The PETRONAS

Dynamic Xperience has proven to be a tremendous success

as it proved the superiority of our Fuel Engineering and

through the testimonials from participants whom have

switched to become PETRONAS customers.

KL BIG KITCHEN FESTIVAL 2015

PDB was proud to be one of the main sponsors for the Kuala

Lumpur Big Kitchen Festival 2015, an event organised by the

Kuala Lumpur City Hall and Visit KL, in collaboration with

Tourism Malaysia and the Ministry of Tourism and Culture

Malaysia. The three day festival at Dataran Merdeka which

was officiated by Guest of Honor, Seri Paduka Baginda Raja

Permaisuri Agong Tuanku Hajjah Haminah Hamidun, brought

together top local and international chefs, restaurants and

street food operators serving authentic Malaysian dishes. The

event was attended by more than 50,000 local and

international visitors.

CUSTOMER

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HARI PENGGUNA KEBANGSAAN

The event was organised by MDTCC at Dataran Merdeka

from 23 to 25 October 2015. PDB opened a booth where

we conducted a membership drive for our PETRONAS Kad

Mesra and sold our PETRONAS Gift Cards.

FIESTA LARUT

Held in Larut Matang and Selama, Perak, Fiesta Larut is an

annual event organised by MDTCC to introduce to the

locals on products and services managed under the Ministry.

During this event, PDB hosted a booth which featured a

Mini Mesra Store, an F1 simulator, a photo booth and also

a Remote Control Track.

Throughout this event, registration for Kad Mesra

membership was acquired along with the sales of PETRONAS

Gift Cards.

SAFETY TALK AND AWARENESS PROGRAMME

As part of our continued focus to enhance safety awareness

among commercial customers, a series of engagement

sessions were held throughout the six regions on LPG

product knowledge, safe handling and customer services.

These sessions were part of our efforts to equip customers

with better knowledge and awareness on our LPG products,

increase customers’ confidence level on the quality of our

products and share safety tips in handling our LPG cylinders.

Besides supporting Ministry of Tourism & Culture to

showcase Kuala Lumpur as the gastronomic destination for

Southeast Asia, Gas PETRONAS as No. 1 Cooking Gas in

Malaysia used this opportunity to further promote HSE and

create awareness towards safe usage of LPG amongst

community.

LPG DEALERS’ STORE OPENING CEREMONY

During the year under review, the LPG Business launched

new premises for its dealers, in line with PDB’s emphasis for

these premises to adhere to stringent HSE standards. The

new premises launched were MTP Abdul Kadir Sdn Bhd

LPG storage facilities and office on 17 March 2015 at Jalan

Sungai Tiram, Johor and Wisma Rompin Enterprise in

Bahau, Negeri Sembilan on 23 October 2015. These new

premises are the benchmark for all channel members to

follow and this will subsequently raise the safety standard

of LPG industry as a whole.

The event was also an opportunity for the LPG Business to

participate in CSR activities and reach out to support local

communities such as orphanages, children with special

needs and poor families. The LPG Business believes in

leading by example and hopes these activities encourage all

LPG Dealers to continuously support and contribute to the

needs of local communities.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

CORPORATE RESPONSIBILITYAND KEY INITIATIVES

We strengthened our efforts to create opportunities and

build long term relationships with our business partners and

commercial customers in developing our business network.

Through training and sharing sessions, we provided guidance

to them in managing HSE risks more effectively when doing

business. We also held annual conferences and business

reviews to leverage on how we can work together to meet

our long term goals.

PETRONAS RETAIL DEALERS CONFERENCE 2015: MANAGING NEW REALITIES

For the year under review, the Dealer Conference was held

in the historical city of Melaka at Equatorial Hotel. A total

of 850 PETRONAS station dealers shared the realities of the

petroleum industry and the changes needed to weather the

challenges that lay ahead. The conference allowed the

Retail Business of PDB to communicate directly with its

large network of dealers: as well as share the direction and

plans moving forward.

SAFETY BRIEFING FOR PUBLIC TRANSPORT INDUSTRY

Working together with SPAD, the Company participated in

SPAD’s Industry Code of Practise Safety Briefing, with 200

participants from the public transport industry from Pahang,

Terengganu and Kelantan. During the event, the Retail

Business shared with the delegates on both safety and

reliability aspects of PETRONAS Primax and PETRONAS

Dynamic Diesel products as well as the SmartPay chip-

based fleet card. This event, which was jointly hosted with

SPAD, will be held throughout 2016 in Johor and Penang.

Through this event, we were able to address the public

transport industry and advocate PETRONAS as the partner

of choice for fuel.

ROAD TANKER OPERATIONS GUIDELINE DAY 2015

RTOG Day 2015 was successfully held on 3 and 4 October

2015 in Kuching. Jambhala Sdn Bhd, one of our APH

orchestrated this successful event which provided a platform

to recognise the hardworking APHs. This was the second

event organised by FMD in an effort to instil a sense of

friendly competition, and also acted as a training ground for

the APHs to strengthen their core competencies with

regards to RTOG compliance.

RTOG Day 2015 was attended by over 200 guests, which

included PDB personnel, Senior Management as well as

APH representatives, RKP and exhibitors.

PDB drivers were also given intensive and frequent training

to ensure that they were able to protect themselves and

other road users. RTOG Day 2015 also served as a networking

platform for new drivers and suppliers, and provided drivers

with the opportunity to test their emergency response skills

to ensure that they were able to respond in the correct

manner during incidents. Plans have also been put in place

MARKETPLACE

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to set-up a platform at national level that allowed sharing of experiences and best practices amongst transportation industry players in Malaysia. The platform would also serve to increase road safety standards in Malaysia.

Prior to the RTOG Day 2015, the team carried out a Corporate Social Responsibility programme on 1 October 2015 by reaching out to the students from Madrasah Darul Uloom Islamiyah, Kuching.

SYNERGY TOWARDS EXCELLENCE

In terms of promoting a mutually-beneficial business partnership with customers, the Commercial Business continues to carry out a series of CRM activities. A notable event organised by the Central Region was the “Synergy Towards Excellence”, held on 11 October 2015, involving key customers and their families. Apart from inculcating product knowledge among participants, it was also aimed at strengthening business partnership with key customers as well as a gesture of appreciation for their significant contribution over the years with Commercial Business.

In addition, Commercial Business conducted periodic training sessions for MINDEF, Felda, Sime Darby and KTMB to keep them abreast with the latest development and safe handling of petroleum products used in its operations.

LPG PRODUCT KNOWLEDGE AND EMERGENCY RESPONSE EXERCISE

An Emergency Response Exercise was conducted at the premises of LPG Premier Dealer, Wazdar Sdn Bhd in Machang, Kelantan on 4 September 2015. The main objective of the exercise which is organised annually by the LPG Business Division, was to strengthen coordination between PDB, Premier Dealer’s ERT and Authorities as well as to test the level of preparedness of the Premier Dealer’s ERT in dealing with emergency situations. The event was participated by local authorities such as BOMBA, Royal Malaysian Police, the local district hospital, DOSH, MDTCC and JPAM as well as LPG East Premier Dealers and Kelantan LPG Dealers.

EMERGENCY RESPONSE PREPAREDNESS DEMONSTRATION AT PETRONAS LPG PREMIER DEALER BERCHAM SEPAKAT, IPOH, PERAK

The LPG Business continued to collaborate with Government Agencies such as MDTCC, BOMBA, DOSH and many others within the industry to ensure business continuity without compromising safety.

During the year under review, Perak DOSH invited the LPG Business to participate in their 2015 OSH Week on 5 August 2015 to provide the Demonstration of ERP for PETRONAS LPG Premier Dealers, which is governed by the Control of Industrial Major Accident Hazards Regulation. This is in conjunction with Perak DOSH 2015 OSH Week which was held from 3 – 7 August 2015. The selected PETRONAS LPG Premier Dealer was Bercham Sepakat Sdn Bhd located at Bercham, Ipoh, Perak.

The emergency scenario set up by the team was executed as planned and more importantly, the exercise elevated the ERT and dealers awareness towards emergency preparation.

LPG DEALER MANAGEMENT

The LPG Business remains committed to ensure our network of LPG dealers is the most preferred, operate at the most efficient and safe manner while providing the highest level of customer service. Currently, the LPG Business manages 52 premier dealers and 267 dealers operating nationwide. Aside from imposing high standards of governance and audit on our LPG dealers, the LPG Business also ensures that all our dealers comply with regulatory requirements and standards such as MS830 requirements on the Dealers’ facilit ies; DOSH requirement for LPG storage and implementation of Route Hazard Mapping to reduce risks while transporting LPG.

INDUSTRY ENGAGEMENT WITH GOVERNMENT AGENCIES

During the year under review, LPG Business together with other LPG industry players and MDTCC successfully conducted the inaugural “Siri Jelajah Roadshow” with all LPG dealers across six regions. The roadshow enabled the relevant government agencies to obtain an in depth understanding on the LPG industry as well as provided a platform for sharing of best practices, regulations and compliance matters across the LPG supply chain.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

CORPORATE RESPONSIBILITYAND KEY INITIATIVES (continued)

The Company’s Human Resource Policies and

Procedures are in line with the PETRONAS

Group Human Resource Pol ic ies and

Procedures as it serves as a guideline for daily

operations and decision making. The Policies

encompass overall HR Value Chain, namely

Human Capital Strategy, Talent Sourcing,

T a l e n t D e v e l o p m e n t , R e m u n e r a t i o n ,

Performance Management, Services and

Attrition.

In December 2015, PDB subscribed to

PETRONAS Compliance Desktop® which

consist of CoBE and ABC Manual e-Learning

modules. The first phase was rolled out to all

PETRONAS employees and expected to be

completed by March 2016. For further

information on CoBE, refer to page 40.

At PDB, our workforce is our greatest asset in ensuring business sustainability. Acknowledging this, we have taken a number of workplace health and safety initiatives for the safety and wellbeing of our employees, as well as managing their personal career progression and growth through capability building, leadership and technical skill development.

WORKPLACE

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HUMAN RIGHTS

PDB adheres to PETRONAS Human Rights commitment

which is in line with the United Nations Guiding Principles:

“PETRONAS is committed to respecting internationally-

recognised human rights in areas of its operations,

complying with its Code of Conduct and Business Ethics

and all relevant legal requirement.”

The objective of the commitment is to ensure our activities

are governed by human rights principles, laws, best industry

practices and standards to manage impacts in our areas of

operation. The Commitment is applicable to all employees,

contractors, subcontractors and any third parties within

PDB premises or performing work and/or business for or on

behalf of the Company.

EMPLOYMENT DIVERSITY

We are committed to maintaining a safe work environment

enriched by diversity and characterised by open

communication, trust, fair treatment and respect.

The Company’s bench strength consists of 84.9% Malaysians

while the remaining 15.1% are made up of employees from

other nationalities including Vietnamese, Thai and Filipino.

Total employees, Malaysia and International Operations

Local15%

85%

International

Domestic International Total Employees

1,660 296 1,956

The Company’s commitment to promote diversity and

improve its service is also reflected in specific initiatives.

The PDB Human Resource Regional Meeting, for instance is

conducted on an annual basis to strengthen alignment and

integration of HR practices across the PDB Group. The

part ic ipants consist of PDB HRM Managers and

representatives from local subsidiaries such as PLM(M)SB

and International Subsidiaries namely PEPI, PIM(T)CL and

PVL. For the year under review, the meeting was conducted

on 11 and 12 November 2015 to provide a platform for HR

capability building through the sharing of information and

HR best practices. The meeting also served as an avenue

for those who needed to seek advice and support on the

planning, implementation, monitoring and reporting of

relevant HR activities.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

Ratio of Female to Male Employees

During the year under review, PDB Group comprised of a

high percentage of permanent employees, of which 69.1%

are male employees and 30.9% are female employees.

MALE 69.0%

FEMALE 31.0%Gender Total Employees

Male 1,352

Female 604

Total 1,956

Ratio of Contract Employees to Permanent Employees

Permanent 14%

86%

Temporary

For the Company, the percentage of contract employees

stood at 14.3% (279 employees) to an overall manning of

1,956 employees.

EMPLOYEE ATTRITION

PDB understands the importance of identifying key factors

that contribute to employee resignations in order for the

Company to retain employees. Though PDB’s employee

resignation stood at a non-alarming rate of 1%, PDB

continuously strives to retain its employees through various

initiatives to ensure they remained inclusive, focused and

consistently engaged. This is important to allow employees

to feel a sense of belonging and work towards achieving

the Company’s vision and mission.

26-30

Fem

ale

Mal

e

31-35

36-40

41-50

2

2

1

1

1

1

51-55

2

2

6

26

2

1

1

Resignation by Age Group and Gender

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TALENT SOURCING

PDB, in alignment with PETRONAS Group Talent Sourcing

policies and procedures, provides equal opportunities for

any qualified and competent individual to be employed by

the Company from various multicultural/multiracial

background, locally and internationally. Talent sourcing

seeks to optimise manning levels in the organisation by

having the right candidate for the right position as this will

ensure implementation of business plans.

Several sourcing channels are used for recruitment including

the PETRONAS recruitment portal – www.petronas.com/

careers, Rigzone, Jobstreet, PETRONAS Sponsored Students,

PETRONAS Employee Referral Programme, printed media,

social media, headhunters and career fairs. PDB also

embarked on a new method called e-recruitment – using

Microsoft Lync. In 2015, PDB has successfully conducted

eight sessions using e-recruitment covering Sabah, Sarawak,

Melaka, Kertih and KLCC.

PDB has also joined several recruitment drives with the

objective to increase diversity of the candidates received.

More than 500 CVs were obtained along the way and more

than 70.0% were shared with respective departments in

PDB for consideration.

PDB ONBOARDING PROGRAMME

The PDB Onboarding Programme is an in house event to

help newcomers (new hires, transfer in and interns) adjust to

the social and performance aspects of their jobs quickly and

smoothly. The one-day event is a collaboration between

several divisions/departments to create a warm welcome to

the newcomers, with a focus on the following areas:

• Overview of PDB High Level Organisation Structure and

PDB MC Members

• Introduction to PDB Knowledge Management and

functional application platforms (Aspire, MyHRM, PETRONAS

website and MyPassport)

• Corporate Briefing

• Upclose and personal session with an identified PDB MC

Member

• Briefing on HSE Policy, ZeTo rules and HSEMS

• Introduction to PETRONAS Cultural Beliefs

• Introduction to PDB Buddy Programme

LABOUR UNION MANAGEMENT

PDB is governed by PETRONAS Group Employee Relations

and Industrial Relations Policies and Procedures which

provides guidance on the regulation of the employee’s

Code of Conduct and discipline; management of industrial

relations issues (i.e. disciplinary matters and union issues);

managing in house unions and collective bargaining with

the intention of inculcating positive values and work culture

within a conducive workplace environment. The policy is

also governed by the prevailing labour legislations.

For the year under review, several activities were conducted

to strengthen industrial harmony at the workplace including

KAPENAS quarterly meetings which saw the participation of

representatives from the Management, Executives and Non-

Executives and four Collective Agreement Upskilling sessions

for Line Managers and Superiors.

HR ENGAGEMENT AND COMMUNICATION

HR Live! which is an online HR engagement and

communication platform was launched in 2015 as cost

effective way to communicate with employees across all

regions.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

HR Live Menu

HRLIVE

1

2

3

TECHNICAL ASSESSMENT AND CHIT CHAT

HR ENGAGEMENT ANDCOMMUNICATION SESSION

GST BRIEFING

For the year under review, HR LIVE! was used to conduct

the following:

1. HR E-Engagement and Communication Session

A total of six sessions were conducted at terminals

located in Lumut, Pasir Gudang, Senai, Bayan Lepas,

Bintulu and Tawau Sales Office.

2. Chit Chat and Interview Sessions

A total of six chit chat and interview sessions were

conducted.

3. Goods and Services Tax Briefing

Briefings were conducted in 10 different business

locations.

4. Employee Performance Management

Performance appraisals were conducted for the mid

year reviews.

SAFETY

Safety Performance

For the year under review, the Company maintained zero

fatalities. However, increased LTIF and TRCF as compared

to the same period last year were the result of increased

awareness of incident reporting related to business travel

and office safety. In relation to the issue, the Company has

introduced Office Safety Programme for all employees.

2013 2014 2015

NO. OF FATALITIES

Employees 0 0 0

Contractor 1 0 0

FATALITY ACCIDENT RATE

Recordable Fatalities per 100

million man hours

Employees 0 0 0

Contractor 19.03 0 0

LOST TIME INJURY

FREQUENCY (LTIF)

No. of injuries per one million man hours

Employees 0.22 0.20 1.00

Contractor 0.19 0 0

TOTAL REPORTABLE CASE

FREQUENCY (TRCF)

No. of cases per one million man hours

Employees 0.9 0.64 1.17

Contractor 0.39 0 0

Note: No. of TRC = No. of Fatality + No. of LTI

We strive to sustain good safety performance in PDB.

Targeted programmes are put in place to enhance Health

and Safety awareness among employees and contractors,

and increasing employee participation in such programmes.

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Safe Motorcycle Riding Campaign

In continuous pursuit to ‘Take Safety Personal’, the Company

launched the Safe Motorcycle Riding Campaign, in

collaboration with JKJR Pulau Pinang.

The campaign was attended by the Director of JKJR Pulau

Pinang who enlightened staff on safe motorcycle riding

habits as well as hazards on the roads that may lead to

accidents and fatality. The campaign was launched to

encourage employees to be more vigilant and extra careful

when riding to and from work. Free luminescent safety

vests and reflective stickers were also issued to all

participants of the campaign.

Defensive Driving Course for LPG Pallet Lorry Drivers

On 1 March 2015, a total of 35 LPG pallet lorry drivers and

premier dealers assembled at the Melaka Sales Office for

the Defensive Driving Course for existing drivers. This

programme was conducted by the LPG Business to highlight

the importance of defensive driving, as a reminder for

premier dealers to continuously maintain their vehicles in

compliance with road regulations and LPG terminal

guidelines.

HEALTHY WORKFORCE

Chemical Health Risk Assessment

For the year under review, PDB initiated a different approach

in assessing risks for chemical hazards via the application of

generic CHRA for PETRONAS stations in view of optimisation

and similarities between workplaces.

Various engagement sessions were conducted with DOSH,

Putrajaya together with PETRONAS DBE and PETRONAS

Group HSE. A total of 17 verifications were conducted at

identified PETRONAS stations.

By conducting CHRA, PDB is expected to increase the level

of legal compliance in the workplace, standardise control

measures in every workplace involved and ease the

monitoring and tracking process of remedial action plans.

Ergonomics, Manual Handling and Back Protection

Programme

For the year under review, PDB Corporate HSE, SDD OEAD

and AOD co-organised a dedicated programme to manage

and control ergonomics risk factors present in the operations

at KLIA Aviation Fuel Terminal, specifically for aviation re-

fuellers. This programme is a result of Health Risk

Assessment and Ergonomics Risk Assessment conducted

for PDB Aviation Operations.

The Ergonomics Excellence Centre of NIOSH Malaysia was

engaged to conduct the programme. A total of five sessions

were conducted in August and September involving

approximately 90 participants. The course comprised five

customised modules including practical training as well as

exercise sessions on back strengthening/protection in

addition to theoretical knowledge.



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Management of Fatigue

Following recommendation of Health Risk Assessment

conducted previously, the Company conducted Management

of Fatigue Awareness Programme specifically for Aviation

Operators at six Aviation Terminals from June to September

2015. The Programme was aimed at providing employees

with a better understanding on issues related to fatigue and

guidelines on the prevention, management and mitigation

of fatigue in the workplace. Proper fatigue management at

workplace helps to reduce risk of accidents, injuries and

illness associated with impairment of work performance

due to fatigue.

Fitness to Work

The Company’s Fitness to Work Programme aims to ensure

all employees are medically fit to perform their jobs and

reduce risks of injuries and illnesses caused by mismatch

between physical and mental fitness in meeting job

demands. The types of fitness to work assessment include

pre employment, pre-placement, job specific and ‘for

cause’ health assessment.

The Company ensures mandatory health assessments are

conducted through the Company’s panel clinics as part of

recertification requirements for road tanker drivers. Health

checks include general fitness, visual and hearing impairment,

and absence of ischemic disease, epilepsy and potential

heart diseases, among others. It is also a mandatory

requirement for the hauler management sector to conduct

drug and alcohol tests for all road tanker drivers every six

months with one test conducted unannounced.

PDB Medical Committee

The Medical Committee was established on 29 April 2014

to facilitate and implement the following matters:

• Employees with Medical Condition and under proposal

for Medical Board Out or Prolong Illness;

• Substance Misuse Policy; and

• Other matters such as:

– Dana As-Syakirin/KAPENAS to provide assistance for

employees with medical condition.

– Deliberate on the employees’ Fitness to Work

assessment upon medical check-up.

This committee is chaired by HRMD and comprises members

from the HSE and HRM fraternity as well as managers from

regional offices.

During the year under review, a total of five Medical Board

Out cases and three Prolong Illness cases were managed.

One employee was referred to Dana As-Syakirin for further

assistance in providing medical related financial assistance.

As part of Substance Misuse Programme implementation,

random drug testings were conducted for 80 employees.

Safety Data Sheet

In view of CLASS Regulations 2013, all SDSs of PDB’s

products were developed in collaboration with PETRONAS

Group HSE.

These SDSs are used as a means of communicating HSE

information to end users of chemicals and persons that

come into contact/handle chemicals. The SDSs are

accessible to all including public in PETRONAS SDS Portal:

https://sds.petronas.com.my.

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Hello Tomorrow HSE Campaign Sabah 2015

Hello Tomorrow HSE Campaign was successfully

conducted by FLTO Sabah in August 2015. ‘Fit to Work’

was selected as the theme of the programme for the

year under review. The objective of the campaign was

to provide a platform to enhance employees knowledge

on their eligibility as well as requirements for SOCSO-

related claim submissions.

The Department of Health of Sabah was invited to the

terminal for a talk session as well to facilitate the Health

Screening Programme for terminal employees. The event

was also participated by the terminal ERT members as

well as its operations employees.

In conjunction with the event, a blood donation drive

was successfully conducted, and was supported by the

Department of Health, Sabah. The blood donation drive

saw a total of 60 bags of blood (equivalent to 27 litres)

successfully contributed to the Tabung Darah Sabah

and Labuan.

Sabah FLTO also successfully organised an inter-

terminal futsal tournament with the objective of

promoting a healthy and active life through sports as

well as to encourage a good team spirit amongst the

FLTO Sabah family members. Regional Retail Business

and Lubricants Business representatives were invited to

participate in the event and they also took the

opportunity to promote their products.

Global/Regional Health Issues

As a company with operations across several countries,

PDB remains committed to address regional and global

health issues to safeguard the health of our employees.

PDB is guided by the PETRONAS Policy on HIV/AIDS in

respecting human rights, dignity and privacy of persons

living with HIV/AIDS. The policy underpins our commitment

to ensure that no individual is unfairly discriminated against

or stigmatised on account of his or her HIV status.

In response to the prolonged regional haze impacting a

large area of our operations in Malaysia over a few months

in 2015, HSE Alert was issued to advise our employees and

contractors on ways to reduce the risk of haze-related

health effects. N95 Disposable Particulate Respirators were

also distributed to employees in affected areas.

In October 2015, the Ministry of Health reported an increase

of typhoid fever cases in Kuala Lumpur. A Health Advisory

Infographic was communicated to all employees on how to

take precautionary measures to safeguard their health

during the typhoid outbreak.



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In line with the Company’s HSE Policy and guided by the PETRONAS Corporate Sustainability Framework, we are committed to protecting the environment in areas where we operate. This means responsibly managing our emissions, discharges and waste; as well as promoting efficient use of water and energy.

CLIMATE CHANGE AND ENERGY USE

At PDB, we recognise the emerging climate change risks,

and we are guided by the PETRONAS Corporate Sustainability

Framework on Climate Change to limit GHG emissions and

support the use of renewable energy. This is also reflected

in our initiatives in promoting energy efficiency, and

delivering fuel efficiency in our products.

For the year under review, our total carbon footprint from

fleet operations and purchased electricity from our terminal

operations was estimated to be 78,149 MT of carbon

dioxide equivalent (tCO2e). Of this, our fleet operations

accounted for 78.8% of total tCO2e, followed by 21.2% from

purchased electricity. The Company’s fleet operations

utilised approximately 163,470 MT of diesel, while electricity

consumption attributed to our terminal operations was

approximately 109,712 gigajoules.

PDB has set 2015 as the base year for GHG data, and the

Company strives to further improve completeness and

accuracy of GHG data, in line with internationally recognised

accounting methodology.

Renewable Energy

The Company continued to convert solar energy into

electricity using PV technology at its first of its kind energy

efficient PETRONAS Twin Stations (PETRONAS Solaris Putra

and PETRONAS Solaris Serdang). The PV panels generate half

the electricity required for the stations to operate. These

solar panels are able to generate 194 kilowatt of energy per

hour. During year under review, the solar panel has generated

approximately 86 megawatt-hour of electricity.

ENVIRONMENT

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In line with the Malaysian Government’s direction to

promote the use of cleaner renewable energy to reduce

national dependency on non-renewable fossil fuels as well

as to bolster the palm oil industry, the implementation of

biodiesel initiative had been extended to the whole of

Malaysia. Currently, our specially formulated biodiesel is

commercially available as PETRONAS Dynamic Diesel at all

our PETRONAS stations.

Energy Efficiency

As part of our efforts in improving energy efficiency at our

PETRONAS stations, fluorescent lighting is progressively

being replaced with the more energy efficient LED lighting.

At this stage, more than 10.0% of all our PETRONAS stations

have been fitted with LED lighting.

WASTE MANAGEMENT

PDB continues to strengthen our internal processes and

capabilities to ensure our facilities comply with the stringent

regulations on hazardous waste handling and disposal. For

the year under review, PDB generated hazardous waste

totaling up to approximately 3,610 MT from our terminal

operations. Of this, about 84.0% was safely disposed,

whereas 16.0% was sent for recycling and recovery at

licensed premises.

Where possible, the Company seeks innovative ways to

reduce, recover and reuse waste in order to minimise our

environmental footprint. For example, an initiative was

undertaken at our Bayan Lepas Aviation Terminal to enhance

waste oil recovery from the terminal’s oil separator, thereby

reducing the total quantity of waste oil-water mixture that

was sent for disposal. The team designed a system that

consists of a floating suction equipment and intermediate

tank. The suction tool allowed for the oil-water mixture to

be collected and further separated. This initiative saved

manhours spent on carrying out this task manually, resolved

ergonomic issues and reduced the quantity of waste sent

for disposal.

WATER

We acknowledge on the increasing risks of water scarcity

due to growing population, urbanisation and industrialisation

which has increased the demand for water resources. Thus,

we recognise the need to manage water responsibly and

began to closely monitor fresh water withdrawal and

effluent quality from our terminal operations.

87%

13%

Water Withdrawal at PDB Terminals

Fuel and LPG

Aviation

In the year under review, fresh water withdrawal was

estimated to be 113 thousand cubic meters (m3). Majority of

our water withdrawal were from Fuel and LPG terminal

operations which accounted approximately 87.0% of the

total. Water was mainly used for LPG cylinder washing

sanitary uses and chain lubrication. Efforts are currently

ongoing to strengthen accurate accounting of fresh water

withdrawal so that water use reduction initiatives can be

identified.



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All our facilities are equipped with oil interceptor systems and/

or effluent treatment systems to prevent any unplanned or

uncontrolled discharges from directly entering public drains and

rivers. Effluent discharges are monitored on a regular basis.

SPILLS

In 2015, the number of hydrocarbon spills to the environment

greater than one barrel was five, up from three in 2014. PDB

continues to investigate and learn from spills. An LOPC Prevention

Programme which commenced in 2014, continued to be

implemented this year, with the objective of improving the

design, maintenance of equipment, operations of our storage

facilities and piping.

The Company conducted an assessment of oil spill response

preparedness and capabilities of our Langkawi Fuel Terminal.

The terminal’s oil spill response plan is being updated and efforts

are currently on going to review and strengthen our oil spill

response preparedness at other facilities.

AIR EMISSIONS

In year under review, SOx and NOx emissions from our fleet

operations and terminal operations were estimated to be 19

metric tonnes and 740 metric tonnes respectively. We are

enhancing our emissions monitoring and SOx and NOx loadings

inventory by reviewing our existing practices.


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Our strong tradition of volunteerism and

communi ty invo lvement encourages

employees to collectively drive the Company’s

Corporate Responsibility programme. This

involves active collaboration with PETROSAINS,

Malaysian Nature Society, PETRONITA and

Young Professional’s Club.

Mesralink

PDB’s Customer Service Centre (Mesralink)

provides customers and the community

with efficient and personalised service in

addressing concerns and feedback. This

is to ensure all complaints received via

telephone calls, emails and faxes are

being processed until completely resolved

and responded accordingly.

As a brand that fuels communities, we are committed to giving back in the areas where our businesses operate. Our corporate social investment initiatives provide the platform for PDB and the community to evolve together, through three focus areas namely education, community well being and development and environment.

COMMUNITY

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The PETRONAS StreetSmart programme was conducted at

20 schools in six regions last year, benefited to 2,000

students nationwide.

A surprise for PETRONAS StreetSmart last year came in the

form of a special visit by MERCEDES AMG PETRONAS

Formula One™ Team driver Lewis Hamilton at SMK Seri

Tanjong, Melaka. The reigning Formula One™ World

Champion spoke to the students on the importance of road

safety and his experience in the Formula One™ races.

Hamilton is also PETRONAS Technical Performance

Consultant and a spokesperson on road safety in other

parts of the world.

WATER FOR LIFE

Water For Life embodies PDB’s commitment to give back to

the communities in the areas where we operate. Going

strong in our third consecutive year, this grass roots based

CSR programme provides basic infrastructure required for

continuous supply of clean water for daily consumption to

communities with little or no access to this basic necessity.

For the year under review, PDB brought the Water For Life

programme to Kampung Belantik in Sik, Kedah; Kampung

Runchang in Pekan, Pahang; and Kampung Pinapak in Pitas,

Sabah. Together with our partner, the Malaysian Nature

Society, volunteers from PDB’s regional offices and our

PETRONAS station dealers, this programme benefited more

than 4,000 residents from 795 families. Installations from this

programme accounted for 17 water storage tanks, nine water

pumps with filtration systems and 8km of piping.

PETRONAS STREETSMART

Good habits on the road start from young. This is the

central theme of the PETRONAS StreetSmart programme, a

road safety programme held in collaboration with

PETROSAINS. The half day workshop modules incorporate

easy to understand science based activities where students

can relate their understanding of applied science to safety

in reality. The programme caters to primary and secondary

school students with modules designed to appeal to the

respective target audiences.



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SPONSORSHIP FOR RAMADHAN – BUBUR LAMBUK COOKING EVENTS

In the spirit of sharing, PDB participated in the annual bubur

lambuk cooking tradition at Masjid Jamek Kampung Baru by

sponsoring 160 Gas PETRONAS LPG cylinders to aid the

mosque in its signature preparation of Bubur Lambuk

Agong. The bubur lambuk was prepared and distributed

daily for free to the public at this historical venue, which

once served as the main mosque in the city.

As part of Gas PETRONAS commitment and responsibility to

the community in promoting safe cooking practices, a media

engagement was conducted on 24 June 2015. During this

event, safety tips on safe handling of LPG cylinders were

demonstrated together with a presentation on Gas PETRONAS

Safety Video featuring Dato’ Chef Wan.

Other Ramadhan Bubur Lambuk activities supported by PDB

nationwide included Jelajah Ramadan RTM 2015, JOHORfm

Bubur Lambuk Cooking Competition, Majlis Penyediaan

Bubur Lambuk by Sabah BOMBA, Menara KL Bubur Lambuk

Cooking Competition and Komuniti 1Malaysia Cooking

Festival by Kondo Rakyat Desa Pantai. PDB also sponsored

chef hats, aprons and t-shirts for volunteers during the

preparation of the bubur lambuk.

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PETRONAS COFFEE BREAK

For 16 consecutive years, we have conducted our flagship

campaign called PETRONAS Coffee Break as part of our

road safety advocacy initiative. Held during the Chinese

New Year and Hari Raya Aidilfitri festive seasons, the

campaign encourages customers to refresh at participating

PETRONAS stations and enjoy free coffee and snacks.

PDB distributed 150,000 limited edition festive pouches

containing beverages and snacks to customers at 40

selected PETRONAS stations nationwide over the four-day

campaign period, which covered 15, 16, 20 and 21 February

2015 for Chinese New Year and 15, 16, 20 and 21 July 2015

for Hari Raya Aidilfitri.

The bi-annual campaign also included the distribution of

leaflets listing out safety tips to motorists when they

received their pouches of goodies.

As part of our media engagement initiatives, we visited our

media stakeholders such as The Star, Sin Chew Daily, China

Press, Nanyang Siang Pau, Kwong Wah Yit Poh, New Straits

Times, Berita Harian, Harian Metro, Utusan Malaysia, Kosmo!

and Sinar Harian to promote the PETRONAS Coffee Break

campaign. The PETRONAS team shared the pouches with

the media members in the spirit of spreading festive cheer.

To further reinforce our commitment to road safety, we

contributed RM40,000 worth of PETRONAS Primax 95 with

Advanced Energy Formula to St. John Ambulance of

Malaysia to fuel its 50 ambulances during these two festive

seasons. These ambulances provide emergency response

services along major highways during peak travel period,

thereby continuing our long term partnership with the

organisation for 21 consecutive years.

PROGRAM JELAJAH RAMADHAN

Program Jelajah Ramadhan is a collaboration between PDB

and Radio Television Malaysia to provide essential aid to

local communities, in particular the less fortunate members

of society in rural areas. A nationwide tour was carried out

during the month of Ramadhan to help communities

prepare for the Hari Raya Aidilfitri celebrations.

A myriad of activities, which include cooking and preparing

popular dishes such as bubur lambuk, rendang tok, pulut

and others were activities part of the programme to foster

harmony and sharing during this holy month. The teams

also stopped at selected PETRONAS stations throughout

their journey to conduct activities such as kurma distribution

and giving out contributions to those in need.

The month-long programme was fuelled by PETRONAS

Primax 95 with Advanced Energy Formula. In addition, PDB

also sponsored PETRONAS LPG cylinders, aprons and chef

hats to aid in the cooking activities. This is the second year

PDB sponsored the programme.

VOLUNTEERING BY PDB YOUNG EXECUTIVES

PDBeat or the PDB Executives Action Team contributed to

PETRONITA’s corporate social responsibility event held on

9 July 2015 at Rumah Titian Kaseh, Kuala Lumpur. The

event included spring cleaning activities, donation of books

for the shelter’s children and breaking of fast with residents

from the shelter. The event received participation from

17 PDBeat volunteers.

Rumah Titian Kaseh is a non-governmental organisation

that provides temporary shelter for the less fortunate

community, which include orphans, abandoned children,

the disabled, underprivileged senior citizens, single mothers

and domestic abuse victims. The shelter is home to 130

residents, including two partially disabled adults, six partially

disabled children, 21 single mothers and six senior citizens.

The Board is committed to high standards of corporate

governance and strives to ensure that it is practised

throughout the Group as a fundamental part of discharging

its responsibilities to protect and enhance shareholders’

value and raise the performance of the Group.

In this Statement, the Board reports on the manner the

Group has adopted and applied the principles and best

practices as set out below:-

(i) MCCG 2012; and

(ii) MMLR of Bursa Malaysia.

BOARD OF DIRECTORS

Roles and Responsibilities of the Board

The Board is entrusted with the responsibility to promote

the success of the Group by leading and overseeing the

Group’s affairs. In discharging the Board’s stewardship

responsibilities, the Board has assumed the following

principal roles:

• To discuss and critically examine strategies proposed by

the Management taking into account the long term

interest of the shareholders as well as other stakeholders;

• To contribute to the formulation of policies and decision

making through the Board’s accumulated expertise and

experience;

• To identify principal risks and ensure that these risks are

managed in a proper and effective manner;

• To review the integrity and capability of the Group’s

internal control systems as well as its management

information system;

• To oversee and critically review the proper management

of the Group’s businesses;

• To review the Company’s plan and budget including

cash flow forecast for the forthcoming year and financial

projections;

• To review and approve financial statements of the

Group;

• To ensure there is an appropriate succession plan for

the Directors and Management; and

• To ensure that the Company has in place a policy to

enable effective communication with its shareholders

and other stakeholders.

Board Composition

The Board comprises eight members, one of whom holds

a dual role as Managing Director and Chief Executive

Officer. There are three members who are independent and

non-executive and four other non-independent and non-

executive members, including the Chairman.

As at the date of this report, the percentage of the Board

composition is as follows:

Executive Director

(also the Managing Director/

Chief Executive Officer)

1 out of 8

(12.5%)

Independent

Non-Executive Directors

3 out of 8

(37.5%)

Non-Independent Non-Executive Directors

(including Chairman)

4 out of 8

(50.0%)

The current composition of the Board is in compliance with

Paragraph 15.02 of the MMLR as more than one-third of its

members are independent directors.

During the year under review, there were changes in the

Board composition whereby Md Arif Mahmood was

appointed as Chairman on 16 April 2015 in place of Datuk

Wan Zulkiflee Wan Ariffin who is now the President and

Group Chief Executive Officer of PETRONAS.


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STATEMENT ONCORPORATE GOVERNANCE

On 6 October 2015, Ir Mohamed Firouz Asnan was

appointed as Non-Independent and Non-Executive Director

in place of Mohd. Farid Mohd. Adnan.

The Directors have vast and diversified experiences in their

respective areas. Together, the Directors bring a wide range

of business and financial experience, skills and technical

expertise, diversity in terms of gender, ethnicity and age

that are vital to the Board’s successful stewardship of the

Group. The Board also believes that the current composition

of the Board satisfactorily represents the interest of the

shareholders. The profile of each Director is presented on

page 044 to page 051 of this Annual Report.

The Board practices a clear division of duties and

responsibilities between the Chairman, MD/CEO and Non-

Executive Directors to ensure a balance of power and

authority in the Board. The Chairman is primarily responsible

for the orderly conduct and function of the Board whilst

the MD/CEO is responsible for the overall operations of the

business, organisational effectiveness and the implementation

of the Group’s strategies and policies. The positions of

Chairman and MD/CEO are held by two different individuals.

The MD/CEO is assisted by the Management Committee in

managing the business on a day-to-day basis. The

Management Committee ensures that effective systems,

controls and resources are in place to execute business

strategies and decisions taken by the MD/CEO and/or

the Board.

The Non-Executive Directors ensure that the strategies

proposed by the Management are fully deliberated, taking

into account the long term interest of the shareholders and

stakeholders. They contribute to the formulation of policy

and decision making through their expertise and experience.

They also provide guidance and promote professionalism

and competence among the Management and employees.

The Non-Executive Directors do not participate in the day

to day management of the Group nor engage in any

business dealing or other relationship with any companies

within the Group. The Independent Non-Executive Directors

play a significant role in providing unbiased and independent

views, advice and judgement taking into account the interest

of relevant stakeholders including minority shareholders of

the Company. For the financial year under review, the

Independent Non-Executive Directors have reaffirmed their

independence based on the criteria of Independent Directors

as provided in the MMLR.

The Board has on 12 February 2015 appointed Lim Beng

Choon, Chairman of the Nomination and Remuneration

Committee as the Senior Independent Director. Lim Beng

Choon has fulfilled the criteria under the definition of

Independent Director pursuant to the MMLR.

All queries relating to the Group can be channeled to

the Senior Independent Director’s email address,

[email protected] or directed to the

following address:-

Lim Beng Choon

Senior Independent Director

PETRONAS Dagangan Berhad

Level 68, Tower 1, PETRONAS Twin Towers


50088 Kuala Lumpur

Malaysia

In accordance with the MMLR, none of the members of the

Board hold more than five directorships in listed companies.

Prior to acceptance of any other appointment for

directorships in other listed companies, the Directors are

required to first notify the Chairman to ensure that such

appointments would not unduly affect their t ime

commitment and responsibilities to the Board.

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Board Meetings

The Board meets at least quarterly with additional meetings convened as and

when necessary. Board meetings for financial year 2015 were scheduled in

November 2014 to facilitate the Directors to plan ahead and fit the Board

meetings into their respective schedules.

Amongst the matters deliberated at Board meetings include business plans,

annual budgets, operational and financial performance reviews, major

investments and financial decisions, investor relations updates, changes to the

organisation structure within the Group, including key policies and procedures

and limits of authority. The Board Audit Committee’s and Nomination and

Remuneration Committee’s updates are also presented and discussed at Board

meetings. All proceedings of Board meetings are duly recorded in the minutes

of meeting and signed minutes of each Board meeting are properly kept by

the Company Secretary.

During the financial year under review, the Board met five times. The attendance

of the Board members is as follows:

No Board Members

Total Number of

Meetings Attended

1 Md Arif Mahmood (Chairman)

(appointed on 16 April 2015)

4 out of 4 (100%)

2 Datuk Wan Zulkiflee Wan Ariffin (Chairman)

(retired on 15 April 2015)

1 out of 1 (100%)

3 Mohd Ibrahimnuddin Mohd Yunus (MD/CEO) 5 out of 5 (100%)

4 Lim Beng Choon 5 out of 5 (100%)

5 Vimala V. R. Menon 5 out of 5 (100%)

6 Datuk Anuar Ahmad 5 out of 5 (100%)

7 Erwin Miranda Elechicon 4 out of 5 (80%)

8 Nuraini Ismail 4 out of 5 (80%)

9 Ir Mohamed Firouz Asnan

(appointed on 6 October 2015)

2 out of 2 (100%)

10 Mohd. Farid Mohd. Adnan

(resigned on 6 October 2015)

3 out of 3 (100%)

Supply of Information

A set of Board papers encompassing

comprehensive information are circulated

to all Directors at least five business days

prior to each Board meeting. The Board

papers contain among others objectives,

background, critical issues, implications,

risks, strategic fit, recommendations and

other pertinent information to enable the

Board to make an informed decision.

The early distribution of the board papers

is to enable the Directors to have

sufficient time to peruse the Board

papers and seek clarifications or further

details from the Management or the

Company Secretary. Any Director may

request matters to be included in the

agenda. Urgent papers may be presented

a n d t a b l e d a t m e e t i n g s u n d e r

supplemental agenda.

Presentations and briefings by the

Management and relevant external

consultants, where applicable, are also

held at Board meetings to advise the

Board and furnish relevant information

and clarification for the Board to arrive

at a considered decision.

Access to Board papers and other

relevant information are carried out

through online application which allows

the Directors to securely access board

documents.

The Directors have direct access to the

Management and have unrestricted

access to any information relating to the

Group to enable them to discharge their

STATEMENT ONCORPORATE GOVERNANCE (continued)


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duties. The Directors also have direct access to the advice

and services of the Company Secretary and are regularly

updated on new statutory and regulatory requirements

relating to the duties and responsibilities of the Directors.

The Directors, whether as a full board or in their individual

capacity, may seek independent professional advice at the

Company’s expense in furtherance of their duties.

Board Committees

To assist the Board in discharging its duties, the Board has

established two Board Committees whose compositions are

in accordance with the best practices as prescribed by the

MMLR of Bursa Malaysia and MCCG 2012. The functions

and Terms of Reference of the Board Committees, as well

as authority delegated by the Board to these Board

Committees, are reviewed and updated from time to time.

(a) Board Audit Committee

The Board Audit Committee comprises two Independent

Non-Executive Directors and one Non-Independent

Non-Executive Director. In line with good corporate

governance, the Executive Director is not a member of

the Board Audit Committee.

The Board Audit Committee reviews quarterly and

annual financial statements, announcements on

quarterly results, internal audit reports and ensures that

the internal control system and management

information system are in compliance with the

Company’s policies and procedures, applicable laws

and regulations. The Board Audit Committee also

monitors the effective implementation of programmes

to ensure compliance to the Group’s Risk Management

Policy and ensures that principal risks are identified and

monitored and appropriate measures are undertaken to

manage these risks.

The report on the Board Audit Committee is presented

on page 187 to page 190 and the Terms of References

of the Board Audit Committee is presented on page

191 to page 192 in this Annual Report.

(b) Nomination and Remuneration Committee

The Nomination Committee and Remuneration

Committee have been amalgamated into a single

committee and is now known as Nomination

and Remuneration Committee with effect from

7 August 2014.

The Nomination and Remuneration Committee

comprises entirely Non-Executive Directors as per the

requirement of Paragraph 15.08A(1) of the MMLR of

Bursa Malaysia and recommendation 2.1 of MCCG

2012 where the Committee must comprise exclusively

Non-Executive Directors with majority being

Independent Directors.

The Nomination and Remuneration Committee ensures

that the Board comprises members with relevant

expertise and experiences drawn from business,

financial and technical background. The wide spectrum

of skills, experiences and diversity in terms of gender,

ethnicity and age strengthen the Board’s composition.

Accordingly, the Nomination and Remuneration

Committee reviews the skills of the Board members.

The report on the Nomination and Remuneration

Committee is presented on page 194 to page 197 and

the Terms of References of the Nomination and

Remuneration Committee is presented on page 198 to

page 201 in this Annual Report.

Continuing Development Programme for Directors

All the Directors have attended the Mandatory Accreditation

Programme as required under the MMLR of Bursa Malaysia.

The Chairman, Md Arif Mahmood completed the Mandatory

Accreditation Programme in June 2009 whilst Ir Mohamed

Firouz Asnan completed the Mandatory Accreditation

Programme in December 2015.

The Directors are regularly updated on the Group’s business

activities and regulatory environment in which the Group

operates. As an integral part of orientation programme for

new directors, the Company provides comprehensive

briefings on the Group’s operations and financial

performance and site visits to the Group’s facilities.

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INSPIRING CHANGE

The Directors observe Principle 4 of MCCG 2012 and

recognise the importance and value of attending conferences

and seminars in order to keep themselves abreast with the

development and changes in the industry the Group

operates, as well as to update themselves on new statutory

and regulatory requirements. During the year under review,

the Directors have attended and participated in programmes,

conferences and forums that covered the areas of corporate

governance, finance, relevant industry updates and global

business developments which they considered as useful in

contributing to the effective discharge of their duties as

Directors. The Directors also participated in the familiarisation

visits to the Group’s various facilities.

Particulars of training programmes attended by the Directors as at 31 December 2015 are as follows:

No Director Training Programmes Attended

1. Md Arif Mahmood(appointed on 16 April 2015)

• Senior Management Development Programme• PETRONAS Woman Network• Strategic Research Insight Forum “Outlook and Lookout” – Engagement with

Wharton MBA Students• Strategic Insight Day

2. Mohd Ibrahimnuddin Mohd Yunus

• Lead the Change : Getting Women on Boards• The Global Sustainability and Impact Investing Forum • Site Visit to Klang Valley Distribution Terminal, Dengkil, Selangor, Malaysia• New Companies Bill 2015 and Boardroom War/Tussle• Site Visit at PETRONAS Energy Philippines, Inc’s LPG Terminal, Cebu, Philippines

3. Lim Beng Choon • Special Discussion on Trans-Pacific Partnership Agreement• Creating an Entrepreneurial Culture • Myths of Innovation• New Companies Bill 2015 and Boardroom War/Tussle

4. Vimala V.R. Menon • Board Chairman Series Part 2 – Leadership Excellence from the Chair • Khazanah Mega Trends • Global Transformation Conference

5. Datuk Anuar Ahmad • Cooking the Books – The Malaysian Recipe on Financial Fraud• Site Visit to Klang Valley Distribution Terminal, Dengkil, Selangor, Malaysia

6. Erwin Miranda Elechicon • Site Visit to PETRONAS Energy Philippines, Inc’s Bottling Plant, Iligan, Philippines• New Companies Bill 2015 and Boardroom War/Tussle • Site Visit to PETRONAS Energy Philippines, Inc’s LPG Terminal, Cebu, Philippines • Philippine Securities and Exchange Commission and the Philippine Stock

Exchange Corporate Governance Forum

7. Nuraini Ismail • Finance Global Talent Strategy Workshop• Strategic Insights Day• Asia Oil and Gas Conference• New Companies Bill 2015 and Boardroom War/Tussle



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

No Director Training Programmes Attended

8. Ir Mohamed Firouz Asnan(appointed on 6 October 2015)

• Site Visit to the Klang Valley Distribution Terminal, Dengkil, Selangor, Malaysia• New Companies Bill 2015 and Boardroom War/Tussle• Maximising Your Leadership Success (“MYLS”) Leadership Conversation with

Newly Appointed Managers• Vice President Oil Business Leadership Sharing Session with Managers

9. Datuk Wan Zulkiflee Wan Ariffin(retired on 15 April 2015)

• IChemE’s Soiree des Fellow : Talk by Dr David Brown, CEO & Paul Ellis, President IChemE Malaysia

• Media Spokes Person Training for Executive Vice Presidents • Panelist session : Fundamentals for Realising Sustainable Growth – GE Oil &

Gas Conference – Florance • Talk by Mr. Timothy Geithner, former United States Secretary of the Treasury

10. Mohd. Farid Mohd. Adnan(resigned on 6 October 2015)

• Top Team Integration Session on Cultural Belief for Downstream Business • Strategic Insights Day • Human Resource Leadership Conversation Session • Platts PETRONAS Day • Engagement with PDB Lubricant • Oil & Gas Thought Leaders Roundtable Networking • Downstream Leadership Programme ‘Change the Culture, Change the Game’ • Asia Oil and Gas Conference

Board Effectiveness Evaluation

Since 2013, the Company conducts Board Effectiveness

Evaluation for its Board, Board Committees, individual

Director and peer review. The purpose of the Board

Effectiveness Evaluation is to measure the effectiveness of

the performance of the Board, Board Committees and

individual Director.

The questionnaires on the Board Effectiveness Evaluation

are designed to assess the following areas:

(a) Board structure;

(b) Board operation;

(c) Board’s roles and responsibilities;

(d) Chairman’s roles and responsibilities; and

(e) Roles of the Board Committees.

The areas evaluated for the individual Directors are as

follows:

(a) Dynamic and participation;

(b) Integrity and independence;

(c) Technical competencies; and

(d) Skills and contribution.

Re-Appointment and Re-election

In accordance with Article 93 of the Articles of Association

of the Company, at every Annual General Meeting (“AGM”),

one-third of the Directors shall retire from office by rotation

and may offer themselves for re-election at least once in

every three years. Directors who are appointed by the

Board during the financial year are subject to re-election by

shareholders at the first AGM held following their

appointments.

As per recommendation 3.2 and 3.3 of MCCG 2012, the

tenure of an independent directors should not exceed a

cumulative term of nine years. Upon completion of the nine

years, an independent director may continue to serve on

the board subject to the directors’ re-designation as a non-

independent director or the board must justify and seek

shareholders’ approval in the event it retains the director as

an independent director.

Currently, none of the Independent Non-Executive Directors

of the Company has served the Board for more than nine

years.

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INSPIRING CHANGE

Upon completion of the Board Effectiveness Evaluation

form by the Directors, Legal and Corporate Secretariat

Department collates and carry out an analysis on the

feedback received. The analysis conducted is presented to

the Nomination and Remuneration Committee for

deliberation.

Directors’ Remuneration

The remuneration structure of Non-Executive Directors of

the Company is as follows:

• Fees for duties as Directors and additional fees for

undertaking responsibilities as Chairman of the Board; and

• Meeting allowance for each meeting attended.

The fees for Non-Executive Directors are determined by the

Board and subject to the approval of the shareholders of

the Company at AGM. Meeting allowance for all the Non-

Executive Directors is determined by the Board.

The Director’s fees and meeting allowance for certain Non-

Independent Non-Executive Directors who are also

employees of PETRONAS and holding positions of Vice

President and above are paid directly to PETRONAS. The

presence and participation of the Non-Independent Non-

Executive Directors who are employees of PETRONAS give

the Board a deeper insight into PETRONAS operations.

For the year under review, the breakdown of the Directors’ remuneration is as follows:-

Name of Directors

Directors’ Fees(RM)

Board Meeting

Attendance Fees^

(RM)

Audit Committee

Meeting Attendance

Fees^(RM)

Nomination and

Remuneration Committee

Meeting Attendance

Fees^(RM)

AGM(RM)

Others**(RM)

Total(RM)

Md Arif Mahmood (appointed on 16 April 2015)

76,500 16,000 Nil Nil Nil Nil 92,500*

Datuk Wan Zulkiflee Wan Ariffin (retired on 15 April 2015)

31,500 4,000 Nil Nil 4,000 Nil 39,500*

Mohd Ibrahimnuddin Mohd Yunus Nil Nil Nil Nil Nil Nil Nil

Lim Beng Choon 72,000 15,000 8,000 6,000 3,000 3,000 107,000

Vimala V. R. Menon 72,000 15,000 12,000 2,000 3,000 6,000 110,000

Datuk Anuar Ahmad 72,000 15,000 Nil Nil 3,000 6,000 96,000

Erwin Miranda Elechicon 72,000 12,000 Nil 2,000 3,000 Nil 89,000

Nuraini Ismail 72,000 12,000 8,000 Nil 3,000 Nil 95,000*

Ir Mohamed Firouz Asnan (appointed on 6 October 2015)

18,000 6,000 Nil 2,000 Nil Nil 26,000*

Mohd. Farid Mohd. Adnan (resigned on 6 October 2015)

54,000 9,000 Nil 2,000 3,000 Nil 68,000*

Total 540,000 104,000 28,000 14,000 22,000 15,000 723,000

* Fees paid and payable to PETRONAS.** Others includes petrol/fleet card.^ Meeting attendance fees are based on the number of meetings attended by the Directors.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

The remuneration package for the Executive Director of the

Company is balanced between fixed and performance-

linked elements. A portion of the Executive Director’s

compensation package is variable in nature and is KPI

based, which includes the Group’s performance. As an

Executive Director, he is not entitled to receive director’s

fee and meeting allowance.

Mohd Ibrahimnuddin Mohd Yunus, MD/CEO and an Executive

Director of the Company, is an employee of PETRONAS and

is seconded to the Company. In consideration for the service,

the Company is required to pay PETRONAS to cover all

payroll related costs and benefits ordinarily incurred by him

in the course of his employment. During the year,

RM721,729.11 was paid for his services as MD/CEO of the

Company.

Management staff and executives of PDB are also seconded

from PETRONAS. Their training and succession planning are

aligned to the PETRONAS’ Human Resource Policies and

Strategies. The Board ensures that only appropriate

personnel with the relevant skills and experiences are

appointed to Management positions of PDB.

Pursuant to Article 84 of the Company’s Articles of

Association, PDB also reimburses reasonable expenses

incurred by Directors, where relevant, in the course of

carrying out their duties as Directors.

RELATIONSHIP WITH SHAREHOLDERS

Communications between the Company and its investors

The Board recognises the importance of effective

communications with the Company’s shareholders and other

stakeholders. Information on the Group’s business activities

and f inancial performance is publ icised through

announcements to Bursa Malaysia, postings on the Company’s

website, press releases, issuance of Annual Report and where

required, press conferences. Immediately after the conclusion

of the AGM, the Company holds a press conference with the

media and any materials distributed during the press

conference are published in the Company’s website.

The MD/CEO together with the CFO and the Company’s

Investor Relations Unit conduct regular dialogues with its

institutional shareholders and analysts, and hold quarterly

analysts briefings to further explain the Group’s quarterly

financial results. These engagements promote better

understanding of the Group’s financial performance and

operations.

The Company actively updates its website www.mymesra.

com.my with the latest information on the corporate and

business aspects of the Group. Press releases, announcements

to Bursa Malaysia, analyst briefings and quarterly results of

the Group are also made available on the website and this

helps to promote accessibility of information to the

Company’s shareholders and other stakeholders.

Communication and feedback from shareholders and other

stakeholders can also be directed to email address zera@

petronas.com.my or alternatively, it can be addressed to:

Raja Zera Raja Zaib Shah

Head, Strategic Planning

Finance Division

Level 31, Tower 1


50088 Kuala Lumpur

Malaysia

Annual General Meeting

The AGM is the principal forum of open dialogue with

shareholders. The notice and agenda of AGM together with

Forms of Proxy are given to shareholders at least 21 days

before AGM, which gives shareholders sufficient time to

prepare themselves to attend the AGM or to appoint proxy

to attend and vote on their behalf. Each item of special

business included in the notice of the AGM will be

accompanied by an explanatory statement on the effects of

the proposed resolution.

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ACCOUNTABILITY



INSPIRING CHANGE

During the AGM, the MD/CEO presents a comprehensive

review of the Group’s performance and value created for

shareholders as well as current development of the Group.

This review is supported by a visual and graphic presentation

of the key points and financial figures. Questions raised by

the Minority Shareholders Watchdog Group prior to the

AGM are also shared with all shareholders during the AGM

together with feedback on pertinent issues and queries

relating to the Company’s business which is uploaded onto

the Company’s website prior to AGM day.

At each AGM, shareholders are encouraged and given

sufficient opportunity as well as time by the Board to raise

questions on issues pertaining to the Annual Report,

resolutions being proposed and the business of the

Company or the Group in general prior to seeking approval

by show of hands from members and proxies on the

resolutions. The shareholders may request for a poll vote

on matters raised at the AGM.

The Board, Senior Management, external auditors and other

advisors, are present at AGM to provide answers and

clarifications to shareholders.

The Company also engages independent scrutineers to

count, audit and validate the votes for each proposal

presented to shareholders. The minutes of the general

meetings are accessible on the Company’s website.

ACCOUNTABILITY AND AUDIT

Financial Reporting

The Board is committed to providing a fair and objective

assessment of the financial position and prospects of the

Group in the quarterly financial results, annual financial

statements, Annual Reports and all other reports or statements

to shareholders, investors and relevant regulatory authorities.

The Statement of Directors’ Responsibility in respect of

preparation of the annual audited financial statements is set

out on page 202 of this Annual Report.

Related Party Transactions and Conflict of Interest Situations

The Group has established Policies and Procedures on

Related Party Transactions (“RPTs”) and Conflict of Interest

(“COI”) Situations (“Policies and Procedures”) to promote

continuous awareness and provide consistent approach to

all RPTs and Recurrent Related Party Transactions (“RRPTs”)

or COI situations.

The said Policies and Procedures require the use of various

processes to ensure that RPTs/RRPTs are conducted on an

arm’s length basis, which are consistent with the Group’s

normal business practices and policies, and will not be to

the detriment of the Group’s minority shareholders. It aims

to provide guidelines under which certain transactions and

situations must be reviewed and endorsed by the various

governing parties of the Group, disclosed to the regulators

and governing bodies and the processes required to identify,

evaluate, approve, monitor and report RPTs and RRPTs and

manage COI.

The Statement on Risk Management and Internal Control

includes an overview of the Group’s policies and procedures

on RPTs and RRPTs, as set out on page 179 to page 186 of

this Annual Report.

Whistleblowing Policy

The Group has adopted the PETRONAS Whistleblowing

Policy which provides an avenue for the Group’s employees

and members of the public to disclose any improper conduct.

Under the Whistleblowing Policy, a whistleblower will be

accorded with protection of confidentiality of identity, to

the extent reasonably practicable. An employee who

whistleblows internally will also be protected against any

adverse and detrimental actions for disclosing any improper

conduct committed or about to be committed within the

Group, to the extent reasonably practicable, provided that

the disclosure is made in good faith. Such protection is

accorded even if the investigation later reveals that the

whistleblower is mistaken as to the facts and the rules and

procedures involved. The whistleblowing policy is accessible

to the public for reference on the Company’s official

website at www.mymesra.com.my.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

Code of Conduct and Business Ethics

The Group adopts and practices PETRONAS Code of

Conduct and Business Ethics (“CoBE”) which emphasises

and advances the principle of discipline, good conduct,

professionalism, loyalty, integrity and cohesiveness that are

critical to the success and well being of the Group. The

CoBE contains detailed policy statements on the standards

of behaviour and ethical conduct expected of each individual

of the Group. The Group also expects that contractors,

sub-contractors, consultants, agents and representatives

and others performing work or services for or on behalf of

the Group to comply with the relevant parts of the CoBE

when performing such work or services. The CoBE expressly

prohibits improper solicitation, bribery and other corrupt

activity not only by employees and directors but also by

third parties performing work or services for or on behalf of

companies in the PETRONAS Group.

Included as part of the CoBE is the Anti-Bribery and

Corruption Policy which explicitly prohibits the giving and

acceptance of bribes, in whatever form, by employees

including giving and receiving of facilitation payments in all

business dealings. The CoBE is accessible to the public for

reference on the Company’s official website at www.

mymesra.com.my.

Risk Management and Internal Control

The Board continues to maintain and review its risk

management processes and internal control procedures to

ensure a sound system of risk management and internal

control to safeguard shareholders’ investments and the

assets of the Company and the Group.

The Statement on Risk Management and Internal Control

which provides an overview of the state of risk management

and internal controls within the Group is set out on page

179 to page 186 of this Annual Report.

Selection of Vendors

The Group has adopted PETRONAS Tendering process and

governing principles that are embedded in the PETRONAS

Supply Chain Management Policy for vendors’ selection.

Generally, the main selection criteria is based on technically

acceptable and commercially lowest bid.

The Group has established Tender Committees to carry out

independent assessment on bidders’ proposals and to

ensure tendering activities are carried out as per its Terms

of Reference.

Tendering processes are as follows:

(i) Tender Plan approval;

(ii) Technical Evaluation;

(iii) Commercial Evaluation; and

(iv) Award Recommendation.

Company Secretaries

The Company Secretaries of the Company are qualified to act as company secretary under Section 139A of the Companies Act, 1965. The Company Secretaries play an advisory role to the Board, particularly with regard to the Company’s constitution, Board policies and procedures, and its compliance with regulatory requirements, codes and guidance.

The Company Secretaries ensure that the discussions and deliberations at Board and Board Committee meetings are well documented, and subsequently communicated to the relevant Management for appropriate actions. Company Secretaries update the Board on the follow up of its decisions and recommendations by the Management.

The Company Secretaries constantly keep themselves abreast with the evolving capital market environment, regulatory changes and developments in corporate governance through continuous training. The Board is satisfied with the performance and support rendered by the Company Secretaries in discharging their functions.

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ACCOUNTABILITY



INSPIRING CHANGE

Trading on Insider Information

Every quarter, a reminder notice is sent to the Directors and

the Management emphasising the rules in dealing with the

Company’s shares whilst in possession of price sensitive

information relating to the Group.

During the year, there were no cases reported on insider

trading.

Relationship with External Auditors

Through the Board Audit Committee, the Company

maintains a professional and transparent relationship with

its external auditors, Messrs. KPMG.

The Board Audit Committee met the external auditors once

without the presence of the Management for the external

auditors to highlight to both the Board Audit Committee

and the Board on matters that warrant their attention.

The role of the Board Audit Committee in relation to the

external auditors is described in the Board Audit Committee

Report on page 187 to page 190 of this Annual Report.

The Malaysian Code on Corporate Governance 2012

The Board is committed and strives to observe the principles

and recommendations of the new MCCG 2012, of which

observance is on voluntary basis.

The Group has fully adopted all recommendations of the

MCCG 2012 except for the following:

1. Recommendation 2.2 – The gender diversity policies

and targets and the measures taken to meet the

targets.

The Board does not have a written gender diversity

policy. However, the Directors have vast and diversified

experiences in their respective areas. Together, the

Directors bring a wide range of business and financial

experience, skills and technical expertise, diversity in

terms of gender, ethnicity and age that are vital to the

Board’s successful stewardship of the Group. Currently,

there are two female directors on the Board

representing 25% of the Board composition.

2. Recommendation 2.3 – The Board should establish

formal and transparent remuneration policies and

procedures to attract and retain directors.

The Company does not have a policy on the

remuneration of the Directors. However, the Company

is considering to develop a formal written policy and

procedures for directors’ remuneration. Currently, the

remuneration of the Directors is competitive and

attractive as it has been benchmarked against the

industry.

3. Recommendation 3.5 – The Board must comprise a

majority of independent directors where the Chairman

of the Board is not an independent board member.

The Chairman of the Company is currently a Non-

Independent Non-Executive Director. This is premised

on the high level of integration with PETRONAS’

business. The Board currently has three Independent

Non-Executive Directors, four Non-Independent Non-

Executive Directors and one Executive Director. The

current Board composition is currently in compliance

with Paragraph 15.02 of the MMLR, as one-third of the

Board members are Independent Directors. The

Company intends to maintain the current Board

composition.

4. Recommendation 5.2 -The Audit Committee should

have policies and procedures to assess the suitability

and independence of external auditors.

The Company does not have a policy and procedures

to assess the suitability and independence of the

external auditors. However, as part of the annual audit

exercise, the Company obtains assurance from the

external auditors confirming their independence

throughout the year under review.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

Statement by the Board on Compliance

The Directors have provided assurance that the financial

statements prepared for each financial year give a true and

fair view of the state of affairs of the Company and the

Group as at the end of the financial year and of the results

and cash flow of the Group for the financial year as required

by the Companies Act, 1965. The Statement of Directors’

Responsibility for the audited financial statements of the

Company and Group is outlined on page 202 of the Annual

Report. Details of the Company and the Group financial

statements for the financial year ended 31 December 2015

are set out on pages 206 to 285 of this Annual Report.

The Board has deliberated, reviewed and approved this

Statement. The Board considers and is satisfied that the

Group has fulfilled its obligations under the relevant chapters

of the MMLR of Bursa Malaysia and the MCCG 2012, on

corporate governance and applicable laws and regulations

throughout the year ended 31 December 2015.

This Statement is made in accordance with the resolution

of the Board of Directors dated 19 February 2016.

Md Arif Mahmood

Chairman

Mohd Ibrahimnuddin Mohd Yunus


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BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

1.0 UTILISATION OF PROCEEDS FROM CORPORATE PROPOSALS

There were no Corporate Proposals undertaken for

the year under review.

[Disclosed in accordance with Appendix 9C, Part A, Item 13

of the MMLR]

2.0 SHARE BUY-BACK

The Company did not propose any share buy-back

during the financial year.


and Appendix 12D of Paragraph 12.23 of the MMLR]

3.0 OPTIONS OR CONVERTIBLE SECURITIES

The Company did not issue any options or convertible

securities during the financial year.


of the MMLR]

4.0 DEPOSITORY RECEIPT PROGRAMME

The Company did not sponsor any depository receipt

programme during the financial year.


of the MMLR]

5.0 IMPOSITION OF SANCTIONS/PENALTIES

There were no sanctions and/or material penalties

imposed on the Company or its subsidiaries, Directors

or Management by the relevant regulatory bodies



of the MMLR]

6.0 NON-AUDIT FEES

The amount of non-audit fees paid and payable to

the External Auditors by the Company for the

financial year ended 31 December 2015 was

RM346,000.00 (RM340,000.00 for the financial year

ended 31 December 2014).


of the MMLR]

7.0 VARIATION IN RESULTS

There were no profit estimates, forecasts or

projections made or released by the Company during

the financial year.


of the MMLR]

8.0 PROFIT GUARANTEE

The Company did not give any profit guarantee



of the MMLR]

9.0 MATERIAL CONTRACTS INVOLVING INTERESTS OF DIRECTORS AND MAJOR SHAREHOLDERS

There were no material contracts or any contracts in

relation to loans entered into by the Company and/

or its subsidiaries involving interests of Directors or

major shareholders either subsisting as at 31

December 2015 or entered into since the end of the

previous financial year ended 31 December 2014.


of the MMLR]

Additional Compliance Information in accordance with Appendix 9C of the MMLR of Bursa Malaysia is as follows:


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

ADDITIONAL COMPLIANCEINFORMATION

10.0 ANALYSIS OF SHAREHOLDINGS

The analysis of shareholdings is disclosed on pages

289 to 293 of this Annual Report.


of the MMLR]

11.0 LISTING OF PROPERTIES

The summary of Landed Property for the financial

year ended 31 December 2015 is disclosed on page

296 of this Annual Report.


of the MMLR]

12.0 SHARE ISSUANCE SCHEME

The Company did not have any Share Issuance

Scheme as required under paragraph 8.17 of the

MMLR.


of the MMLR]

13.0 SHARE OPTION SCHEME FOR EMPLOYEES

The Company did not have any Share Option Scheme

for its Employees.


of the MMLR]

14.0 TRAINING ATTENDED BY DIRECTORS

The list of trainings attended by Directors is disclosed

on pages 166 to 167 of this Annual Report.


of the MMLR]

15.0 CORPORATE SOCIAL RESPONSIBILITY ACTIVITIES

The corporate social responsibil ity activit ies

undertaken by the Company is disclosed on pages



of the MMLR]

16.0 RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING IN NATURE ( RRPTs )

Details of the RRPTs entered into during the financial

year ended 31 December 2015 is disclosed on pages


[Pursuant to Paragraph 10.09(2)(b) and Paragraph 3.1.5 of

Practice Note 12 of the MMLR]

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ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

1. INTRODUCTION

This Board Charter (“Charter”) has been developed to

emphasise PETRONAS Dagangan Berhad’s (“PDB”)

Board of Directors’ (“the Board”) commitment to high

standards of corporate governance. It adopts best

practices, applicable rules and regulations, processes

and procedures to guide the Board in the discharge of

its duties and functions.

In this Charter, a reference to PDB shall, where

applicable, include reference to PDB’s subsidiaries and

to PDB’s jointly operated and associate companies.

2. OBJECTIVE

The Charter sets out the roles, responsibilities,

membership and operation of the Board. The powers

and authorities of the Board are derived from the

Articles of Association of PDB (“Articles”), the Companies

Act, 1965, Main Market Listing Requirements (“MMLR”)

of Bursa Malaysia Securities Berhad (“Bursa Malaysia”)

and other regulatory guidelines and requirements that

are in force.

3. ROLES OF THE BOARD

The Board’s primary commitment is to lead and oversee

the business of PDB and to ensure that the conduct of

PDB operations promotes business sustainability,

integrity and complies with the relevant laws, rules and

regulations.

3.1 The Board’s roles are:-

(i) To review, approve and monitor the strategic

business plans, goals and key policies proposed

by the Management to ensure sustainability

and optimisation of long term returns;

(ii) To review and approve financial statements;

(iii) To identify, continuously assess and manage

principal risks affecting PDB and implement

an effective system of internal control,

mitigation measures and risk management;

(iv) To oversee the conduct and the performance

of the Management as well as PDB’s Business;

(v) To ensure that there is an appropriate

succession plan for members of the Board

and Management; and

(vi) To develop and implement an investor

relations programme or shareholders’

communications policy.

3.2 Chairman

The Chairman is appointed from a member of the

Board. The Chairman leads the Board in the

conduct of the Board Meetings and is also

responsible for the effective performance of the

Board.

There is a clear division of roles and responsibilities

between the Chairman and the Managing Director/

Chief Executive Officer.

3.3 Managing Director/Chief Executive Officer

The Managing Director/Chief Executive Officer is a

member of the Board. He is responsible for the

overall operations of the business, organisational

effectiveness of PDB and the implementation of

the strategies, targets and policies set by the

Board. He is assisted by the Management

Committee in managing the business on the

day-to-day basis, which he consults regularly.


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FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

BOARDCHARTER

4. BOARD MEMBERSHIP

4.1 Attributes and Composition

The Board ensures that its composition meets the

requirements of PDB to achieve efficient decision

making, given the broad range of experiences,

knowledge, qualifications and expertise available.

The composition of the Directors shall at all times

comply with the MMLR, the Articles, other relevant

laws and regulations.

The Board assesses its performance and that of

individual Directors on an annual basis. In addition,

the Board also assesses the independence of the

independent directors and their ability to bring

unbiased and objective judgement to the Board’s

deliberations.

4.2 Board Appointment and Board Succession

Planning

The appointment of a new Director is made upon

recommendation from the Nomination and

Remunerat ion Committee whose pr imary

responsibilities are to evaluate, assess and

recommend candidates for the Board’s approval.

All Directors are expected to commit to their

responsibility to PDB, including in the exercise of

their fiduciary and leadership roles. The Directors

shall inform the Chairman before accepting new

directorship in any other public listed company.

4.3 Induction and Training for Board Members

Each newly appointed Director is provided with a

Director’s dossier to serve as an induction literature

on PDB’s expectations, business and operations. In

addition to the Mandatory Accredited Programme,

the Board shall assess further training needs of the

Directors on an on-going basis.

5. BOARD COMMITTEES

5.1 The Board may from time to time, establish

Committees as it considers appropriate to assist in

carrying out its duties, in addition to its

responsibilities and allow detailed deliberation on

specific issues. The Board currently delegates

certain functions to the following Committees to

assist in the execution of its responsibilities:-

i. Audit Committee; and

ii. Nomination and Remuneration Committee.

5.2 The Committees shall operate under its respective

Terms of Reference. The Chairman of the

respective Committees reports to the Board on

the outcome of the Committee meetings and

minutes of Committee meetings are made

available to all Directors.

6. DIRECTORS’ REMUNERATION

Directors’ remuneration is generally determined at

levels which would continue to attract and retain

Directors of high calibre and with the required

competence. The Board is assisted by the Nomination

and Remuneration Committee in assessing and

recommending suitable remuneration for the Directors.

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7. BOARD PROCESS

7.1 Board Meetings

The Board meets every quarter with additional

meetings convened as and when urgent issues

and/or important decisions are required to be

taken. Notwithstanding the scheduled Board

meetings, any Director may, at any time, and the

Company Secretary shall, on the requisition of a

Director, convene a meeting of Directors. The

Management and the external consultants may be

invited to attend Board meetings to present or

report on matters relating to their areas of

responsibility.

All proceedings in Board Meetings are recorded as

minutes of the meeting and signed by the

Chairman, in accordance with the provisions of

the Companies Act, 1965.

7.2 Financial Reporting/Non-Financial Reporting

The Board is committed to present a fair and

balanced evaluation of PDB’s financial position,

performance and prospects by ensuring that the

financial treatment of the accounts of PDB Group

is in compliance with the applicable law,

regulations and reporting standards.

7.3 Access to Advice

All Directors have access to the advice and

services of the Company Secretaries. The Board is

entitled to obtain external independent professional

advice on matters relating to PDB’s business and

operations at PDB’s expense.

8. PETRONAS CODE OF CONDUCT AND BUSINESS ETHICS

The Board has adopted the PETRONAS Code of

Conduct and Business Ethics (“PETRONAS CoBE”) that

seeks to ensure ethical behaviours and conduct by the

Directors, all PDB’s employees and external parties

liaising with PDB. This Board Charter shall be read in

conjunction with PETRONAS CoBE.

9. STAKEHOLDER COMMUNICATION

The Board recognises the importance of effective

communications with PDB’s shareholders and other

stakeholders including the general public. Information

on PDB’s business activities and financial performance

is disseminated timely through announcements to

Bursa Malaysia, postings on PDB’s website, press

releases, issuance of Annual Report and where required,

press conferences.

10. RISK MANAGEMENT

The Board acknowledges the importance of maintaining

a sound system of internal control and a robust risk

management practices to manage financial and health,

safety and environment risks, for good corporate

governance with the objective of safeguarding the

shareholder’s investment and the Group’s assets.

BOARDCHARTER (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

INTRODUCTION

The Statement is made pursuant to Paragraph 15.26(b) of

the MMLR of Bursa Malaysia where the Board of Directors

of public companies are required to publish a statement

about the state of the internal control of the listed issuer as

a group. The MCCG 2012 requires the Board of Directors

of a listed company to establish a sound risk management

framework and internal control system. Observance to the

MCCG 2012 is on voluntary basis. The Group adopts the

PETRONAS Shared Values of Loyalty, Integrity, Professionalism

and Cohesiveness which set the tone for a sound system of

risk management and internal control.

The Board is committed to maintain and continuously

improve the Group’s system of risk management as well as

internal control. The Group is currently operating in a

challenging oil price environment and competitive market

in which risk management and internal control system must

be responsive in order to support its business objectives.

The Board is pleased to provide the following statement

which outlines the nature and scope of risk management

and internal control of the Group during the financial year

under review.

BOARD ACCOUNTABILITY

The Board acknowledges the importance of maintaining a

sound internal control system and a robust risk management

practice for good corporate governance with the objective

of safeguarding the shareholders’ investments and the

Group’s assets. The Board affirms its overall responsibility

for reviewing the adequacy and the integrity of the Group’s

risk management and internal control system which ensures

compliance with applicable laws, regulations and guidelines.

The Group has established a process for identifying,

evaluating, monitoring and managing significant risks that

may materially affect the achievement of corporate

objectives. This process is being implemented throughout

the Group and the Board will continue to review this

process periodically, enhancing it as and when relevant to

ensure sustainability.

In view of the limitations that are inherent in any internal

control system, this system is designed to manage, rather

than eliminate, the risk of failure in achieving the Group’s

objectives. Hence, it can only provide reasonable, but not

absolute assurance, against material misstatements or

losses.

MANAGEMENT ACCOUNTABILITY

Management is accountable to the Board for the

implementation of the processes in identifying, evaluating,

monitoring and reporting of risks and internal controls as

prescribed above. The MD/CEO and the CFO have provided

the Board with assurance that the Group’s risk management

and internal control system is operating adequately and

effectively, in all material aspects, to ensure achievement of

corporate objectives. In providing the above assurance by

MD/CEO and CFO, similar letters of assurance have also

been obtained from Management Committee members

confirming the adequacy and effectiveness of risk

management practices and internal control system within

their respective areas.

RISK MANAGEMENT

The Group has established risk management practices to

safeguard its business interest from risk events that may

impede achievement of business strategy, enable value

creation and growth through identification of opportunities

and provide assurance to the Group’s various stakeholders.

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STATEMENT ON RISK MANAGEMENTAND INTERNAL CONTROL

The Group has adopted the PETRONAS Resiliency Model

(“PRM”) in 2015 that provides an integrated view on the

overall strategy for managing risk, focusing on three areas

of business resiliency, namely Enterprise Risk Management

(“ERM”), Crisis Management (“CM”) and Business Continuity

Management (“BCM”).

PDB has adopted an ERM Framework which outlines the

elements and processes to identify, assess, treat and monitor

risks impacting its business and supporting activities.

The main components of the Group’s risk governance and

structure consist of the Board, the Board Audit Committee

(“BAC”) and the Management. The structure allows for

strategic risk conversations to take place between the

Board, the BAC and the Management on a quarterly basis.

The Board is responsible for the overall risk oversight for

the Group. The Board’s roles include reviewing and

monitoring the Group’s critical risks and ensuring that a

robust system is in place to manage these risks. The Board

also reviews the adequacy and integrity of the Group’s

internal control systems including systems for compliance

with applicable laws, regulations, rules, directives and

guidelines.

The Board, assisted by the BAC, provides advice to the

Board on risk matters. The BAC’s roles include reviewing,

endorsing policies and frameworks as well as other key

components of risk management to be implemented within

the Group.

The Management oversees the effective implementation of

risk policies and guidelines, ERM and institutionalisation of a

risk management culture within the organisation through the

Risk Management Committee. The Risk Management

Committee’s roles include reviewing and monitoring the

Group’s key risks and its mitigation actions which are reported

to the BAC, and subsequently to the Board. The Group has

also placed appropriate operational risk mechanisms covering

the areas of systems, processes, reporting of risks, knowledge

management and assurance activities.

During the year under review, PDB established its risk

profile based on the ERM process consisting of key risks in

the areas of Market, Strategy, Health, Safety and Environment,

Finance, Operations and Technology. The likelihood and

impact of these risks were assessed and evaluated against

PDB’s risk appetite and tolerance levels, while appropriate

key risk indicators and mitigation actions have been

identified and implemented accordingly. Among the key risk

mitigations implemented during the year of review was the

inventory management to mitigate market risk of declining

oil prices. The key risks and mitigation actions were

monitored and reported to the PDB Risk Management

Committee, the BAC and the Board for their deliberation

and guidance on a quarterly basis. Risk Assessments were

also conducted on investment proposals to support decision

making by the Management and Board.

PDB remains committed towards building its capabilities for

an effective business resumption that safeguards the

interests of its key stakeholders, reputation, brand and value

creating activities following any prolonged disruptive

incident. As such, PDB adopted the PETRONAS BCM

Framework as the foundation for clear and consistent BCM

practices to ensure continuation of business during

prolonged disruption. Throughout the year, the Group

underwent several activities in line with its key processes

within its framework, including the review of its Business

Impact Analysis and Business Recovery Strategy, of which

are critical inputs for the development of the Group’s

Business Continuity Plan (“BCP”).

There are other risk committees such as Health, Safety and

Environment (“HSE”) Committee, Credit Control Committee,

Tender Committee and Business Information Technology

Management of Change Committee to support the

Management in specific risk areas and good governance

practices.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

STATEMENT ON RISK MANAGEMENTAND INTERNAL CONTROL (continued)

During the year under review, PDB implemented the

following risk activities which are in line with PETRONAS’

practices:

• Participated in the BCM exercise to test the resumption

of Critical Business Functions staff at Alternate Worksites

and Virtual Office;

• Conducted Emergency Management exercises at five

locations during the year under review. The objectives

of the exercise were to assess the capabilities of the

Emergency Management Team and Unification of

Command between PDB and various parties towards

mitigation of the crisis;

• Enhanced Hazards and Effects Management Process

through review and strengthening of operation-specific

Hazards and Effects Registers for PDB operating units,

including Terminals (Fuel, LPG and Aviation), Retail and

NGV Stations and storage facilities at customer sites;

• Performed HSE assurance with PETRONAS Group

HSE to ensure effective HSE Management System

implementation and that HSE risks were adequately

managed; and

• Initiated Risk Management Validation to ensure existing

risk mitigations identified in the risk profile were

implemented as intended.

At PDB, risk management is conducted through an ongoing

process between the Board, the Management and the

employees of the Group. The Group will continue its focus

on institutionalising risk management as a business culture

within the Group.

INTERNAL AUDIT

Internal audits are undertaken to provide independent

assessments on the Group’s internal control systems to

evaluate potential risks exposure across key business

processes and ensure proper conduct of business within

the Group. The BAC has full and direct access to Internal

Auditors and receives reports on all internal audits

performed.

During the financial year, the internal audit function was

carried out by the PDB Internal Audit Department (“IAD”),

which was established on 1 April 2011, with a direct reporting

line to the BAC, in line with the recommendation of

principle 6.2 of the MCCG 2012. IAD’s mission is to enhance

and protect the organisational value by providing risk based

and objective assurance, advice and insight. A key objective

of the IAD is to assist the Group in accomplishing its goals

by bringing a systematic and disciplined approach to

evaluate and improve the effectiveness of risk management,

control and governance processes within the Group.

IAD maintains its impartiality and due professional care by

having its plans and reports directly under the purview of

the BAC. Through the continuous training of its staff, the

IAD has also put in place relevant procedures to ensure that

its staff are competent and adequately equipped in carrying

out their duties and responsibilities.

IAD’s position within the Group, its authority, responsibilities

and scope of work is defined in the Internal Audit Charter

(“the Charter”) that is approved by the BAC. The Charter

was established consistent with the requirement of the

Institute of Internal Auditors’ International Standards of the

Professional Practice of Internal Auditing which includes the

Definition of Internal Auditing, the Code of Ethics, and the

International Standards for the Professional Practice of

Internal Auditing.

IAD reviews the internal controls across selected key

activities of the Group’s businesses in accordance with the

approved risk based internal audit plan. IAD continues to

independently and objectively monitor compliance with

regard to policies, procedures and the effectiveness of the

internal control systems. Signif icant f indings and

recommendations for improvement are highlighted to the

Management and the BAC, with periodic follow up on the

implementation of action plans. The Management is

responsible for ensuring that corrective actions are

implemented accordingly.

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OTHER KEY ELEMENTS OF INTERNAL CONTROL SYSTEMS

In reinforcing the Board’s commitment to maintain a sound

system of internal control, the Board continues to maintain

and implement a strong control structure and environment

for the proper conduct of the Group’s business operations

as follows:

Board of Directors

The Board meets at least once on a quarterly basis and has

set a schedule of matters, which is required to be brought

to its attention for discussion, thus ensuring that it maintains

full and effective supervision over appropriate controls. The

MD/CEO leads the Management in presentation of board

papers and ensures Management provides detailed

explanation of pertinent issues. In arriving at any decision

requiring Board’s approval as set out in the Limits of

Authority manual on recommendation by the Management,

thorough deliberation and discussion by the Board is a

prerequisite. In addition, the Board is kept updated on the

Group’s activities and its operations on a regular basis.

The MD/CEO reports to the Board on significant issues

arising from the changes in the business and external

environment which may result in significant risks to the

Group. The CFO provides the Board with quarterly

performance reports and related financials of the Group.

Board Audit Committee

The Board has delegated the duty of reviewing and

monitoring the effectiveness of the Group’s system of

internal control to the BAC.

The BAC assumes the overall duties of reviewing with the

External Auditors their audit plan, audit report, as well as

their findings and recommendations pursuant to the

statutory audit. The BAC also evaluates the adequacy and

effectiveness of the Group’s risk management and internal

control systems by reviewing the internal control issues

identified by the Internal Auditors and Management.

The BAC meets at least once every quarter, having full and

unimpeded access to the Internal and External Auditors.

Further information relating to the activities of the BAC

have been set out in the BAC’s report.

Organisation Structure and Management Committees

An organisational structure, which is not only aligned to the

business and operational requirements but with clearly

defined lines of responsibility, accountability as well as

levels of authority, which has been put in place to assist in

implementing the Group’s strategies and day-to-day

business activities.

The Group has a Management Committee which serves in

an advisory capacity to the MD/CEO in accomplishing the

vision, mission, strategies and objectives set for the Group.

Various functional committees have also been established

across the Group to ensure the Group’s activities and

operations are properly aligned towards achieving the

organisation goals and objectives.

Limits of Authority

The Group has established Limits of Authority which defines

the appropriate approving authority to govern and manage

the business decision process. The Limits of Authority sets

out a clear line of accountability and responsibility which

serves as a reference in identifying the approving authority

for various transactions, including matters that require

Board’s approval. It not only provides a framework of

authority and accountability within the Group, but also

facilitates decision-making at the appropriate level in the

Group hierarchy.

Credit Risk Framework and Guidelines

The PETRONAS Credit Risk Framework and Guidelines

facilitates management of credit risk exposures from customers.

It also allows credit exposure to be closely tracked as a

monitoring and control tool to guide credit risk decision.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE


Risk Control Self-Assessment

Regular self-assessment of internal controls for key

processes are also conducted by respective divisions, based

on Risk Control Self-Assessment (“RCSA”) process. Based on

the RCSA findings, the Head of Division will provide

assurance on the level of internal controls within their

respective areas to MD/CEO and CFO.

Financial Control Framework

The Group has implemented a Financial Control Framework

(“FCF”) to ensure key internal controls are adequate and

effective at all times. The framework requires the

documentation of key processes, outlines a structured

assessment process to identify control gaps and the required

mitigation action. Annually, each key process owner at

various management levels is required to provide FCF its

level of compliance and key controls for their respective

business areas. The FCF, thus provides assurance on the

quality of the Group’s financial reports.

Corporate Financial Policy

The Group has adopted the PETRONAS Corporate Financial

Policy (“CFP”) which sets forth the policy for financial

management activities, embedding the principles of financial

r isk management. The CFP governs f inancial r isk

management practices across the Group. It prescribes a

framework in which financial risk exposures are identified

and managed.

Business Plan and Budget

The Group undertakes an annual budgeting and forecasting

exercise which includes development of business strategies

for the next five years and the establishment of key

performance indicators against which the overall

performance of the Group, including the respective

performance of business segments and companies within

the Group, can be measured and evaluated. Operating and

capital expenditure requirements are tabled to the Board for

approval, prior to the commencement of a new financial

year. The Group’s performance is reported internally on a

monthly basis to the Management Committee. The Group’s

quarterly performance is also presented to the Board with

comparison to approved plans as well as against prior

periods. The Group’s strategic direction is also reviewed

through a rigorous assessment process, taking into account

changes in market conditions and significant business risks.

Code of Conduct and Business Ethics

The Group adopts and practices the PETRONAS Code of

Conduct and Business Ethics (“CoBE”). The CoBE is

accessible to the public for reference on PDB’s official

website at www.mymesra.com.my which emphasises and

advances the principle of Discipline, Good Conduct,

Professionalism, Loyalty, Integrity and Cohesiveness that are

critical to the success and well being of the Group. The

CoBE contains detailed policy statements on the standards

of behaviour and ethical conduct expected of each individual

of the Group. The Group also expects that contractors,

sub-contractors, consultants, agents and representatives

and others performing work or services for or on behalf of

the Group to comply with the relevant parts of the CoBE

when performing such work or services. The CoBE explicitly

prohibits improper solicitation, bribery and other corrupt

activities, not only by employees and directors, but also by

third parties performing work or services for or on behalf of

companies in the PETRONAS Group.

Whistleblowing Policy

The Group has adopted the PETRONAS Whistleblowing

Policy (“WBP”) which provides an avenue for the Group

employees and members of the public to disclose any

improper conduct, in accordance with the procedures as

provided under the policy. The WBP is accessible to the

public for reference on the Company’s official website at

www.mymesra.com.my.

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Under the WBP, a whistleblower will be accorded with

protection of confidentiality of identity, to the extent

reasonably practicable. An employee who is an internal

whistleblower will also be protected against any adverse

and detrimental actions for disclosing any improper conduct

committed or about to be committed within the Group to

the extent reasonably practicable, provided that the

disclosure is made in good faith. Such protection is accorded

even if the investigation later reveals that the whistleblower

is mistaken as to the facts and the rules and procedures

involved.

Tender Committee

The Tender Committee (“TC”) structure which comprises

cross-functional representatives has been established to

review all major purchases and contracts. The TC provides

the oversight function on tendering matters prior to approval

by the relevant Approving Authorities as set out by the

Limits of Authority.

Employees Performance Management

The Group selects talents for employment through a

structured recruitment process. The professionalism and

competency of staff are continuously enhanced through a

disciplined training and development programme. A

performance management system has been put in place to

measure staff performance against agreed key performance

indicators on a semi-annual basis.

Operating Procedures and Guidelines

The Group has developed Operating Procedures and

Guidelines (“OPG”) which covers business planning, capital

expenditure, financial operation, performance reporting,

operations, marketing and sales, supply chain management,

human resource management, information system as well

as health, safety and environment. These define the policies

and procedures for day-to-day operations and act as

guidelines for proper measures to be undertaken in a given

set of circumstances. The policies and procedures are also

reviewed on a regular basis to ensure continued relevance

and effectiveness.

Information and Communications Technology

Information and Communications Technology (“ICT”) is

deployed in the Group to automate work processes, where

possible, and to efficiently collect key business information.

The Group continues to enhance its information and

communication systems in ensuring that it can act as an

enabler to improve business processes, work productivity

and decision making throughout the Group. System reviews

are conducted to confirm adequate controls are in place to

ensure adherence to the Group’s business objectives,

policies and procedures.

Related Party Transactions and Conflict of Interest

The Group has established Policies and Procedures on

Related Party Transactions (“RPTs”) and Conflict of Interest

(“COI”) Situations (“Policies and Procedures”) to promote

continuous awareness and provide consistent approach to

all RPTs and Recurrent Related Party Transactions (“RRPTs”)

or COI situations.

The said Policies and Procedures require the use of various

processes to ensure that RPTs/RRPTs are conducted on an

arm’s length basis, which are consistent with the Group’s

normal business practices and policies, and will not be to

the detriment of the Group’s minority shareholders. It aims

to provide guidelines under which certain transactions and

situations must be reviewed and endorsed by the various

governing parties of the Group, disclosed to the regulators

and governing bodies and the processes required to identify,

evaluate, approve, monitor and report RPTs and RRPTs and

manage COI.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE


Such processes include identification and screening of

transactions, negotiation of transaction and approval/

mandate mechanism, monitoring and reporting principles,

and renewal or changes in the terms or termination of such

dealings. In principle the said Policy and Procedure sets

forth the following:

• All sourcing and sales of the Group’s products, general

merchandise and/or shared facilities/services shall be

based on market or industry or negotiated pricing

formulas and the terms are not more favourable to the

related party than those generally applied to a third

party, in order to ensure that the transactions are on an

arm’s length basis;

• Database is maintained to capture the list of related

parties and RPTs/RRPTs which have been entered into;

• If a Director or a related party has an interest in a

transaction, he or she will abstain from any deliberation

and decision making at the Board or subsidiary

company’s Board (as the case may be) in respect of the

said transaction;

• The BAC is responsible to ensure that the policies and

procedures relating to RPTs/RRPTs and COI situations

are sufficient to ensure that RPTs/RRPTs are carried out

on an arm’s length basis and not to the detriment of the

Group’s minority shareholders;

• The Board has the overall responsibility to ensure

compliance to the established guidelines and procedures

to approve and monitor RPTs/RRPTs and COI situations.

The Board and/or BAC may also appoint individuals and

committees to examine the RPTs/RRPTs, as deemed

appropriate;

• On an annual basis, all Directors and any related party

of the Group will declare in writing an annual declaration

form, designed to elicit information about current/

potential relationships and/or COI situations, involving

their interest, either directly or indirectly. All Directors

and any related party of the Group shall also notify in

writing of any interest in RPT or COI situation when it

becomes known to them;

• The Directors have completed Declaration of Interest for

the financial year under review in line with the Policies

and Procedures; and

• Bursa Malaysia has granted the Company exemptions

from having to seek shareholders’ mandate for RRPTs

with PETRONAS, Ministry of Finance and Khazanah

Group of Companies. The said exemption essentially

states that the exempted RRPTs must be transacted on

an arm’s length basis.

REVIEW OF THIS STATEMENT BY EXTERNAL AUDITORS

The External Auditors have reviewed this Statement on Risk

Management and Internal Control, pursuant to the scope

set out in Recommended Practice Guide (“RPG”) 5 (Revised

2015), Guidance for Auditors on Engagements to Report on

the Statement on Risk Management and Internal Control

included in the Annual Report issued by the Malaysian

Institute of Accountants (“MIA”) for inclusion in the Annual

Report of the Group for the year ended 31 December 2015,

and reported to the Board that nothing has come to their

attention that causes them to believe that the statement

intended to be included in this Annual Report of the Group,

in all material respects:

(a) has not been prepared in accordance with the

disclosures required by paragraphs 41 and 42 of the

Statement on Risk Management and Internal Control:

Guidelines for Directors of Listed Issuers, or

(b) is factually inaccurate.

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RPG 5 (Revised 2015) does not require the External Auditors

to consider whether the Directors’ Statement on Risk

Management and Internal Control covers all risks and

controls, or to form an opinion on the adequacy and

effectiveness of the Group’s risk management and internal

control system including the assessment and opinion by the

Board and Management thereon. The Auditors are also not

required to consider whether the processes described to

deal with material internal control aspects of any significant

problems disclosed in this Annual Report will, in fact,

remedy the problems.

CONCLUSION

Based on the above, the Board is of the view that the

system of risk management and internal control instituted

throughout the Group is sound and provides a level of

confidence on which the Board relies for assurance. In the

year under review, there was no significant control failure

or weakness that would result in material losses,

contingencies or uncertainties requiring separate disclosure

in this Annual Report.

The Board and Management continue to review and

strengthen the Group’s risk management and internal

control system to ensure ongoing adequacy and

effectiveness of the system of internal control and risk

management practices to meet the changing and

challenging operating environment.

The internal control systems discussed in this statement do

not apply to joint ventures and associated companies which

falls under the control of their majority shareholders.

Nonetheless, the interest of the Group is safeguarded

through the representatives on the Board of the joint

ventures and associated companies and through the review

of management accounts received.

This statement is made in accordance with the resolution

of the Board of Directors dated 19 February 2016.

Md Arif Mahmood

Chairman

Mohd Ibrahimnuddin Mohd Yunus



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE


OVERVIEW

The Board Audit Committee is pleased to present its report

for the financial year ended 31 December 2015 in

compliance with Paragraph 15.15 of MMLR of Bursa Malaysia.

COMPOSITION

The Board has established the Board Audit Committee since

3 March 1994. The composition of the Board Audit

Committee during the financial year under review is as

follows:

(1) Vimala V. R. Menon (Chairman)

(Independent Non-Executive Director)

(2) Lim Beng Choon

(Independent Non-Executive Director)

(3) Nuraini Ismail

(Non-Independent Non-Executive Director)

In compliance with Paragraph 15.09(1)(b) of the MMLR and

the MCCG 2012, all three Board Audit Committee members

are Non-Executive Directors including two Independent

Directors who fulfil the criteria of independence as defined

in the MMLR. None of the Independent Directors have

appointed alternate directors.

The Chairman of the Board Audit Committee, Vimala V.R.

Menon and Nuraini Ismail are both qualified accountants.

Vimala V.R. Menon is a member of the Malaysian Institute

of Accountants and also a Fellow of the Institute of

Chartered Accountants in England and Wales whilst Nuraini

Ismail is a Fellow member of the Association of Chartered

Certified Accountants, United Kingdom. In this regard, the

Company is in compliance with Paragraph 15.09(c)(i) under

the MMLR which requires at least one member of the Board

Audit Committee to be a qualified accountant.

The Board assesses the performance of the Board Audit

Committee and its members through an annual Board

effectiveness evaluation. The Board is satisfied that the

Board Audit Committee and its members discharged their

functions, duties and responsibilities in accordance with its

Terms of Reference.

TERMS OF REFERENCE

The Terms of Reference sets out the authority, duties and

responsibilities of the Board Audit Committee. The Terms of

Reference of the Board Audit Committee as set out on

page 191 to page 192 of this Annual Report are consistent

with the MMLR and the MCCG 2012. All the requirements

under the Terms of Reference are fully complied with.

MEETINGS AND ATTENDANCE

The Board Audit Committee meets at least quarterly with

additional meetings convened as and when necessary.

Board Audit Committee meetings for financial year 2015 are

scheduled in November 2014 to facilitate the Directors to

plan ahead and fit the Board Audit Committee meetings

into their respective schedules.

The agenda and a set of meeting papers encompassing

qualitative and quantitative information relevant to the

business of the meeting are distributed via electronic

application to the Board Audit Committee members not

less than five business days from the meeting dates.

The Board Audit Committee met four times during the year

ended 31 December 2015 and details of attendance of the

Board Audit Committee members are as follows:-

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BOARD AUDITCOMMITTEE REPORT

No Board Audit Committee Members

Total Number of

Meetings Attended

1. Vimala V. R. Menon (Chairman) 4 out of 4 (100%)

2. Lim Beng Choon 4 out of 4 (100%)

3. Nuraini Ismail 4 out of 4 (100%)

The MD/CEO, CFO, Head of Risk Management, Head of Internal Audit and

external auditors were invited to attend Board Audit Committee meetings to

appropriately brief and furnish the members of Board Audit Committee with

relevant information and clarification to relevant items on the agenda.

At the conclusion of each meeting, recommendations are made for the

Management to improve the internal controls, procedures and systems of the

Group, where relevant.

Deliberations during the Board Audit Committee meetings included performance

review of the Company, annual and interim financial reporting to Bursa

Malaysia, the status of audit findings together with the agreed corrective

actions and risk management activities.

All proceedings of Board Audit Committee meetings are duly recorded in the

minutes of each meeting and signed minutes of each Board Audit Committee

meeting are properly kept by the Company Secretary. It is a common practice

that the draft Board Audit Committee minutes are circulated to the Board

members prior to the Board meeting subsequent to the Board Audit Committee

meeting. This assists the Board Audit Committee Chairman to brief the Board

matters deliberated at the Board Audit Committee meeting. Minutes of the

Board Audit Committee meeting are tabled for confirmation during the next

Board Audit Committee meeting, after which it is distributed to the Board for

notation.

During the year under review, Board Audit Committee had one private session

with the external auditors without the presence of the Management.

SUMMARY OF ACTIVITIES OF THE BOARD AUDIT COMMITTEE

During the year ended 31 December

2015, the Board Audit Committee carried

out the following activities in discharging

its functions and duties:-

External Audit

(a) Reviewed and recommended the

terms of engagement and fees

structure of external auditors for

Board’s approval;

(b) Reviewed and approved the external

auditors audit plan and scope for

the year under review; and

(c) Reviewed the external audit report.

Internal Audit

(a) Reviewed and approved the annual

internal audit plan to ensure

a d e q u a c y o f r e s o u r c e s ,

competencies and coverage of

entities based on risk assessment;

(b) Reviewed internal audit reports on

the effectiveness and adequacy of

governance, risk management,

opera t iona l and compl i ance

processes;

(c) Reviewed the measures to improve

the system of internal control;

(d) Rev iewed the adequacy and

effectiveness of agreed corrective

actions undertaken by management

on significant and secondary issues

raised;

(e) Reviewed the Internal Audit Charter

which establishes the purpose,

authority and responsibilities of the

internal audit activities;

BOARD AUDITCOMMITTEE REPORT (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

(f) Reviewed the result of Quality Assurance Review on

Internal Audit Department carried out by Institute of

Internal Auditors Malaysia; and

(g) Reviewed the performance of Internal Audit Department

for financial year ended 2014.

Financial Results

(a) Reviewed the audited financial statements of the

Group and draft announcement to Bursa Malaysia prior

to submission to the Board for their consideration and

approval. The review was to ensure that the audited

financial statements were drawn up in accordance with

the provisions of the Companies Act, 1965 and the

applicable approved accounting standards. The review

and discussions were conducted with the MD/CEO and

the CFO of the Company;

(b) Reviewed the quarterly financial results and draft

announcement to Bursa Malaysia prior to the approval

by the Board, to ensure compliance to the MMLR, the

applicable financial reporting standards as well as other

relevant legal and regulatory requirements. The review

and discussion were conducted with MD/CEO and the

CFO of the Company;

(c) Reviewed the relevant corporate governance and

internal controls statements for the annual report in

relation to the audited financial statements, prior to the

approval by the Board, to ensure that they were

prepared incompliance to MMLR, Malaysian Accounting

Standards Board and other relevant legal and regulatory

requirements, in particular, the quarterly and year end

financial statements;

(d) Reviewed the progress of ongoing risk management

activities to identify, evaluate, monitor and manage

critical risks including the Company’s Business

Continuity Management Policy and Framework;

(e) Reviewed the implementation of Financial Control

Framework; and

(f) Reviewed the Trade Accounts Receivables Status of the

Company.

Corporate Governance

(a) Reviewed the impact of relevant regulatory changes

and ensured compliance by the Company and the

Group; and

(b) Recommended the revision to Limits of Authority

manual of the Company.

Annual Reporting

The Board Audit Committee also reviewed the disclosures

on the Corporate Governance Statement, Board Audit

Committee Report, Statement on Risk Management and

Internal Control and Statement on Internal Audit Function

for the financial year ending 31 December 2015. These

statements are as set out on pages 162 to 173, 187 to 190,

179 to 186 and 193 respectively.

Related Party Transactions (“RPTs”)/Recurrent Related

Party Transactions (“RRPTs”)

The Board Audit Committee ensured that there were

adequate Policies and Procedures in place to identify and

monitor RPTs/RRPTs such that they were conducted on an

arm’s length basis, and not detrimental to the minority

shareholders. These Policies and Procedures were reviewed

by the Group’s External Auditors and independently audited

by a third audit firm; and

The Board Audit Committee performed a quarterly review

of all RRPTs by the Company.

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Risk Management

(a) Reviewed and endorsed all policies, frameworks,

guidelines and other key components of risk

management for implementation within the Company

and throughout the Group;

(b) Reviewed and endorsed corporate risk profile for the

Group; and

(c) Reviewed the progress of ongoing risk management

activities to identify, evaluate, monitor and manage

critical risks.

INTERNAL AUDIT

The internal audit function of the Group is carried out by

the Internal Audit Department of the Company.

They maintained at all times their impartiality, proficiency

and due professional care by having their plans and reports

directly under the purview of the Board Audit Committee.

The internal audits were undertaken to provide independent

assessment on the adequacy, efficiency and effectiveness of

the Group’s internal control systems in the assessment of

potential risk exposures over key business processes within

the Group. The Board Audit Committee has full and direct

access to Internal Auditors and received reports on all

internal audit engagements performed.

During the financial year, the Internal Auditors had carried

out audits according to the risk-based internal audit plan

which had been approved by the Board Audit Committee.

In performing the audits, they also conformed to the

Internal Audit Charter. The internal audit provides assurance

that adequate and effective internal controls are in place

and relevant policies, procedures and guidelines and

applicable laws and regulations are adhered to.

The Board Audit Committee reviews the audit reports and

directs the Management for the necessary corrective actions

and process improvements. The Management is responsible

for ensuring that the recommendations are implemented

accordingly.

The total costs incurred for the internal audit function of

the Company and the Group for the financial year was

RM3,426,136.45. Further details of the activities of Internal

Audit Department are presented in the Statement on Internal

Audit Function on page 193 in this Annual Report.

Vimala V. R. Menon

Chairman

Board Audit Committee

BOARD AUDITCOMMITTEE REPORT (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

MEMBERSHIP

• The members of the Audit Committee shall be appointed by the Board from amongst their number and shall consist of not less than three members. All the Audit Committee members must be Non-Executive Directors with majority of them being Independent Directors. Independent Directors shall be one who fulfils the requirement as provided in the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Malaysia”).

• All the Audit Committee members must be financially literate and at least one member of the Audit Committee:

i. must be a member of the Malaysian Institute of Accountants; or

ii. if he/she is not a member of the Malaysian Institute of Accountants, he must have at least three years working experience and:

a. he/she must have passed the examinations specified in Part I of the First Schedule of the Accountants Act, 1967; or

b. he/she must be a member of one of the associations of accountants specified in Part II of the First Schedule of the Accountants Act, 1967.

iii. fulfils such other requirements as prescribed or approved by the Bursa Malaysia.

• The members of the Audit Committee shall elect a Chairman from amongst them who shall be an Independent Director.

• If a member of the Audit Committee resigns, dies or for any other reason ceases to be a member with the result that the number of members is reduced below three, the Board shall within three months of that event, appoint such number of new members as may be required to make up the minimum number of three members.

• No alternate Director can be appointed as a member of the Audit Committee.

MEETING

• A quorum shall be two members, both being Independent

Directors and one of whom shall be the Chairman of the

Audit Committee. The Audit Committee shall be able to

convene meetings with the External Auditors, Internal

Auditors or both, excluding the attendance of other

directors and employees whenever deemed necessary.

The External Auditors and Internal Auditors have the right

to appear and be heard at any meeting of the Audit

Committee and shall appear before the Committee when

required to do so by the Audit Committee.

• The Company Secretary or in his/her absence, his/her

deputy shall be the Secretary of the Audit Committee.

Minutes of the meetings shall be duly entered in the

books provided therefor.

• Meetings shall be held not less than four times a year.

The External Auditors may request a meeting if they

consider it necessary. The Chairman of the Audit

Committee shall convene a meeting of the Committee

to consider any matters the External Auditors believe

should be brought to the attention of the Directors or

shareholders.

AUTHORITY

• The Audit Committee is authorised by the Board to

investigate any activity within its Terms of Reference. It

is authorised to seek any information it requires from

any employee and all employees are directed to co-

operate with any request made by the Audit Committee.

• The Audit Committee is authorised by the Board to

obtain external legal or other independent professional

advice and to secure the attendance of outsiders with

relevant experience and expertise if it considers

necessary.

CONSTITUTION

The Audit Committee was created by the Board pursuant to its resolution on 3 March 1994.

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BOARD AUDIT COMMITTEETERM OF REFERENCE

DUTIES AND FUNCTIONS

• The duties and functions of the Audit Committee shall

be:

a. to consider the suitability and independence of

External Auditors for their appointment, the audit

fee, and any questions of resignation or dismissal of

the External Auditors before making recommendation

to the Board;

b. to discuss with the External Auditors before the

audit commences the nature and scope of the

audit, and ensure coordination where more than

one audit firm is involved;

c. to review with the Management and the External

Auditors the quarterly results and year end financial

statements prior to the approval by the Board,

focusing particularly on:

– any change in accounting policies and practices;

– significant and unusual events;

– major judgemental areas;

– significant adjustments resulting from the audit;

– the going concern assumption;

– compliance with accounting standards; and

– compliance with stock exchange and legal

requirements.

d. to arrange for per iodic reports from the

Management, the External Auditors, and the Internal

Auditors to assess the impact of significant

regulatory changes, and accounting or reporting

developments proposed by accounting and other

bodies, or any significant matters that may have a

bearing on the annual examination;

e. to discuss problems and reservations arising from

the internal or external interim and final audits, and

matters the External or Internal Auditors may wish

to discuss (in the absence of Management where

necessary);

f. to review the internal audit programme, consider

the major f indings of internal audits and

Management’s response, and ensure coordination

between the Internal and External Auditors;

g. to review the adequacy of the competency of the

internal audit function;

h. to review the performance of the Head of Internal

Audit for the Management’s endorsement;

i. to approve the appointment or termination of the

Head of Internal Audit;

j. to review any related party transaction and conflict

of interest situation that may arise in the Company

including any transaction, procedure or course of

conduct that raises questions on the Management’s

integrity;

k. to keep under review the effectiveness of internal

control systems, and the Internal and/or External

Auditors’ evaluation of these systems and in

particular, review the External Auditor’s Management

Letter and Management’s Response;

l. to review the audit reports;

m. to review the risk management framework,

processes and responsibilities and assess whether

they provide reasonable assurance that risks are

managed within tolerable ranges;

n. to direct and where appropriate, supervise any

special project or investigation considered

necessary;

o. to prepare periodic report to the Board of Directors

summarising the work performed in fulfilling the

Audit Committee’s primary responsibilities; and

p. to consider other topics, as defined.

REPORTING PROCEDURES

• The Secretary shall circulate the minutes of meetings of

the Audit Committee to all members of the Board.

BOARD AUDIT COMMITTEETERM OF REFERENCE (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

On 1 April 2011, the Board established an in-house internal audit function with a direct reporting line to the Board Audit Committee (“BAC”). PDB Internal Audit Department (“IAD”) supports the BAC in their governance responsibilities as stated in the BAC’s Terms of Reference. At the same time, IAD assists the Management in enhancing the risk management, control, and governance processes within the Group.

The Head of IAD reports functionally to the BAC and administratively to the MD/CEO. The BAC reviews IAD’s annual budget and resource requirements, and approves the internal audit plan. Periodically, the Head of IAD communicates quarterly the results of internal audit engagements to the BAC, as well as presents a report on IAD’s performance.

IAD demonstrates its authority, responsibility, independence and objectivity as prescribed in the Internal Audit Charter, which is periodically reviewed and approved by the BAC. The Head of IAD communicates the Internal Audit Charter to the Management and throughout the Group.

IAD adopts the Institute of Internal Auditors’ International Professional Practices Framework (“IPPF”) which includes the Definition of Internal Auditing, the Code of Ethics, and the International Standards for the Professional Practice of Internal Auditing. In performing internal audit engagements, IAD staff adheres to IAD’s Procedures and Guidelines Manual, as well as relevant PETRONAS policies and procedures.

IAD continues to adopt the risk based audit plan to ensure that audit programmes carried out are prioritised based on the Group’s key risks. In deriving the audit plan, IAD gathers input from a variety of sources including reviewing the corporate risk profile for the Group, business plans and strategies, past audit history, and feedback from the Senior Management and the BAC.

In 2015, IAD performed reviews in various areas involving the Retail Business, the Commercial Business, the Supply and Distribution Division, the Legal and Corporate Secretariat Services Division, as well as the local and international Subsidiaries and Associates. IAD covered key audit scope such as:

– Terminal operations and maintenance– Sales and marketing– Product supply chain management– Logistics and distribution

– Project management– Procurement– Information & communications technology – Human resource management– Accounting and financial activities

IAD highlights to the BAC on the key control issues, significant risks and relevant recommendations for improvement, along with Management’s responses and agreed corrective actions. On quarterly basis, IAD monitors the progress of these actions and reports the status to the BAC.

During the financial year, the internal audit activities were performed in-house with strength of 10 staff comprising of internal audit managers and internal auditors. IAD continues its commitment to equip the staff with adequate knowledge and proficiencies to discharge their duties and responsibilities. This involved staff’s participation in trainings, workshops and seminars performed in-house or external.

Annually, individual internal auditors undergoes a functional competency assessment to identify skill gaps (if any). This helps IAD to determine and plan the learning and development activities that will assist the staff in closing the gaps. The appraisal process is part of PETRONAS capability development programme for internal auditors, which considers the Institute of Internal Auditors (“IIA”) Global Internal Audit Competency Development Framework. The capability development programme for internal auditors comprises the following core competencies:

– Internal audit delivery– Technical expertise– Personal skills– Internal audit management– Professional ethics

Akmal Nur AnuarHead Internal Audit Department

Vimala V. R. MenonChairman Board Audit Committee

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INSPIRING CHANGE

STATEMENT ONINTERNAL AUDIT FUNCTION

OVERVIEW

The Nomination and Remuneration

Committee of the Company is pleased

to present the Nominat ion and

Remuneration Committee Report for the

financial year ended 31 December 2015

in compliance with Paragraph 15.08A of

MMLR of Bursa Malaysia.

COMPOSITION

The Board established the Nomination

C o m m i t t e e a n d R e m u n e r a t i o n

Committee on 16 February 2011 which

were later amalgamated into a single

committee and is now known as the

N o m i n a t i o n a n d R e m u n e r a t i o n

Committee.

The members of the Nomination and

Remuneration Committee during the

financial year under review comprise the

following Directors:

NRC

(1) Lim Beng Choon (Chairman)

( I n d e p e n d e n t N o n - E x e c u t i v e

Director)

(2) Erwin Miranda Elechicon

( I n d e p e n d e n t N o n - E x e c u t i v e

Director)

(3) Ir Mohamed Firouz Asnan


(Non-Independent Non-Executive

Director)

(4) Mohd. Farid Mohd. Adnan


(Non-Independent Non-Executive

Director)

The members of the Nomination and Remuneration Committee comprise two

Independent Non-Executive Directors and one Non-Independent Non-

Executive Director which is in compliance with the requirement of Paragraph

15.08A(1) of MMLR of Bursa Malaysia as well as recommendation 2.1 of the

MCCG 2012 where the committee must comprise exclusively Non-Executive

Directors with majority are Independent Directors.

Lim Beng Choon, Senior Independent Director has been appointed as Chairman

of the Nomination and Remuneration Committee since 7 August 2014.

During the financial year under review, there was a change to the composition

of the Nomination and Remuneration Committee where Ir Mohamed Firouz

Asnan was appointed in place of Mohd. Farid Mohd. Adnan on 6 October

2015. Based on the Board Effectiveness Evaluation findings, the Board is

satisfied with the performance and effectiveness of the Nomination and

Remuneration Committee in providing sound advice and recommendations to

the Board.

TERMS OF REFERENCE

The Terms of Reference of the Nomination and Remuneration Committee as

set out on pages 198 to 201 of this Annual Report are consistent with the

MMLR of Bursa Malaysia and the MCCG 2012. All the requirements under the

Terms of Reference are fully complied with.

MEETINGS

During the financial year under review, the Nomination and Remuneration

Committee in discharging its duties and functions as sub-committee of the

Board, held two meetings and details of attendance of the members are as

follows:

No

Nomination and Remuneration

Committee Members

Total Number of

Meetings Attended

1. Lim Beng Choon (Chairman) 2 out of 2 (100%)

2. Erwin Miranda Elechicon 1 out of 2 (50%)

3. Ir Mohamed Firouz Asnan


1 out of 1 (100%)

4 Mohd. Farid Mohd. Adnan


1 out of 1 (100%)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

NOMINATION AND REMUNERATIONCOMMITTEE REPORT

The MD/CEO, Head of Legal and Secretariat, Head of

Human Resource and any other persons deemed necessary

are invited to attend Nomination and Remuneration

Committee meetings to appropriately brief and furnish the

members of Nomination and Remuneration Committee

with relevant information and clarification to relevant items

on the agenda.

At the Nomination and Remuneration Committee meeting

held on 9 February 2015, the members of the Nomination

and Remuneration Committee reviewed the remuneration

structure and benchmarking for the Management of the

Company. A review of the career path in the Company and

PETRONAS was also conducted to ensure that is strong

practice of talent development and retention. In this

meeting, the Board performance for the previous year was

also reviewed together with the annual report statement.

At a meeting of the Nomination and Remuneration

Committee held on 27 October 2015 where performance

and succession plan of the Management were deliberated,

the Directors who are non-members of Nomination and

Remuneration Committee were invited to provide their

input and views on the performance and succession plan of

the Management.

The Nomination and Remuneration Committee meetings

for financial year 2015 were scheduled in November 2014

to facilitate the Directors to plan ahead and fit the

Nomination and Remuneration Committee meetings into

their respective schedules. This is also to provide the

members with ample notice of the meetings.

The agenda and a set of meeting papers relevant to the

business of the meeting are distributed via electronic

application to the Nomination and Remuneration Committee

members not less than five business days from the meeting

dates.

All proceedings of Nomination and Remuneration Committee

meetings are duly recorded in the minutes of each meeting

and the signed minutes are properly kept by the Secretary.

The draft minutes are circulated to the Nomination and

Remuneration Committee members subsequent to the

meeting but prior to the Board meeting. This assists the

Nomination and Remuneration Committee Chairman to

effectively convey to the Board, matters deliberated at the

meeting. The minutes of the Nomination and Remuneration

Committee meetings are also distributed to Board for their

notation.

BOARD APPOINTMENT PROCESS

The Company practices a formal and transparent procedure

for appointment of new Directors. Nomination of Directors

to the Board is made either by PETRONAS being the

majority shareholder or through engagement of professional

recruitment firm to find suitable or best possible candidates

to fill in the position as the Independent Non-Executive

Directors.

All nominees to the Board are first considered by the

Nomination and Remuneration Committee, taking into

consideration the mix of skills, competencies, experience,

integrity and time commitment required to effectively

discharge his or her role as a director. Diversity in terms of

age, gender and ethnicity is also considered in ranking and

selecting the best candidates. This is to promote good

decision making by harnessing different insights and

perspectives.

The recommended candidate is then scheduled to meet

selected existing Directors and Chairman in an interview to

confirm suitability. The final decision is then made by the

Board.

DIRECTORS’ RE-ELECTION AND RE-APPOINTMENT

Since 2014, the Nomination and Remuneration Committee

has implemented a policy whereby independent non-

executive directors are appointed only for a tenure of three

years. Further extension to the tenure will be at the Board’s

discretion based on the performance of the Director.

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INSPIRING CHANGE

Based on the schedule of retirement by rotation, the

Nomination and Remuneration Committee is responsible

for recommending to the Board those Directors who are

eligible to stand for re-election or re-appointment. The

recommendation is based on the performance of the

Directors, taking into account the results of their latest

Board Evaluation, contribution to the Board through their

skills, experience, strengths and qualities, level of

independence and ability to act in the best interest of the

Company in decision making.

Article 93 of the Articles of Association of the Company

provides that one-third of the Directors of the Company for

the time being shall retire by rotation at an Annual General

Meeting of the Company provided always that all Directors,

shall retire from office once at least in each three years but

shall be eligible for re-election at the Annual General

Meeting.

The Nomination and Remuneration Committee at their

meeting held on 2 February 2016 recommended to the

Board for Nuraini Ismail and Lim Beng Choon to be retired

and put up for re-election at the 34th Annual General

Meeting. Both Nuraini Ismail and Lim Beng Choon are

eligible for re-election and had expressed their intention to

seek re-election.

During the year under review, Md Arif Mahmood and Ir

Mohamed Firouz Asnan were appointed as Non-Executive

Directors to the Board of the Company on 16 April 2015

and 6 October 2015 respectively. Article 96 of the Articles

of Association of the Company provides amongst others,

that the Board shall have the power to appoint any person

to be a Director to fill a casual vacancy or as an addition

to the existing Board, and that any Director so appointed

shall hold office until the next following Annual General

Meeting and shall then be eligible for re-election.

The Nomination and Remuneration Committee at their

meeting held on 2 February 2016 recommended to the

Board for Md Arif Mahmood and Ir Mohamed Firouz Asnan

to be put up for re-election under Article 96 at the

forthcoming Annual General Meeting.

ANNUAL ASSESSMENT

Every year, under the purview of the Nomination and

Remuneration Committee, a formal evaluation is undertaken

to assess the effectiveness of the following:

(a) The Board as a whole and the various Board Committees;

(b) Contribution of each Individual Director; and

(c) Independence of Independent Directors.

This is conducted through a Board Evaluation process

which consists of a Board and Peer Annual Assessment

(Board Evaluation). The Board Evaluation focuses on

maximising the effectiveness and performance of the Board

in the best interest of the Company.

ACTIVITIES OF THE NOMINATION AND REMUNERATION COMMITTEE

During the financial year under review, the Nomination and

Remuneration Committee carried out the following activities

in discharging its functions and duties:

(i) Board Evaluation

• Established the Individual Director Self/Peer

Evaluation Questionnaires to evaluate on the

following areas:

(a) Board structure;

(b) Board operation;

(c) Board’s roles and responsibilities;

(d) Chairman’s roles and responsibilities; and

(e) Roles of the Board Committees.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

NOMINATION AND REMUNERATIONCOMMITTEE REPORT (continued)

The areas evaluated for the individual Directors are

as follows:

(a) Dynamic and participation;

(b) Integrity and independence;

(c) Technical competencies; and

(d) Skills and contribution.

• Assessed the performance of the Board as whole,

its sub-committees and members through the

Board and Directors Evaluation exercise and initiated

action to work on areas which have been identified

for improvement.

(ii) Skills Evaluation

• Carried out a skill mapping exercise for the Directors

to review the mix of skills, education and business

experience as well as other qualities, including core

competencies of the Directors.

(iii) Board Membership

• Assisted the Board in defining and assessing

qualifications for Board membership and identify

qualified individuals.

• Recommended candidates to fill vacancies on the

Board.

• Recommended the Directors who are eligible for

re-election at the Annual General Meeting.

• Ensured the Board comprises members that are not

only equipped with the relevant skills and experience

but also taking into consideration time commitment

and diversity in terms of gender, ethnicity and age.

(iv) Performance Management

• Reviewed the objective setting and performance

evaluation of MD/CEO and the Management at the

onset of the year 2015.

• Reviewed the succession plan for the MD/CEO and

the Management.

• Reviewed the compensation and benefits structure

for the Management.

• Reviewed careers paths implementation in the

Company to ensure successful skills development

and retention.

(v) Directors’ Training

• Gathered inputs from the Directors and analysed

training needs.

• Identified programmes/events for the continuous

education of the Board members to ensure that

they are up-to-date on new regulations and

conversant with industry trends and developments.

Lim Beng Choon

Chairman

Nomination and Remuneration Committee

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INSPIRING CHANGE

1. PURPOSE

The Committee is to assist the Board of Directors (“the

Board”) in the following areas:-

a. Establish and assess membership qualifications for

the Board of Directors, including defining specific

criteria for Directors’ independence and committee

membership criteria;

b. Recommend to the Board on candidates for

directorship for both the Executives and Non-

Executives to the Board of the Company (in

consideration of the professionalism, mix of skills,

experience, personality, competency and integrity

as required therein);

c. Periodically assess the performance of the Board

as a whole, the various Committees of the Board

and the contribution of each individual Director;

and

d. Review and recommend the remuneration policies

and procedures which is used to determine

remuneration packages of Directors, including that

of the Chief Executive Officer (“CEO”) as well as the

key Senior Management personnel within the

Company.

2. SCOPE OF AUTHORITY

a. The Committee within the scope of its assigned

duties is authorised to seek any information it

requires from employees, company officers and

external parties;

b. The Committee may engage external consultants

and other Advisers or otherwise obtain such

independent legal or other professional services it

requires, at the expense of the Company; and

c. The Board will provide the Committee with

sufficient resources to undertake its duties,

including access to the company secretariat.

3. COMPOSITION

a. The Committee shall have at least three members;

b. Members shall be appointed by the Board from

amongst its members and shall comprise

exclusively of Non-Executive Directors, a majority

of whom must be independent;

c. The actual number of members shall be determined

from time to time by resolution of the Board; and

d. Members of the Committee should be suitably

knowledgeable in matters pertaining to Corporate

Governance.

4. REMOVAL AND RESIGNATION

a. The entire Committee or individual member may

be removed from office without cause by the

affirmed vote of a majority of the Board of

Directors;

b. Any committee member may resign effective

upon giving written notice to the Chairman of the

Board of Directors, the Company Secretary or the

Board of Directors (unless the notice specifies a

later time for the effectiveness of such resignation);

and

c. If the resignation of a member is effective at a

future time, the Board of Directors may elect a

successor to take office when the resignation

becomes effective.

5. QUORUM

The presence of two directors which includes one

Independent Non-Executive Director shall form a

quorum for the Committee Meetings.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

NOMINATION AND REMUNERATION COMMITTEE TERMS OF REFERENCE

6. CHAIRMAN

a. The Chairman may be designated by the Board

based upon recommendations by the Committee,

if any; and

b. In the absence of the Chairman, the remaining

members present shall elect one of their members

as Chairman of the meeting.

7. SECRETARY

The Secretary to the Committee shall be the Company

Secretary or any other person appointed by the

Committee.

8. MEETINGS AND MINUTES

a. The Committee shall meet at least once a year or

at such other times as the Chairman of the

Committee deems necessary;

b. In addition to the regular meeting schedule

established by the Committee, the Chairman of

the Committee may call a special meeting at any

time;

c. Meetings of the Committee shall be arranged by

the Secretary at the request of the Committee

Chairman or any other member of the Committee.

Unless otherwise agreed, notice of each meeting

confirming the venue, time and date shall be

forwarded to each Committee member and to

other attendees (as appropriate) in advance of

each scheduled meeting date together with an

agenda and supporting papers;

d. The Committee shall regulate its own detailed

procedures, in particular, the calling of meetings,

the notice to be given for meetings, the voting and

proceedings of meetings, the keeping of minutes

and the custody, production and inspection of

minutes;

e. Minutes of each meeting shall be distributed to

each member of the Committee;

f. Minutes of each meeting shall be distributed to

the Board for notation. Meeting minutes shall be

confirmed at the next meeting of the Committee

and shall be available on request from the

Secretary to all Non-Executive Directors;

g. Questions arising shall be decided by a majority of

votes. In the case of an equality of votes, the

Chairman of the meeting shall have a second or

casting vote provided that where two members

form a quorum, the Chairman of the meeting at

which only such a quorum is present, or at which

only two members are competent to vote on the

question at issue, shall not have a casting vote;

h. The Committee may also decide by way of the

Committee’s circular resolutions. A resolution in

writing signed or approved by letter by all the

members who may at the time be present in

Malaysia, being not less than two Directors are

sufficient to form a quorum shall be valid and

effectual as if it had been passed at a meeting of

the Nomination and Remuneration Committee

duly called and constituted. All such resolutions

shall be described as “Nomination and Remuneration

Committee Circular Resolutions” and shall be

forwarded or otherwise delivered to the Secretary

without delay and shall be recorded by the

Secretary in the Company’s minute book and

submitted for confirmation at the next Board

meeting, following the receipt thereof by the

Secretary; and

i. Attendance of other directors and employees at any

particular Committee meeting shall only be at the

Committee’s invitation, specific to the relevant

meeting.

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9. COMMITTEE EVALUATION

The Committee will annually complete a self-evaluation

of the Committee’s own performance and effectiveness.

The Committee will also consider whether any changes

to the Committee’s Terms of Reference are appropriate.

10. DUTIES AND RESPONSIBILITIES

The following shall be the common recurring duties

and responsibilities of the Committee in carrying out

its purposes. These duties and responsibilities are set

forth as a guide to the Committee with the

understanding that the Committee may alter or

supplement them as deemed appropriate under the

circumstances to the extent permitted by applicable

laws.

a. Board Composition:

i. The Committee shall review and assess the mix

of skills, expertise, composition, size and

experience of the Board, including core

competencies of the Non-Executive Directors,

as well as consider aspects of boardroom

diversity;

ii. The Committee shall make recommendations

with regard to any adjustments that are

deemed necessary as an outcome of the

review and assessment of the Board structure,

size and composition;

iii. The Committee shall make appropriate

recommendations to the Board on matters of

renewal or extension of Directors’ appointment

and reappointment of retiring Directors;

iv. The Committee shall be responsible for making

the recommendation to the Board and

reviewing potential candidates for both

Executive and Non-Executive Directorship on

the Board of the Company, as required, to

provide an appropriate balance of knowledge,

skills, experience and capability in meeting the

needs of the Company;

v. The Committee shall establish and provide an

on-going review of the membership

qualifications for the Board of Directors and

all Board Committees, including defining

specific criteria for Director’s independence

and committee membership criteria;

vi. The Committee shall monitor compliance

with Board of Directors and Board Committee

membership criteria; and

vii. The Committee shall be responsible for

overseeing the development of a succession

management plan for the Non-Executive

Directors.

b. Board Effectiveness Review:

i. The Committee shall assess:

a. the effectiveness of the Board as a

whole;

b. the Committees of the Board; and

c. the contribution of Directors, through

rigorously assessment and evaluation

processes.

All assessments and evaluations carried out

by the Committee in the discharge of all its

functions shall be properly documented; and

ii. The Committee shall provide oversight of the

performance and effectiveness of the self-

evaluation process for the Board and its

Committees.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

NOMINATION AND REMUNERATION COMMITTEE TERMS OF REFERENCE (continued)

c. Directors’ Development:

i. The Committee shall undertake the assessment

of Directors’ training and development needs

(e.g. seminars, training, programmes,

workshops and conferences) to further

enhance business acumen and professionalism

in discharging their duties to the Company;

and

ii. The Committee shall keep itself updated on

new regulations and requirements in relation

to governance.

d. Remuneration:

i. The Committee shall review and recommend

the Company’s framework, relating to the

policy and procedures in determining the

remuneration and compensation packages of

the Directors, including the CEO, Management

Committee members as well as the key

Senior Management personnel of the

Company; and

ii. The Committee shall review and recommend

the remuneration of Non-Executive Directors

to ensure that it is aligned to the market and

reflective of experience and expertise that

commensurate wi th the dut ies and

responsibilities.

e. The Committee shall also undertake the following

in relation to the Company’s CEO and key Senior

Management:-

i. The Committee shall, at least annually,

evaluate the CEO and Senior Management’s

performance as measured against the goals

and objectives of the Company; and

ii. The Committee shall oversee the development

of a succession management plan for the

CEO and Senior Management and shall make

an annual report to the Board.

f. General:

i. The Committee shall consider the appointment

of the service of such Advisors or Consultants

as it deems necessary to fulfil its functions;

and

ii. The Committee shall take such other actions

and do such other things as may be referred

to it from time to time by the Board.

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INSPIRING CHANGE

The financial statements of the Group and of the Company as set out on pages 206 to 283, are

properly drawn up so as to give a true and fair view of the state of affairs of the Group and the

Company as at 31 December 2015 and of the results of its operations and cash flows for the

financial period ended on that date.

The Directors consider the following in preparing the financial statements of the Group and of

the Company:

• appropriate accounting policies have been used and are consistently applied;

• reasonable and prudent judgements and estimates were made;

• the Companies Act, 1965 and Malaysian Financial Reporting Standards have been adhered to; and

• prepared on a going concern basis.

The Directors are also responsible for ensuring that the accounting and other records and

registers required by the Companies Act, 1965 to be retained by the Group and the Company

have been properly kept in accordance with the provisions of the said Companies Act, 1965.

The Directors also have general responsibilities for taking such steps that are reasonably available

to them to safeguard the assets of the Group and of the Company, and to prevent and detect

fraud and other irregularities.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

STATEMENT OFDIRECTORS’ RESPONSIBILITYIN RELATION TO THE FINANCIAL STATEMENTS

PDB has adopted the PETRONAS BCM Framework which

acts as its guideline to ensure its business remains resilient,

protected and continues to operate effectively in the event

of a crisis or during prolonged disruptions.

During the year under review, the Company revised its

Business Impact Analysis, where the data collected was

used to assist the management in deciding the most

appropriate Business Recovery Strategy for its respective

business lines and enabling entities. These critical inputs

were then incorporated into PDB’s BCP, which is the main

document for reference when faced with a crisis.

In ensuring the robustness of the BCP, PDB participated in

two simulation tests as follows:

(a) A simulation exercise was conducted on 26 November

2015 on the unavailability of office building as

workplace, specifically Menara Dayabumi (code named

Exercise Dayabumi-2). Menara Dayabumi is a regional

office for PDB and the CBF staff onsite were tested on

their preparedness to resume business operations

during a crisis.

(b) An integrated simulation exercise was conducted on

7 December 2015 on the unavailability of PETRONAS

Twin Towers (code named Exercise Siaga-3) as

workplace as well as to test the readiness and

effectiveness of PETRONAS Twin Towers BCP’s Crisis

Management and BCM plans. The simulation also

tested the level of preparedness of the CBF staff as

they were required to mobilise to alternate work sites/

virtual offices and resume business operations at

optimum levels.

Necessary information and feedback were gathered upon

the completion of each exercise and analysed for continuous

BCM improvement.

In summary, the Company recognises that unanticipated

events may happen which leads to business expectations

being compromised. As such, PDB will continue to adopt

and adapt the necessary BCM practices to ensure the

business resumes effectively, as well as protect the

Company’s reputation and stakeholders’ interests.

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BUSINESS CONTINUITYMANAGEMENT


206 Directors’ Report

211 Statement by Directors

212 Statutory Declaration

213 Consolidated Statement of Financial Position

214 Consolidated Statement of Profit or Loss and

Other Comprehensive Income

216 Consolidated Statement of Changes in Equity

217 Consolidated Statement of Cash Flows

218 Statement of Financial Position

219 Statement of Profit or Loss and Other

Comprehensive Income

220 Statement of Changes in Equity

221 Statement of Cash Flows

222 Notes to the Financial Statements

284 Independent Auditors’ Report to the Members


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

The Directors are pleased to submit their report and the audited financial statements of the Group and of the Company for

the financial year ended 31 December 2015.

PRINCIPAL ACTIVITIES

The principal activity of the Company during the course of the financial year remains unchanged as domestic marketing of

petroleum products.

The principal activities of the subsidiaries, associates and joint ventures are stated in Note 32, Note 33 and Note 34 to the

financial statements respectively. There has been no significant change in the nature of these activities during the financial

year.

RESULTS

Group Company

RM’000 RM’000

Profit for the year 794,624 758,518

Attributable to:

Shareholders of the Company 789,975 758,518

Non-controlling interests 4,649 –

794,624 758,518

DIVIDENDS

The dividends paid by the Company since the end of the previous financial year are as follows:

In respect of the financial year ended 31 December 2014:

(i) A single tier special interim dividend of 22.0 sen per ordinary share amounting to RM218,559,880 on 27 March 2015.

In respect of the financial year ended 31 December 2015:

(i) A single tier interim dividend of 12.0 sen per ordinary share amounting to RM119,214,480 on 25 June 2015;

(ii) A single tier interim dividend of 14.0 sen per ordinary share amounting to RM139,083,560 on 22 September 2015; and

(iii) A single tier interim dividend of 14.0 sen per ordinary share amounting to RM139,083,560 on 4 December 2015.

The Directors had on 19 February 2016 declared a single tier interim dividend of 20.0 sen per ordinary share amounting to RM198,690,800 in respect of the financial year ended 31 December 2015.

The financial statements for the current financial year do not reflect the declared interim dividend. The dividend will be accounted for in equity as an appropriation of retained profits in the financial year ending 31 December 2016.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

DIRECTORS’REPORTFOR THE YEAR ENDED 31 DECEMBER 2015

RESERVES AND PROVISIONS

There were no material transfers to and from reserves and provisions during the financial year other than as disclosed in the financial statements.

DIRECTORS OF THE COMPANY

Directors who served since the date of the last report are:

Md Arif bin Mahmood – appointed as Chairman on 16 April 2015

Mohd Ibrahimnuddin bin Mohd Yunus – Managing Director/CEO

Vimala a/p V R Menon

Lim Beng Choon

Nuraini binti Ismail

Erwin Miranda Elechicon

Datuk Anuar bin Ahmad

Mohamed Firouz bin Asnan – appointed on 6 October 2015

Datuk Wan Zulkiflee bin Wan Ariffin – retired as Chairman on 15 April 2015

Mohd Farid bin Mohd Adnan – resigned on 6 October 2015

DIRECTORS’ INTERESTS

The Directors in office at the end of the financial year who have interests and deemed interests in the shares of the Company and of its related corporations other than wholly owned subsidiaries (including the interests of the spouse and/or children of the Director who themselves are not Director of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:

Shares in PETRONAS Dagangan Berhad

Number of ordinary shares at RM1.00 each

Balance at Balance at

Name 1.1.2015 Bought Sold 31.12.2015

Mohd Ibrahimnuddin bin Mohd Yunus – 3,000 – 3,000

207

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DIRECTORS’ INTERESTS (CONTINUED)

Shares in PETRONAS Chemicals Group Berhad



Name 1.1.2015 Bought Sold 31.12.2015

Mohd Ibrahimnuddin bin Mohd Yunus 6,000 – – 6,000

Vimala a/p V R Menon 20,000 – – 20,000

Nuraini binti Ismail 10,000 – – 10,000

Datuk Anuar bin Ahmad 20,000 – 20,000 –


Name 16.4.2015 Bought Sold 31.12.2015

Md Arif bin Mahmood 20,000 – – 20,000


Name 6.10.2015 Bought Sold 31.12.2015

Mohamed Firouz bin Asnan 6,000 – – 6,000

Shares in PETRONAS Gas Berhad



Name 1.1.2015 Bought Sold 31.12.2015

Nuraini binti Ismail 5,000 – – 5,000

None of the other Directors holding office at 31 December 2015 had any interest in the ordinary shares of the Company

and of its related corporations during the financial year.

DIRECTORS’REPORT (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no Director of the Company has received or become entitled to receive any

benefit (other than the benefit included in the aggregate amount of emoluments received or due and receivable by Directors

as shown in 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 the Director is a member, or with a company in which the Director has a substantial

financial interest.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the

Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body

corporate.

ISSUE OF SHARES

There were no changes in the issued and paid up capital of the Company during the financial year.

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up unissued shares of the Company during the financial year.

OTHER STATUTORY INFORMATION

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to

ascertain that:

(i) all known bad debts have been written off and adequate provision made for doubtful debts, and

(ii) any current assets which were unlikely to be realised, in the ordinary course of business, have been written down to an amount which they might be expected so to realise.

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

(i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts in the Group and in the Company inadequate to any substantial extent, or

(ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or

(iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or

(iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading.

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OTHER STATUTORY INFORMATION (CONTINUED)

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

(i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or

(ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

In the opinion of the Directors, the financial performance of the Group and of the Company for the financial year ended 31 December 2015 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

AUDITORS

The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directors

in accordance with a resolution of the Directors:

MD ARIF BIN MAHMOOD


Kuala Lumpur,

Date: 19 February 2016

DIRECTORS’REPORT (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

In the opinion of the Directors, the financial statements set out on pages 213 to 282 are drawn up in accordance with

Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies

Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company at 31

December 2015 and of their financial performance and cash flows for the year ended on that date.

In the opinion of the Directors, the information set out in Note 38 on page 283 to the financial statements has been

compiled in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or

Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the

Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Signed on behalf of the Board of Directors

in accordance with a resolution of the Directors:

MD ARIF BIN MAHMOOD


Kuala Lumpur,


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STATEMENT BYDIRECTORS

I, PUTERI LIZA ELLI SUKMA, the officer primarily responsible for the financial management of PETRONAS Dagangan Berhad,

do solemnly and sincerely declare that the financial statements set out on pages 213 to 283, 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.

Subscribed and solemnly declared by the abovenamed

PUTERI LIZA ELLI SUKMA at KUALA LUMPUR

in WILAYAH PERSEKUTUAN on 19 February 2016.

BEFORE ME:

COMMISSIONER OF OATHS


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

STATUTORYDECLARATION

Note2015

RM’0002014

RM’000

ASSETS

Property, plant and equipment 3 3,989,865 4,031,094

Prepaid lease payments 4 491,950 500,908

Investments in associates 6 3,015 2,781

Investments in joint ventures 7 10,281 6,736

Deferred tax assets 17 9,412 8,227

TOTAL NON-CURRENT ASSETS 4,504,523 4,549,746

Inventories 9 625,558 1,031,957

Trade and other receivables 10 1,649,252 2,119,144

Cash and cash equivalents 11 1,258,637 1,839,684

Assets classified as held for sale 12 32,635 –

TOTAL CURRENT ASSETS 3,566,082 4,990,785

TOTAL ASSETS 8,070,605 9,540,531

EQUITY

Share capital 13 993,454 993,454

Reserves 14 3,958,865 3,758,725

Total equity attributable to shareholders of the Company 4,952,319 4,752,179

Non-controlling interests 15 31,693 39,644

TOTAL EQUITY 4,984,012 4,791,823

LIABILITIES

Borrowings 16 113,321 134,726

Deferred tax liabilities 17 153,066 140,189

Other long term liabilities and provisions 18 27,427 29,120

TOTAL NON-CURRENT LIABILITIES 293,814 304,035

Borrowings 16 98,499 359,638

Trade and other payables 19 2,602,174 4,059,457

Taxation 67,600 25,578

Liabilities classified as held for sale 12 24,506 –

TOTAL CURRENT LIABILITIES 2,792,779 4,444,673

TOTAL LIABILITIES 3,086,593 4,748,708

TOTAL EQUITY AND LIABILITIES 8,070,605 9,540,531

The notes on pages 222 to 283 are an integral part of these financial statements.

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INSPIRING CHANGE

CONSOLIDATED STATEMENT OFFINANCIAL POSITIONAT 31 DECEMBER 2015

Note2015

RM’0002014

RM’000

Revenue

– sales of petroleum products 25,145,940 32,321,470

– rendering of services 25,270 19,528

25,171,210 32,340,998

Cost of revenue

– cost of petroleum products (23,110,473) (30,404,491)

– cost of services (27,852) (27,989)

(23,138,325) (30,432,480)

Gross profit 2,032,885 1,908,518

Selling and distribution expenses (280,669) (350,969)

Administration expenses (985,027) (1,033,502)

Other income 327,124 204,348

Operating profit 20 1,094,313 728,395

Financing costs 21 (13,444) (21,009)

Share of profit after tax of equity accounted associates and joint ventures 3,779 1,906

Profit before taxation 1,084,648 709,292

Tax expense 22 (290,024) (201,142)

PROFIT FOR THE YEAR 794,624 508,150

Other comprehensive income

Items that may be reclassified subsequently to profit or loss

Exchange differences arising from translation of financial statements of foreign operations 29,175 11,858

TOTAL OTHER COMPREHENSIVE INCOME FOR THE YEAR 29,175 11,858

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 823,799 520,008


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

CONSOLIDATED STATEMENT OFPROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2015

Note2015

RM’0002014

RM’000

Profit attributable to:


Non-controlling interests 4,649 6,578

PROFIT FOR THE YEAR 794,624 508,150

Total comprehensive income attributable to:


Non-controlling interests 4,649 6,578

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 823,799 520,008

Earnings per ordinary share

Basic 25 79.5 sen 50.5 sen


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INSPIRING CHANGE

<--Attributable to the shareholders of the Company-->

<------------ Non-distributable ------------> Distributable

Note

Sharecapital

RM’000

Foreigncurrency

translation reserveRM’000

CapitalreserveRM’000

Retainedprofits

RM’000Total

RM’000

Non-controlling

interestsRM’000

Totalequity

RM’000

At 1 January 2014 993,454 (820) (44,053) 3,841,535 4,790,116 39,366 4,829,482

Exchange difference arising from translation of financial statements of foreign operations – 11,858 – – 11,858 – 11,858

Profit for the year – – – 501,572 501,572 6,578 508,150

Total comprehensive income for the year – 11,858 – 501,572 513,430 6,578 520,008

Dividends paid 23 – – – (551,367) (551,367) (6,300) (557,667)

At 31 December 2014 993,454 11,038 (44,053) 3,791,740 4,752,179 39,644 4,791,823

Note 13 Note 14 Note 14 Note 14 Note 15

At 1 January 2015 993,454 11,038 (44,053) 3,791,740 4,752,179 39,644 4,791,823

Exchange difference arising from translation of financial statements of foreign operations – 29,175 – – 29,175 – 29,175

Profit for the year – – – 789,975 789,975 4,649 794,624

Total comprehensive income for the year – 29,175 – 789,975 819,150 4,649 823,799

Waiver of loan for a subsidiary acquired under common control business combination in prior year – – (3,069) – (3,069) – (3,069)

Dividends paid 23 – – – (615,941) (615,941) (12,600) (628,541)

Total transactions with shareholders of the Company – – (3,069) (615,941) (619,010) (12,600) (631,610)

At 31 December 2015 993,454 40,213 (47,122) 3,965,774 4,952,319 31,693 4,984,012

Note 13 Note 14 Note 14 Note 14 Note 15



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2015

2015RM’000

2014RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers 25,547,500 33,057,234

Cash paid to suppliers and employees (24,685,761) (30,267,119)

861,739 2,790,115

Interest expenses paid (2,325) (3,267)

Taxation paid (242,775) (236,837)

Net cash generated from operating activities 616,639 2,550,011

CASH FLOWS FROM INVESTING ACTIVITIES

Interest income from fund and other investments 54,554 23,534

Acquisition of a joint venture – (1,028)

Advances to a joint venture – (3,067)

Purchase of property, plant and equipment (315,010) (395,062)

Prepayment of leases (21,012) (42,392)

Proceeds from disposal of property, plant and equipment 9,550 8,872

Net cash used in investing activities (271,918) (409,143)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid (615,941) (551,367)

Dividends paid to non-controlling interests (12,600) (6,300)

Net repayment of term loan (10,066) (2,146)

Net (repayment)/drawdown of Islamic medium term notes (300,000) 300,000

Net (repayment)/drawdown of Islamic financing facilities (16,550) 6,933

Net drawdown/(repayment) of revolving credit facilities 42,288 (397,152)

Interest paid on term loan (1,512) (1,277)

Profit margin paid for Islamic medium term notes (5,281) (5,368)

Profit margin paid for Islamic financing facilities (4,891) (4,498)

Net cash used in financing activities (924,553) (661,175)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (579,832) 1,479,693

NET FOREIGN EXCHANGE DIFFERENCES 4,541 1,358

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 1,839,684 358,633

CASH AND CASH EQUIVALENTS AT END OF THE YEAR (Note 11) 1,264,393 1,839,684

Included in Cash and Cash Equivalents at end of the year is an amount of RM5,756,000 categorised as Disposal Group Held

for Sale as disclosed in Note 12.


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CONSOLIDATED STATEMENT OFCASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2015

Note2015

RM’0002014

RM’000

ASSETS

Property, plant and equipment 3 3,614,346 3,676,113

Prepaid lease payments 4 491,950 500,908

Investments in subsidiaries 5 283,425 254,721

Investments in associates 6 1,959 1,959

Investments in joint ventures 7 25 25

Long term receivable 8 14,231 26,507

TOTAL NON-CURRENT ASSETS 4,405,936 4,460,233

Inventories 9 556,560 987,556



TOTAL CURRENT ASSETS 3,237,363 4,785,351

TOTAL ASSETS 7,643,299 9,245,584

EQUITY

Share capital 13 993,454 993,454

Reserves 14 3,925,080 3,785,572

TOTAL EQUITY 4,918,534 4,779,026

LIABILITIES

Deferred tax liabilities 17 133,691 125,304

Other long term liabilities and provisions 18 25,160 28,336

TOTAL NON-CURRENT LIABILITIES 158,851 153,640

Borrowings 16 – 300,000

Trade and other payables 19 2,495,835 3,985,113

Taxation 70,079 27,805

TOTAL CURRENT LIABILITIES 2,565,914 4,312,918

TOTAL LIABILITIES 2,724,765 4,466,558

TOTAL EQUITY AND LIABILITIES 7,643,299 9,245,584



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STATEMENT OFFINANCIAL POSITIONAT 31 DECEMBER 2015

Note2015

RM’0002014

RM’000

Revenue 24,258,120 31,854,308

Cost of revenue (22,430,146) (30,051,715)

Gross profit 1,827,974 1,802,593

Selling and distribution expenses (239,647) (326,323)

Administration expenses (893,525) (953,313)

Other income 344,818 229,911

Operating profit 20 1,039,620 752,868

Financing costs 21 (5,709) (15,562)


Tax expense 22 (275,393) (207,829)

PROFIT/TOTAL COMPREHENSIVE INCOME FOR THE YEAR 758,518 529,477


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STATEMENT OFPROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2015

Attributable to shareholders of the<----------------- Company ----------------->

Non-distributable Distributable

Note

Sharecapital

RM’000

CapitalreserveRM’000

Retainedprofits

RM’000

Totalequity

RM’000

At 1 January 2014 993,454 26,920 3,780,542 4,800,916

Profit/total comprehensive income for the year – – 529,477 529,477

Dividends paid 23 – – (551,367) (551,367)

At 31 December 2014/1 January 2015 993,454 26,920 3,758,652 4,779,026

Profit/total comprehensive income for the year – – 758,518 758,518

Waiver of loan for a subsidiary acquired under common control business combination in prior year – (3,069) – (3,069)

Dividends paid 23 – – (615,941) (615,941)

At 31 December 2015 993,454 23,851 3,901,229 4,918,534

Note 13 Note 14 Note 14



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STATEMENT OFCHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2015

2015RM’000

2014RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers 24,647,481 32,431,475

Cash paid to suppliers and employees (23,801,289) (29,684,354)

846,192 2,747,121

Interest expenses paid – (2,490)

Taxation paid (224,732) (231,161)

Net cash generated from operating activities 621,460 2,513,470

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in subsidiary – (30,723)

Dividends received 23,400 11,700

Interest income from fund and other investments 52,760 21,252

Purchase of property, plant and equipment (292,994) (349,544)

Prepayment of leases (21,012) (42,392)

Proceeds from disposal of property, plant and equipment 9,550 8,862

Proceeds from redemption of redeemable preference shares 8,000 –

Advances to a subsidiary (15,000) –

Net cash used in investing activities (235,296) (380,845)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid (615,941) (551,367)

Net repayment of revolving credit – (400,000)

Net (repayment)/drawdown of Islamic medium term notes (300,000) 300,000

Profit margin paid for Islamic medium term notes (5,281) (5,368)

Net cash used in financing activities (921,222) (656,735)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (535,058) 1,475,890

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 1,754,464 278,574

CASH AND CASH EQUIVALENTS AT END OF THE YEAR (Note 11) 1,219,406 1,754,464


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STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2015

1. BASIS OF PREPARATION

1.1 Statement of Compliance

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian

Financial Reporting Standards (“MFRS”), International Financial Reporting Standards and the requirements of

Companies Act, 1965 in Malaysia.

These financial statements also comply with the applicable disclosure provisions of the Listing Requirements of

Bursa Malaysia Securities Berhad.

As of 1 January 2015, the Group and the Company adopted amendments to MFRS and IC Interpretations

(collectively referred to as “pronouncements”) that have been issued by the Malaysian Accounting Standards Board

(“MASB”) as described in Note 35.

The adoption of these pronouncements do not have any material impact to the financial statements of the Group

and of the Company.

MASB has also issued new and revised pronouncements which are not yet effective for the Group and the

Company and therefore have not been adopted in these financial statements. These pronouncements are set out

in Note 36.

These financial statements were approved and authorised for issue by the Board of Directors on 19 February 2016.

1.2 Basis of Measurement

The financial statements of the Group and the Company have been prepared on historical cost basis except for,

as disclosed in the accounting policies below, certain items which are measured at fair value.

1.3 Functional and Presentation Currency

The individual financial statements of each entity in the Group are measured using the currency of the primary

economic environment in which the entity operates (“the functional currency”). The Group’s and the Company’s

financial statements are presented in Ringgit Malaysia (“RM”), which is also the Company’s functional currency.

1.4 Use of Estimates and Judgements

The preparation of financial statements in conformity with MFRS requires management to make judgements,

estimates and assumptions that affect the application of accounting policies and the reported amounts of assets,

liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are

recognised in the period in which the estimates are revised and in any future periods affected.


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NOTES TO THEFINANCIAL STATEMENTS31 DECEMBER 2015

1. BASIS OF PREPARATION (CONTINUED)

1.4 Use of Estimates and Judgements (continued)

In particular, information about significant areas of estimation uncertainty and critical judgements in applying

accounting policies that have the most significant effect on the amount recognised in the financial statements are

described in the following notes:

(i) Note 2.4 and Note 3 : Property, Plant and Equipment;

(ii) Note 2.5 and Note 4 : Prepaid Lease Payments;

(iii) Note 10 : Trade and Other Receivables;

(iv) Note 2.12 and Note 18 : Other Long Term Liabilities and Provisions;

(v) Note 2.14 and Note 17 : Deferred Tax;

(vi) Note 2.19 and Note 19 : Deferred Revenue; and

(vii) Note 2.22 and Note 29 : Financial Instruments

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these financial

statements and have been applied consistently by the Group and the Company, unless otherwise stated.

2.1 Basis of Consolidation

Subsidiaries

Subsidiaries are entities controlled by the Company. The Group controls an entity when it is exposed to, or has

rights to, variable returns from its involvement with the entity and has the ability to affect those returns through

its power over the entity. Potential voting rights are considered when assessing control only when such rights are

substantive. The Group considers it has de facto power over an investee when, despite not having the majority of

voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s

return.

The financial statements of subsidiaries are included in the consolidated financial statements of the Group from

the date that control commences until the date that control ceases.

All inter-companies transactions are eliminated on consolidation and revenue and profits relate to external

transactions only. Unrealised losses resulting from inter-companies transactions are also eliminated unless cost

cannot be recovered.

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2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of Consolidation (continued)

Business Combinations

A business combination is a transaction or other event in which an acquirer obtains control of one or more

businesses. Business combinations are accounted for using the acquisition method. The identifiable assets acquired

and liabilities assumed are measured at their fair values at the acquisition date. The cost of an acquisition is

measured as the aggregate of the fair value of the consideration transferred and the amount of any non-controlling

interests in the acquiree. Non-controlling interests are stated either at fair value or at the proportionate share of

the acquiree’s identifiable net assets at the acquisition date.

When a business combination is achieved in stages, the Group remeasures its previously held non-controlling

equity interest in the acquiree at fair value at the acquisition date, with any resulting gain or loss recognised in the

profit or loss. Increase in the Group’s ownership interest in an existing subsidiary is accounted for as equity

transactions with differences between the fair value of consideration paid and the Group’s proportionate share of

net assets acquired, recognised directly in equity.

The Group measures goodwill as the excess of the cost of an acquisition as defined above and the fair values of

any previously held interest in the acquiree over the fair value of the identifiable assets acquired and liabilities

assumed at the acquisition date. When the excess is negative, a bargain purchase gain is recognised immediately

in profit or loss.

Goodwill arising from business combinations prior to 1 October 2009 is stated at the previous carrying amount

less subsequent impairments, pursuant to the adoption of MFRS framework by the Group in the financial year

ended 31 December 2012.

Transaction costs, other than those associated with the issuance of debt or equity securities that the Group incurs

in connection with a business combination, are expensed as incurred.

Non-controlling Interests

Non-controlling interests at the reporting period, being the portion of the net assets of subsidiaries attributable to

equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries, are

presented in the consolidated statement of financial position and statement of changes in equity within equity,

separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the

results of the Group are presented in the consolidated statement of profit or loss and other comprehensive income

as an allocation of the profit or loss and other comprehensive income for the year between the non-controlling

interests and shareholders of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even

if doing so causes the non-controlling interests to have a deficit balance.

NOTES TO THEFINANCIAL STATEMENTS (continued)


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2.1 Basis of Consolidation (continued)

Non-controlling Interests (continued)

The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as

equity transactions between the Group and its non-controlling interest holders. Any difference between the

Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or

against Group reserves.

Loss of Control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the subsidiary, any

non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit

arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous

subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted

for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence

retained.

2.2 Associates

Associates are entities in which the Group has significant influence including representation on the Board of

Directors, but not control or joint control, over the financial and operating policies of the investee company.

Associates are accounted for in the consolidated financial statements using the equity method. The consolidated

financial statements include the Group’s share of post-acquisition profits or losses and other comprehensive

income of the equity accounted associates, after adjustments to align the accounting policies with those of the

Group, from the date that significant influence commences until the date that significant influence ceases.

The Group’s share of post-acquisition reserves and retained profits less losses is added to the carrying value of

the investment in the consolidated statement of financial position. These amounts are taken from the latest audited

financial statements or management financial statements of the associates.

When the Group’s share of post-acquisition losses exceeds its interest in an equity accounted associate, the

carrying amount of that interest (including any long term investments) is reduced to nil and the recognition of

further losses is discontinued except to the extent that the Group has an obligation or has made payments on

behalf of the associate.

When the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the

entire interest in that associate, with the resulting gain or loss being recognised in profit or loss. Any retained

interest in the former associate at the date when significant influence is lost is remeasured at fair value and this

amount is regarded as the initial carrying amount of a financial asset.

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2.2 Associates (continued)

When the Group’s interest in an associate decreases but does not result in a loss of significant influence, any

retained interest is not remeasured. Any gain or loss arising from the decrease in interest is recognised in profit

or loss. Any gains or losses previously recognised in other comprehensive income are also reclassified

proportionately to the profit or loss, if that gain or loss would be required to be reclassified to profit or loss on

the disposal of the related assets and liabilities.

Investments in associates are measured in the Company’s statement of financial position at cost less any

impairment losses, unless the investment is classified as held for sale or distribution. The cost of investments

includes transactions costs.

Unrealised profits arising from transactions between the Group and its associates are eliminated to the extent of

the Group’s interests in the associates. Unrealised losses on such transaction are also eliminated partially, unless

cost cannot be recovered.

2.3 Joint Arrangements

Joint arrangements are arrangements in which the Group has joint control, established by contracts requiring

unanimous consent for decisions about the activities that significantly affect the arrangements’ returns.

Joint arrangements are classified as either joint operation or joint venture. A joint arrangement is classified as joint

operation when the Group or the Company has rights to the assets and obligations for the liabilities relating to an

arrangement. The Group and the Company account for each of its share of the assets, liabilities and transactions,

including its share of those held or incurred jointly with the other investors, in relation to the joint operation. A

joint arrangement is classified as joint venture when the Group has rights only to the net assets of the arrangements.

The Group accounts for its interest in the joint venture using the equity method.

2.4 Property, Plant and Equipment

Freehold land and projects-in-progress are stated at cost less accumulated impairment losses and are not

depreciated. Other property, plant and equipment are stated at cost less accumulated depreciation and accumulated

impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly

attributable to bringing the assets to working condition for their intended use, and the costs of dismantling and

removing the items and restoring the site on which they are located. The cost of self-constructed assets also

includes the costs of materials and direct labour. For qualifying asset, borrowing costs are capitalised in accordance

with the accounting policy on borrowing costs. Purchased software that is integral to the functionality of the

related equipment is capitalised as part of that equipment.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted

for as separate items (major components) of property, plant and equipment.



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2.4 Property, Plant and Equipment (continued)

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying

amount of the item if it is probable that the future economic benefits embodied within the component will flow

to the Group or the Company and its cost can be measured reliably. The carrying amount of the replaced item

of property, plant and equipment is derecognised with any corresponding gain or loss recognised in the profit or

loss accordingly. The costs of the day-to-day servicing of property, plant and equipment are recognised in the

profit or loss as incurred.

Depreciation for property, plant and equipment other than freehold land and projects-in-progress, is recognised

in the profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property,

plant and equipment.

Property, plant and equipment are not depreciated until the assets are ready for their intended use.

Buildings are depreciated over 20 – 30 years or over the remaining land lease year, whichever is shorter.

Lease properties are depreciated over the lease term or the estimated useful lives, whichever is shorter. Leasehold

land is depreciated over the lease term. The leasehold land are categorised into long lease and short lease. Long

lease is defined as a lease with an unexpired lease year of fifty years or more. Short lease is defined as a lease

with an unexpired lease year of less than fifty years.

The estimated useful lives of the other property, plant and equipment are as follows:

• Plant, machinery, tankage and pipeline 2 – 30 years

• Office equipment, furniture and fittings 3 – 10 years

• Motor vehicles 4 – 15 years

• Computer hardware and software 5 years

The depreciable amount is determined after deducting residual value. The residual value, useful life and depreciation

method are reviewed at each financial year end to ensure that the amount, period and method of depreciation

are consistent with previous estimates and the expected pattern of consumption of the future economic benefits

embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are

expected from its use or disposal. The difference between the net disposal proceeds, if any, and the net carrying

amount is recognised in the profit or loss.

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2.5 Leased Assets

A lease arrangement is accounted for as finance or operating lease in accordance with the accounting policy

stated below. When the fulfilment of an arrangement is dependent on the use of a specific asset and the

arrangement conveys a right to use the asset, it is accounted for as a lease although the arrangement does not

take the legal form of a lease.

(i) Finance Lease

A lease is recognised as a finance lease if it transfers substantially to the Group and the Company all the risks

and rewards incidental to ownership. Upon initial recognition, the leased asset is measured at an amount

equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial

recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. The

corresponding liability is included in the statement of financial position as borrowings.

Minimum lease payments made under finance leases are apportioned between the finance costs and the

reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing

commitments and the fair value of the assets acquired, are recognised in the profit or loss and allocated over

the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability

for each accounting period.

(ii) Prepaid Lease Payments

Leases of a leasehold land which in substance is a finance lease is classified as property, plant and equipment.

The remaining leases of a leasehold land which is not in substance a finance lease, together with prepaid

rental for service station sites and depots, are operating leases and recognised as prepaid lease payments.

The payment made on entering into or acquiring such leasehold land and prepaid rental arrangement is

amortised over the lease term in accordance with the pattern of benefits provided.

Prepaid lease payments are recognised as an expense in the profit or loss on a straight-line basis over the

term of the lease or the year of the agreements.

2.6 Investments

Long term investments in subsidiaries, associates and joint ventures are stated at cost less impairment loss, if any,

in the Company’s financial statements, unless the investment is classified as held for sale or distribution. The cost

of investments includes transaction costs.

The carrying amount of these investments includes fair value adjustments on shareholder’s loans and advances, if

any.



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2.7 Non-Current Assets Held for Sale

Non-current assets and disposal groups comprising assets and liabilities that are expected to be recovered primarily

through sale rather than through continuing use, are classified as held for sale. This condition is regarded as met

only when the sale is highly probable and the asset is available for immediate sale in its present condition.

Immediately before classification as held for sale, the assets (or all the assets and liabilities in a disposal group) are

remeasured in accordance with the Group’s applicable accounting policies. Thereafter, on initial classification as

held for sale, the assets or disposal group are measured at the lower of carrying amount and fair value less cost

to sell. Any differences are charged to the profit or loss.

Intangible assets, property, plant and equipment and investment properties once classified as held for sale are not

amortised or depreciated. In addition, equity accounting of equity-accounted investees ceases once classified as

held for sale.

2.8 Financial Instruments

A financial instrument is recognised in the statement of financial position when, and only when, the Group or the

Company becomes a party to the contractual provisions of the instrument.

(i) Financial Assets

Initial Recognition

Financial assets are classified as financial assets at fair value through profit or loss, loans and receivables, held-

to-maturity investments or available-for-sale financial assets, as appropriate. The Group and the Company

determine the classification of financial assets at initial recognition.

Financial assets are recognised initially at fair value, normally being the transaction price plus, in the case of

financial assets not at fair value through profit or loss, any directly attributable transaction costs.

Purchases or sales that require delivery of financial assets within a timeframe established by regulation or

convention in the marketplace concerned (“regular way purchases”) are recognised on the trade date i.e. the

date that the Group and the Company commit to purchase or sell the financial asset.

Fair value adjustments on shareholder’s loans and advances at initial recognition, if any, are added to the

carrying value of investments in the Company’s financial statements.

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2.8 Financial Instruments (continued)

(i) Financial Assets (continued)

Subsequent Measurement

Financial assets at fair value through profit or loss

Fair value through profit or loss category comprises financial assets that are held for trading, including

derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging

instrument), contingent consideration in a business combination and financial assets that are specifically

designated into this category upon initial recognition.

Financial assets categorised as fair value through profit or loss are subsequently measured at their fair value with

gains or losses recognised in the profit or loss. The methods used to measure fair value are stated in Note 2.22.

Loans and receivables

Loans and receivables category comprises debt instruments that are not quoted in an active market.

Subsequent to initial recognition, financial assets categorised as loans and receivables are measured at

amortised cost using the effective interest method.

Held-to-maturity investments

Held-to-maturity investments category comprises debt instruments that are quoted in an active market and

the Group or the Company has positive intention and ability to hold the assets to maturity. Subsequent to

initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest

method.

The Group and the Company did not have any held-to-maturity investments during the year ended 31

December 2015.

Available-for-sale financial assets

Available-for-sale category comprises investment in equity and debt securities instruments that are not held

for trading.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair

value cannot be reliably measured are measured at cost. Other financial assets categorised as available-for-

sale are subsequently measured at fair value with unrealised gains and losses recognised directly in other

comprehensive income and accumulated under available-for-sale reserve in equity until the investment is

derecognised or determined to be impaired, at which time the cumulative gain or loss previously recorded in

equity is recognised in the profit or loss.

The Group and the Company did not have any available-for-sale investments during the year ended 31

December 2015.



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(ii) Financial Liabilities

Initial Recognition

Financial liabilities are classified as financial liabilities at fair value through profit or loss or loans and

borrowings, as appropriate. The Group and the Company determine the classification of financial liabilities at

initial recognition.

Financial liabilities are recognised initially at fair value less, in the case of loans and borrowings, any directly

attributable transaction costs.

Subsequent Measurement

Financial liabilities at fair value through profit or loss

Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a

derivative that is a financial guarantee contract or a designated and effective hedging instrument), contingent

consideration in a business combination and financial liabilities that are specifically designated into this

category upon initial recognition.

Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair value

with gains or losses recognised in the profit or loss.

Loans and borrowings

Subsequent to initial recognition, loans and borrowings are measured at amortised cost using the effective

borrowing cost/interest method.

Gains and losses are recognised in the profit or loss when the liabilities are derecognised as well as through

the amortisation process.

(iii) Derivative financial instruments

The Group and the Company use derivative financial instruments such as forward rate contracts to manage

certain exposures to fluctuations in foreign currency exchange rates.

Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract

is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when

the fair value is positive and as financial liabilities when the fair value is negative.

Any gains and losses arising from changes in fair value on derivatives during the year are taken directly to the

profit or loss.

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(iii) Derivative financial instruments (continued)

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if,

and only if, it is not closely related to the economic characteristics and risks of the host contract and the

host contract is not categorised as at fair value through profit or loss. The host contract, in the event an

embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the

nature of the host contract.

In general, contracts to sell or purchase non-financial items to meet expected own use requirements are not

accounted for as financial instruments. However, contracts to sell or purchase commodities that can be net

settled or which contain written options are required to be recognised at fair value, with gains and losses

taken to the profit or loss.

(iv) Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial

position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there

is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

(v) Amortised Cost of Financial Instruments

Amortised cost is computed using the effective interest method. This method uses effective interest rate that

exactly discounts estimated future cash receipts or payments through the expected life of the financial

instrument to the net carrying amount of the financial instrument. Amortised cost takes into account any

transaction costs and any discount or premium on settlement.

(vi) Derecognition of Financial Instruments

Financial Assets

A financial asset is derecognised when the rights to receive cash flows from the asset have expired or, the

Group and the Company have transferred their rights to receive cash flows from the asset or have assumed

an obligation to pay the received cash flows in full without material delay to a third party under a “pass-

through” arrangement without retaining control of the asset or substantially all the risks and rewards of the

asset. On de-recognition of a financial asset, the difference between the carrying amount and the sum of the

consideration received (including any new asset obtained less any new liability assumed) and any cumulative

gain or loss that had been recognised in equity is recognised in the profit or loss.

Financial Liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired.

On de-recognition of a financial liability, the difference between the carrying amount of the financial liabilities

extinguished or transferred to another party and the consideration paid, including any non-cash assets

transferred or liabilities assumed, is recognised in the profit or loss.



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FINANCIAL REVIEW

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INSPIRING CHANGE


2.9 Impairment

(i) Financial Assets

All financial assets (except for financial assets categorised as fair value through profit or loss, investments in

subsidiaries and investments in associates and investments in joint ventures) are assessed at each reporting

date to determine whether there is any objective evidence of impairment as a result of one or more events

having an impact on the estimated future cash flows of the asset. Losses expected as a result of future events,

no matter how likely, are not recognised. For an investment in an equity instrument, a significant or prolonged

decline in the fair value below its cost is an objective evidence of impairment. If any such objective evidence

exists, then the financial asset’s recoverable amount is estimated.

An impairment loss in respect of loans and receivables and held-to-maturity investments is recognised in

profit or loss and is measured as the difference between the asset’s carrying amount and the present value

of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount

of the asset is reduced through the use of an allowance account.

An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is

measured as the difference between the asset’s acquisition cost (net of any principal repayment and

amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a

decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive

income, the cumulative loss in other comprehensive income is reclassified from equity to profit or loss.

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profit or

loss and is measured as the difference between the financial asset’s carrying amount and the present value

of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available-

for-sale are not reversed through profit or loss.

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively

related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss

is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would

have been had the impairment not been recognised at the date the impairment is reversed. The amount of

the reversal is recognised in profit or loss.

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2.9 Impairment (continued)

(ii) Other Assets

The carrying amounts of other assets, other than inventories, amount due from contract customers, deferred

tax assets and financial assets (financial assets in this context exclude investments in subsidiaries, associates

and joint ventures), are reviewed at each reporting date to determine whether there is any indication of

impairment.

If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised if

the carrying amount of an asset or the cash-generating unit to which it belongs exceeds its recoverable

amount. Impairment losses are recognised in the profit or loss.

A cash-generating unit is the smallest identifiable asset group that generates cash flows from continuing use

that are largely independent from other assets and groups. Impairment losses recognised in respect of cash-

generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and

then to reduce the carrying amounts of the other assets in the unit on a pro-rata basis.

The recoverable amount is the greater of the asset’s fair value less cost to sell and its value in use. In assessing

the value in use, the estimated future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money and the risks specific to

the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is

determined for the cash-generating unit to which the asset belongs.

An impairment loss in respect of goodwill is not reversed in the subsequent year. In respect of other assets,

impairment losses are reversed if there has been a change in the estimates used to determine the recoverable

amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed

the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment

loss had been recognised.

Reversals of impairment losses are credited to the profit or loss in the year in which the reversals are

recognised, unless it reverses an impairment loss on a revalued asset, in which case it is credited directly to

revaluation surplus. Where an impairment loss on the same revalued asset was previously recognised in the

profit or loss, a reversal of that impairment loss is also recognised in the profit or loss.

2.10 Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, bank balances and deposits with licensed financial institutions

and highly liquid investments which have insignificant risk of changes in value. For the purpose of the statements

of cash flows, cash and cash equivalents are presented net of bank overdrafts and deposits restricted, if any.



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2.11 Inventories

Inventories of petroleum products and non-tradeable spare parts are stated at the lower of cost and net realisable

value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated

costs of completion and selling expenses.

Cost of petroleum products includes direct costs and transportation charges necessary to bring the inventories

to their present locations and condition and is determined on the weighted average basis.

The cost of spare parts is the invoiced value from suppliers.

2.12 Provisions

A provision is recognised if, as a result of a past event, the Group and the Company have a present legal or

constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits

will be required to settle the obligation. Provisions are determined by discounting the expected future net cash

flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific

to the liability. Where discounting is used, the accretion in the provision due to the passage of time is recognised

as finance cost.

The amount recognised as a provision is the best estimate of the expenditure required to settle the present

obligation at the reporting date. Provisions are reviewed at each reporting date and adjusted to reflect the current

best estimate.

Possible obligations whose existence will only be confirmed by the occurrence or non-occurrence of one or

more future events not wholly within the control of the Group, are not recognised in the financial statements

but are disclosed as contingent liabilities unless the possibility of an outflow of economic resources is considered

remote.

In particular, information about provisions that has the most significant effect on the amount recognised in the

financial statements is described in Note 18.

2.13 Employee Benefits

(i) Short Term Benefits

Wages and salaries, bonuses and social security contributions are recognised as an expense in the year in

which the associated services are rendered by employees of the Group and the Company.

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2.13 Employee Benefits (continued)

(ii) Defined Contribution Plans

As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees

Provident Fund (“EPF”).

Some of the Group’s foreign subsidiaries make contributions to their respective countries’ statutory pension

schemes and certain other independently administered funds which are defined contribution plans.

Such contributions are recognised as an expense in the profit or loss as incurred.

2.14 Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the profit

or loss except to the extent it relates to items recognised directly in equity, in which case it is recognised in

equity.

(i) Current Tax

Current tax expense is the expected tax payable on the taxable income for the year, using the statutory tax

rates at the reporting date, and any adjustment to tax payable in respect of previous years.

(ii) Deferred Tax

Deferred tax is provided for, using the liability method, on temporary differences at the reporting date

between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In

principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets

are recognised for all deductible temporary differences, unabsorbed capital allowances, unused tax losses and

unused tax credits to the extent that it is probable that future taxable profit will be available against which

the deductible temporary differences, unabsorbed capital allowances, unused tax losses and unused tax

credits can be utilised.

Deferred tax is not recognised if the temporary difference arises from initial recognition of goodwill or from

the initial recognition of an asset or liability in a transaction which is not a business combination and at the

time of the transaction, affects neither accounting profit nor taxable profit nor loss.

Deferred tax is measured at the tax rates that are expected to apply in the period when the assets is realised

or the liability is settled, based on the laws that have been enacted or substantively enacted by the end of

the reporting period.



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2.14 Taxation (continued)

(ii) Deferred Tax (continued)

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities

and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or

on different tax entities, where they intend to settle current tax liabilities and assets on a net basis or their

tax assets and liabilities will be realised simultaneously.

Deferred tax asset is reviewed at each reporting date and is reduced to the extent that it is no longer

probable that the future taxable profit will be available against which related tax benefit can be realised.

2.15 Foreign Currency Transactions

In preparing the financial statements of individual entities in the Group, transactions in currencies other than the

entity’s functional currency (foreign currencies) are translated to the functional currencies at rates of exchange

ruling on the transaction dates.

Monetary assets and liabilities denominated in foreign currencies at the reporting date have been retranslated to

the functional currency at rates ruling on the reporting date.

Non-monetary assets and liabilities denominated in foreign currencies, which are measured at fair value, are

retranslated to the functional currency at the foreign exchange rates ruling at the date when the fair value was

determined. Non-monetary items that are measured in terms of historical cost in foreign currency are not

retranslated.

Gains and losses on exchange arising from retranslation are recognised in the profit or loss, except for differences

arising on the retranslation of available-for-sale equity instruments, which are recognised in equity.

On consolidation, the assets and liabilities of subsidiaries with functional currencies other than Ringgit Malaysia

are translated into Ringgit Malaysia at the exchange rates approximating those ruling at reporting date except for

goodwill and fair value adjustments arising from business combinations before 1 April 2011 which are treated as

assets and liabilities of the acquirer company pursuant to the adoption of MFRS framework.

The income and expenses are translated at the average exchange rates for the year, which approximates the

exchange rates at the dates of the transactions. All resulting exchange differences are taken to the foreign

currency translation reserve within equity.

In the consolidated financial statements, when settlement of a monetary item receivable from or payable to the

Group’s foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses

arising from such a monetary item are considered to form part of a net investment in a foreign operation and

are reclassified to other comprehensive income and accumulated under foreign currency translation reserve in

equity. Upon disposal of the investment, the cumulative exchange differences previously recorded in equity are

recognised in the consolidated profit or loss.

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2.16 Borrowing Costs and Foreign Currency Exchange Differences Relating to Projects-in-Progress

Borrowing costs which are directly attributable to the acquisition, construction or production of qualifying assets,

which are assets that necessarily take a substantial period of time to be prepared for their intended use or sale,

are capitalised as part of the cost of those assets.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditures for

the assets is being incurred, borrowing cost are being incurred and activities that are necessary to prepare the

asset for its intended use or sale are in progress. Capitalisation of borrowing costs ceases when all activities

necessary to prepare the qualifying asset for its intended use are completed.

The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is the weighted

average of the borrowing costs applicable to borrowings that are outstanding during the year, other than

borrowings made specifically for the purpose of financing a specific project-in-progress, in which case the actual

borrowing cost incurred on that borrowing less any investment income on the temporary investment of that

borrowings will be capitalised.

Exchange differences arising from foreign currency borrowings, although regarded as an adjustment to borrowings

costs, are not capitalised but instead recognised in the profit or loss in the period in which they arise.

2.17 Revenue

Revenue from sale of petroleum products is recognised in the profit or loss when the significant risks and rewards

of ownership have been transferred to the buyer.

Revenue from services rendered is recognised in the profit or loss based on the value of services performed

during the year.

2.18 Financing Costs

Financing costs comprise of interest payable on borrowings and profit share margin on Islamic Financing Facilities

and unwinding of discount for provision of dismantling, removal and restoration costs.

All interest and other costs incurred in connection with borrowings are expensed as incurred, other than those

capitalised in accordance with the accounting standard stated in Note 2.16. The financing costs on borrowings

are recognised using the effective profit/interest method.



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2.19 PETRONAS Mesra Loyalty Programme

PETRONAS Mesra Loyalty Programme is an in-house loyalty programme where members are awarded with

PETRONAS Mesra points at the point of sale made at PETRONAS stations and Kedai Mesra. The monetary value

attributed to the awarded points is treated as deferred revenue and only recognised as revenue in the profit or

loss on redemption, cancellation and expiration of the points. Currently, members can redeem the awarded points

for purchase of fuel at PETRONAS Stations or items at Kedai Mesra.

On an annual basis, fair value of the deferred revenue will be estimated by reference to the monetary value

attributable to the awarded points and points redemption profile. This accounting treatment is in line with IC

Interpretation 13, Customer Loyalty Programmes.

2.20 Earnings Per Ordinary Share

The Group presents basic earnings per ordinary share (“EPS”) data for its ordinary shares.

Basic EPS is calculated by dividing the profit and loss attributable to ordinary shareholders of the Company by the

weighted average number of ordinary shares outstanding during the period.

2.21 Operating Segments

An operating segment is a component of the Group that engages in business activities from which it may earn

revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s

other components, and for which discrete financial information is available. An operating segment’s operating

results are reviewed regularly by the Group’s chief operating decision maker, which is the Board of Directors of

the Company, to make decisions about resources to be allocated to the segment and assess the Group’s

performance.

2.22 Fair Value Measurements

Fair value of an asset or a liability, except for lease transactions, is determined as the price that would be received

to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the

measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes

place either in the principal market or in the absence of a principal market, in the most advantageous market.

(i) Financial instruments

The fair value of financial instruments that are actively traded in organised financial markets is determined by

reference to quoted market bid prices at the close of business at the end of reporting date. For financial

instruments where there is no active market, fair value is determined using valuation techniques. Such

techniques may include using recent arm’s length market transactions; reference to the current fair value of

another instrument that is substantially the same; discounted cash flow analysis or other valuation models.

239

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2.22 Fair Value Measurements (continued)

(ii) Non-financial assets

For non-financial assets, the fair value measurement takes into account a market participant’s ability to

generate economic benefits by using the asset in its highest and best use or by selling it to another market

participant that would use the asset in its highest and best use.

When measuring the fair value of an asset or a liability, the Group uses observable market data as much as

possible. Fair values are categorised into different levels in a fair value hierarchy based on the input used in the

valuation technique as follows:

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or

liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable

input).

The fair value of an asset to be transferred between levels is determined as of the date of the event or change

in circumstances that caused the transfer.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

3. PROPERTY, PLANT AND EQUIPMENT

Group

At1.1.2015RM’000

AdditionsRM’000

Disposals/Write-offs

RM’000Transfers

RM’000

Transferto disposalgroup held

for saleRM’000

At31.12.2015

RM’000

At cost

Freehold land 1,057,864 – (6,885) (32,869) – 1,018,110

Leasehold land

– Long lease 560,589 628 (824) 42,325 – 602,718

– Short lease 12,262 – – 3,282 – 15,544

Buildings 2,081,657 441 (4,372) 36,142 (3,519) 2,110,349

Plant, machinery, tankage and pipeline 2,312,698 44,228 (58,584) 184,880 (38,805) 2,444,417

Office equipment, furniture and fittings 428,955 6,771 (5,125) 28,665 (294) 458,972

Motor vehicles 65,061 1,810 (763) 10,763 (2,592) 74,279

Computer hardware and software 567,941 13,365 (1,190) 11,625 (425) 591,316

Projects-in-progress 403,608 263,787 (63) (284,813) – 382,519

7,490,635 331,030 (77,806) – (45,635) 7,698,224

Note 12

Group

At1.1.2015RM’000

Depreciationcharge for

the yearRM’000


RM’000Transfers

RM’000


for saleRM’000

At31.12.2015

RM’000

Accumulated depreciation and impairment losses

Freehold land 809 – – – – 809

Leasehold land

– Long lease 75,217 13,918 (201) – – 88,934

– Short lease 4,832 333 – – – 5,165

Buildings 1,148,727 96,976 (2,041) – (1,751) 1,241,911

Plant, machinery, tankage and pipeline 1,404,496 161,869 (43,899) 231 (34,582) 1,488,115

Office equipment, furniture and fittings 289,253 31,499 (5,183) – (294) 315,275

Motor vehicles 59,641 5,109 (711) – (2,377) 61,662

Computer hardware and software 476,566 31,761 (1,194) (231) (414) 506,488

Projects-in-progress – – – – – –

3,459,541 341,465 (53,229) – (39,418) 3,708,359

Note 12

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3. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Group

At1.1.2014RM’000

AdditionsRM’000


RM’000Transfers

RM’000


for saleRM’000

At31.12.2014

RM’000

At cost

Freehold land 1,036,132 – (2,782) 24,514 – 1,057,864

Leasehold land

– Long lease 537,011 – – 23,578 – 560,589

– Short lease 12,262 – – – – 12,262

Buildings 2,021,775 412 (13,994) 73,464 – 2,081,657

Plant, machinery, tankage and pipeline 2,051,128 35,456 (83,517) 309,631 – 2,312,698

Office equipment, furniture and fittings 387,261 6,158 (4,781) 40,317 – 428,955

Motor vehicles 63,126 1,066 (2,777) 3,646 – 65,061

Computer hardware and software 524,944 25,210 (1,442) 19,229 – 567,941

Projects-in-progress 504,272 397,686 (3,971) (494,379) – 403,608

7,137,911 465,988 (113,264) – – 7,490,635

Group

At1.1.2014RM’000


the yearRM’000


RM’000Transfers

RM’000


for saleRM’000

At31.12.2014

RM’000


Freehold land 1,202 – (393) – – 809

Leasehold land

– Long lease 67,290 8,054 (127) – – 75,217

– Short lease 4,556 276 – – – 4,832

Buildings 1,066,766 93,932 (11,971) – – 1,148,727

Plant, machinery, tankage and pipeline 1,333,062 150,591 (79,157) – – 1,404,496

Office equipment, furniture and fittings 266,040 29,390 (6,177) – – 289,253

Motor vehicles 59,003 2,417 (1,779) – – 59,641

Computer hardware and software 448,043 29,356 (833) – – 476,566

Projects-in-progress – – – – – –

3,245,962 314,016 (100,437) – – 3,459,541



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE


Group

Carrying amounts

2015RM’000

2014RM’000

Freehold land 1,017,301 1,057,055

Leasehold land

– Long lease 513,784 485,372

– Short lease 10,379 7,430

Buildings 868,438 932,930

Plant, machinery, tankage and pipeline 956,302 908,202

Office equipment, furniture and fittings 143,697 139,702

Motor vehicles 12,617 5,420

Computer hardware and software 84,828 91,375

Projects-in-progress 382,519 403,608

3,989,865 4,031,094

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Company

At1.1.2015RM’000

AdditionsRM’000


RM’000Transfers

RM’000

At31.12.2015

RM’000

At cost

Freehold land 1,057,864 – (6,885) (32,869) 1,018,110

Leasehold land

– Long lease 550,989 – (810) 42,325 592,504

– Short lease 12,262 – – 3,282 15,544

Buildings 2,051,110 36 (4,372) 36,142 2,082,916

Plant, machinery, tankage and pipeline 1,720,242 9,348 (52,159) 184,824 1,862,255

Office equipment, furniture and fittings 426,543 4,621 (4,874) 28,078 454,368

Motor vehicles 56,556 – (447) 10,763 66,872

Computer hardware and software 554,795 11,916 (1,101) 11,317 576,927

Projects-in-progress 402,073 233,579 – (283,862) 351,790

6,832,434 259,500 (70,648) – 7,021,286

Company

At1.1.2015RM’000


the yearRM’000


RM’000Transfers

RM’000

At31.12.2015

RM’000


Freehold land 809 – – – 809

Leasehold land

– Long lease 70,069 13,099 (187) – 82,981

– Short lease 4,832 333 – – 5,165

Buildings 1,125,423 95,365 (2,041) – 1,218,747

Plant, machinery, tankage and pipeline 1,147,850 124,244 (39,330) – 1,232,764

Office equipment, furniture and fittings 287,377 30,909 (4,936) – 313,350

Motor vehicles 54,181 3,853 (447) – 57,587

Computer hardware and software 465,780 30,863 (1,106) – 495,537

Projects-in-progress – – – – –

3,156,321 298,666 (48,047) – 3,406,940



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE


Company

At1.1.2014RM’000

AdditionsRM’000


RM’000Transfers

RM’000

At31.12.2014

RM’000

At cost

Freehold land 1,036,121 – (2,782) 24,525 1,057,864

Leasehold land

– Long lease 527,859 – – 23,130 550,989

– Short lease 12,262 – – – 12,262

Buildings 1,993,414 399 (13,994) 71,291 2,051,110

Plant, machinery, tankage and pipeline 1,714,162 10,315 (89,095) 84,860 1,720,242

Office equipment, furniture and fittings 387,105 5,595 (4,438) 38,281 426,543

Motor vehicles 58,078 1,036 (2,558) – 56,556

Computer hardware and software 513,550 23,496 (1,111) 18,860 554,795

Projects-in-progress 277,521 389,470 (3,971) (260,947) 402,073

6,520,072 430,311 (117,949) – 6,832,434

Company

At1.1.2014RM’000


the yearRM’000


RM’000Transfers

RM’000

At31.12.2014

RM’000


Freehold land 1,202 – (393) – 809

Leasehold land

– Long lease 62,847 7,349 (127) – 70,069

– Short lease 4,556 276 – – 4,832

Buildings 1,045,797 92,370 (12,744) – 1,125,423

Plant, machinery, tankage and pipeline 1,117,124 115,126 (84,400) – 1,147,850

Office equipment, furniture and fittings 261,576 29,107 (3,306) – 287,377

Motor vehicles 55,073 1,501 (2,393) – 54,181

Computer hardware and software 437,810 28,796 (826) – 465,780

Projects-in-progress – – – – –

2,985,985 274,525 (104,189) – 3,156,321

245

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Company

Carrying amounts

2015RM’000

2014RM’000

Freehold land 1,017,301 1,057,055

Leasehold land

– Long lease 509,523 480,920

– Short lease 10,379 7,430

Buildings 864,169 925,687

Plant, machinery, tankage and pipeline 629,491 572,392

Office equipment, furniture and fittings 141,018 139,166

Motor vehicles 9,285 2,375

Computer hardware and software 81,390 89,015

Projects-in-progress 351,790 402,073

3,614,346 3,676,113

Restrictions of land title

The titles to certain freehold and leasehold land are in the process of being registered in the Company’s name.

Additions to projects-in-progress

Included in addition to project-in-progress is the following:

i. Borrowing cost of the Islamic financing facilities of the Group amounting to RM NIL (2014: RM1,550,000). In the

previous year, the borrowing cost rate of the Islamic financing facilities capitalised ranged from 3.85% to 4.10% per

annum.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

4. PREPAID LEASE PAYMENTS

Group and Company

At1.1.2015RM’000

AdditionsRM’000


RM’000

At31.12.2015

RM’000

At cost

Leasehold land 51,804 – (57) 51,747

Prepaid rental 719,683 18,094 (3,791) 733,986

771,487 18,094 (3,848) 785,733

Group and Company

At1.1.2015RM’000

Charge forthe yearRM’000


RM’000

At31.12.2015

RM’000

Accumulated amortisation

Leasehold land 29,067 1,421 (57) 30,431

Prepaid rental 241,512 25,101 (3,261) 263,352

270,579 26,522 (3,318) 293,783

Group and Company

At1.1.2014RM’000

AdditionsRM’000


RM’000

At31.12.2014

RM’000

At cost

Leasehold land 51,907 1,106 (1,209) 51,804

Prepaid rental 684,684 38,033 (3,034) 719,683

736,591 39,139 (4,243) 771,487

Group and Company

At1.1.2014RM’000

Charge forthe yearRM’000


RM’000

At31.12.2014

RM’000

Accumulated amortisation

Leasehold land 28,365 1,596 (894) 29,067

Prepaid rental 219,500 25,025 (3,013) 241,512

247,865 26,621 (3,907) 270,579

247

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4. PREPAID LEASE PAYMENTS (CONTINUED)

Carrying amounts

Group and Company2015

RM’0002014

RM’000

Leasehold land 21,316 22,737

Prepaid rental 470,634 478,171

491,950 500,908

Restrictions of land title

The titles to certain leasehold land are in the process of being registered in the Company’s name.

5. INVESTMENTS IN SUBSIDIARIES

Company

2015RM’000

2014RM’000

Unquoted shares at cost 283,425 254,721

During the year, the Company had:

i. subscribed to ordinary shares of a subsidiary amounting to RM3,000,000;

ii. subscribed to redeemable preference shares of a subsidiary amounting to RM30,309,000; and

iii. redeemed preference shares of a subsidiary amounting to RM4,605,000.

Details of the subsidiaries are stated in Note 32 to the financial statements.

6. INVESTMENTS IN ASSOCIATES

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Unquoted shares at cost 1,959 1,959 1,959 1,959

Share of post-acquisition profits and reserves 1,056 822 – –

3,015 2,781 1,959 1,959

Security

The assets of an associate with the cost of RM12,637,000 (2014: RM10,779,000) have been pledged as security for the

term loan facility of a subsidiary as set out in Note 16 to the financial statements.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

6. INVESTMENTS IN ASSOCIATES (CONTINUED)

Summary of financial information on associates:Group

2015RM’000

2014RM’000

Total assets (100%) 45,429 37,760

Total liabilities (100%) 35,446 28,368

Revenue (100%) 15,568 14,053

Profit/Total comprehensive income (100%) 1,548 998

Details of the associates are stated in Note 33 to the financial statements.

7. INVESTMENTS IN JOINT VENTURES

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Unquoted shares at cost 1,053 1,053 25 25

Share of post-acquisition profits and reserves 9,228 5,683 – –

10,281 6,736 25 25

Summary of financial information on joint ventures:Group

2015 2014

RM’000 RM’000

Total assets (100%) 80,470 99,393

Total liabilities (100%) 37,020 50,411

Revenue (100%) 264,252 281,629

Profit/Total comprehensive income (100%) 8,996 5,224

Details of the joint ventures are stated in Note 34 to the financial statements.

249

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ACCOUNTABILITY



INSPIRING CHANGE

8. LONG TERM RECEIVABLE

Group

2015RM’000

2014RM’000

Loan to a subsidiary 14,231 26,507

The loan to a subsidiary is unsecured, interest-bearing at 3.05% (2014: 2.82%) per annum charged semi-annually and

is repaid in instalments until maturity on 15 April 2020.

9. INVENTORIES

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Petroleum products 621,484 1,026,217 556,560 987,556

Others 4,074 5,740 – –

625,558 1,031,957 556,560 987,556

Recognised in profit or loss:

Inventories recognised as cost of sales 23,110,473 30,404,491 22,430,146 30,051,715

Write-down to net realisable value 6,723 4,878 – –

Inventory written off 7,648 3,838 5,539 3,838

23,124,844 30,413,207 22,435,685 30,055,553

Inventory is carried at the lower of cost and net realisable value.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

10. TRADE AND OTHER RECEIVABLES

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Trade receivables 1,049,076 1,322,773 871,263 1,167,525

Subsidy receivables 363,342 586,272 363,342 586,272

Other receivables, deposits and prepayments 143,452 72,394 115,744 40,996

Advances and loans to:

Subsidiaries – – 16,298 4,564

Associates and joint ventures 29,324 22,760 19,693 19,693

Amounts due from:

Subsidiaries – – 4,903 108,708

Associates and joint ventures 4,101 8,876 – –

Related companies 108,638 152,866 106,551 151,943

1,697,933 2,165,941 1,497,794 2,079,701

Less: Impairment losses (48,681) (46,797) (36,397) (36,370)

Trade and other receivables 1,649,252 2,119,144 1,461,397 2,043,331

The amounts due from subsidiaries, associates, joint ventures and related companies are unsecured and arose in the

normal course of business.

Included in advances and loans to subsidiaries are:

i. an amount of RM15,000,000 (2014: RM NIL) relating to a shareholder advance to a subsidiary which is interest-

bearing at 3.90% (2014: NIL) per annum; and

ii. an amount of RM1,298,000 (2014: RM4,564,000) relating to the current portion of a shareholder loan to a

subsidiary which is interest-bearing at 3.05% (2014: 2.82%) per annum.

Other advances to subsidiaries and associates are unsecured, interest free and repayable on demand.

Included in subsidy receivables is an amount of RM89,900,000 in respect of subsidy claimed for diesel, which is

pending approval from the Government Authorities, whereby all relevant documentations to support these claims have

been submitted.

251

ANNUAL REPORT 2015

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ACCOUNTABILITY



INSPIRING CHANGE

11. CASH AND CASH EQUIVALENTS

Group Company

2015RM’000

2014RM’000

2015RM’000

2104RM’000

Cash with PETRONAS Integrated Financial Shared Services Centre 1,224,508 1,721,909 1,211,753 1,684,523

Cash and bank balances 25,064 106,294 7,653 69,941

Deposits placed with licensed banks 9,065 11,481 – –

1,258,637 1,839,684 1,219,406 1,754,464

A portion of the Group’s and Company’s cash and cash equivalents are held in the In-House Account (“IHA”) managed

by PETRONAS Integrated Financial Shared Services Centre (“IFSSC”) to enable more efficient cash management for the

Group and the Company.

Included in cash and cash equivalents of the Group are interest-bearing balances amounting to RM1,250,980,000

(2014: RM1,795,372,000).

12. DISPOSAL GROUP HELD FOR SALE

Following the Group’s commitment to sell two of its subsidiaries, the related assets and liabilities of the subsidiaries are

presented as assets/liabilities classified as held for sale. Efforts to sell the subsidiaries are ongoing and the transaction

is expected to complete in 2016.Group

Note2015

RM’000

Assets classified as held for sale:

Property, plant and equipment 12.1 6,217

Inventories 5,486

Trade and other receivables 15,176

Cash and cash equivalents 5,756

32,635

Liabilities classified as held for sale:

Borrowing 12.2 10,896

Trade and other payables 13,610

24,506

The carrying amounts of property, plant and equipment of the disposal group is the same as its carrying amounts

before it was being reclassified to current assets.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

12. DISPOSAL GROUP HELD FOR SALE (CONTINUED)

Note 12.1

Property, plant and equipment held for sale comprise the following:

Group

Note2015

RM’000

Cost 3 45,635

Accumulated depreciation 3 (39,418)

6,217

Note 12.2

Borrowing comprises an unsecured revolving credit which bears interest rate of 5.3% per annum.

13. SHARE CAPITAL

Number of shares Amount

2015’000

2014’000

2015RM’000

2014RM’000

Group and Company

Authorised:

Ordinary shares of RM1.00 each 1,000,000 1,000,000 1,000,000 1,000,000

Issued and fully paid:

Ordinary shares of RM1.00 each 993,454 993,454 993,454 993,454

253

ANNUAL REPORT 2015

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ACCOUNTABILITY



INSPIRING CHANGE

14. RESERVES

Capital reserve

Capital reserve arose as a result of business combination of entities under the common control of PETRONAS and

comprise merger deficit and capital contribution.

(i) Merger deficit

Merger deficit represents the excess of cost of acquisition over the Group’s interest in the net carrying value of

identifiable net assets, liabilities and contingent liabilities of the acquiree. Merger deficit is classified as part of non-

distributable reserves.

(ii) Capital contribution

Capital contribution represents the excess of amount paid or payable to the Company over the cost of acquisition.

Capital contribution is classified as part of non-distributable reserves.

Foreign currency translation reserve

The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the

financial statements of subsidiaries whose functional currencies are different from that of the Company’s functional

currency as well as foreign currency differences arising from the translation of monetary items that are considered to

form part of a net investment in a foreign operation.

15. NON-CONTROLLING INTERESTS

This consists of the non-controlling interests’ proportion of share capital and reserves of a partly-owned subsidiary.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

16. BORROWINGS

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Current

Secured

Term loan 10,066 8,586 – –

Unsecured

Revolving credits 71,376 34,277 – –

Islamic medium term notes – 300,000 – 300,000

Islamic financing facilities 17,057 16,775 – –

98,499 359,638 – 300,000

Non-current

Secured

Term loan 27,681 32,197 – –

Unsecured

Islamic financing facilities 85,640 102,529 – –

113,321 134,726 – –

Terms and debt repayment schedule

GroupTotal

RM’000

Under1 year

RM’000

1 – 2years

RM’000

2 – 5years

RM’000

Over 5years

RM’000

2015

Secured

Term loan 37,747 10,066 10,066 17,615 –

Unsecured

Revolving credits 71,376 71,376 – – –

Islamic financing facilities 102,697 17,057 17,685 57,114 10,841

174,073 88,433 17,685 57,114 10,841

255

ANNUAL REPORT 2015

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ACCOUNTABILITY



INSPIRING CHANGE

16. BORROWINGS (CONTINUED)

GroupTotal

RM’000

Under1 year

RM’000

1 – 2years

RM’000

2 – 5years

RM’000

Over 5years

RM’000

2014

Secured

Term loan 40,783 8,586 8,586 23,611 –

Unsecured

Revolving credits 34,277 34,277 – – –

Islamic medium term notes 300,000 300,000 – – –

Islamic financing facilities 119,304 16,775 17,352 55,690 29,487

453,581 351,052 17,352 55,690 29,487

Company

2014

Unsecured

Islamic medium term notes 300,000 300,000 – – –

Unsecured Revolving Credits

The unsecured revolving credits of the Group bear interest at rates ranging from 2.50% to 2.90% (2014: 2.50% to 5.30%)

per annum.

Secured Term Loan

The secured term loan obtained by the Group is secured by way of a charge over assets of an associate (see Note 6).

The secured term loan bears interest at a rate of 4.04% (2014: 2.61%) per annum with principal repayment of 20 equal

monthly instalments commencing October 2014.

Unsecured Islamic Financing Facilities

The unsecured Islamic financing facilities are governed by the Musharakah Mutanaqisah and Commodity Murabahah

principles, and bear a profit margin ranging from 4.41% to 4.61% (2014: 4.10% to 4.39%) above the financing bank’s

cost of fund per annum.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

17. DEFERRED TAX

The components and movements of deferred tax liabilities and assets during the year are as follows:

At 1.1.2015RM’000

Credited/(charged) to profit

or lossRM’000

At31.12.2015

RM’000

Group

Deferred tax liabilities

Property, plant and equipment (140,189) (12,877) (153,066)

At 1.1.2015RM’000


or lossRM’000

At31.12.2015

RM’000

Deferred tax assets

Unutilised tax losses 3,218 (1,701) 1,517

Other provisions 5,009 2,886 7,895

8,227 1,185 9,412

At 1.1.2014RM’000


or lossRM’000

At31.12.2014

RM’000

Group


Property, plant and equipment (149,424) 9,235 (140,189)

At 1.1.2014RM’000


or lossRM’000

At31.12.2014

RM’000

Deferred tax assets

Unutilised tax losses 3,218 – 3,218

Other provisions 4,406 603 5,009

7,624 603 8,227

257

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INSPIRING CHANGE

17. DEFERRED TAX (CONTINUED)

At 1.1.2015RM’000


or lossRM’000

At31.12.2015

RM’000

Company


Property, plant and equipment (125,304) (8,387) (133,691)

At 1.1.2014RM’000


or lossRM’000

At31.12.2014

RM’000


Property, plant and equipment (136,722) 11,418 (125,304)

18. OTHER LONG TERM LIABILITIES AND PROVISIONS

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Dismantling, removal and restoration costs 25,160 28,336 25,160 28,336

Other long term liabilities 2,267 784 – –

27,427 29,120 25,160 28,336

Dismantling, removal and restoration costs

The movement of provision for dismantling, removal and restoration costs during the financial year is shown below:

Group

2015RM’000

2014RM’000

Balance at 1 January 28,336 23,914

Net changes in provisions 36 399

Reversal of provisions (6,600) (801)

Unwinding of discount 3,388 4,824

Balance at 31 December 25,160 28,336



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LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

18. OTHER LONG TERM LIABILITIES AND PROVISIONS (CONTINUED)

Under provisions of certain land lease agreements, the Company has an obligation to dismantle and remove structures

on certain sites and restore those sites at the end of the lease term to an acceptable condition consistent with the

lease agreement.

For these affected sites, the liabilities for dismantling, removal and restoration costs are recognised at present value of

the compounded future expenditure estimated using existing technology, at current prices and discounted using a real

discount rate.

The present value of the estimated costs is capitalised as part of the asset and the related provisions raised on the date

when the obligation arises. The capitalised cost is depreciated over the expected life of the asset. The increase in the

net present value of the provision for the expected cost is included as finance costs in the profit or loss.

Any change in the present value of the estimated expenditure is reflected as an adjustment to the provision.

While the provision is based on the best estimate of future costs and the economic lives of the affected assets, there

is uncertainty regarding both the amount and timing of incurring these costs. All the estimates are reviewed on an

annual basis or more frequently, where there is indication of a material change.

19. TRADE AND OTHER PAYABLES

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Trade payables 112,867 229,429 76,946 197,983

Other payables 840,053 1,082,644 760,216 1,044,816

Deferred revenue 38,796 37,295 38,708 37,265

Amounts due to:

Holding company 253,689 513,986 253,463 509,084

Subsidiaries – – 9,733 –

Associates and joint ventures 3,155 2,458 3,155 2,458

Related companies 1,353,614 2,193,645 1,353,614 2,193,507

2,602,174 4,059,457 2,495,835 3,985,113

Deferred revenue is attributable to the monetary value of the awarded Mesra points under PETRONAS Mesra Loyalty

Programme. The movement has been recorded in the profit or loss. On an annual basis, the fair value of the deferred

revenue will be estimated by reference to the monetary value attributable to the awarded points and the points

redemption profile.

259

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

19. TRADE AND OTHER PAYABLES (CONTINUED)

While the deferred revenue is based on the best estimate of future redemption profile, there is uncertainty regarding

the trend of redemption. All the estimates are reviewed on an annual basis or more frequently, where there is indication

of a material change.

The amounts due to holding company, associates, joint ventures and related companies arose in the normal course of

business.

20. OPERATING PROFIT

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Included in operating profit are the following charges:

Audit fees

– KPMG Malaysia 585 566 476 454

– Overseas affiliates of KPMG Malaysia 205 171 – –

Non-audit fees paid

– KPMG Malaysia 346 340 298 340

Amortisation of prepaid lease payments 26,522 26,621 26,522 26,621

Staff costs 203,596 270,932 162,184 244,420

Contribution to EPF 34,191 37,310 31,711 36,001

Depreciation of property, plant and equipment 341,465 314,016 298,666 274,525

Loss on disposal of property, plant and equipment – 5,011 – 4,898

Impairment losses on trade and other receivables 2,543 4,193 420 12

Inventories written down to net realisable value 6,723 4,878 – –

Inventories written off 7,648 3,838 5,539 3,838

Property, plant and equipment written off 13,308 1,056 10,035 –

Rental of land and building 41,354 31,423 31,031 23,689

Rental of plant and equipment 5,639 10,401 5,538 9,700

Other receivables written off 7,684 57 7,684 57

and credits:

Gain on disposal of property, plant and equipment 3,707 – 3,597 –

Dividend income from: Subsidiaries (unquoted) – – 23,400 11,700

Interest income from deposits 54,511 22,809 52,760 21,252

Income from rental of premises 1,456 2,290 31 1,727

Net gain on foreign exchange 25,601 6,416 28,559 6,375

Reversal of impairment losses on trade receivables 659 1,003 393 953



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

21. FINANCING COSTS

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Unwinding of discount – Provision for dismantling, removal

and restoration costs 3,388 4,824 3,388 4,824

Interest on revolving credits 1,795 3,189 – 2,111

Interest on term loan 1,115 1,277 – –

Profit margin on Islamic medium term notes 2,321 8,627 2,321 8,627

Profit margin on Islamic financing facilities 4,825 3,092 – –

13,444 21,009 5,709 15,562

22. TAX EXPENSE

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Current tax expense

Current year 280,638 217,804 269,321 216,737

Prior year (2,306) (6,824) (2,315) 2,510

278,332 210,980 267,006 219,247

Deferred tax expense

Origination and reversal of temporary differences 12,333 (7,738) 7,843 (7,105)

(Over)/Under provision in prior year (641) (2,100) 544 (4,313)

11,692 (9,838) 8,387 (11,418)

290,024 201,142 275,393 207,829

261

ANNUAL REPORT 2015

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ACCOUNTABILITY



INSPIRING CHANGE

22. TAX EXPENSE (CONTINUED)

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income

tax expense at the effective income tax rate of the Group and the Company is as follows:

2015 2014

% RM’000 % RM’000

Group


Taxation at Malaysian statutory tax rate 25 271,162 25 177,323

Effect of different tax rates in foreign jurisdiction – (337) – (564)

Non-deductible expenses, net of non-taxable income 2 19,239 5 37,589

Effect of changes in tax rates – – (1) (5,821)

Effect of net deferred tax assets not recognised – 2,907 – 1,539

27 292,971 29 210,066

(Over)/Under provision in prior year

– current tax expense – (2,306) (1) (6,824)

– deferred tax expense – (641) – (2,100)

Tax expense 27 290,024 28 201,142

2015 2014

% RM’000 % RM’000

Company


Taxation at Malaysian statutory tax rate 25 258,477 25 184,327

Effect of changes in tax rates – – (1) (5,221)

Non-deductible expenses, net of non-taxable income 2 18,687 4 30,526

27 277,164 28 209,632

(Over)/Under provision in prior year

– current tax expense – (2,315) – 2,510

– deferred tax expense – 544 – (4,313)

Tax expense 27 275,393 28 207,829



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

23. DIVIDENDS

Group and Company

2015RM’000

2014RM’000

In respect of financial year ended 31 December 2014:

Single tier special interim dividend of 22.0 sen per ordinary share (2014: 17.5 sen) 218,559 173,855

In respect of financial year ended 31 December 2015:

Single tier interim dividend of 12.0 sen per ordinary share (2014: 12.0 sen) 119,214 119,214



615,941 551,367

The Directors had declared a single tier interim dividend of 20.0 sen per ordinary share amounting to RM198,690,800

in respect of the financial year ended 31 December 2015 which has not been accounted for in the financial statements.

24. RELATED PARTIES DISCLOSURES

Significant transactions with related parties

For the purposes of these financial statements, parties are considered to be related to the Group or the Company if

the Group or the Company has the ability, directly or indirectly, to control or jointly control the party or exercise

significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or

the Company and the party are subject to common control.

Related parties also include key management personnel defined as those persons having authority and responsibility for

planning, directing and controlling the activities of the Group either directly or indirectly and an entity that provides

key management personnel services to the Group.

The Group’s and the Company’s related parties include subsidiaries, associates, joint ventures as well as the Government

of Malaysia and its related entities as the holding company is wholly-owned by the Government of Malaysia.

Key management personnel compensation

Group and Company

2015RM’000

2014RM’000

Directors

Fees 387 327

Other short term benefits (including estimated monetary value of benefits-in-kind) 15 15

402 342

263

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

24. RELATED PARTIES DISCLOSURES (CONTINUED)

The Company pays management fees to the holding company in relation to services of an Executive Director and also

fees for certain Non-Executive Directors of the Company.

In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the

following significant transactions with related parties during the financial year:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Sales of petroleum products:


Federal and State Government of Malaysia 310,759 399,959 310,759 399,959

Government of Malaysia’s related entities 3,041,493 4,380,004 3,041,493 4,379,977

Purchases of petroleum products:


Holding company 698,955 564,076 698,955 564,076

Fees for representation in the Board of Directors*:

Holding company 1,057 1,058 1,057 1,058

* Fees paid directly to holding company in respect of Directors who are appointees of the holding company.

Information regarding outstanding balances arising from related party transactions as at 31 December 2015 is disclosed

in Note 10 and Note 19.

The Directors of the Company are of the opinion that the above transactions have been entered into in the normal

course of business.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

25. EARNINGS PER ORDINARY SHARE

Basic earnings per ordinary share

The calculation of basic earnings per ordinary share at 31 December 2015 was based on the profit attributable to

ordinary shareholders and a weighted average number of ordinary shares outstanding calculated as follows:

Group

2015 2014

Profit for the year attributable to shareholders (RM’000) 789,975 501,572

Number of ordinary shares (’000) 993,454 993,454

Basic earnings per ordinary share (sen) 79.5 50.5

Diluted earnings per ordinary share

No diluted earnings per share is disclosed in these financial statements as there is no dilutive potential ordinary share.

26. COMMITMENTS

Outstanding commitments in respect of capital expenditure at reporting year not provided for in the financial statements

are:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Property, plant and equipment

Approved and contracted for 9,104 21,208 8,754 20,171

Approved but not contracted for 185,942 308,458 165,991 220,406

195,046 329,666 174,745 240,577

27. CONTINGENT LIABILITIES

There were no material contingent liabilities and contingent assets during the year.

28. OPERATING SEGMENTS

The Group’s reportable segments comprise of Retail, Commercial and Others. Each reportable segment offers different

services because they require different marketing strategies.

For each of the reportable segment, the Group’s chief operating decision maker which is the Board of Directors of the

Company, reviews internal management reports at least on a quarterly basis.

265

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ACCOUNTABILITY



INSPIRING CHANGE

28. OPERATING SEGMENTS (CONTINUED)

The Group’s reportable segments are as follows:

• Retail – consist of sales and purchase of petroleum products to the retail sector• Commercial – consist of sales and purchase of petroleum products to the commercial sector• Others – comprise mainly of aviation fuelling services, technical services and business activities other than

retail and commercial segment

Segment performance is measured based on profit or loss before tax, depreciation and amortisation, finance costs and

interest as included in the internal management reports that are reviewed by the Company’s Board of Directors.

Segment profit is used to measure performance as management believes that such information is the most relevant in

evaluating the results of certain segments relative to other entities that operate within these industries.

In RM’000 2015 2014

Business Segments Retail Commercial Others Group Retail Commercial Others Group

Revenue 13,508,086 11,637,854 25,270 25,171,210 15,707,397 16,616,168 17,433 32,340,998

Operating expenditures:

Depreciation and amortisation 308,381 57,703 1,903 367,987 281,900 57,133 1,604 340,637

Other income 265,433 58,633 3,058 327,124 190,110 14,082 156 204,348

Operating profit 526,357 541,828 26,128 1,094,313 291,367 411,243 25,785 728,395

Finance costs 4,952 3,667 4,825 13,444 13,168 4,748 3,093 21,009

Share of profit after tax of associates and joint ventures 3,779 1,906


Geographical information

There is no disclosure on geographical segment information as the results of the Group’s operations outside of Malaysia

are not material during the year under review.

Major customers

No disclosure on major customer information is required as there are no customers representing 10 percent or more

of the Group’s revenue.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

29. FINANCIAL INSTRUMENTS

Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

(i) Loans and receivables (“L&R”); and

(ii) Loans and borrowings (“L&B”);

Note

L&R/(L&B)

RM’000

TotalcarryingamountRM’000

Group

2015

Financial assets



2,907,889 2,907,889

Financial liabilities

Borrowings 16 (211,820) (211,820)

Trade and other payables 19 (2,602,174) (2,602,174)

(2,813,994) (2,813,994)

2014

Financial assets



3,958,828 3,958,828


Borrowings 16 (494,364) (494,364)


(4,553,821) (4,553,821)

267

ANNUAL REPORT 2015

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ACCOUNTABILITY



INSPIRING CHANGE

29. FINANCIAL INSTRUMENTS (CONTINUED)

Categories of financial instruments (continued)

Note

L&R/(L&B)

RM’000

TotalcarryingamountRM’000

Company

2015

Financial assets



2,680,803 2,680,803



2014

Financial assets



3,797,795 3,797,795


Borrowings 16 (300,000) (300,000)


(4,285,113) (4,285,113)

Financial Risk Management

Petroliam Nasional Berhad (PETRONAS) has policies and guidelines in place that sets the foundation for a consistent

approach towards establishing an effective financial risk management across the PETRONAS Group.

The Group’s and the Company’s goal in risk management is to ensure that the management understands, measures

and monitors the various risks that arise in connection with their operations. Policies and guidelines have been

developed to identify, analyse, appraise and monitor the dynamic risks facing the Group and the Company. Based on

this assessment, the Group and the Company adopt appropriate measures to mitigate these risks in accordance with

their views of the balance between risk and reward.

The main financial risks faced by the Group and the Company arising from the use of financial instruments in their

normal activities are credit risk, liquidity risk, market risk, profit or interest rate risk and foreign currency risk.



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Credit Risk

Credit risk is the potential exposure of the Group and the Company to losses in the event of non-performance by

counterparties. The Group’s and the Company’s exposures to credit risk arise principally from receivables from

customers and placement in money market. Credit risks are controlled by individual companies in line with PETRONAS’

policies and guidelines.

Trade and Other Receivables

Credit evaluations are performed on an on-going basis where customers’ credit worthiness are evaluated using a list

of qualitative and quantitative weighted criteria.

The Group uses ageing analysis to monitor the credit quality of the receivables. With respect to the trade and other

receivables that are neither impaired nor past due, there is no indication as of reporting date that the debtors will not

meet their payment obligations. As at the year end, 91.5% (2014: 95.7%) of gross trade receivables of the Group are

within the credit terms.

The Group and the Company mitigate their credit risks within a conservative framework by dealing with creditworthy

counterparties or setting credit limits on exposures to counterparties where appropriate. These are done on an on-

going basis to constantly monitor any developments. The Group and the Company further mitigate and limit credit risks

by securing collateral or other credit enhancements such as cash deposits, letter of credit, Amanah Saham Bumiputera

(ASB) and bank guarantee.

On reporting date, there is a significant concentration of credit risk of the Group arising from an amount owing from

a customer constituting 26% (2014: 31%) of the total trade receivables of the Group, of which all outstanding balances

are current.

In addition, there is a significant concentration of credit risk of the Group being an amount owing from the Government

constituting 72% (2014: 89%) of the total other receivables of the Group relating to subsidies arising from the Automatic

Pricing Mechanism governing the sale of petroleum products.

The maximum exposure to credit risk for the Group and the Company is represented by the carrying amount of each

financial asset, without taking into account the fair value of any collateral.

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Trade and Other Receivables (continued)

The movements in the allowance for impairment losses of trade and other receivables during the year are as follows:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Opening balance 46,797 43,607 36,370 37,311

Impairment loss recognised 2,543 4,193 420 12

Reversal of impairment (659) (1,003) (393) (953)

Closing balance 48,681 46,797 36,397 36,370

Fund and Other Investment

The Group and the Company are also exposed to counterparty credit risk from financial institutions through fund and

investment activities comprising primarily money market placement and investments in bonds, and trade facilities. These

exposures are managed in accordance with existing policies and guidelines that define the parameters within which the

investment activities shall be undertaken in order to achieve the Group’s investment objective of preserving capital and

generating optimal returns above appropriate benchmarks within allowable risk parameters.

Investments are only made with approved counterparties who meet the appropriate rating and other relevant criteria,

and within approved credit limits, as stipulated in the policies and guidelines. The treasury function undertakes credit

risk management activities similar to the credit management and monitoring procedures for receivables.

The maximum exposure to credit risk is represented by the carrying amounts in the statements of financial position.

As at the reporting date, the Group and the Company have only interests in short term domestic money market

instrument. In view of the credit rating of counterparties, the Group and the Company do not expect any counterparties

to fail to meet its obligation.

Liquidity Risk

Liquidity risk is the risk that suitable sources of funding for the Group’s and Company’s business activities may not be

available. The Group's and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities

of financial assets and liabilities. The Group's and the Company’s objective is to maintain a balance between continuity

of funding and flexibility through use of stand-by credit facilities. The Company’s current credit rating enables it to

access banking facilities in excess of current and immediate future requirements of the Group and the Company.



KEY MESSAGES


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LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE


Maturity Analysis

The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities as at the

reporting date based on undiscounted contractual payments:

Group

CarryingamountRM’000

Effectiveprofit

margin orinterest

rate%

Contractualcash flows

RM’000

Within 1year

RM’000

1-2years

RM’000

2-5years

RM’000

More than5 years

RM’000

2015


Unsecured Islamic financing facilities floating rate 102,697 4.44 116,311 21,334 21,195 62,748 11,034

Unsecured revolving credit floating rate 71,376 2.75 71,736 71,736 – – –

Secured term loan floating rate 37,747 4.04 41,207 10,473 10,896 19,838 –

Trade and other payables 2,602,174 – 2,602,174 2,602,174 – – –

2,813,994 2,831,428 2,705,717 32,091 82,586 11,034

2014


Unsecured Islamic financing facilities floating rate 119,304 4.15 136,314 21,416 21,283 63,070 30,545

Unsecured Islamic medium term notes fixed rate 300,000 3.53 302,350 302,350 – – –

Unsecured revolving credit floating rate 31,222 3.00 31,375 31,375 – – –

Unsecured revolving credit fixed rate 3,055 5.30 3,217 3,217 – – –

Secured term loan floating rate 40,783 2.61 42,308 8,810 9,040 24,458 –


4,553,821 4,575,021 4,426,625 30,323 87,528 30,545

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Liquidity Risk (continued)

Maturity Analysis (continued)

Company

CarryingamountRM’000

Effectiveprofit

margin orinterest

rate%

Contractualcash flows

RM’000

Within 1year

RM’000

1-2years

RM’000

2-5years

RM’000

More than5 years

RM’000

2015



2014


Unsecured Islamic medium term notes fixed rate 300,000 3.53 302,350 302,350 – – –


4,285,114 4,287,464 4,287,464 – – –

Market Risk

Market risk is the risk or uncertainty arising from changes in market prices and their impact on the performance of the

business. The market price changes that the Group and the Company are exposed to include interest rates and foreign

currency exchange rates that could adversely affect the value of the Group’s and the Company’s financial assets,

liabilities or expected future cash flows.

Profit Margin or Interest Rate Risk

Profit margin or interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate

because of changes in market rates.

The Group’s exposure to the risk of changes in market rates relates primarily to the Islamic financing facilities and term

loan of subsidiaries with floating profit margin and interest rate. Changes in the profit margin may expose the Group

to a risk of change in cash flows.

The Group’s remaining interest-bearing financial asset and financial liability, which consists mainly of fixed rate short

term fund placement and short term revolving credit facilities do not have significant exposure to interest rate risk.

All profit or interest rate exposures are monitored and managed proactively in line with PETRONAS’ policies and

guidelines.

As at 31 December 2015, 95% (2014: 39%) of the interest-bearing financial liabilities of the Group are floating rate

instruments.



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ACHIEVEMENTS

INSPIRING CHANGE


Profit Margin Risk Sensitivity Analysis

As at 31 December 2015, it is estimated that an increase/decrease of 100 basis points in profit margin of the Islamic

financing facilities or in interest rate of the term loan, with all other variables held constant, would not have any

significant impact to the Group’s cash flows.

Foreign Currency Risk

The Group and Company are exposed to varying levels of foreign exchange risk when they enter into transactions that

are not denominated in the respective companies’ functional currencies and/or when foreign currency monetary assets

and liabilities are translated at the reporting date. The main underlying economic currencies of the Group’s cash flows

are Ringgit Malaysia and US Dollars. The Company’s funds are managed by PETRONAS Integrated Financial Shared

Services Centre (IFSSC) whereby foreign currency exposure is internally hedged with IFSSC and IFSSC will execute

external hedging where required.

The Group’s and the Company’s exposure to foreign currency risk, based on carrying amounts as at the reporting date

is as follows: 2015 2014

Denominated in

USD’000 RM’000

Denominated in

USD’000 RM’000

Group

Financial assets

Cash and cash equivalents 727 3,123 180 630

Trade and other receivables 29,166 125,238 70,949 247,931

29,893 128,361 71,129 248,561


Trade and other payables 9,911 42,558 101,436 354,469

Net exposure 19,982 85,803 (30,307) (105,908)

Company

Financial assets

Cash and cash equivalents 727 3,123 – –

Trade and other receivables 29,166 125,238 66,932 233,894

29,893 128,361 66,932 233,894


Trade and other payables 5,325 22,865 73,674 257,452

Net exposure 24,568 105,496 (6,742) (23,558)

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Currency risk sensitivity analysis

The following table demonstrates the indicative post-tax effects on the profit of applying reasonably foreseeable market

movements in the currency exchange rates:2015 2014

Appreciationin foreign

currencyrate

%

Effecton profit

or lossRM’000

Appreciation in foreign

currencyrate

%

Effecton profit

or lossRM’000

Group

USD 10 8,580 5 (3,972)

Company

USD 10 10,550 5 (883)

This analysis assumes all other variables, in particular interest rates, remain constant.

A depreciation in USD would have had equal but opposite effect, on the basis that all other variables remain constant.



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LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE


Fair value information

The Group’s financial instruments consist of cash and cash equivalents, trade and other receivables and trade and other

payables.

The carrying amounts of cash and cash equivalents, short term receivables and payables and short term borrowings

reasonably approximate their fair values due to the relatively short term nature of these financial instruments.

The following table analyses financial instruments not carried at fair value for which fair value is disclosed, together

with the carrying amounts shown in the statement of financial position.

Fair value of financialinstruments not carried

at fair value Carrying amountRM’000

Level 3RM’000

TotalRM’000

Group

2015


Islamic financing facilities 88,871 88,871 102,697

Term loan 34,159 34,159 37,747

123,030 123,030 140,444

2014


Islamic financing facilities 103,584 103,584 119,304

Term loan 39,239 39,239 40,783

142,823 142,823 160,087

Company

2015

Financial Asset

Long term loan to a subsidiary 14,082 14,082 14,231

2014

Financial Asset

Long term loan to a subsidiary 23,769 23,769 26,507

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and

interest cash flows, discounted at the prevailing rate of interest charged on the respective loans at the end of the

reporting period.

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Income/(expense), net gains and losses arising from financial instruments

Net gain/(loss)

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Financial instruments through profit and loss

Forward contracts (5) 166 (5) 166

Loans, receivables and payables 64,328 (3,683) 75,228 12,512

Total 64,323 (3,517) 75,223 12,678

30. CAPITAL MANAGEMENT

The Group defines capital as total equity and debt. The objective of the Group’s capital management is to maintain an

optimal capital structure and ensure availability of funds to support its business and maximise shareholders’ value. As a

subsidiary of Petroliam Nasional Berhad (PETRONAS), the Group’s approach in managing capital is set out in the

PETRONAS Group Corporate Financial Policy.

The Group monitors and maintains a prudent level of total debt to total asset ratio to optimise shareholders’ value and

to ensure compliance with covenants under debt and shareholders’ agreements and regulatory requirements, if any.

The debt equity ratio of the Group as at 31 December 2015 is 4.2:100 (2014: 9.6:100).

There were no changes in the Group’s approach to capital management during the year.

Under the requirement of Bursa Malaysia Practice Note No.17/2005, the Group is required to maintain consolidated

shareholders’ equity equal to or not less than 25% of the issued and paid-up capital (excluding treasury shares) and

such shareholders’ equity is not less than RM40 million. The Group has complied with this requirement.

31. HOLDING COMPANY

The holding company is Petroliam Nasional Berhad (PETRONAS), a company incorporated in Malaysia.



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FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

32. SUBSIDIARIES AND ACTIVITIES

Effectiveownership andvoting interest

2015 2014 Principal Activities

Companies incorporated in Malaysia

Kuala Lumpur Aviation Fuelling System Sdn. Bhd.

65% 65% To operate aviation fuell ing at Kuala Lumpur International Airport, Sepang.

PETRONAS LUBRICANTS MARKETING (MALAYSIA) SDN BHD (f.k.a. Lub Dagangan Sdn Bhd)

100% 100% To market and distribute lubricants.

PETRONAS AVIATION SDN. BHD. 100% 100% To provide technical consultancy services.

Company incorporated in Netherlands

*PDB (Netherlands) B.V. 100% 100% Investment holding company.

Company incorporated in Philippines

** PETRONAS ENERGY PHILIPPINES, INC. 100% 100% To buy, sell, store, distribute and market liquefied petroleum gas (LPG) and other petroleum products.

Company incorporated in Thailand

* PETRONAS INTERNATIONAL MARKETING (THAILAND) CO., LTD.

100% 100% To market and distribute lubricants.

Companies incorporated in Vietnam

** PETRONAS (VIETNAM) CO., LTD. 100% 100% To store, process and distribute LPG.

** THANG LONG LPG COMPANY LIMITED 100% 100% To store and bottle LPG and lease jetty.

* Not audited by member firms of KPMG International

** Audited by member firms of KPMG International

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33. ASSOCIATES AND ACTIVITIES

Effectiveownership and voting interest



*IOT Management Sdn. Bhd. 20% 20% To operate and manage a petroleum storage terminal with facilities for receipt, storage and delivery of petroleum products at Senari, Kuching, Sarawak for the users, PETRONAS Dagangan Berhad and Shell Timur Sdn. Bhd.

* Tanjung Manis Oil Terminal Management Sdn. Bhd.

20% 20% To operate and manage a petroleum storage terminal with facilities for receipt, storage and delivery of petroleum products at Bandar Baru Tanjung Manis, Mukah, Sarawak for the users, PETRONAS Dagangan Berhad and Shell Timur Sdn. Bhd.

Company incorporated in Philippines

**Duta, Inc. 40% 40% To lease properties to PETRONAS Energy Philippines, Inc.

**Kaparangan, Inc (wholly owned by Duta, Inc.)

40% 40% To engage in the business of buying, investing, exchanging, selling securities of every kind and leasing land.


** Audited by member firms of KPMG International



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ACHIEVEMENTS

INSPIRING CHANGE

34. JOINT VENTURES AND ACTIVITIES

Effectiveownership and voting interest



PS Pipeline Sdn. Bhd. 50% 50% To maintain and operate the Multi-Product Pipeline and Klang Valley Distribution Terminal (MPP-KVDT) and the associated facilities for the transportation of the petroleum products on behalf of the MPP-KVDT owners/shareholders.

PS Terminal Sdn. Bhd. 50% 50% To operate, manage and maintain the joint facilities – terminal, depot, warehouse etc. in Tawau and Bintulu on behalf of the owners, PETRONAS Dagangan Berhad and Shell Timur Sdn. Bhd.

Company incorporated in Kingdom of Saudi Arabia

*United Fuel Company Ltd 40% 40% To import fuel and spare parts for jets, supply and distribution of fuel for aircrafts and operate fuel storage facilities in all airports in the Kingdom of Saudi Arabia.


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35. ADOPTION OF NEW AND REVISED PRONOUNCEMENTS

As of 1 January 2015, the Group and the Company adopted the following pronouncements that are applicable and

have been issued by the MASB as listed below:

Effective for annual periods beginning on or after 1 July 2014

Amendments to MFRS 3, Business Combinations (Annual Improvements 2010-2012 Cycle and 2011-2013 Cycle)

Amendments to MFRS 8, Operating Segments (Annual Improvements 2010-2012 Cycle)

Amendments to MFRS 13, Fair Value Measurement (Annual Improvements 2010-2012 Cycle and 2011-2013 Cycle)

Amendments to MFRS 116, Property, Plant and Equipment (Annual Improvements 2010-2012 Cycle)

Amendments to MFRS 119, Employee Benefits – Defined Benefit Plans: Employee Contributions

Amendments to MFRS 124, Related Party Disclosures (Annual Improvements 2010-2012 Cycle)

The initial adoption of the abovementioned pronouncements do not have any material impact to the financial

statements of the Group and the Company.

36. PRONOUNCEMENTS YET IN EFFECT

The following pronouncements that have been issued by the Malaysian Accounting Standards Board will become

effective in future financial reporting periods and have not been adopted by the Group and/or the Company in these

financial statements:

Effective for annual periods beginning on or after 1 January 2016

Amendments to MFRS 5, Non-current Assets Held for Sale and Discontinued Operations (Annual Improvements 2012-

2014 Cycle)

Amendments to MFRS 7, Financial Instruments: Disclosures (Annual Improvements 2012-2014 Cycle)

Amendments to MFRS 11, Joint Arrangements – Accounting for Acquisitions of Interests in Joint Operations

MFRS 14, Regulatory Deferral Accounts

Amendments to MFRS 101, Presentation of Financial Statements – Disclosure Initiative

Amendments to MFRS 116, Property, Plant and Equipment and MFRS 138, Intangible Assets – Clarification of Acceptable

Methods of Depreciation and Amortisation

Amendments to MFRS 119, Employee Benefits (Annual Improvements 2012-2014 Cycle)

Amendments to MFRS 127, Separate Financial Statements – Equity Method in Separate Financial Statements Amendments

to MFRS 134, Interim Financial Reporting (Annual Improvements 2012-2014 Cycle)

Amendments to MFRS 134, Interim Financial Reporting (Annual Improvements 2012-2014 Cycle)

Effective for annual periods beginning on or after 1 January 2018

MFRS 9, Financial Instruments (2014)

MFRS 15, Revenue from Contracts with Customers



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FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

36. PRONOUNCEMENTS YET IN EFFECT (CONTINUED)

Effective for a date yet to be confirmed

Amendments to MFRS 10, Consolidated Financial Statements: Sale or Contribution of Assets between an Investor and

its Associate or Joint Venture

Amendments to MFRS 128, Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an

Investor and its Associate or Joint Venture

The Group and the Company are expected to apply the abovementioned pronouncements beginning from the

respective dates the pronouncements become effective.

(i) MFRS 15, Revenue from Contracts with Customers

MFRS 15 replaces the guidance in MFRS 111, Construction Contracts, MFRS 118, Revenue, IC Interpretation 13,

Customer Loyalty Programmes, IC Interpretation 15, Agreements for Construction of Real Estate, IC Interpretation

18, Transfers of Assets from Customers and IC Interpretation 131, Revenue – Barter Transactions Involving

Advertising Services.

The Group is currently assessing the financial impact that may arise from the adoption of MFRS 15.

(ii) MFRS 9, Financial Instruments

MFRS 9 replaces the guidance in MFRS 139, Financial Instruments: Recognition and Measurement on the

classification and measurement of financial assets. Upon adoption of MFRS 9, financial assets will be measured at

either fair value or amortised cost.

The Group is currently assessing the financial impact that may arise from the adoption of MFRS 9.

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37. NEW PRONOUNCEMENTS NOT APPLICABLE TO THE GROUP AND THE COMPANY

The MASB has issued pronouncements which are not yet effective, but for which are not relevant to the operations of

the Group and the Company and hence, no further disclosure is warranted.

Amendments to MFRS 10, Consolidated Financial Statements – Investment Entities: Applying the Consolidation

Exception

Amendments to MFRS 12, Disclosure of Interests in Other Entities – Investment Entities: Applying the Consolidation

Exception

MFRS 14, Regulatory Deferral Accounts

Amendments to MFRS 116, Property, Plant and Equipment – Agriculture: Bearer Plants

Amendments to MFRS 128, Investments in Associates and Joint Ventures – Investment Entities: Applying the

Consolidation Exception

Amendments to MFRS 140, Investment Property (Annual Improvements 2011-2013 Cycle)

Amendments to MFRS 141, Agriculture – Agriculture: Bearer Plants



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LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

38. RETAINED EARNINGS

The breakdown of the retained earnings of the Group and the Company as at 31 December 2015, into realised and

unrealised profits, pursuant to Paragraph 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements are as

follows:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Total retained profits

– realised 4,119,185 3,968,823 4,004,558 3,852,944

– unrealised (111,775) (99,372) (103,329) (94,292)

4,007,410 3,869,451 3,901,229 3,758,652

Total retained profits of associates attributable to the Group

– realised 1,056 821 – –

Total retained profits of joint ventures attributable to the Group

– realised 9,228 5,683 – –

Less: Consolidation adjustments (51,920) (84,215) – –

Total retained profits 3,965,774 3,791,740 3,901,229 3,758,652

The determination of realised and unrealised profits is based on the Guidance of 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, issued by Malaysian Institute of Accountants on 20 December 2010.

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REPORT ON THE FINANCIAL STATEMENTS

We have audited the financial statements of PETRONAS Dagangan Berhad, which comprise the statements of financial

position as at 31 December 2015 of the Group and of the Company, and the statements of profit or loss and other

comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended, and

a summary of significant accounting policies and other explanatory information, as set out on pages 222 to 282.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view

in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements

of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors

determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether

due to fraud or error.

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 about 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 judgement, 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 entity’s preparation of financial statements that give a true and fair view 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

entity’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 give a true and fair view of the financial position of the Group and of the Company

as of 31 December 2015 and of their financial performance and cash flows for the year then ended in accordance with

Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies

Act, 1965 in Malaysia.


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FINANCIAL REVIEW

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INSPIRING CHANGE

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company

and its subsidiaries, of which we have acted as auditors, have been properly kept in accordance with the provisions of

the Act.

(b) We have considered the accounts and the auditors’ reports of all the subsidiaries of which we have not acted as

auditors, which are indicated in the Note 32 to the financial statements.

(c) We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financial

statements are in form and content appropriate and proper for the purposes of the preparation of the financial

statements of the Group and we have received satisfactory information and explanations required by us for those

purposes.

(d) The audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made

under Section 174(3) of the Act.

OTHER REPORTING RESPONSIBILITIES

Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The information

set out in Note 38 on page 283 to the financial statements has been compiled by the Company as required by the Bursa

Malaysia Securities Berhad Listing Requirements and is not required by the Malaysian Financial Reporting Standards or

International Financial Reporting Standards. We have extended our audit procedures to report on the process of compilation

of such information. In our opinion, the information has been properly compiled, in all material respects, in accordance with

the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of

Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of

Accountants and presented based on the format prescribed by 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.

KPMG CHONG DEE SHIANG

Firm Number: AF 0758 Approval Number: 2782/09/16(J)

Chartered Accountants Chartered Accountant

Petaling Jaya,


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PDB defines stakeholders as those who may be affected by or have an effect or influence on its business and operations.

Each year, the Company will monitor and assess its stakeholders based on the publicity generated about the Company,

smoothness in receiving the approval to run its business and operations, market sentiments towards the Company’s

performances, and feedback from internal stakeholders.

PDB is honoured to be part of the daily lives of the people in the country whom the Company engages with, at both

individual and organisational levels. PDB has introduced various formal and informal channels of communication with each

of its stakeholder groups in order to understand their needs and concerns on matters related to PDB’s business and

operations. The Company’s goal is to manage its stakeholders’ expectations effectively to achieve sustainable long term

relationships.

During the year under review, the Company has strategically engaged with its stakeholders via the following communication

channels:-

Stakeholders Name of the Engagements Frequency

PDB Board of Directors Official/Formal Meeting

Board Away Day

Quarterly

Annually

Board Site Visit Annually

Government Authorities/Regulatory Bodies

• State Governments

• MOF

• MDTCC

• CUSTOMS

• MPIC

• MPOB

• EPU

• PEMANDU

• KLCH

• BOMBA

• MHA

• LPTC (SPAD)

• Land Office

• Municipal Council

• PDB Facilities’ Visits

Formal and Informal Meetings/Dialogue Sessions/Forums/

Sharing Sessions/Networking/Terminal Visits

Ad hoc

Monthly

Weekly/Quartely/

Ad Hoc

Bi-Annually/

Quartely/Ad-Hoc

Ad hoc

Ad hoc

Ad hoc

Ad hoc

Ad hoc

Ad hoc

Ad hoc

Ad hoc

Ad hoc

Annually

Industry Association Formal Meetings

Networking

Ad hoc

Ad hoc

Vendors/Suppliers Business Reviews

Forums

Sharing Sessions

Annually

Quarterly

Ad hoc


KEY MESSAGES


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LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

STAKEHOLDER MANAGEMENTCOMMUNICATION

Customers Customer Feedback Management

Mesralink

Loyalty Programmes

Events/Dialogues/Roadshows/Engagement Sessions

Daily

Daily

Regularly

Regularly

Media Press Releases

Press Conferences

Media Coverages

Regularly

Regularly

Regularly

Social Media Engagement with social media practitioners

Promotion via PDB's official Twitter, Facebook,

Instagram and YouTube accounts

Regularly

Daily

Employees Townhalls

Top Management Message

Employee Satisfaction Survey

Dialogues

Intranet and Newsletters

Employee Engagement Programmes

PDBeat Club

LIFE of PI

Annually

Monthly

Annually

Regularly

Regularly

Regularly

Regularly

Regularly

Academics Talent Sourcing Quarterly

Business Partners Progress Report

Annual and Sustainability Reports

Corporate Presentations

Signing Ceremonies

Regularly

Annually

Ad hoc

Ad hoc

Union Persatuan Pengusaha Stesen Minyak PETRONAS Malaysia

KAPENAS

Ad hoc

Quaterly

JV Partners BOD Meetings

Management Meetings

Operations Meetings

Networking

Bi-Annually

Bi-Annually

Quarterly

Annually

NGOs Formal Meetings Ad hoc

Shareholders and Investment Community AGM

Analyst Briefings

Formal Meetings

PDB Facilities’ Visits

Networking sessions

Annually

Quarterly

Ad-hoc

Annually

Quaterly

287

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

Professional Bodies:-

• Auditors

• MSWG

• MIRA

• Bursa

• NIOSH

Formal Meetings

Formal Meetings/Networking Sessions

Workshops/Formal Meetings

Formal Meetings

Formal Meetings

Ad hoc

Ad hoc/Annually

Ad hoc

Ad hoc

Ad hoc

Community Website


Visits, Seminars and Joint Activities

Community Engagement Activities

Daily

Annually

Ad hoc

Regularly

Public Website

Mesralink


Campaign and Roadshows

Regularly

Daily

Annually

Regularly

STRATEGIC ENGAGEMENT

The Government relations scope of activities are focused on strengthening the professional networking relationship with the

related authorities for the benefit of PDB’s interests. The scope includes implementing and executing Government related

activities, coordinating and conducting meetings with the authorities as well as facilitating interaction and leading

engagements with the local Government. In addition to this, the Government relations personnel work hand in hand with

business lines and the management to resolve issues with relevant parties.

STAKEHOLDER MANAGEMENTCOMMUNICATION (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

Authorised Share Capital : RM1,000,000,000

Issued and Paid-up Share Capital : RM993,454,000 comprising 993,454,000 ordinary shares of RM1.00 each

Class of Shares : Ordinary Shares of RM1.00 each

Voting Rights : One Vote Per Ordinary Share (On A Poll)

Size of Holdings

No. of

Holders

% of Total

Shareholders

No. of

Shares

% of

Total Shares

Less than 100 171 2.39 1,390 0.00

100 – 1,000 1,754 24.46 1,194,517 0.12

1,001 – 10,000 4,523 63.07 12,168,337 1.22

10,001 – 100,000 523 7.29 18,346,239 1.85

100,001 to less than 5% of issued shares 199 2.78 267,739,517 26.95

5% and above of issued shares 1 0.01 694,004,000 69.86

7,171 100.00 993,454,000 100.00

289

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INSPIRING CHANGE

AUTHORISED AND ISSUED SHARE CAPITALAS AT 10 FEBRUARY 2016

ANALYSIS OFSHAREHOLDINGSAS AT 10 FEBRUARY 2016

CLASSIFICATION OF SHAREHOLDERS

As at 10 February 2016

No. of Holders No. of Shares

% of Total

Shareholdings

Category Malaysian Foreign Malaysian Foreign Malaysian Foreign

• Individuals 5,739 67 16,584,879 429,224 1.67 0.04

• Body Corporate

a. Banks/Finance Companies 45 1 114,311,600 28 11.50 0.00

b. Investment Trusts/Foundation/

Charities 1 0 1,400 0 0.00 0.00

c. Other types of companies 188 4 4,747,302 690,000 0.48 0.08

• Government Agencies/Institutions 7 0 7,423,300 0 0.75 0.00

• Nominees 565 554 768,853,212 80,413,055 77.39 8.09

6,545 626 911,921,693 81,532,307 91.79 8.21

LIST OF SUBSTANTIAL SHAREHOLDERS


Direct Indirect

No. of

Shares

% of

Total Shares

No. of

Shares

% of

Total Shares

1. CIMB Group Nominees (Tempatan) Sdn Bhd

(Exempt AN for Petroliam Nasional Berhad)

(Exempt AN for Petroliam Nasional Berhad (PRF))

694,004,000 69.86 200,900* 0.02

2. Employees Provident Fund Board 50,336,400 5.07 0.00 0.00

* Deemed interest in 200,900 shares of PETRONAS for Petroleum Research Fund held through CIMB Group Nominees (Tempatan) Sdn Bhd pursuant to Section 6A of the Companies Act, 1965.

ANALYSIS OFSHAREHOLDINGS (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

LIST OF DIRECTORS’ SHAREHOLDINGS


No. Name

No. of

Shares

% of Total

Shareholding

1. Md Arif Mahmood Nil Nil

2. Mohd Ibrahimnuddin Mohd Yunus 3,000 0.00

3. Lim Beng Choon Nil Nil

4. Vimala V. R. Menon Nil Nil

5. Datuk Anuar Ahmad Nil Nil

6. Erwin Miranda Elechicon Nil Nil

7. Nuraini Ismail Nil Nil

8. Ir Mohamed Firouz Asnan Nil Nil

LIST OF MANAGEMENT’S SHAREHOLDINGS


No. Name

No. of

Shares

% of Total

Shareholding

1. Mohd Ibrahimnuddin Mohd Yunus 3,000 0.00

2. Puteri Liza Elli Sukma Nil Nil

3. Shaharuddin Muhammad Sidek 2,000 0.00

4. Lu Jia Lih 2,000 0.00

5. Zubair Abdul Razak Nil Nil

6. Mohd Shobri Abu Bakar Nil Nil

7. Manisah Shaari Nil Nil

8. Hasnizaini Mohd Zain Nil Nil

9. Tariq Ashra Sulaiman Nil Nil

10. Ruziah Azdi Abdul Rahman Nil Nil

291

ANNUAL REPORT 2015

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ACCOUNTABILITY



INSPIRING CHANGE

Name

No. of

Shares

% of

Total Shares

1. CIMB GROUP NOMINEES (TEMPATAN) SDN BHD (EXEMPT AN FOR PETROLIAM NASIONAL BERHAD)

694,004,000 69.86

2. CITIGROUP NOMINEES (TEMPATAN) SDN BHD (EMPLOYEES PROVIDENT FUND BOARD)

48,307,900 4.86

3. AMANAHRAYA TRUSTEES BERHAD (AMANAH SAHAM BUMIPUTERA)

46,278,600 4.66

4. AMANAHRAYA TRUSTEES BERHAD (AMANAH SAHAM WAWASAN 2020)

11,203,400 1.13

5. AMANAHRAYA TRUSTEES BERHAD (AMANAH SAHAM MALAYSIA)

8,650,700 0.87

6. AMANAHRAYA TRUSTEES BERHAD (AMANAH SAHAM DIDIK)

8,248,800 0.83

7. AMANAHRAYA TRUSTEES BERHAD (AS 1MALAYSIA)

7,949,400 0.80

8. CARTABAN NOMINEES (ASING) SDN BHD (EXEMPT AN FOR STATE STREET BANK & TRUST COMPANY (WEST CLT OD67))

6,831,700 0.69

9. KUMPULAN WANG PERSARAAN (DIPERBADANKAN) 5,465,800 0.55

10. MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD (GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD (PAR 1))

5,031,100 0.51

11. HSBC NOMINEES (ASING) SDN BHD (BBH AND CO BOSTON FOR VANGUARD EMERGING MARKETS STOCK INDEX FUND)

4,906,800 0.49

12. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC SELECT ENTERPRISES FUND)

4,380,700 0.44

13. HSBC NOMINEES (ASING) SDN BHD (EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (U.S.A.))

4,014,086 0.40

14. DB (MALAYSIA) NOMINEE (ASING) SDN BHD (BNYM SA/NV FOR PEOPLE’S BANK OF CHINA (SICL ASIA EM))

3,952,500 0.40

15. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC DIVIDEND FUND)

3,708,700 0.37

16. HSBC NOMINEES (ASING) SDN BHD (EXEMPT AN FOR THE BANK OF NEW YORK MELLON (MELLON ACCT))

3,669,562 0.37


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

LIST OF THIRTY LARGESTSHAREHOLDERSAS AT 10 FEBRUARY 2016

Name

No. of

Shares

% of

Total Shares

17. PERMODALAN NASIONAL BERHAD 3,391,100 0.34

18. CARTABAN NOMINEES (TEMPATAN) SDN BHD (EXEMPT AN FOR EASTPRING INVESTMENTS BERHAD)

3,265,000 0.33

19. MAYBANK NOMINEES (TEMPATAN) SDN BHD (MAYBANK TRUSTEES BERHAD FOR PUBLIC REGULAR SAVINGS FUND (N14011940100)

2,432,000 0.24

20. MAYBANK NOMINEES (TEMPATAN) SDN BHD (MAYBANK TRUSTEES BERHAD FOR PUBLIC ITTIKAL FUND (N14011970240)

2,340,000 0.24

21. PERTUBUHAN KESELAMATAN SOSIAL 2,297,200 0.23

22. HSBC NOMINEES (ASING) SDN BHD (EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (JPMELAB AIF APG))

2,214,900 0.22

23. CARTABAN NOMINEES (ASING) SDN BHD (GIC PRIVATE LIMITED FOR GOVERNMENT OF SINGAPORE (C))

2,160,700 0.22

24. MAYBANK NOMINEES (TEMPATAN) SDN BHD (SETIAUSAHA KERAJAAN PULAU PINANG)

2,000,000 0.20

25. STATE FINANCIAL SECRETARY SARAWAK 2,000,000 0.20

26. FOH CHONG & SONS SDN BHD 1,884,000 0.19

27. CITIGROUP NOMINEES (ASING) SDN BHD (EXEMPT AN FOR CITIBANK NEW YORK (NORGES BANK 14))

1,875,800 0.19

28. STATE SECRETARY KEDAH INCORPORATED 1,800,000 0.18

29. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC SECTOR SELECT FUND)

1,791,000 0.18

30. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC EQUITY FUND)

1,772,700 0.18

293

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INSPIRING CHANGE

Freehold Leasehold Total Land Building

Net BookValue of

Land(RM’000)

No. of Lots

Area(sq. ft.)

Net BookValue of

Land(RM’000)

No. ofLots

Area(sq. ft.)

Net BookValue of

Land(RM’000)

No. ofLots

Area(sq. ft.)

Net BookValue of

Buildings(RM’000)

CENTRAL REGION 400,986 114 4,342,167 267,311 86 5,321,836 668,297 200 9,664,003 295,121

NORTHERN REGION 191,566 85 3,683,095 51,165 41 3,883,115 242,731 126 7,566,210 158,529

SOUTHERN REGION 354,951 142 5,582,061 76,232 43 1,514,640 431,183 185 7,096,701 181,027

EAST COAST REGION 64,879 40 1,579,511 35,724 46 1,688,456 100,603 86 3,267,967 111,653

SARAWAK 2,125 3 81,302 33,131 37 1,679,205 35,256 40 1,760,507 63,917

SABAH 2,794 7 185,613 32,987 27 2,305,475 35,781 34 2,491,088 52,269

HEADQUARTER - - - 23,352 1 17,939,413 23,352 1 17,939,413 1,653

Grand Total 1,017,301 391 15,453,749 519,902 281 34,332,140 1,537,203 672 49,785,889 864,169


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

NET BOOK VALUE OFLAND & BUILDINGS OF PDB COMPANY

BulkDepot

KlangValley

DistributionTerminal

LPGStorage

& BottlingPlant

MultiProductPipeline

ServiceStation

TrainingCentre &

ServiceStation Warehouse

VacantLand

GrandTotal

CENTRAL REGION – 2 – – 190 1 – 7 200

NORTHERN REGION 3 – – – 114 – – 9 126

SOUTHERN REGION – – – – 175 – – 10 185

EAST COAST REGION – – 1 – 79 – 1 5 86

SARAWAK 3 – – – 35 – – 2 40

SABAH 3 – – – 30 – – 1 34

HEADQUARTER – – – 1 – – – – 1

Grand Total 9 2 1 1 623 1 1 34 672

* Build on Freehold and Leasehold land only.** The remaining stations and depots were built on land on operating and prepaid leases.

295

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ACCOUNTABILITY



INSPIRING CHANGE

USAGE OFLAND PROPERTIES*

Name of facilities and location

Net Book

Value (RM)

PSS JLN KOLAM AYER AMPANG Lot 36904,

Jalan Kolam Air Lama, 68000 Ampang, Kuala Lumpur

11,925,292

PSS KM 58 KL-KARAK H/WAY

Lot 8207 Mukim Bentong, Daerah Bentong, 28400 Bentong, Pahang

8,591,234

PSS TELAGA HARBOUR PARK

Petronas Service Station, Harbour Park Langkawi, Pantai Kok, 07000 Padang Matsirat, Kedah

7,837,675

PSS PLUS/BESRAYA HIGHWAY PGS KM 305

PLUS Arah Selatan, Lot 896, GRN 46223, Mukim Kajang, 43650 Hulu Langat, Selangor

7,325,230

PRAI BOTTLING PLANT

PETRONAS Dagangan Berhad, Prai Fuel Terminal, Lot 93, Prai Industrial Area, 13600 Prai, Penang

7,256,915

PSS KM0.7 BESRAYA

KM 0.7, Lebuhraya Sg. Besi, 43300 Seri Kembangan, Selangor

5,941,693

PSS BKT ANTARABANGSA (HYPERSTATION)

Lot PT 3429, Jalan Wangsa 2, Bukit Antarabangsa, 68000 Ampang, Selangor

5,142,014

PSS NKVE-DAMANSARA BOUND

Lot 15385 Km 15.3 NKVE-Damansara Bound, 47000 Sungai Buloh, Selangor

4,991,372

PSS FEDERAL-HIGHWAY (KLANG BOUND)

KM 12.3 Lebuhraya Persekutuan Arah Klang, Seksyen 15, 40200 Shah Alam, Selangor

4,195,732

PSS KILIMU RANAU

Part Of Lot N.T 063021303, Kg Kilimu, Jalan Ranau-Poring, 89300 Ranau, Sabah

4,145,523


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

LIST OF TOP 10LANDED PROPERTIESAS AT 31 DECEMBER 2015

NOTICE IS HEREBY GIVEN THAT the 34th Annual General Meeting of PETRONAS Dagangan

Berhad (“the Company”) will be held at the Sapphire Ballroom, Level 1, Mandarin Oriental

Kuala Lumpur, Kuala Lumpur City Centre, 50088 Kuala Lumpur, Malaysia on Wednesday,

20 April 2016 at 10.00 a.m. for the following purposes:

AGENDA

As Ordinary Business

1. To receive the Audited Financial Statements for the financial year ended 31 December 2015 together

with the Reports of the Directors and Auditors thereon.

Please refer to Explanatory Note A.

2. To re-elect the following Directors who retire in accordance with Article 93 of the Company’s

Articles of Association and, being eligible, offer themselves for re-election:

(a) Nuraini binti Ismail (Resolution 1)

(b) Lim Beng Choon (Resolution 2)

3. To re-elect the following Directors who retire in accordance with Article 96 of the Company’s

Articles of Association and, being eligible, offer themselves for re-election:

(a) Md Arif bin Mahmood (Resolution 3)

(b) Ir Mohamed Firouz bin Asnan

Please refer to Explanatory Note B.

(Resolution 4)

4. To approve the Directors’ fees of RM723,000.00 payable to Non-Executive Directors for the

financial year ended 31 December 2015.

Please refer to Explanatory Note C.

(Resolution 5)

5. To approve the Directors’ fees of up to RM902,000.00 with effect from 1 January 2016 until the

next Annual General Meeting of the Company payable to Non-Executive Directors.

Please refer to Explanatory Note C.

(Resolution 6)

6. To re-appoint Messrs. KPMG, as Auditors of the Company for the financial year ending 31 December

2016 and to authorise the Directors to fix their remuneration.

Please refer to Explanatory Note D.

(Resolution 7)

7. To transact any other business for which due notice has been given.

By Order of the Board

HASNIZAINI BINTI MOHD ZAIN (LS 0009780)

YEAP KOK LEONG (MAICSA 0862549)

Company Secretaries

Kuala Lumpur

22 March 2016

297

ANNUAL REPORT 2015

BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

NOTICE OFANNUAL GENERAL MEETING

NOTES:

Proxy and/or Authorised Representative

1. For the purposes of determining a member who shall

be entitled to attend and vote at the forthcoming 34th

Annual General Meeting (“AGM”), the Company shall be

requesting the Record of Depositors as at 12 April 2016. Only a depositor whose name appears on the

Record of Depositors as at 12 April 2016 shall be

entitled to attend and vote at the meeting as well as

for appointment of proxy(ies) to attend and vote on

his/her stead.

2. A member of the Company entitled to attend and vote

at the meeting may appoint not more than two proxies

to attend and vote on his behalf. A proxy may but

need not be a Member of the Company and a Member

may appoint any person to be his proxy without

limitation and the provision of Section 149(1)(b) of the

Companies Act, 1965 shall not apply to the Company.

There shall be no restriction as to the qualification of

the proxy.

3. Where a member of the Company is an authorised

nominee as defined under the Securities Industry

(Central Depositories) Act, 1991 (“SICDA”), it may

appoint at least one proxy but not more than two

proxies in respect of each Securities account it holds

with ordinary shares of the Company standing to the

credit of the said Securities accounts.

4. Where a member of the Company is an exempt

authorised nominee which holds ordinary shares in the

Company for the omnibus account, there is no limit to

the number of proxies which the exempt authorised

nominee may appoint in respect of each omnibus

account it holds. An exempt authorised nominee refers

to an authorised nominee defined under the SICDA

which is exempted from compliance with the provision

of subsection 25A(1) of SICDA.

5. Where a member or the authorised nominee appoints

two proxies, or where an exempt authorised nominee

appoints two or more proxies, the proportion of

shareholdings to be represented by each proxy must

be specified in the instrument appointing the proxies.

6. The instrument appointing a proxy shall be in writing

under the hand of the appointer or his attorney duly

authorised in writing or if the appointer is a corporation

either under seal or under the hand of an officer or

attorney duly authorised and must be deposited at the

Company’s Share Registrar, Symphony Share Registrars

Sdn. Bhd., Level 6, Symphony House, Pusat Dagangan

Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor,

Malaysia, not less than 48 hours before the time fixed

for holding the meeting.

7. If the Proxy Form is signed under the hand of an

officer duly authorised, it should be accompanied by a

statement reading “signed as authorised officer under

Authorisation Document which is still in force, no

notice of revocation having been received”. If the

Proxy Form is signed by an attorney duly appointed

under a power of attorney, it should be accompanied

by a statement reading “signed under Power of Attorney

which is still in force, no notice of revocation having

been received”. A copy of the Authorisation Document

or the Power of Attorney, which should be valid in

accordance with the laws of the jurisdiction in which it

was created and is exercised, should be enclosed with

this Proxy Form.

Explanatory Notes

Note A

Audited Financial Statements for the Financial Year Ended 31 December 2015

The audited financial statements are laid before the

shareholders pursuant to the provisions of Section 169(1)

and (3) of the Companies Act, 1965. The same is for

discussion and not put forward for voting.

Note B

Re-election of Directors who retire in accordance with Article 93 and Article 96 of the Company’s Articles of Association (“AA”)

Article 93 of the AA provides that one-third of the Directors

of the Company for the time being shall retire by rotation

at an AGM of the Company provided always that all

Directors, shall retire from office once at least in each three

years but shall be eligible for re-election at the AGM.

NOTICE OFANNUAL GENERAL MEETING (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

Article 96 of the AA provides, amongst others, that the

Board shall have the power to appoint any person to be a

Director to fill a casual vacancy or as an addition to the

existing Board, and that any Director so appointed shall

hold office until the next following AGM and shall then be

eligible for re-election.

The Nomination and Remuneration Committee of the

Company determines the eligibility of each director standing

for re-election at the AGM based on the performance of

the Directors, taking into account the results of their latest

Board Evaluation, contribution to the Board through their

skills, experience, strengths and qualities, level of

independence and ability to act in the best interest of the

Company in decision making.

The profiles of the retiring Directors are set out in the

Profile of the Board of Directors on pages 044 to 051 of

the 2015 Annual Report.

The Board endorsed the Nomination and Remuneration

Committee’s recommendation that the Directors who retire

in accordance with Article 93 and Article 96 of the AA are

eligible to stand for re-election.

Note C

Non-Executive Directors’ Fees

The remuneration structure of the Non-Executive Directors

(“NEDs”) of the Company is as follows:

• Monthly fixed fees for duties as Director/Chairman; and

• Meeting allowance for each meeting attended.

The Directors’ fees and meeting allowance for Md Arif

Mahmood, Nuraini Ismail and Ir Mohamed Firouz Asnan,

being the Non-Independent Non-Executive Directors who

are also employees of Petroliam Nasional Berhad

(“PETRONAS”) and holding positions of Vice President and

above are paid directly to PETRONAS.

The shareholders at the last AGM held on 15 April 2015

approved RM664,000.00 per annum as Directors’ fees for

the financial year ended 31 December 2014.

Details of the fees payable to the NEDs for the financial

year ended 31 December 2015 are enumerated on page

168 of the 2015 Annual Report.

The Directors’ fees proposed for the financial year ending

31 December 2016 and payment of the fees from 1 January

2017 until the conclusion of the next AGM (“FYE2016/2017”)

are calculated based on the number of scheduled Board’s

and Board Committees’ meetings and assumption that all

the NEDs will remain in office until the next AGM. This

resolution is to facilitate payment of the Directors’ fees for

FYE2016/2017.

The Board will seek shareholders’ approval at the next AGM

in the event the Directors’ fees proposed is insufficient due

to an increase in the number of the Board’s and Board

Committees’ meetings and/or increase in the Board size.

Note D

Re-appointment of Auditors

The Board at its meeting held on 19 February 2016 endorsed

for the re-appointment of Messrs. KPMG as External Auditors

of the Company for the financial year ending 31 December

2016 be presented to the shareholders for approval.

299

ANNUAL REPORT 2015

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ACCOUNTABILITY



INSPIRING CHANGE

PURSUANT TO PARAGRAPH 8.27(2) OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES

BERHAD

The following are Directors retiring pursuant to Articles 93 and 96 of the Company’s Articles of Association:

1. The Directors who are standing for re-election pursuant to Article 93 of the Company’s Articles of Association are as

follows:-

• Nuraini binti Ismail Resolution 1

• Lim Beng Choon Resolution 2

2. The Directors who are standing for re-election pursuant to Article 96 of the Company’s Articles of Association are as

follows:-

• Md Arif bin Mahmood Resolution 3

• Ir Mohamed Firouz bin Asnan Resolution 4

The profiles of the respective Directors who are standing for re-election as stated in the Notice of 34th Annual General

Meeting are set out in the Profile of the Board of Directors on pages 044 to 051 of this Annual Report.

The details of the Directors’ interests in the securities of the Company as at 10 February 2016 are stated on page 291 of

this Annual Report.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

STATEMENT ACCOMPANYING NOTICE OFANNUAL GENERAL MEETING

REGISTRATION

(1) Registration will start at 8.15 a.m. on 20 April 2016 in front of the Sapphire Ballroom, Level 1, Mandarin Oriental Kuala

Lumpur, Kuala Lumpur City Centre, 50088 Kuala Lumpur, Malaysia.

(2) Please produce your original Identity Card (“IC”) to the registration staff for verification. Please make sure you collect

your IC thereafter.

(3) Upon verification, you are required to write your name and sign on the Attendance List placed on the registration table.

(4) You will also be given an identification tag. No person will be allowed to enter the meeting room without the

identification tag. There will be no replacement in the event that you lose or misplace the identification tag.

(5) No person will be allowed to register on behalf of another person, even with the original IC of that person.

(6) The registration counter will handle only verification of identity and registration.

HELP DESK

(7) Please proceed to the Help Desk for any clarification or enquiry.

(8) The Help Desk will also handle revocation of proxy’s appointment.

PARKING

(9) Please take note that PDB will not be giving cash reimbursements for parking this year. Instead, you are advised to park

at Levels P2 and P4 of Mandarin Oriental Kuala Lumpur and car park opposite Ascott Kuala Lumpur (KLCC Management).

Please bring along your parking ticket for validation at the counter near the Sapphire Ballroom.

(10) By validating the parking ticket, you will not be charged for parking when you leave. Please be advised that the ticket

would expire by 4 p.m. on 20 April 2016. Any additional costs incurred for parking after 4 p.m. will not be borne by

PDB.

(11) Please be advised that PDB will not reimburse any parking costs incurred at any other location. As such, please observe

the parking areas mentioned in Item 9 above.

ANNUAL REPORT

(12) PDB’s Annual Report for Financial Year 2015 is available on:

http://www.bursamalaysia.com

http://www.mymesra.com.my

301

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INSPIRING CHANGE

ADMINISTRATIVEDETAILSPETRONAS DAGANGAN BERHAD 34TH ANNUAL GENERAL MEETING

CENTRAL REGIONLevel 12, Menara Dayabumi

Jalan Sultan Hishamuddin

P. O. Box 11946

50762, Kuala Lumpur

Tel : (+603)-2783 6000

Fax : (+603)-2260 1527

Officer in Charge:

Mohd Ajmi Abdi

NORTHERN REGIONLot No. 93

Prai Industrial Estate

13600, Prai, Pulau Pinang

Tel : (+604)-390 7291/7201

Fax : (+604)-399 0211

Manager in Charge:

Shuhaimi Hashim

SOUTHERN REGION1st & 2nd Floor

Bangunan PETRONAS

Lot 12106, Bandar Baru UDA

Km 7, Jalan Skudai

81200, Johor Bahru, Johor

Tel : (+607)-233 6000

Fax : (+607)-233 6001

Manager in Charge:

Badruldin Isami Ibrahim

EASTERN REGIONA-39 & A-43, Jalan Haji Abdul Aziz

25000, Kuantan, Pahang

Tel : (+609)-513 7022/7099

Fax : (+609)-514 4040

Manager in Charge:

Azri Othman

SARAWAK REGION3rd & 4th Floor

Wisma Naim

Lot 2679, Jalan Rock

93200, Kuching, Sarawak

Tel : (+6082)-255 200

Fax : (+6082)-412 712

Manager in Charge:

Johnnes Gobli anak Jien

SABAH REGIONLot 7AF01-7AF13, Block A, Level 7

Karamunsing Complex

88300, Kota Kinabalu, Sabah

Tel : (+6088)-525 777

Fax : (+6088)-269 817

Manager in Charge:

Tuan Ameran Tuan Yaacob

HEAD OFFICELevel 30-33, Tower 1, PETRONAS Twin TowersKuala Lumpur City Centre, 50088 Kuala LumpurTel : (+603)-2051 5000 Fax: (+603)-2026 5505

REGIONAL OFFICES


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

CORPORATEDIRECTORY

ABC Anti-Bribery and Corruption

AEF Advanced Energy Formula

AGM Annual General Meeting

ALARP As Low As Reasonably Practicable

AMG Aufrecht, Melcher and Großaspach

ANGKASA Angkatan Koperasi Kebangsaan Berhad

AOD Aviation Operations Department

APH Aspiring Professional Hauler

ASB Asian Supply Base Sdn Bhd

ATM(s) Automatic Teller Machine(s)

bbl barrel

Board The Board of Directors of PDB

bpd Barrels per day

Bursa Malaysia Bursa Malaysia Securities Berhad

CEO Chief Executive Officer

CFO Chief Financial Officer

CHRA Chemical Health Risk Assessment

CIA Communication in Action

CIAP Corporate Integrity Action Pledge

CIO Chief Integrity Officer

CLASS Classification, Labelling and Safety Data

Sheet of Hazardous Chemicals

CO2 Carbon Dioxide

CoBE Code of Conduct and Business Ethics

CP Community Point

CRM Customer Relationship Management

CSR Corporate Social Responsibility

CUSTOMS Royal Malaysian Customs Department

DBE Downstream Business Excellence

DCIC Downstream Continuous Improvement

Convention

DOSH Department of Occupational Health

and Safety

DYMM Duli Yang Maha Mulia

EPM Employee Performance Management

EPU Economic Planning Unit

ERP Emergency Response Plan

ERT Emergency Response Team

EVP Executive Vice President

FAR Fatal Accident Rate

FBM KLCI FTSE Bursa Malaysia Kuala Lumpur

Composite Index

FLTO Fuel and LPG Terminal Operations

FMD Fleet Management Department

FRDM Fire and Rescue Department of

Malaysia/“BOMBA”

GEES Graduate Employability Enhancement

Scheme

GHG Greenhouse gas

Group PETRONAS Dagangan Berhad and

Subsidiaries

Group HSE Group Health Safety and Environment

GST Goods and Services Tax

HAZMAT Hazardous Material

HEMP Hazards and Effects Management

Process

HR Human Resource

HRMD Human Resource Management Division

HSE Health, Safety and Environment

HSEMS Health, Safety and Environment

Management System

ICOP Industry Code of Practise

IMD International Marketing Department

INSEAD Institut Européen d’Administration des

Affaires

ISO International Organization for

Standardization (ISO)

JKJR Jabatan Keselamatan Jalan Raya

JPAM Jabatan Pertahanan Awam Malaysia

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BUSINESS OVERVIEW


ACCOUNTABILITY



INSPIRING CHANGE

GLOSSARY

KAPENAS Kesatuan Kakitangan Petroliam Nasional

Berhad

KDU Kolej Damansara Utama

KL Kuala Lumpur

KLCC Kuala Lumpur City Centre

KLCH/DBKL Kuala Lumpur City Hall/Dewan

Bandaraya Kuala Lumpur

KLIA Kuala Lumpur International Airport

KPMG Messrs KPMG

KVDT Klang Valley Distribution Terminal

LDSB Lub Dagangan Sdn Bhd

LED Light Emitting Diode

LIFE Lubricant Integration For Excellence

LIFE of PI Listen, Integrate and Facilitate

Execution of Potential Ideas

LIMA Langkawi International Maritime &

Aerospace Exhibition

LNG Liquified Natural Gas

LOPC Loss of Primary Containment

LPG Liquified Petroleum Gas

LPLFRD Low Profile Low Flow Rate Dispenser

LPTC Land Public Transport Commission

LTIF Lost Time Injury Frequency

MC Management Committee

MCCG 2012 Malaysian Code on Corporate

Governance 2012

MCDF Malaysian Civil Defence Force

MCF Mandatory Control Framework

MD/CEO Managing Director/Chief Executive

Officer

MDP Managerial Development Programme

MDTCC Ministry of Domestic Trade,

Cooperatives and Consumerism

MHA Malaysia Highway Association

MINDEF Ministry of Defense

MLNG Malaysia Liquified Natural Gas

MMLR Main Market Listing Requirements

MOF Ministry of Finance

MOPS Mean off Platts Straits

MOSTI Ministry of Science, Technology and

Innovation

MPIC Ministry of Plantation, Industries and

Commodities

MPOB Malaysia Plam Oil Board

MPP Multiproduct Pipeline

MS830 Malaysian Standard 830

MSOSH Malaysian Society for Occupational

Safety & Health

NACRA National Annual Corporate Report

Awards

MT Metric Tonnes

NENT Non-Executive Non-Technical

Capability

NET Non-Executive Technical

NGV Natural Gas Vehicle

NIOSH National Institute for Occupational

Safety and Health

NLDF Non-Executives Learning and

Development Framework

NOX Nitrogen Oxides

OEAD Operational Excellence and Assurance

Departments

OEM(s) Original equipment manufacturer(s)

OPEC Organization of the Petroleum

Exporting Countries

OSH Occupational Health and Safety

PAVSB PETRONAS Aviation Sdn Bhd

PCG PETRONAS Chemicals Group Berhad


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

GLOSSARY(continued)

PCSB PETRONAS Carigali Sdn Bhd

PDB DGP PDB Downstream Grounding

Programme

PDB or the PETRONAS Dagangan Berhad

Company

PDBSB PETRONAS Dagangan Sdn Bhd

PDBeat PDB Executives Action Team

PECAS PETRONAS’ Competency-based

Assessment System

PEMANDU Performance Management Delivery Unit

PEPI PETRONAS Energy Philippines, Inc.

PETRONAS Petroliam Nasional Berhad

PETRONITA The Ladies’ Association of PETRONAS

PIM(T)CL PETRONAS International Marketing

(Thailand) Co. Limited

PLISB PETRONAS Lubricant International

Sdn Bhd

PLM(M)SB PETRONAS Lubricants Marketing

(Malaysia) Sdn Bhd

PME Palm – Oil Methyl Ester

PMO Project Management Office

PP(T)SB PETRONAS Penapisan Terengganu

PV Photovoltaic

PVL PETRONAS (Vietnam) Co., Ltd

QSR(s) Quick Serve Restaurant(s)

RAPID Refinery and Petrochemical Integrated

Development Project

RKP Rakan Khidmat Penghantar

RM Ringgit Malaysia

RON Research Octane Number

RTM Route to Market

RTOG Road Tanker Operations Guidelines

SDD Supply and Distribution Division

SDS Safety Data Sheet

SIRIM Standards and Industrial Research

Institute of Malaysia

SL1M Skim Latihan 1Malaysia

SME Small Medium Enterprise

SMK Sekolah Menengah Kebangsaan

SOCSO Social Security Organization

SOX Sulphur Oxides

SPAD Suruhanjaya Pengangkutan Awam Darat

TC Time Charter

TLLCL Thang Long LPG Company Limited

TM Technical Managers

TMCA Technical Managers Capability

Assessment

TRCF Total Recordable Cases Frequency

TSER Talent Sourcing and Employee

Relations

ULG Unleaded Gasoline

USA United States of America

USD United States Dollar

WEBS West Port Bunkering Services

YAB Yang Amat Berhormat

YB Yang Berhormat

YPC Young Professionals’ Club

ZeTo Zero Tolerance

Directors Members of the Board

Management Senior Key Personnel of PDB

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ACCOUNTABILITY



INSPIRING CHANGE

This page has been intentionally left blank

I/We Tel:

of

being a member of PETRONAS Dagangan Berhad (“the Company”) hereby appoint:

Full Name (in Block) NRIC/Passport No. Proportion of Shareholdings

No. of Shares %

Address

and/or (delete as appropriate)

Full Name (in Block) NRIC/Passport No. Proportion of Shareholdings

No. of Shares %

Address

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the 34th Annual

General Meeting of the Company to be held at the Sapphire Ballroom, Level 1, Mandarin Oriental Kuala Lumpur,

Kuala Lumpur City Centre, 50088 Kuala Lumpur, Malaysia on Wednesday, 20 April 2016 at 10.00 a.m. and at any

adjournment thereof.

Resolution *Ordinary Business For Against

1 Re-election of Nuraini binti Ismail as a Director

2 Re-election of Lim Beng Choon as a Director

3 Re-election of Md Arif bin Mahmood as a Director

4 Re-election of Ir Mohamed Firouz bin Asnan as a Director

5 Directors’ Fees of RM723,000.00 payable to Non-Executive Directors for the

financial year ended 31 December 2015

6 Directors’ Fees of up to RM902,000.00 with effect from 1 January 2016 until

the next Annual General Meeting of the Company payable to Non-Executive

Directors

7 Re-appointment of Messrs. KPMG as Auditors of the Company

* Please refer to the Notice of Annual General Meeting for full details of the proposed Resolutions.

(Please indicate with an “X” in the spaces provided whether you wish your vote to be cast for or against the Resolutions.

In the absence of specific directions, your proxy will vote or abstain as he/she thinks fit)

Date:

Signature/Common Seal of Shareholder(s)

Number of Ordinary Shares Held

CDS Account No.

PROXY FORM

Notes:

1. For the purposes of determining a member who shall be entitled to attend and vote at the forthcoming 34th Annual General Meeting, the Company shall be requesting the Record of Depositors as at 12 April 2016. Only a depositor whose name appears on the Record of Depositors as at 12 April 2016 shall be entitled to attend and vote at the meeting as well as for appointment of proxy(ies) to attend and vote on his/her stead.

2. A member of the Company entitled to attend and vote at the meeting may appoint not more than two proxies to attend and vote on his behalf. A proxy may but need not be a Member of the Company and a Member may appoint any person to be his proxy without limitation and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. There shall be no restriction as to the qualification of the proxy.

3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991 (“SICDA”), it may appoint at least one proxy but not more than two proxies in respect of each Securities account it holds with ordinary shares of the Company standing to the credit of the said Securities accounts.

4. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for the omnibus account, there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defined under the SICDA which is exempted from compliance with the provision of subsection 25A(1) of SICDA.

5. Where a member or the authorised nominee appoints two proxies, or where an exempt authorised nominee appoints two or more proxies, the proportion of shareholdings to be represented by each proxy must be specified in the instrument appointing the proxies.

6. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if the appointer is a corporation either under seal or under the hand of an officer or attorney duly authorised and must be deposited at the Company’s Share Registrar, Symphony Share Registrars Sdn. Bhd., Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor, Malaysia, not less than 48 hours before the time fixed for holding the meeting.

7. If the Proxy Form is signed under the hand of an officer duly authorised, it should be accompanied by a statement reading “signed as authorised officer under Authorisation Document which is still in force, no notice of revocation having been received”. If the Proxy Form is signed by an attorney duly appointed under a power of attorney, it should be accompanied by a statement reading “signed under Power of Attorney which is still in force, no notice of revocation having been received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed with this Proxy Form.

Symphony Share Registrars Sdn BhdLevel 6, Symphony House

Pusat Dagangan Dana 1

Jalan PJU 1A/46

47301 Petaling Jaya, Selangor

Malaysia

AFFIX STAMPHERE

FOLD HERE

FOLD HERE

www.mymesra.com.my

PETRONAS Dagangan Berhad (88222-D)

Level 30-33, Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre, 50088 Kuala LumpurTel: (03) 2051 5000 • Fax: (03) 2026 5505

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ANNUAL REPORT 2015 PETRONAS Dagangan Berhad

I N S P I R I N G

PETRONAS Dagangan Berhad (PDB) - INSPIRING... PETRONAS Dagangan Berhad (88222-D)Level 30-33, Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre, 50088 Kuala Lumpur Tel: (03) 2051

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