...& growing our brands

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Continued to grow

our station network

and achieved higher

sales volume.

retail

Maintained our

leadership position

with 64%

market share.

commercial

Enhanced our

market leadership

to 52% through

aggressive

promotions.

lpg

Introduced new

products and

expanded our

distribution

channels.

lubricant

stay ahead in a challenging

marketplace. as we move

forward to achieve new

milestones, our focus

remains resolute

- to continuously grow

our brand portfolio and

create sustainable value

for all stakeholders.

our Vision

2

about Us

4

Corporate Information

6

Financial Calendar

8

Corporate Information

9

Board of Directors

10

Profi le of Directors

12

Management Committee

18

Performance Review

20

Performance at a glance

22

Financial highlights

24

simplifi ed group Balance sheet

26

Value added statement

27

share Performance

28

Crude oil and Petroleum Product Price trend

29

Chairman’s statement

30

MD/Ceo’s report

34

Highlights 2009/10

48

Corporate social responsibility

50

Calendar of events

60

PDB in the news

66

Corporate Governance

68

Corporate governance statement

70

statement on Internal Control

76

Board audit Committee’s report

78

Board audit Committee’s terms of reference

81

statement of Directors’ responsibility

83

Financial Statements

85

areas of operation

136

shareholders’ Information

138

List of Properties

141

notice of annual general Meeting

178

statement accompanying notice of annual general Meeting

180

Proxy Form

inside

to be the “Brand

of 1

st

Choice”

PETRONAS Dagangan Berhad (the Company) was incorporated in Malaysia under the Companies Act, 1965 on 5 August 1982 and was converted to a public company on 21 August 1993. Shares of the Company were listed on the Main Board of Bursa Malaysia Securities Berhad on 8 March 1994. The Company is the principal domestic marketing arm of Petroliam Nasional Berhad (PETRONAS), the national oil company, which holds 69.86% of its equity.

The Company markets a wide range of high quality petroleum products through its core businesses, namely Retail, Commercial, LPG and Lubricant. Petroleum products offered include motor gasoline, aviation fuel, kerosene, diesel, fuel oil, bunker fuel, lubricants, liquefied petroleum gas (LPG) and asphalt. The market for petroleum products is highly competitive, with major multinational corporations competing for sales of fuels to consumers which include motorists, households, airlines, shipping lines, transporters, plantations, processing and manufacturing plants, power stations and commercial enterprises. The Company’s convenience store i.e. Kedai Mesra, continues to grow and offer more convenience and better services to its customers.

The Company markets its products throughout the country, directly to customers as well as through its network of service stations, LPG dealers and industrial dealers. Its marketing activities are well supported by a comprehensive logistics and distribution system consisting of bulk depots, aviation depots, bunkering facilities and LPG bottling plants, all strategically located to ensure a reliable supply of products at all times. The Company has a sophisticated 24-hour customer service centre i.e. Mesralink, to ensure quality services to its customers. With Mesralink, customers have a central point of reference for all their questions and enquiries.

The Company currently employs more than 1,700 personnel at its Head Office in PETRONAS Twin Towers, Kuala Lumpur, 6 regional offices and depot installations throughout Malaysia.

retail

Growing our

reach with

more than 900

PETRONAS

Stations

nationwide.

Introduced

Euro 2-M products

– PETRONAS

PRIMAx 95,

PETRONAS

Dynamic Diesel

and PETRONAS

PRIMAx 97.

Launched new

PETRONAS

Mesra Loyalty

Programme

and Islamic

Co-branded

credit cards.

8

Financial Calendar

9

Corporate Information

10

Board of Directors

12

Profi le of Directors

Financial

Calendar

25 August 2009 announcement of the unaudited consolidated results for the 1st quarter ended 30 June 2009

26 August 2009 Date of payment of the 2008/2009 fi nal dividend

23 November 2009 announcement of the unaudited consolidated results for the 2nd quarter ended 30 september 2009

23 December 2009 Date of payment of the 2009/2010 interim dividend

19 February 2010 announcement of the unaudited consolidated results for the 3rd quarter ended 31 December 2009

31 March 2010 Date of fi nancial year end

25 May 2010 announcement of the unaudited consolidated results for the 4th quarter and fi nancial year

ended 31 March 2010

5 July 2010 Date of notice of 28th annual general Meeting and date of issuance of 2010 annual report

27 July 2010 Date of 28th annual general Meeting

DIRECTORS

Datuk anuar bin ahmad (Chairman)

amir hamzah bin azizan

(Managing Director / Chief executive offi cer) (appointed on 15 June 2010)

Dato’ Chew Kong seng Dato’ Dr. r. thillainathan

Dato’ Kamaruddin bin Mohd Jamal Datuk ainon Marziah bt Wahi Md arif bin Mahmood

Mohamad sabarudin bin Mohamad amin

(resigned on 15 June 2010) BOARD AUDIT COMMITTEE Dato’ Chew Kong seng (Chairman)

Dato’ Dr. r. thillainathan

Dato’ Kamaruddin bin Mohd Jamal Datuk ainon Marziah bt Wahi COMPANY SECRETARIES ahmad nabil bin azizan Yeap Kok Leong

BANKERS CIMB Bank Berhad Malayan Banking Berhad STOCK EXCHANGE LISTING Main Market of

Bursa Malaysia securities Berhad AUDITORS

KPMg Desa Megat & Co. WEBSITE

www.mymesra.com.my

CUSTOMER SERVICE CENTRE (MESRALINK)

tel : 1-300-88-8181

e-mail : mesralink@petronas.com.my REGISTRAR

symphony share registrars sdn. Bhd. Level 6, symphony house

Pusat Dagangan Dana 1 Jalan PJU 1a/46 47301 Petaling Jaya selangor, Malaysia tel : (03) 7841 8000 Fax : (03) 7841 8151 / 7841 8152 REGISTERED ADDRESS tower 1

Petronas twin towers Kuala Lumpur City Centre 50088 Kuala Lumpur tel : (03) 2051 5000 Fax : (03) 2026 5505 BUSINESS ADDRESS Level 30-33, tower 1 Petronas twin towers Kuala Lumpur City Centre 50088 Kuala Lumpur tel : (03) 2051 5000 Fax : (03) 2026 5505

Board of

Directors

seateD, FroM LeFt:

Dato’ Kamaruddin bin Mohd Jamal • Dato’ Chew Kong seng

Mohamad sabarudin bin Mohamad amin • Datuk anuar bin ahmad (Chairman) stanDIng, FroM LeFt:

Yeap Kok Leong (Company secretary)• ahmad nabil bin azizan (Company secretary)

Datuk Anuar bin Ahmad

,

a Malaysian aged 56, is a non-Independent non-executive Director. he was appointed as Chairman of Petronas Dagangan Berhad on 3 october 2005. he holds a Bachelor of science Degree (econs) from the London school of economics & Political science, University of London and had attended harvard Business school’s advanced Management Programme (aMP), Usa.

he joined Petronas in 1977 and is currently the executive Vice President, gas, Petronas. Before his appointment to this position, he held various senior managerial positions in International Marketing Division, Corporate Planning Unit, Petronas trading Corporation sdn Bhd, Petronas Dagangan Berhad, Vice President of oil Business and Vice President of human resource Management, Petronas. he has been a member of Petronas Management Committee since July 1998 and a Petronas Board member since october 2002. he also sits on the Board of several other companies within the Petronas group.

he was appointed to the Board on 20 May 1995 and attended four (4) Board meetings during the financial year.

Profile of

Directors

Mohamad Sabarudin bin Mohamad Amin

,

a Malaysian aged 54, was the Managing Director and Chief executive offi cer of Petronas Dagangan Berhad before resigning on 15 June 2010. he holds a B.a (hons), University of Malaya. he joined Petronas in 1979 and since then has held various senior managerial positions in Petronas.

Prior to his appointment as Managing Director/Chief executive offi cer of the Company on 16 november 2007, he was the senior Manager (southern region) of Petronas Dagangan Berhad, general Manager (Commercial) of Malaysia Lng sdn. Bhd, senior general Manager of Crude oil group, Petronas and Managing Director/Chief executive offi cer of asean Bintulu Fertilizer sdn. Bhd. he is also a Board member of other affi liated companies.

he was appointed to the Board on 16 november 2007 and resigned as a Director and Managing Director/Chief executive offi cer on 15 June 2010. he attended four (4) Board meetings during the fi nancial year.

Dato’ Chew Kong Seng

,

a Malaysian aged 72, is an Independent non-executive Director and the Chairman of the Board audit Committee. he is a Fellow of the Institute of Chartered accountants in england and Wales and a member of the Malaysian Institute of Certified Public accountants and the Malaysian Institute of accountants. his career started off as a tax officer in the United Kingdom with the Inland revenue Department and stoy hayward & Co. from 1964 to 1970. he returned to Malaysia to join turquand Young & Co. (now known as ernst & Young) and was subsequently transfered to sarawak office in 1973, first as Manager-in-Charge and later as Partner-in-Charge. he served as the Managing Partner of ernst & Young for six (6) years before he retired from professional practice in 1996. From May 1999 to June 2005, he was an executive director of sarawak enterprise Corporation Bhd.

his experience covers a wide variety of industries including those relating to banking and financial institutions, utilities, timber based, manufacturing, trading and advisory services to local and foreign investors. he is also an Independent Director and audit Committee Chairman of three (3) public listed companies namely Petronas Dagangan Berhad, aeon Co. (M) Bhd and PBa holdings Berhad. he is an audit Committee member of Petronas gas Berhad and guocoLand Malaysia Berhad. he also acts as an Independent Director in other public limited companies.

he was appointed to the Board on 25 March 1994 and attended four (4) Board meetings during the financial year.

Dato’ Dr. R. Thillainathan

,

a Malaysian aged 65, is an Independent

non-executive Director. he holds a Class 1 honours in Bachelor of arts (economics), University of Malaya (1968) and obtained his Masters and PhD in economics from the London school of economics. he is also a Fellow of the Institute of Bankers, Malaysia.

he sits on the Boards of Bursa Malaysia Berhad, genting Berhad and asia Capital reinsurance Malaysia sdn Bhd. he is also a member of the Board of trustees of Child Information, Learning and Development Centre as well as Yayasan Mea. Dato’ Dr. r. thillainathan has extensive years of experience in finance and banking and is actively involved in numerous professional and national bodies. he is also the Past President of the Malaysian economic association.

he was appointed to the Board on 24 March 1994 and attended four (4) Board meetings during the financial year.

Dato’ Kamaruddin bin Mohd Jamal

,

a Malaysian aged 67, is an Independent non-executive Director. he had attended the British royal Military College of science and British Command and staff College. he holds an MBa from the school of Business Management of the Cranfi eld Institute of technology, United Kingdom. he had also attended the advance Management Program at the IMD, Lousanne, switzerland. he was commissioned into the Malaysian army in 1962 and left the service in 1974 after he had served in various command and staff positions for twelve (12) years. he then joined esso Production Malaysia Inc. in 1975 and held various management positions in both upstream and downstream sectors. he was an assistant to the Chairman for two (2) years before he was appointed as hr Director for the esso Companies in Malaysia on 1 January 1987. he remained in this position until he elected to retire in December 2001. he was appointed to the Board on 1 March 2002 and attended three (3) Board meetings during the fi nancial year.

Md Arif bin Mahmood

,

a Malaysian aged 47, is a non-Independent non-executive Director. he holds a Masters of Business administration from Massachusetts Institute of technology, Usa and B.sc in electrical engineering Boston University, Usa.

he joined Petronas in 1984 and is currently the Vice President of Corporate strategic Planning, Petronas. Prior to assuming this position, he has held various senior positions in Petronas including the 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), Petronas gas Berhad. he is also a Board member of other companies within the Petronas group.

he was appointed to the Board on 20 april 2009 and attended four (4) Board meetings during the financial year.

Datuk Ainon Marziah bt Wahi

,

a Malaysian aged 59, is a non-Independent non-executive Director.

she holds a Bachelor of arts (hons) anthropology & sociology, University of Malaya and obtained her Master of science (Industrial relations) from University of strathclyde, United Kingdom.

she joined Petronas in 1979 and has held various senior positions in human resource Management Division, Petronas including the Vice President, human resource Management Division until she retired on 31 March 2009. she is also a Board member of several other companies within the Petronas group.

Amir Hamzah bin Azizan

,

a Malaysian aged 43, is the Managing Director and Chief executive offi cer of Petronas Dagangan Berhad effective from15 June 2010. he holds a Bachelor of science degree in Management (majoring in Finance and economics) from syracuse University, new York. he had also attended the stanford executive Programme at stanford University, U.s.a. and the Corporate Finance evening Programme at the London Business school, United Kingdom.

he has served the shell group of companies for 10 years in various capacities including head of Financial services and Manager, Planning & support at sarawak shell Berhad, Marketing Credit accountant at shell singapore Pte Ltd, Internal auditor at shell eastern Petroleum Pte Ltd, and senior treasury advisor at shell International Ltd., London.

amir hamzah joined MIsC in 2000 and was the group’s general Manager, Corporate Planning services. subsequently in 2004, he was the regional Business Director (europe, americas, africa and FsU) of MIsC based in London, UK before being appointed as President/Chief executive offi cer, aet tanker holdings sdn. Bhd. on 1 april 2005.

Prior to his current position, he was the President/Chief executive offi cer of MIsC Berhad from 1 January 2009. he is also a Board member of MIsC Berhad, United Kingdom Mutual steam ship assurance association (Bermuda) Ltd. (UK P&I Club) as well as a council member of the american Bureau of shipping and general Committee Member of Bureau Veritas. he is also a Director of Bintulu Port holdings Berhad and nCB holdings Berhad.

he was appointed to the Board on 15 June 2010. hence, he had not attended any Board meetings during the fi nancial year.

none of the Directors has :

any family relationship with any Director and/or major shareholder. any confl ict of interest with Petronas Dagangan Berhad.

any conviction for offences within the past ten (10) years other than traffi c offences. (all of the Directors are members of nomination and remuneration Committee).

FroM LeFt:

Baharin bin Raoh

head, operation Performance Improvement Department

Ungku Haslina bt Ungku Mohamed Tahir general Manager,

human resource Management Division

Ahmad Kushaini bin Ramli

senior Manager, strategic Planning Department Lee Ten Chai

senior Manager, hse Department Zubair bin A. Razak

general Manager, LPg Business Division

Nur Azmin bin Abu Bakar

general Manager, Corporate services Division Ahmad Nabil bin Azizan

Company secretary / senior Legal Counsel Abdul Majeed bin K. Kunheen general Manager, Finance services Division

Management

Committee

Md Yazid bin Mansor senior general Manager, supply & Distribution Division

Mohamad Sabarudin bin Mohamad Amin Managing Director/Chief executive offi cer

(resigned on 15 June 2010)

Mohd Shobri bin A. Bakar

general Manager, Lubricant Business Division Mohd Farid bin Mohd Adnan

senior general Manager, retail Business Division Sabri bin Said

commercial

Performance Review

22

Performance at a glance

24

Financial highlights

26

simplifi ed group Balance sheet

27

Value added statement

28

share Performance

29

Crude oil and Petroleum

Product Price trend

30

Chairman’s statement

Launched the

Commercial

website to

better serve

our customers.

Achieved

volume growth

through strategic

marketing

initiatives

and improved

economic

conditions.

Leading the way

in Bio-Diesel (B5)

implementation

in the country.

Revenue (RM million) 16,567.9 19,496.4 22,301.6 24,367.6 20,687.0 Profit before taxation (RM million) 724.6 903.2 908.4 810.3 1,046.0 Profit for the year attributable to shareholders of the Company (RM million) 504.7 640.3 661.7 578.7 752.9 Total equity attributable to shareholders of the Company (RM million) 3,026.3 3,487.8 3,917.4 4,163.3 4,558.5 Total assets (RM million) 6,170.9 6,516.9 8,609.6 6,584.2 7,884.7

Earnings per ordinary share (sen) 50.8 64.5 66.6 58.2 75.8

SHARE INFORMATION 2006 2007 2008 2009 2010

Per share

- Gross dividend (sen) 20.0 30.0 45.0 45.0 60.0

- Net dividend (sen) 14.4 21.8 33.5 33.8 45.0

Performance

at a Glance

Financial

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Value Added

Statement

Value added is defi ned 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 the replacement of assets, development of operations and future growth.

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Less: Purchase of goods and services (19,238,585) (23,204,230)

Value added 1,448,457 1,163,392

other income 126,906 111,835

Financing costs (3,409) (2,161)

share of profi t after tax of equity

accounted associates 444 326 Value Created 1,572,398 1,273,392 Distributed to: % RM’000 % RM’000 employees 13 203,198 14 180,665 Providers of equity 30 465,167 26 336,078 Providers of debt 0 29 0 14 government (taxation) 18 288,478 18 228,533 retained for reinvestment and future growth

- Depreciation and amortisation 20 319,789 22 280,274 - Unappropriated profi ts 19 295,737 20 247,828

Ordinary Share

of RM1.00 each 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*

Highest Price 7.85 6.80 4.70 4.42 4.70 4.50 6.05 7.05 8.00 8.10 4.98 6.25 9.25 8.80 9.24 Lowest Price 5.60 2.99 1.78 3.40 2.86 2.80 4.20 4.96 6.15 3.52 3.66 4.82 6.10 6.10 7.50

* Based on transacted prices for the period ended 31 March 2010.

PDB Stock Highest Price Lowest Price Total Volume Traded FBM KLCI H]VgZEg^XZ

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Performance

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note: average monthly prices based on Mean of Platts singapore (MoPs)

ron 97 ron 95 Diesel Jet a-1 Crude oil (tapis)

Crude Oil and Petroleum

Product Price Trend

Chairman’s

Statement

on behalf of the Board of Directors, it is my pleasure to present the annual report of Petronas Dagangan Berhad (the Company) for the financial year ended 31 March 2010. ECONOMIC LANDSCAPE

the past financial year 2009/10 was both challenging and at the same time filled with opportunities. the global economic recession during the first half of 2009 had severely impacted both advanced and developing economies, leading to huge business and personal wealth erosion, decline in energy demand and rising unemployment. however, the economy made a turn and gradually recovered in the second half of the year following massive stimulus packages introduced by the various governments.

the Malaysian economy was not spared from the global recession as its gross Domestic Product (gDP) for 2009 suffered a contraction of 1.7%. the economy managed to recover in the later part of the year to 4.5%, fuelled by higher domestic expenditures and rising exports.

Despite the tough and challenging economic backdrop, the Company was able to secure a commendable revenue of rM20.7 billion albeit lower than the previous year due to lower product prices. With effective planning and implementation, the Company managed to achieve the highest ever pre-tax profit of rM1,046 million during the year.

the Board of Directors is recommending a final dividend of 30 sen and a special dividend of 15 sen per share. With an interim dividend of 15 sen per share paid on 23 December 2009, total dividend paid for the financial year amounts to 60 sen per share, 33% higher than the previous year.

total dividend for the

fi nancial year amounts to

60 sen per share, 33% higher

than the previous year.

THE COMPANy

During the period under review, the Company has managed to expand its network with the completion of new service stations and convenience stores at strategic locations nationwide. Petronas PrIMaX 95, Petronas Dynamic Diesel and Petronas PrIMaX 97 introduced during the year have won the confi dence of consumers, keeping the products’ market share on a steady growing trend. the Commercial & Liquefi ed Petroleum gas (LPg) Businesses have continued to maintain their market leadership with consistent high sales volume. the Lubricant Business performance also recorded a high growth against industry with new products being launched, namely Petronas Urania, Petronas MPlus and Petronas syntium Moto. the Company’s market share stands at about 43.5%, sustaining its market leadership in the country. the Company continues to explore new business opportunities to further expand its growth momentum.

the Company will continue

to strive for superior

performance through service

excellence, innovation and

cost optimisation initiatives.

ACKNOWLEDGEMENT

on behalf of the Board of Directors, I would like to thank the Management and staff for their determination and commitment in making this year a significant success. the Company wishes to express its utmost gratitude to the previous MD/Ceo, encik Mohamad sabarudin bin Mohamad amin for his leadership, commitment and hard work to bring the Company to where it is today. the Company would like to welcome the new MD/Ceo, encik amir hamzah bin azizan. I am confident that with his experience in the oil and gas industry, he will elevate Petronas Dagangan Berhad to yet another higher level. I would also like to express my deepest appreciation to all our customers, dealers, partners, shareholders and especially the government for their relentless support. Last but not least, to our Board of Directors, thank you for your insightful guidance, support and cooperation.

OUTLOOK

Looking ahead, the global economy is expected to sustain a gradual recovery trend. global growth is forecasted at 3.9% in 2010 compared to -0.8% in 2009. In line with the global oil demand improvement, crude oil price is projected to hover around the current level which is acceptable to both producers and consumers.

on the domestic front, Malaysia’s gDP is anticipated to achieve growth of about 5% in 2010, driven by both government initiatives as well as those by the private sectors. In addition, the introduction of the new economic Model (neM) to be implemented along with the 10th Malaysia Plan will ensure sustainability in the domestic economic growth between 2011 and 2015.

the Company will continue to strive towards superior performance through service excellence, innovation and cost optimisation initiatives, creating value for the Company and upholding the vision to be the ‘Brand of 1st _Choice’.

the Company emphasizes on health, safety and environment (hse) in all its operations. During the year, various hse exercises, drills, audits and educational programmes were conducted to ensure the Company’s preparedness during emergency situations. as a responsible and caring organization, the Company also believes in giving back to the community through involvement in various projects i.e. sponsorships, donations and educational activities at both state and national levels.

the concerted efforts on hse, corporate social responsibility and aggressive business improvement activities have resulted in the Company being recognized for its superior brand performance, winning many prestigious awards like the reader’s Digest trusted Brand 2009 gold award, the Putra Brand gold award and Malaysia’s 30 Most Valuable Brand award.

Datuk Anuar bin Ahmad Chairman

MD/CEO’s

Report

Financial year 2009/10 was faced with a challenging economic environment where signs of recovery from the recession were only seen in the later part of the year. Despite the uncertainties, Petronas Dagangan Berhad through effective execution of its plan has continued to record commendable earnings and market share during financial year ended 31 March 2010.

FINANCIAL PERFORMANCE

amidst an uncertain economic landscape, the Company recorded a revenue of rM20.7 billion in FY2009/10. Despite lower revenue, the Company registered higher profit before tax of rM1,046 million compared to rM810.3 million last year. earnings per share rose to 75.8 sen.

the Company registered higher

profit before tax of rM1,046 million

compared to rM810.3 million last year,

while earnings per share rose to 75.8 sen.

a total of rM371 million was spent during the year on capital expenditure, financed solely by internal funds.

BUSINESS PERFORMANCE

the Company, though faced with a difficult economic situation, has undertaken several key mitigating initiatives without however, sacrificing its share of the market. It continued its overall domestic market dominance with a share of about 43.5%.

the Company will continue to expand its

retail station network, increase Mesra stores

with partners’ offerings, while at the same time

further enhancing service excellence for

customers’ satisfaction.

focus with the completion of about 30 new stations during FY2009/10. the opening of new Mesra stores has further complemented retail income, enhancing further convenience to the customers. the business market share hovers around 32%.

the Company was the fi rst to launch ron 95 with euro 2-M specifi cation under the brand name of Petronas PrIMaX 95 at Petronas station Precinct 9D, Putrajaya on 12 May 2009. this was followed by the introduction of Petronas Dynamic Diesel, a diesel fuel that delivers superior engine performance for optimum power and improved fuel economy, at all Petronas stations in september 2009. In fulfi lling customers’ demand, the Company later on 18 January 2010 launched Petronas PrIMaX 97, a revolutionary fuel that provides consumers with enhanced acceleration and fuel effi ciency to replace Petronas PrIMaX 3.

initiatives and promotions were conducted to increase customer patronage at the stations. some of these were the transformers merchandise promotion, hot Cars Cool Cash 2, Mesra Card Food Fest promotion and the “experience the Power, enjoy the savings” contest. the new Petronas Mesra Loyalty Programme and the Petronas Co-Branded Islamic Credit Cards were also introduced during the year to further enhance brand loyalty whilst providing its members with a range of privileged benefi ts. these cards were well received in the market, evidenced by the increased in new memberships recorded during the year. In order to verify customers’ satisfaction level at the stations, a ‘Mystery shopper’ program by an independent party was conducted nationwide. the results showed signifi cant service improvement at the stations from quarter to quarter, refl ecting the Company’s relentless effort to further improve its quality offerings and convenience to customers.

During the last quarter of the year, the Company opened its new Petronas Cards Centre at Petronas twin towers KLCC, together with a standalone ‘Mesra shoppe’. the move was to not only further enhance card members’ convenience and experience, but also to further elevate the Company’s brand image. also in accommodating customers’ needs, to date there are more than 958 atMs, 285 stores with touch n go facilities, 753 e-Pay terminals, 71 nationwide express counters and 39 transnasional counters available in about 600 Mesra stores at Petronas stations nationwide.

In line with the Company’s effort to sustain its growth, the Company will continue to expand its retail station network, increase Mesra stores with partners’ offerings, while at the same time further enhancing service excellence for customers’ satisfaction.

the Commercial Business has continued to maintain its market share at about 64% in the sales of industrial products. sales volume continued to grow following improved business landscape in the manufacturing, agricultural, fi sheries, aviation and shipping sectors. the Company was again at the forefront in product development with the introduction and supplying of Bio-diesel (B5) to government agencies namely the Ministry of Defence (MInDeF) in Central region and Dewan Bandaraya Kuala Lumpur (DBKL) since February 2009. as per government’s directive, the Company is preparing the necessary facilities at its terminals to supply Bio-diesel to consumers in the Klang Valley effective June 2011.

the Commercial Business

continued to maintain its market share

at about 64% in the sales of

industrial products.

necessary facilities at its terminals to supply Bio-diesel to consumers in the Klang Valley

Providing efficient after-sales and superior technical services for customer satisfaction have always been the focus in Commercial Business. In July 2009, a website was launched specifically for commercial customers with useful information on products and technical information. this, together with other ongoing initiatives and efforts in place, will continue to uphold the Commercial Business as the trusted and preferred supplier in the sales of industrial products.

the Liquefied Petroleum Gas (LPG) Business has expanded its market share to about 52%, firming its position as the market leader with high cylinder sales following aggressive promotions and new market penetration.

In better serving customers and educating the public, the LPg Business has continued to sponsor various related programs and activities. these include sponsoring a “healthy Living” Infomercial aired on astro plus several cooking competitions conducted nationwide. In March 2010, the Company sponsored 7,000kg of Bulk LPg for the 4-day Putrajaya International hot air Balloon Fiesta which helped to further promote the gas Petronas brand.

LPg Business is well poised to continue leading the LPg industry in Malaysia whilst at the same time enhancing value, further reinforcing its tagline “Malaysia’s no. 1 selling Cooking gas”.

LPg Business is well poised to continue

leading the LPg industry in Malaysia,

further reinforcing gas Petronas as

“Malaysia’s no. 1 selling Cooking gas”.

With high quality products meeting

stringent international specifi cations,

the Lubricant Business is set to further

accelerate new growth in the industry.

the Lubricant Business recorded higher sales volume compared to the industry despite the challenging business conditions. the business has managed to clinch about 21% of the domestic lubricant market. During the period under review, the Company introduced two major new products to add to its current range of lubricants. In May 2009, the Company successfully introduced the Petronas Urania range of heavy duty diesel engine oils. Petronas Urania is specially formulated from premium quality base oils and advanced additives system that provides high level resistance and ensures superior engine cleanliness. Following the success of Petronas Urania, the Company introduced the Petronas syntium Moto range of premium grade synthetic motorcycle engine oils in March 2010. the Petronas syntium Moto range has been developed with

technology exceeding the highest international standards for optimum engine performance. as such, this product range offers avid bikers the ultimate engine performance and protection, even under the most extreme and demanding motoring conditions.

the acquisition of Lub Dagangan sdn. Bhd. (LDsB) in the last fi nancial year has also resulted in effi cient streamlining of the Company’s market segments, with LDsB focusing primarily on the highstreet market. the Company also continued to leverage on Petronas MotosPorts involvement in the Mercedes gP-Petronas F1 team to further strengthen the Company’s lubricant brands. With high quality products meeting stringent international specifi cations, improved channel penetration and major accounts secured, the Lubricant Business is set to further accelerate new growth in the industry.

SUPPLy AND LOGISTICS

the Company undertook a series of improvements and upgrading initiatives to meet increasing demand and ensure an efficient logistics support system. these initiatives were focused on effective asset management, operational efficiency and development of capable and knowledgeable human capital to support the Company’s business operations in achieving its targets. amongst these initiatives includes the ‘simultaneous Product Discharge’ operation at sepangar Bay terminal beginning august 2009 which involved simultaneous discharging of Jet a-1 and Unleaded gasoline, contributing to cost and time savings, as well as easing port congestion. Besides this, the Company also undertook two major initiatives to reduce transportation costs, namely the pilot project on Petronas B-Double tanker in november 2009 with higher capacity volume and advanced safety features, plus the supply re-zoning exercise of terminals.

through the addition of the new Lumut Fuel terminal in January 2009 and the completion of the Kuantan terminal, Pasir gudang Bulk and LPg terminal and the bunkering facility in Bintulu, sarawak, the Company was able to further enhance its products availability thus better serving its customers nationwide. With the aim of “trusted Delivery at effective Cost”, the Company will continue to strive for operational excellence and enhanced efficiency.

OPERATIONAL IMPROvEMENT

In developing and maintaining valuable human capital, the Company has invested in a series of training and development activities such as MyPDB familiarization program and the Petronas Induction Program for new executives, leadership training through Building Leaders Programme and Leadership excellence at Petronas and teambuilding programmes. these activities are to ensure the availability of a pool of highly capable and well-trained human resources in the Company.

the Company

undertook a series

of improvements and

upgrading initiatives

to meet increasing

demand and ensure

an efficient logistics

support system.

Various hse programs were also undertaken during the year, including educational programmes, audits and drills. the Company organized ‘total health Promotion’ sessions for staff to increase health awareness and promote healthy lifestyles. other health related activities organized include ‘h1n1 awareness’ and ‘Managing your Weight’ talks. two major tier-3 exercises were conducted during the year at the shah alam training Centre (emergency response table top exercise) and Prai Depot (emergency response Full scale exercise). the objective of these exercises is to enhance understanding of the roles and responsibilities between the Company and government agencies apart from strengthening the coordination and profi ciency of ‘Unifi cation of Command’ between these organisations. these exercises have enabled the Company to assess its systems and procedures, emergency response Plan (erP) and Business Continuity Plan (BCP) during an emergency situation.

Besides the above, safety exercises and drills were also conducted at various regions in collaboration with related local authorities. these include the emergency response road tanker accident exercises at Plaza toll sg. Besi in september 2009, at Petronas station Behrang, Perak in July 2009 and at the Lebuhraya sepangar Bay, Kota Kinabalu in February 2010.

the Company’s hse commitment was recognized at the Petronas group hse Forum 2009 with an award for the development of a Jet a-1 Filter Water separator Vessel opener at KL aviation Fuel terminal which made the fi lter replacing process faster and cost effective. the Company also won an award for the Vapor recovery system (Vrs) which was designed to recover hydrocarbon vapor during product loading at Prai Fuel terminal, thus reducing hydrocarbon emission into the atmosphere.

the year in review saw the Company winning another four awards in recognition of the Company’s superior brand performance. the Company was awarded the reader’s Digest trusted Brand 2009 gold award under the Petrol station category, the 2010 Putra Brand gold award under the automotive Fuel category, Malaysia’s Most Valuable Brand award in the energy Industry Category and Best Investor relations 2009 award by a Malaysian Company. these awards were the result of the continuous sales driven initiatives, which included the re-imaging, housekeeping and service quality improvements implemented to ensure customers’ satisfaction. For the fi rst time, the Company was listed in the 2009 Forbes global 2000 Companies.

REACHING OUT TO THE COMMUNITy as a socially responsible corporate citizen, the Company continued its involvement in community programmes nationwide, enhancing the relationship bond with the local community whilst increasing brand awareness among the public at large. During the month of ramadhan, the Company through its retail and LPg Businesses held various ‘buka puasa’ gatherings and distributed donations at various service stations, mosques and orphanages. as in the past, the Company also undertook sponsorship of gas cylinders for bubur lambuk cooking events in Klang Valley organized by the local mosques, while in sabah the event was held by rtM sabah and the sabah Cultural Ministry. the sponsoring of gas cylinders for various community cooking

contests and charity food fairs and bazaars held nationwide were also undertaken, which further promoted the Company’s brand. other contributions were made to the ‘sentuhan Kasih’ program in semporna, sabah and a relief effort for the Down syndrome Child Centre (PerPIKat) in Bintulu, sarawak. apart from that, the Company sponsored educational visits for children under programs like “Dino goes to hospital” in Kuantan and Program Bakti Pendidikan Petronas (PBPP) held at Universiti teknologi Petronas.

In our continuous effort to promote safe driving during the holiday seasons, the Company held its 10th year anniversary Coffee Break campaign at selected Petronas stations throughout the country.

FUTURE OUTLOOK AND CHALLENGES Based on improvements in economic fundamentals in major and developing economies, the global economy is expected to continue experiencing recovery and growth in future years. a growth of 3.9% in 2010 is anticipated in line with this positive global optimism. the Malaysian economy is expected to sustain its recovery momentum by registering growth of about 5%.

the manufacturing sector has started to recover since the second half of 2009. In assisting to further strengthen the economy, the government has allocated rM15.1 billion in the 2010 Budget to boost infrastructure and growth corridor developments. the new economic Model (neM) coupled with the 10th Malaysia Plan will further drive the nation’s economy, creating opportunities in the oil sector in the years to come.

In line with the favourable economic outlook, the Company is well-prepared to leverage on this development, turning the opportunities available into greater value to its businesses. the Company will stay focused on its quest to remain competitive and add value to stakeholders through quality innovation, enhanced effi ciency, cost optimization and improved customers satisfaction and loyalty. APPRECIATION

the employees form the foundation and backbone of the Company’s success. on behalf of the management, I would like to express my gratitude to all employees of this Company for their commitment, hard work and sacrifi ces in turning challenges into opportunities and

enabling the Company to achieve its objectives. I would also like to thank the government of Malaysia and its agencies for their continued support and cooperation in many aspects of our businesses. to the Board of Directors, thank you for your encouragement, insightful guidance and stewardship. Last but not least, I would like to express my sincere appreciation and gratitude to all our customers, dealers, partners, shareholders and stakeholders for your continued support.

Mohamad Sabarudin bin Mohamad Amin Managing Director / Chief executive offi cer

the Company will stay

focused on its quest

to remain competitive

and add value to its

stakeholders.