mrs oil nigeria plc - Investing In Africa

MRS Oil Nigeria Plc2012 Annual Report and AccountsMRS Oil Nigeria Plc - 2012 Board MeetingsDIRECTORS DESIGNATION Feb 28,‘12March 23,‘12May 3,’12July 10,‘12Nov 8,‘12Alhaji Sayyu I. Dantata Chairman X X XMr. S.B Prasad*ManagingX X X X XDirectorMr. Paul Bissohong** ManagingDirectorMr. Patrice Alberti Director X X X X XMr. Andrew O. Gbodume ExecutiveX X X X XDirectorChief Sylvanus C. Ezendu Director X X X X XDr. Samaila M. Kewa Director X X X XMr. Lawal Mangal*** AlternateDirectorX X* Mr. Shardhashis B. Prasad resigned as the Managing Director of the Company on December 5, 2012.** Mr. Paul Bissohong was appointed to the Board on 5 December, 2012.*** Mr. Lawal Mangal was appointed to the Board on 14 August, 2012.Board Performance Appraisal:The Board did not undertake any formal evaluation of its performance, individual or collectivein the year under review.A process exists for the follow up on all matters of concern or potential improvement whichmay arise when an evaluation process is carried out.Sub Committees of the Board:The Board has established Committees, each with written terms of reference approved by theBoard. Currently, there are 4 sub-committees of the Board and the Chairman is not on any ofthe Committees. The sub-committees are established to assist the Board to effectively andefficiently perform guidance and oversight functions, amongst others.The terms of reference for all the committees are available for inspection at the registeredoffice of Company.The current composition of the Board Sub-committees and attendance at meetings in the yearunder review are as follows:-8

MRS Oil Nigeria Plc2012 Annual Report and Accounts1. The Audit CommitteeAuditMembersCommitteeDesignation Feb, 22 ‘12March22, ‘12May 2,‘12Aug 7,‘12Nov 6,‘12Engr. Tunji Ijaiya Chairman X X X X XMr. Isiaka Saliu Member X X X X XChief Vincent Barrah Member X X X X XChief Sylvanus C. Member X X X X XEzenduMr. Andrew Gbodume Member X X X X XDr. Samaila M. Kewa Member X X XMr. Lawal Mangal Member (Appointed to the Committee on April 18, 2013)The Audit Committee is chaired by a shareholder representative. On the invitation of theChairman of the Audit Committee, representatives of Management and the External Auditorsare invited to attend meetings. The Audit Committee is responsible for the review of thequarterly and annual financial reports of the Company before submission to the Board. TheAudit Committee makes recommendations on the appointment of the External Auditors andreviews the nature and scope of their work as well as recommendations on the company’saccounting procedures and internal controls.In the year under review, the Audit Committee met 5 times.2. Board Nominations and Corporate Governance CommitteeThe Board Nominations and Corporate Governance Committee is responsible for proposingcandidates for appointment to the board, bearing in mind the balance and structure of theBoard. The board also considers corporate governance issues, ensures strict compliance andmakes recommendation to the Board (on issues regarding but not limited to) the membershipof the Audit, Strategic & Finance Planning and the Human Resources Committee in consultationwith the Chairman of each Committee.In the year under review, the Board Nominations and Corporate Governance Committee did notmeet.9

MRS Oil Nigeria Plc2012 Annual Report and Accounts3. The Strategic and finance Planning CommitteeStrategic Planning and FinanceDesignation Dec, 5, ‘12Committee:MembersChief Sylvanus C. Ezendu Chairman XMr. Paul BissohongMemberX(appointed to committee on Dec 5,2012)Dr. Samaila M. KewaMemberX(appointed to Committee on Nov 5,2012)Mr. S.B. Prasad(resigned from the board on Dec 5, 2012)Mr. Andrew O. Gbodume Member XThe Committee is responsible for assisting the Board of Directors in performing its guidance andoversight functions effectively and efficiently, and is specifically charged with defining theCompany’s strategic objectives, determining its financial and operational priorities, makingrecommendations regarding the Company’s dividend policy and evaluating the long-termproductivity of the Company’s operations.In the year under review, the Strategic Planning and Finance Committee Members met once.4. Human Resources CommitteeHuman Resources Committee Designation Dec, 6 ‘12MembersDr. Samaila M. Kewa Chairman XChief Sylvanus C. Ezendu Member XMr. Paul Bissohong Member XMr. Andrew O. Gbodume Member XThe Human Resources Committee is responsible for reviewing the contract terms,remuneration and other benefits of the Executive Directors and Senior Management of theCompany. The Committee also reviews the reports of external consultants for servicesrendered, which assist the Committee in their duties.The Chairman and other Directors may be invited to attend meetings of the Committee, but donot take part in any decision making directly affecting their own remuneration. The Committeeundertakes an external and independent review of remuneration levels on a periodic basis, toensure that employment policies are strictly adhered to.In the year under review, the Human Resources Committee met once.Meetings:The register of attendance at meetings is available for inspection during normal business hoursat the registered office of the Company and at each Annual General Meeting of the Company.10

MRS Oil Nigeria Plc2012 Annual Report and AccountsEmployment Policy:The Company is committed to selecting and employing the best qualified individuals forpositions, consistent with the Company’s long term best interest. The determining factors inrecruiting, hiring, selecting and placing employees are the overall requirements of the job.The objective of the policy is to provide a level of remuneration that is sufficient to attract,retain and motivate high quality employees to run the Company successfully and to ensure thatthere is an alignment between the Company’s business plan and shareholder objectives. Asignificant proportion of the employee remuneration is linked to the achievement of short andlong – term performance objectives.The Company maintains a fair policy in considering job applications of physically challengedpersons having regard to their abilities and aptitude. The policy prohibits any form ofdiscrimination on the basis of disability, race, religion, colour, national or ethnic origin, age, sex,political preference, membership or non-membership of any lawful organization or any otherbasis in the recruitment, training and career development of employees. The Company did notemploy any physically challenged person during the year.The Company provides a working environment that promotes diversity within its workforce andenables employees to participate and contribute to the growth of the Company.Employees Health, Safety and Environment:The Company is committed to achieving and maintaining the highest standards of safety for itsemployees, suppliers, customers and the public in line with best global HSE standards. In theyear under review, consistent Health Safety and Environment (HSE) standards continued toguide the Company’s operations and activities.In July, 2012 the Company engaged the services of medical health providers to provide betterhealth and welfare care services to the generality of the staff and their families. The head officeand Apapa complex in-house outpatient clinic were functional and accessible to employeesthroughout the year, during business hours.The theme of the 2012 annual safety week was “SAFETY STARTS WITH ME”, with action learningsessions provided for the employees, haulers, drivers, contractors on the best safe work andhealth practices.On regulatory compliance, statutory inspections visits were conducted and emergencypreparedness drills were carried out at our operational facilities by the Department ofPetroleum Resources (DPR), NOSDRA (Federal agency), LASEPA(State agency) and the NigerianPorts Authority-Health Safety and Environment Committee (NPA-HSE) and FAAN, AirlinesOperators. The Company received a satisfactory report of compliance, by the industry(petroleum downstream sector and the different Aviation regulatory agencies).11

MRS Oil Nigeria Plc2012 Annual Report and AccountsEmployees Involvement, Training and Development:In the year under review, various employees took part in various training and developmentprogrammes; Staff Induction Training, Finance for Non – finance managers, Station Managertraining programme, SAP Reporting, External training for team building, Time Management andCredit Management, to mention a few.Contributions and Charitable Donations:During the year, the Company made the following donations in fulfillment of its corporate socialresponsibility:NAMEAMOUNT1. The Zamarr Institute (School for Autism), Abuja 200,0002. Poorest of the Poor, Abuja 100,0003. Ereko Methodist Primary School, Berkley, Lagos 200,0004. Lagos State School Management Board (L.S.P.E.B) G.R.A, Oba Akinbiyi way, 300,000Ikeja, Lagos.5. Wasimi Community Primary School, Wasimi, Maryland, Lagos 200,0006. Pacelli School for The Blind, Surulere, Lagos 100,0007. G.R.A. Primary School, G.R.A Ikeja, Opposite Police Force HQ. Lagos 200,0008. Opebi Primary School, Opebi, Ikeja, Lagos. 300,0009. Olusosun Wright Estate Primary School, off Kudirat Abiola way, Oregun, Lagos 200,00010. 9 Brigade Primary School, Brigade Miliktary Cantonment, Ikeja, Lagos 200,00011. Bola Memorial Primary School, Mobolaji Bank Anthony way, Maryland, Lagos 200,000TOTAL 2,200,000Donations made in 2011 amounted to N2,200,000.In accordance with Section 38(2) of the companies and Allied Matters Act, the Company did notmake any donations or gift to any political party, political association or for any politicalpurpose in the course of the year under review.Information Technology Upgrades:The Company is committed to the provision of regular upgrade of its information technologyinfrastructure for its head office and field locations to assist with online monitoring of its fieldtransactions. IT achievements in the year under review include:1. Upgrade of 27 Remote Locations VSAT connectivity from 64-128k to 512-256k toaccommodate (BPCS now SAP and Emails) from the Head-office.2. VPN connection created for usage of Network facilities outside the head-office/Apapa.3. Backup VSAT connect created for the Head-office – Two ISPs namely Main One Cableand Vodacom Business Nigeria.4. SAP - New Business Application – Implementation, launch and go live.5. Email platform upgraded to Office 365.6. Head-Office Access monitoring system upgraded – for the access control system andbiometric data capturing, time and attendance system.7. Replacement of Laptops & Desktop that had reached end-of-life.12

MRS Oil Nigeria Pic2012 Annual Report and Accounts8. Remote access provided to employees.9. Loyalty Card System for MRS Stations.Appointments and Promotions: The Company is committed to attracting, recruiting and retaining skilled and experience personnel into the organization for future growth and continuity of the Company's operations. The Company will continue to identify and reward positive contributions by our employees who excel in their various functional areas. In 20U, the Company employed several new employees to strengthen its operations.Staff Strengt h: As at 31 December 2012, the Company's staff strength was 109. This number includes expatriates and employees on secondment from MRS Holdings. One (1) employee was promoted in the year under review. Property; Plant and Equipment:Information relating to changes in the Company's property, plant and equipment Is given inNote 12 to the financial statements. In the Directors opinion, the market value of theCompany's properties is not less than the value shown in the financial statements during theyear.IFHS TransitionIn line with the IFRS transition roadmap released by the Financial Reporting Council ofNigeria (FRC), MRS all Nigeria Pic is classified as a Listed and Significant Public InterestEntity and has prepared these financial statements for the first time in accordance withInternational Financial Reporting Standards (IFRS) . An explanation of how the transitionto IFRS has affected the reported financial position, financial performance and cashflows of the Company is provided in Note 30.Auditors:Messers KPMG Professional Services was appointed External Auditors to the Companyhave indicated their willingness to continue in office as Auditors in accordance withSection 357(2) of the Companies and Allied Matters Act of Nigeria. A resolution for theirre-appointment as Auditors will be proposed at the Annual General Meeting of theCompany to be held on 14 August 2013.By the Order 0 ~Board\Company Secret ryI 5 n'10 ?--G 1.3 13

STATEMENT Of DIRECTORS' RESPONSIBILITIES IN RElATION TO THE FINANCIALSTATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012The directors accept responsibility for the preparation of the annual financialstatements set out on pages 16 and 70 that give a true and fair view in accordance withthe International Financial Reporting Standards (IFRS) and in the manner required bythe Companies and Allied Matters Act of Nigeria and the Financial Reporting Council ofNigeria Act, 2011 .The directors further accept responsibility for maintaining adequate accounting recordsas required by the Companies and Allied Matters Act of Nigeria and for such internalcontrol as the directors determine is necessary to enable the preparation of financialstatements that are free from material misstatements whether due to fraud or error.The directors have made an assessment of the Company's ability to continue as a goingconcern and have no reason to believe the Company will not remain a going concern inthe year ahead .E BOARD OF DIRECTORS BY:b \'&1ss Q \to ~ ~.NameDate14

KPMG Professional Services Telephone 234 (1) 271 8955KPMG Tower234 m27 1 8599Bishop Aboyade Cole StreetFax 234 (1) 27 1 0540Victoria IslandInternet www.kprng com/ngPMB 40014, FalonloLagosINDEPENDENT AUDITOR'S REPORTTo the Members of MRS Oil Nigeria PicReport on the Financial StatementsWe have audited the accompanying financialstatements of MRS Oil Nigeria Pic ("the Company),w hich comprise the statement of financial position asat 31 December 2012 and the statement ofcomprehensive income, statement of changes inequity, and statement of cash flows for the year thenended, and a summary of significant accountingpolicies and other explanatory infonnation, as set outon pages 17 to 70.Directors' Responsibility for the FinancialStatementsT he directors are responsible for the preparation offi nancial statements that give a true and fair view inaccordance with International Financial ReportingStandards and in the manner required by theCompanies and Allied Matters Act of N igeria andthe Financial Reporting Council of N igeria Act,20 11, and for such internal control as the directorsdetermine is necessary to enable the preparation offinancial statements that are free from materialmisstatement, whether due to fraud or error.A IIditor's R espoftsibilityOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perfolm the audit to obtain reasonable assurance about whether the financial statements are free from mat.erial misstatement. An audit involves performing procedures to obtainaudit evidence about the amounts and disclosures inthl: fmancial statements. The procedures selecteddepend on the auditor's judgment, including theassesu nent of the risks of material misstatement ofthe financial statements, whether due to fraud orerror. In making those risk assessments, the auditorconsiders internal control relevant to the entity'spreparation and fair presentation of the financialstatements that give a true and fair view in order todesign audit procedures that are appropriate in thecircumstances, but not for the purpose of expressingan opinion on the effectiveness of the entity'sinternal control. An audit also include~ evaluatingthe appropriatenc:.: of accounting polIcies used anothe reasonableness of accounting estImates made bythe directors, as well as evaluating the overallpresentation of the fmancial statements.We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis forour audit opinion.OpinionIn our opinion, these financial statements gi ve a truand fair view of the financial position of MRS OilNigeria Pic (" the Company) as at 31 December 2012and of the Company's financial p rformance andcash flows for the year then ended in accordancewith Intemational Financial Reporting Standards andin the manner required by the Companies and AlliedMatters Act of N igeria and the Financial ReportingCouncil of Nigeria Act, 2011.Report on Other Legal and RegulatoryRequirementsCompliance with the requirements of Schedule 6 ofthe Companies and Allied Matters Act o(NigeriaIn our opinion, proper books of account have beenkept by the Company, so far as appears from ourexamination of those books and the statement offinancial position and the statement ofcomprehensive income are in agreement with thebooks of account.15 May 2013Lagos, NigeriaFR CI2 0 /2 IfC;! NIOOOOOO(l()442,PMG Pro~e~Slanat $('!rvl(.tJ~. a PnW'le~lllp ~ sla.b L'ihe':"ID K AiIYJ A.,bo

MRS Oil Nigeria PIcStatement of financial positionNon-current assetsProperty, planl and equipmentInLangible assetsOther receivablesPrepaymentsTotal non-current asset!iNotes12131431 DeC2.0~2Rooo2. ,013,568140,5607,507236.67322,398,30831 Dec 2011Wooo23.172,968162,641247,557116,08523,699,2511 Jan 2011N'ooo24 115.946280,858209,14324,605,947Current assetsInventoriesTrade and other receivablesPrepaymentsCash and cash equivalentsTotal current assets1514164,331,733 8,294,19018,406,207 32,207,135158,738 78,15010,300,702 8,421,51233,197,380 49.000,9878,565,75210,161,14898,0712,899.39521.724.366Total assets55,595,688 72,700,2384 6,330 ,313EquityShare capitalRetained earnings1718126,994 126,99418,927,016 18,861 ,691.126,99418,512,872Total equity19,054,OtO 18,988,68518,639,866LiabilitiesNon-current liabilitiesEmployee benefit obligaLions 19 218,415 551,480 580,919Deferred tax liabililY 11 6,238,600 6,399,890 6,700,89Total non-current liabilities6,457,01..1)6.951,3707,281,809Current liabilitiesSecurity deposits 20Dividend payable 21Trade and other payables 22Bank overdraft and short term borrowings 23Tax payable 111,510,904473.94214,180,6771 ,460,102459,038822,920533,08123,243,05321,003,9581,1 7,.171630,699528,54317,384,934517,3471,347,115Total current liabilities30,084,66346,760,18320,408,638Total liabilities36.541,67853,711,55327,690,447Total equity and liabilities 55,595,688 72 ,700,.238 4 6,330,313Approved by the Board of Directors on /5 fYl~ 2013 and signed on its behalfby:r) Alhaji Sayyu 1. Dantata (Chairman)----------+-~~~+-.------------Mr. Paul Bissohong (Managing Director (Ag.))The Dotes on pages 21 to 70 are an integral part of these financial statements.Mr. Andrew Guodume (Executive Director, Finance &Administration)16

MRS Oil Nigeria PlcStatement of comprehensive income for the year ended 31 DecemberNotes 2012 2,011N’000 N’000Revenue 5 79,727,349 71,490,715Cost of Sales 7(74,015,487) (64,667,973)Gross Profit 5,711,862 6,822,742Other income 6 923,383 933,073Selling and distribution expenses 7Administrative expenses 7(709,665)(4,337,680)(996,307)(4,986,741)Results from operating activities 1,587,900 1,772,767Finance income 149,051 157,537Finance cost(1,358,196) (517,062)Net finance costs 8(1,209,145)(359,525)Profit before income tax 9 378,755 1,413,242Income tax expense 11(173,634) (797,618)Profit for the year 205,121 615,624Other comprehensive income:Actuarial gains on post-employment benefit obligation 19 5,321 57,289Tax effect on other comprehensive income(1,596) (17,187)Other comprehensive income, net of tax 3,725 40,102Total comprehensive income for the year 208,846 655,726Earnings per share (EPS)Basic earnings per share (Naira) 10 0.81 2.42The notes on pages 21 to 70 are an integral part of these financial statements.17

MRS Oil Nigeria PlcStatement of changes in equityNotesSharecapitalRetainedearningsTotalequityFor the year ended 31 December 2011N’000 N’000 N’000Balance at 1 January 2011 126,994 18,512,872 18,639,866Comprehensive income for the yearProfit for the year - 615,624 615,624Actuarial gains on post-employment benefitobligation, net of tax - 40,102 40,102Total comprehensive income for the year - 655,726 655,726Transactions with owners recorded directly inequityDividends 21 -(317,486) (317,486)Unclaimed dividend written back 21 - 10,579 10,579Total transactions with owners of theCompany -(306,907)(306,907)Balance at 31 December 2011 126,994 18,861,691 18,988,685For the year ended 31 December 2012N’000 N’000 N’000Balance at 1 January 2012 17, 18 126,994 18,861,691 18,988,685Comprehensive income for the yearProfit for the year - 205,121 205,121Actuarial gains on post-employment benefitobligation, net of tax - 3,725 3,725Total comprehensive income for the year - 208,846 208,846Transactions with owners recorded directly inequityDividends 21 -(177,792)(177,792)Unclaimed dividend written back 21 - 34,271 34,271Total transactions with owners of theCompany -(143,521)(143,521)Balance at 31 December 2012 126,994 18,927,016 19,054,010The notes on pages 21 to 70 are an integral part of these financial statements.18

MRS Oil Nigeria PlcStatement of cash flows for the year ended 31 DecemberNotes 2012 2011N’000 N’000Cash flows from operating activities:Profit for the year 205,121 615,624Adjustments for :Depreciation 12 1,476,481 1,330,289Amortisation of intangible assets 13 31,301 3,189Finance income 8(149,051) (157,537)Finance cost 8 1,358,196 517,062Loss on sale of property, plant and equipment 15,875 2,043Provision for long-term service award 10,167 8,938Curtailment gains on long-term service award 19(b) (28,112)-Provision for gratuity 97,152 86,720Curtailment gains of gratuity provision 19(a) (140,188)-Tax expense 11(a) 173,634 797,6183,050,576 3,203,946Changes in:- trade and other receivables 13,841,961 (4,313,316)- inventories 3,962,457 271,562- security deposits 687,984 192,221- trade and other payables (9,881,038) 5,887,482Cash generated from operating activities 11,661,940 5,241,895Income taxes paidWitholding tax credit notes utilisedLong-term service award paidGratuity paidValue added tax paid11(d)11(d)19(b)19(a)(976,442)(58,211)(909)(271,175)(77,789)(1,295,850)(9,900)(4,215)(120,882)(151,033)Net cash from operating activities 10,277,414 3,660,015Cash flows from investing activities:Proceeds from sale of property, plant and equipment 6,668 8,298Purchase of property, plant and equipment12(a)(339,624) (397,652)Purchase of intangible assets 13(9,220) (165,830)Interest received 146,892 137,894Net cash used in investing activities(195,284) (417,290)Cash flows from financing activities:Net repayment on short term borrowings (7,954,779) 2,388,934Dividends paid21(b)(202,660) (302,369)Interest paid(456,424) (292,692)Net cash (used in)/ generated from financing activities (8,613,863) 1,793,873Net change in cash and cash equivalents 1,468,267 5,036,598Cash and cash equivalents as at 1 January 7,418,646 2,382,048Cash and cash equivalents as at 31 December 16 8,886,913 7,418,646The notes on pages 21 to 70 are an integral part of these financial statements.19

MRS Oil Nigeria PlcNotes to the financial statements for the year ended 31 December 2012PageNotes1 Reporting entity 212 Basis of preparation 213 Significant accounting policies 224 Determination of fair values 335 Revenue 346 Other Income 347 Expenses by nature 348 Finance income and costs 359 Profit before taxation 3510 Earnings per share (EPS) 3711 Taxation 3712 Property, plant and equipment 4013 Intangible assets 4114 Trade and other receivables 4215 Inventories 4216 Cash and cash equivalents 4317 Share capital 4318 Retained earnings 4319 Employee benefit obligations 4420 Security deposits 4721 Dividends 4722 Trade and other payables 4723 Bank overdraft and other short term borrowings 4824 Financial instruments 4825 Related party transactions 5526 Segment reporting 5627 Contingencies 5728 Operating leases 5829 Subsequent events 5830 Explanation of the transition to IFRSs 5920

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 20121. Reporting entityThe Company was incorporated as Texaco Nigeria Limited (a privately owned Company) on 12August 1969 and was converted to a Public Limited Liability company quoted on the Nigerian StockExchange in 1978, as a result of the 1977 Nigerian Enterprises Promotions Decree. The Company isdomiciled in Nigeria and its shares are listed at the Nigerian Stock Exchange (NSE). The Company’sname was changed to Texaco Nigeria Plc. in 1990 and again on 1 September 2006 to Chevron OilNigeria Plc.On the 20th of March, 2009 there was an acquisition of Chevron Africa Holdings Limited, (aBermudian Company) by Corlay Global SA of Moffson Building, East 54th Street, Panama, Republicof Panama. By virtue of this foreign transaction, M.R.S. Africa Holdings Limited gained control of allassets of Chevron Nigeria Holdings Limited, Bermuda.The new management of the Company announced a change of name of the Company from ChevronOil Nigeria Plc to MRS Oil Nigeria Plc (“MRS”) effective 2nd of December, 2009 following theratification of the name change of the Company at the 40th Annual General Meeting of the Companyon September 29, 2009.The Company is domiciled in Nigeria and has its registered office address at:8, Macarthy StreetOnikanLagosNigeriaThe Company is principally engaged in the business of marketing and distribution of refinedpetroleum products, blending of lubricants and manufacturing of greases.2 Basis of preparation(a) Statement of complianceThe financial statements have been prepared in accordance with International Financial ReportingStandards (IFRS). These are the Company’s first set of financial statements prepared in accordancewith IFRS and IFRS 1 First-time Adoption of International Financial Reporting Standards has beenapplied.An explanation of how the transition to IFRS has affected the reported financial position, financialperformance and cash flows of the Company is provided in Note 30.The financial statements were authorised for issue by the Board of Directors on __________(b) Basis of measurementThe financial statements have been prepared on the historical cost basis except for defined benefitobligations.The methods used to measure fair values are discussed further in Note 4.(c) Functional and presentation currencyThese financial statements are presented in Nigerian naira, which is the Company’s functionalcurrency. All financial information presented in naira have been rounded to the nearest thousandunless stated otherwise.21

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012(d) Use of estimates and judgementsThe preparation of the financial statements in conformity with IFRS requires management to makejudgements, estimates and assumptions that affect the application of accounting policies and thereported amounts of assets, liabilities, income and expenses. Actual results may differ from theseestimates.Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognized in the period in which the estimates are revised and in any future periodsaffected.In particular, information about assumptions and estimation uncertainties and critical judgements inapplying accounting policies that have the most significant effect on the amounts recognised in thefinancial statements are described in the following notes:Note 19 – Employee benefit obligationsNote 24 – Financial instrumentsNote 27 – ContingenciesInformation about assumptions and estimation uncertainties that have a significant risk of resultingin a material adjustment within the next financial year are included in Note 12 and relates to keyassumptions used in discounted cash flow projections to assess the impairment of Property, plant andequipment.3 Significant accounting policiesThe accounting policies set out below have been applied consistently to all periods presented in thesefinancial statements and in preparing the opening IFRS statement of financial position at 1 January2011 for the purposes of the transition to IFRS, unless otherwise indicated.(a) Foreign currency transactionsTransactions denominated in foreign currencies are translated and recorded in Nigerian Naira at theactual exchange rates as of the date of the transaction. Monetary assets and liabilities denominated inforeign currencies at the reporting date are retranslated at the rates of exchange prevailing at thatdate. The foreign currency gain or loss on monetary items is the difference between amortised cost inthe functional currency at the beginning of the period, adjusted for effective interest and paymentsduring the period, and the amortised cost in foreign currency translated at the exchange rate at theend of the reporting period. Non-monetary assets and liabilities denominated in foreign currenciesthat are measured at fair value are retranslated to the functional currency at the exchange rate at thedate that the fair value was determined.Foreign currency differences arising on retranslation are recognized in profit or loss, except forqualifying cash flow hedges, which are recognized in other comprehensive income. Non-monetaryitems that are measured in terms of historical cost in a foreign currency are translated using theexchange rate at the date of the transaction.(b) Financial instrumentsi. Non-derivative financial assetsThe Company initially recognizes loans and receivables on the date that they are originated. All otherfinancial assets (including assets designated at fair value through profit or loss) are recognizedinitially on the trade date at which the Company becomes a party to the contractual provisions of theinstrument.22

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012The Company derecognizes a financial asset when the contractual rights to the cash flows from theasset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in atransaction in which substantially all the risks and rewards of ownership of the financial asset aretransferred. Any interest in transferred financial assets that is created or retained by the Company isrecognized as a separate asset or liability.Financial assets and liabilities are offset and the net amount presented in the statement of financialposition when, and only when, the Company has a legal right to offset the amounts and intends eitherto settle on a net basis or to realize the asset and settle the liability simultaneously.The Company has the following non-derivative financial assets: financial assets at fair value throughprofit or loss, loans and receivables.Cash and cash equivalentsCash and cash equivalents comprise cash on hand; cash balances with banks and call deposits withoriginal maturities of three months or less. Bank overdrafts that are repayable on demand and forman integral part of the Company’s cash management are included as a component of cash and cashequivalents for the purpose of statement of cash flows.Financial assets at fair value through profit or lossA financial asset is classified at fair value through profit or loss if it is classified as held for trading oris designated as such upon initial recognition. Financial assets are designated at fair value throughprofit or loss if the Company manages such investments and makes purchase and sale decisions basedon their fair value in accordance with the Company’s documented risk management or investmentstrategy. Upon initial recognition attributable transaction costs are recognized in profit or loss asincurred. Financial assets at fair value through profit or loss are measured at fair value, and changestherein are recognized in profit or loss.Loans and receivablesLoans and receivables are financial assets with fixed or determinable payments that are not quoted inan active market. Such assets are recognized initially at fair value plus any directly attributabletransaction costs. Subsequent to initial recognition loans and receivables are measured at amortisedcost using the effective interest method, less any impairment losses. Loans and receivables comprisetrade and other receivables.ii Non-derivative financial liabilitiesAll financial liabilities (including liabilities designated at fair value through profit or loss) arerecognized initially on the trade date at which the Company becomes a party to the contractualprovisions of the instrument.The Company derecognizes a financial liability when its contractual obligations are discharged orcancelled or expire.Financial assets and liabilities are offset and the net amount presented in the statement of financialposition when, and only when, the Company has a legal right to offset the amounts and intends eitherto settle on a net basis or to realize the asset and settle the liability simultaneously.The Company has the following non-derivative financial liabilities: loans and borrowings, trade andother payables.23

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012Such financial liabilities are recognized initially at fair value plus any directly attributable transactioncosts. Subsequent to initial recognition these financial liabilities are measured at amortised cost usingthe effective interest method.iii Share capitalThe Company has only one class of shares, ordinary shares. Ordinary shares are classified as equity.Incremental costs directly attributable to the issue of ordinary shares are recognized as a deductionfrom equity, net of any tax effects.(c) Property, plant and equipmenti Recognition and measurementItems of property, plant and equipment are measured at cost or deemed cost less accumulateddepreciation and accumulated impairment losses. The Company elected to apply the optionalexemption to recognize cost of certain items of property, plant and equipment by reference to theprevious (Nigerian) GAAP revaluation and others using the fair value option as deemed cost at 1January 2011, the date of transition to IFRS.Cost includes expenditure that is directly attributable to the acquisition of the asset. Property, plantand equipment under construction are disclosed as capital work-in-progress. The cost of selfconstructedasset includes the cost of materials and direct labour, any other costs directly attributableto bringing the assets to a working condition for their intended use including, where applicable, thecosts of dismantling and removing the items and restoring the site on which they are located andborrowing costs on qualifying assets.Purchased software that is integral to the functionality of the related equipment is capitalized as partof the equipment.When parts of an item of property, plant and equipment have different useful lives, they areaccounted for as separate items (major components) of property, plant and equipment.Gains and losses on disposal of an item of property, plant and equipment are determined bycomparing the proceeds from disposal with the carrying amount of property, plant and equipment,and are recognized net within other income in profit or loss.ii Subsequent costsThe cost of replacing a part of an item of property, plant and equipment is recognized in the carryingamount of the item if it is probable that the future economic benefits embodied within the part willflow to the Company and its cost can be measured reliably. The carrying amount of the replaced partis derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognizedin profit or loss as incurred.iii DepreciationDepreciation is calculated over the depreciable amount, which is the cost of an asset, or other amountsubstituted for cost, less its residual value.24

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives ofeach part of an item of property, plant and equipment which reflects the expected pattern ofconsumption of the future economic benefits embodied in the asset. Leased assets are depreciatedover the shorter of the lease term and their useful lives unless it is reasonably certain that theCompany will obtain ownership by the end of the lease term in which case the assets are depreciatedover the useful life.The estimated useful lives for the current and comparative periods are as follows:- Land and Buildings- Leasehold Land Lease period- Buildings 10 to 25 years- Plant and Machinery 10 to 20 years- Furniture and Fittings 5 years- Automotive equipment 4 years- Computer and office equipment 3 yearsDepreciation methods, useful lives and residual values are reviewed at each financial year end andadjusted if appropriate.Capital work-in-progress is not depreciated. The attributable cost of each asset is transferred to therelevant asset category immediately the asset is available for use and depreciated accordingly.(d) Intangible assetsIntangible assets that are acquired by the Company and have finite useful lives are measured at costless accumulated amortisation and accumulated impairment losses.The Company’s intangible assets with finite useful lives comprise acquired software.Subsequent expenditureSubsequent expenditure is capitalized only when it increases the future economic benefits embodiedin the specific intangible asset to which it relates. All other expenditure is recognized in profit or lossas incurred.Amortisation of intangible assetsAmortisation is calculated over the cost of the asset, or other amount substituted for cost, less itsresidual value. Amortisation is recognized in profit or loss on a straight-line basis over the estimateduseful lives of intangible assets from the date that they are available for use, since this most closelyreflects the expected pattern of consumption of the future economic benefits embodied in the asset.The estimated useful life for the current period for the acquired computer software is 3 years.(e) LeasesLeased assetsLeases in terms of which the Company assumes substantially all the risks and rewards of ownershipare classified as finance leases. Upon initial recognition the leased asset is measured at an amountequal to the lower of its fair value and the present value of the minimum lease payments. Subsequentto initial recognition, the asset is accounted for in accordance with the accounting policy applicable tothat asset.25

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012Other leases are operating leases and the leased assets are not recognized in the Company’s statementof financial position.Lease paymentsPayments made under operating leases are recognised in profit or loss on a straight-line basis over theterm of the lease. Lease incentives received are recognised as an integral part of the total leaseexpense, over the term of the lease.Minimum lease payments made under finance leases are apportioned between the finance expenseand the reduction of the outstanding liability. The finance expense is allocated to each period duringthe lease term so as to produce a constant periodic rate of interest on the remaining balance of theliability.Determining whether an arrangement contains a leaseAt inception of an arrangement, the Company determines whether such an arrangement is or containsa lease. This will be the case if the following two criteria are met:·· the arrangement contains a right to use the asset(s).At inception or on reassessment of the arrangement, the Company separates payments and otherconsideration required by such an arrangement into those for the lease and those for other elementson the basis of their relative fair values. If the Company concludes for a finance lease that it isimpracticable to separate the payments reliably, then an asset and a liability are recognised at anamount equal to the fair value of the underlying asset. Subsequently the liability is reduced aspayments are made and an imputed finance cost on the liability is recognised using the Company’sincremental borrowing rate.(f) Inventoriesthe fulfilment of the arrangement is dependent on the use of a specific asset or assets; andInventories are measured at the lower of cost and net realizable value. The cost of inventories includesexpenditure incurred in acquiring the inventories, production or conversion costs and other costsincurred in bringing them to their existing location and condition. In the case of manufactured/blended inventories and work in progress, cost includes an appropriate share of production overheadsbased on normal operating capacity.The basis of costing inventories are as follows:Product TypeWhite Petroleum Products ( AGO, ATK,PMS , DPK)Packaging Materials , Lubricants andGreasesInventory-in-transitCost BasisWeighted Average Cost of costsincurred (for deregulatedproducts) and reduced value ofsubsidies due for deregulatedproducts.First in , First OutPurchase cost incurred to dateNet realizable value is the estimated selling price in the ordinary course of business, less the estimatedcosts of completion and selling expenses. Inventory values are adjusted for obsolete, slow-moving ordefective items.26

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012(g) Impairmenti Non-derivative financial assets (including receivables)A financial asset not carried at fair value through profit or loss, including an equity accountedinvestee, is assessed at each reporting date to determine whether there is objective evidence that it isimpaired. A financial asset is impaired if objective evidence indicates that a loss event has occurredafter the initial recognition of the asset, and that the loss event had a negative effect on the estimatedfuture cash flows of that asset that can be reliably estimated.Objective evidence that financial assets (including equity securities) are impaired can include defaultor delinquency by a debtor, restructuring of an amount due to the Company on terms that theCompany would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, orthe disappearance of an active market for a security. In addition, for an investment in an equitysecurity, a significant or prolonged decline in its fair value below its cost is objective evidence ofimpairment.The Company considers evidence of impairment for receivables at both a specific asset and collectivelevel. All individually significant receivables are assessed for specific impairment. All individuallysignificant receivables found not to be specifically impaired are then collectively assessed for anyimpairment that has been incurred but not yet identified. Receivables that are not individuallysignificant are collectively assessed for impairment by grouping together receivables with similar riskcharacteristics.In assessing collective impairment the Company uses historical trends of the probability of default,timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as towhether current economic and credit conditions are such that the actual losses are likely to be greateror less than suggested by historical trends.An impairment loss in respect of a financial asset measured at amortised cost is calculated as thedifference between its carrying amount and the present value of the estimated future cash flowsdiscounted at the asset’s original effective interest rate. Losses are recognized in profit or loss andreflected in an allowance account against receivables. Interest on the impaired asset where applicablecontinues to be recognized through the unwinding of the discount. When a subsequent event causesthe amount of impairment loss to decrease, the decrease in impairment loss is reversed through profitor loss.ii Non-financial assetsThe carrying amounts of the Company’s non-financial assets, other than inventories are reviewed ateach reporting date to determine whether there is any indication of impairment. If any suchindication exists, then the asset’s recoverable amount is estimated.The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fairvalue less costs to sell. In assessing value in use, the estimated future cash flows are discounted totheir present value using a pre-tax discount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset. For the purpose of impairment testing, assets thatcannot be tested individually are grouped together into the smallest group of assets that generatescash inflows from continuing use that are largely independent of the cash inflows of other assets orgroups of assets (the “cash-generating unit, or CGU”).The Company’s corporate assets do not generate separate cash inflows. If there is an indication that acorporate asset may be impaired, then the recoverable amount is determined for the CGU to whichthe corporate asset belongs.27

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimatedrecoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognizedin respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to theunits, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a prorata basis.Impairment losses recognized in prior periods are assessed at each reporting date for any indicationsthat the loss has decreased or no longer exists. An impairment loss is reversed if there has been achange in the estimates used to determine the recoverable amount. An impairment loss is reversedonly to the extent that the asset’s carrying amount does not exceed the carrying amount that wouldhave been determined, net of depreciation or amortisation, if no impairment loss had beenrecognized.(h) Employee benefitsi Defined contribution planA defined contribution plan is a post-employment benefit plan (pension fund) under which theCompany pays fixed contributions into a separate entity. The Company has no legal or constructiveobligations to pay further contributions if the fund does not hold sufficient assets to pay all employeesthe benefits relating to employee service in the current and prior periods.In line with the provisions of the Pension Reform Act 2004, the Company has instituted a definedcontribution pension scheme for its permanent staff. Staff contributions to the scheme are fundedthrough payroll deductions while the Company’s contribution is recognised in profit or loss asemployee benefit expense in the periods during which services are rendered by employees. Employeescontribute 3 % each of their Basic salary, Transport and Housing Allowances to the Fund on amonthly basis. The Company’s contribution is 12 % of each employee’s Basic salary, Transport andHousing Allowances.ii Defined benefit planThe Company currently operates one gratuity scheme which is a defined benefit scheme for certainemployees.The Company’s net obligation in respect of defined benefit scheme is calculated by estimating theamount of future benefit that employees have earned in return for their service in the current andprior periods and that benefit is discounted to determine its present value. In determining the liabilityfor employee benefits under the defined benefit scheme, consideration is given to future increases insalary rates and the Company's experience with staff turnover.The recognised liability is determined by an independent actuarial valuation every year using theprojected unit credit method. HR Nigeria Limited was engaged as the independent actuary in thecurrent and prior years. Actuarial gains and losses arising from differences between the actual andexpected outcome in the valuation of the obligation are recognised fully in Other ComprehensiveIncome. The effect of any curtailment is recognised in full in the profit or loss immediately thecurtailment occurs. The discount rate is the yield on Federal Government of Nigeria issued bonds thathave maturity dates approximating the terms of the Company’s obligation. Although the scheme isnot funded, the Company ensures that adequate arrangements are in place to meet its obligationsunder the scheme.28

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012iii Other long-term employee benefitsThe Company’s other long-term employee benefits represents Long Service Awards scheme institutedfor all permanent employees. The Company’s obligations in respect of these schemes are the amountof future benefits that employees have earned in return for their service in the current and priorperiods. The benefit is discounted to determine its present value. The discount rate is the yield at thereporting date on Federal Government of Nigeria issued bonds that have maturity datesapproximating the term of the Company’s obligation. The calculation is performed using the ProjectedUnit Credit method. Any actuarial gains and losses are recognised in profit or loss in the period whichthey arise.iv Termination benefitsTermination benefits are recognized as an expense when the Company is committed demonstrably,without realistic possibility of withdrawal, to a formal detailed plan to either terminate employmentbefore the normal retirement date, or to provide termination benefits as a result of an offer made toencourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized asan expense if the Company has made an offer of voluntary redundancy, it is probable that the offerwill be accepted, and the number of acceptances can be estimated reliably. If benefits are payablemore than 12 months after the reporting period, then they are discounted to their present value.v Short-term employee benefitsShort-term employee benefit obligations are measured on an undiscounted basis and are expensed asthe related service is provided.A liability is recognized for the amount expected to be paid under short-term cash bonuses if theCompany has a present legal or constructive obligation to pay this amount as a result of past serviceprovided by the employee, and the obligation can be estimated reliably.(i)Provisions and contingent liabilitiesProvisionsA provision is recognized if, as a result of a past event, the Company has a present legal orconstructive obligation that can be estimated reliably, and it is probable that an outflow of economicbenefits will be required to settle the obligation. Provisions are determined by discounting theexpected future cash flows at a pre-tax rate that reflects current market assessments of the time valueof money and the risks specific to the liability. The unwinding of the discount is recognized as financecost.A provision for restructuring is recognised when the Company has approved a detailed and formalrestructuring plan, and the restructuring either has commenced or has been announced publicly.Future operating losses are not provided for.A provision for onerous contracts is recognized when the expected benefits to be derived by theCompany from a contract are lower than the unavoidable cost of meeting its obligations under thecontract. The provision is measured at the present value of the lower of the expected cost ofterminating the contract and the expected net cost of continuing with the contract. Before a provisionis established, the Group recognizes any impairment loss on the assets associated with that contract.29

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012Contingent liabilitiesA contingent liability is a possible obligation that arises from past events and whose existence will beconfirmed only by the occurrence or non-occurrence of one or more uncertain future events notwholly within the control of the company, or a present obligation that arises from past events but isnot recognised because it is not probable that an outflow of resources embodying economic benefitswill be required to settle the obligation; or the amount of the obligation cannot be measured withsufficient reliability.Contingent liabilities are only disclosed and not recognised as liabilities in the statement of financialposition.If the likelihood of an outflow of resources is remote, the possible obligation is neither a provision nora contingent liability and no disclosure is made.(j)RevenueRevenue from the sale of goods in the course of ordinary activities is measured at the fair value of theconsideration received or receivable, net of value added tax, sales returns, trade discounts and volumerebates. Revenue for regulated products equates the amounts that accrue to the Company directly netof amounts the Company collects from regulators on behalf of third parties i.e. dealer commissionsand transport costs. Revenue is recognized when persuasive evidence exists that the significant risksand rewards of ownership have been transferred to the buyer, recovery of the consideration isprobable and there is no continuing management involvement with the goods and the amount ofrevenue can be measured reliably.If it is probable that discounts will be granted and the amount can be measured reliably, then thediscount is recognised as a reduction of revenue as the sales are recognised.(k)(l)Rental incomeRental income is recognized in profit or loss on a straight-line basis over the term of the lease. Leaseincentives granted are recognized as an integral part of the total rental income, over the term of thelease. Rental income is recognized as other income.Finance income and finance costsFinance income comprises interest income on funds invested and changes in the fair value of financialassets at fair value through profit or loss.. Finance income is recognized as it accrues in profit or loss,using the effective interest method.Finance costs comprise interest expense on borrowings, bank charges, unwinding of the discount onprovisions and impairment losses recognized on financial assets except finance costs that are directlyattributable to the acquisition, construction or production of a qualifying asset which are capitalisedas part of the related assets, are recognized in profit or loss using the effective interest method.Foreign currency gains and losses are reported on a net basis.30

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012(m) Income and deferred taxIncome tax expense comprises current and deferred tax. Current tax and deferred tax are recognizedin profit or loss except to the extent that it relates to a business combination, or items recognizeddirectly in equity or in other comprehensive income.Current tax is the expected tax payable or receivable on the taxable income or loss for the year, usingtax rates statutorily enacted at the reporting date, and any adjustment to tax payable in respect ofprevious years.Deferred tax is recognised in profit or loss account except to the extent that it relates to a transactionthat is recognised directly in equity. A deferred tax asset is recognised only to the extent that it isprobable that future taxable profits will be available against which the amount will be utilised.Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefitwill be realised.Deferred tax is measured at the tax rates that are expected to be applied to temporary differenceswhen they reverse, based on the laws that have been enacted or substantively enacted by the reportingdate. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset currenttax liabilities and assets, and they relate to income taxes levied by the same tax authority on the sametaxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets ona net basis or their tax assets and liabilities will be realized simultaneously.Deferred tax is recognized in respect of temporary differences between the carrying amounts of assetsand liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferredtax is not recognized for the initial recognition of assets or liabilities in a transaction that is not abusiness combination and that affects neither accounting nor taxable profit or loss.(n) Earnings per share (EPS)The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. BasicEPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Companyby the weighted average number of ordinary shares outstanding during the period, adjusted for ownshares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinaryshareholders and the weighted average number of ordinary shares outstanding, adjusted for ownshares held, for the effects of all dilutive potential ordinary shares.(o) Segment reportingAn operating segment is a component of the Company that engages in business activities from whichit may earn revenues and incur expenses. All operating segments’ operating results are reviewedregularly by the Board of Directors to make decisions about resources to be allocated to the segmentand assess its performance, and for which discrete financial information is available.Segment results that are reported to the Board of Directors include items directly attributable to asegment as well as those that can be allocated on a reasonable basis.31

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012(p) Loans and borrowingsLoans and borrowings are recognised initially at fair value, net of transaction costs incurred. Loansand borrowings are subsequently stated at amortised cost; any difference between the proceeds (netof transaction costs) and the redemption value is recognised in profit or loss over the period of theborrowings using the effective interest method.Loans and borrowings, for which the Company has an unconditional right to defer settlement of theliability for at least 12 months after the statement of financial position date, are classified as noncurrentliabilities.(q) Statement of cash flowsThe statement of cash flows is prepared using the indirect method. Changes in statement of financialposition items that have not resulted in cash flows such as translation differences, fair value changes,equity-settled share-based payments and other non-cash items, have been eliminated for the purposeof preparing the statement. Dividends paid to ordinary shareholders are included in financingactivities. Finance costs paid is also included in financing activities while finance income is includedin investing activities.(r) Government GrantsPetroleum Products Pricing Regulatory Agency (PPPRA) subsidies which compensate the Companyfor losses made on importation of certain refined petroleum products are recognised when there isreasonable assurance that they will be recovered and the Company has complied with the conditionsattached to receiving the subsidy. The subsidies are recognised as a reduction to the landing cost ofthe subsidised petroleum product.(s) Jointly Controlled AssetsJointly controlled assets refers to the Company’s interests in joint aviation facilities held with otherparties. These financial Statements include the Company’s share of these jointly controlled assets anda proportionate share of the relevant revenue and related operating costs.(t) New standards and interpretations not yet adoptedA number of new standards, amendments to standards and interpretations are effective for annualperiods beginning after 1 January 2013, and have not been applied in preparing these financialstatements. Those which may be relevant to the Company are IFRS 11 Joint Arrangement , IFRS 13Fair Value Measurement and IFRS 9 Financial Instruments , which is expected to impact theclassification and measurement of financial assets. These standards will become mandatory for theCompany’s 2013 financial statements except for IFRS 9 which is mandatory for the 2015 financialstatements. The extent of the impact has not been determined and the Company does not plan toadopt these standards early.32

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 20124 Determination of fair valuesA number of the Company’s accounting policies and disclosures require the determination of fairvalue, for both financial and non-financial assets and liabilities. Fair values have been determined formeasurement and/or disclosure purposes based on the following methods. When applicable, furtherinformation about the assumptions made in determining fair values is disclosed in the notes specificto that asset or liability.(i) Trade and other receivablesThe fair value of trade and other receivables is estimated as the present value of future cash flows,discounted at the market rate of interest at the reporting date. This fair value is determined fordisclosure purposes. For short term trade receivables, no disclosure of fair value is presented whenthe carrying amount is a reasonable approximation of fair value.(ii) Non-derivative financial instrumentsFair value, which is determined for disclosure purposes, is calculated based on the present value offuture principal and interest cash flows, discounted at the market rate of interest at the reportingdate.33

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 20125 Revenue2012 2011N’000 N’000Premium Motor Spirit (PMS) 58,922,799 49,150,651Aviation Turbine Kerosene (ATK) 10,120,921 9,933,242Automotive Gas Oil (AGO) 6,281,355 7,278,709Lubricants and greases 2,459,812 2,593,049Dual Purpose Kerosene (DPK) 1,713,289 2,535,064Low Pour Fuel Oil (LPFO) 229,173 -79,727,349 71,490,7156 Other income2012 2011N’000 N’000Rental and lease income (Note 6 (a)) 136,591 100,635Loss on disposal of property, plant & equipment(15,875) (2,043)Sundry income 377,258 81,487Income on storage services 425,409 752,994Total 923,383 933,073(a)Rental and lease income relates to income earned on assets that are on lease (finance and operating leases) to thirdparties. Assets on lease include filling stations and related equipment (generators and dispenser pumps).7 Expenses by nature2012 2011N’000 N’000Depreciation 1,476,481 1,330,289Amortisation of intangible assets 31,301 3,189Change in inventories of lubes, greases and white products 73,231,224 64,082,703Rental of service stations, buildings and equipment 220,767 225,581Advertising expense 10,361 12,749Consultancy expense 158,602 109,567Maintenance expense 260,770 244,972Throughput expense 874,853 791,940Freight expense 463,826 537,780Impairment of deferred intercompany charges 18,207 -Management fees ( Note 25 (a)) 531,628 704,150Director's renumeration 17,034 16,076Employee benefit expense (Note 9 (b)) 812,667 1,525,011Auditor's renumeration 24,914 17,114Write-off (write-on) of trade and other receivables 40,665(6,504)Local and international travel 122,616 134,435Office expenses and supplies 257,531 357,395Communication and postage 171,951 96,945Meeting expenses 45,567 12,191Other expenses 291,867 455,438Total cost of sales, selling and distribution expenses andadministrative expenses79,062,832 70,651,02134

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 20128 Finance income and finance costs2012 2011N’000 N’000Finance incomeInterest income on short-term bank deposits 147,721 135,211Interest on employee receivables - 17,898Interest income on loans (dealer and staff loans)1,330 4,428Total finance income 149,051 157,537Finance cost– Interest expense 249,756 269,728– Bank charges 252,079 68,375– Net foreign exchange loss 856,361 178,959Total finance costs 1,358,196 517,062Net finance costs 1,209,145 359,5259 Profit before income tax(a) Profit before income tax is stated after charging:2012 2011N’000 N’000Depreciation (Note 12) 1,476,481 1,330,289Amortisation of intangible assets (Note 13) 31,301 3,189Management fees (Note 25 (b)) 531,628 704,150Director's renumeration (Note 9 ( b) (iv)) 17,034 16,076Employee benefit expense (Note 9 (b) (i)) 812,667 1,525,011Auditor's renumeration 24,914 17,114Loss on disposal of property, plant and equipment 15,875 2,043Foreign currency exchange loss 856,361 178,959(b)iDirectors and employeesEmployee costs during the year comprise:2012 2011N’000 N’000Salaries and wages 581,257 1,225,372Other employee benefits 54,351 648Termination benefits - 86,309Employer's pension contribution 64,442 117,024Post employment benefit charge (Note 19) 102,473 86,720Other long term employee benefit charge (Note 19) 10,144 8,938812,667 1,525,011iiThe average number of full-time persons employed during the year (other than executive directors) was as follows:Number2012 2011Administration 23 49Technical and production 19 37Operation and distribution 35 43Sales and marketing 32 74109 20335

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012iiiHigher-paid employees of the Company, other than directors, whose duties were wholly or mainly discharged inNigeria, received remuneration in excess of N1,000,000 (excluding pension contributions) in the following ranges:Number2012 20111,000,001 2,000,000 - 62,000,001 3,000,000 1 83,000,001 4,000,000 19 734,000,001 5,000,000 50 465,000,001 6,000,000 10 326,000,001 7,000,000 10 197,000,001 8,000,000 12 98,000,001 9,000,000 2 29,000,001 10,000,000 1 3Above 10,000,000 4 5109 203ivDirectors's remuneration (including pension contributions) for directors of the Company charged to the profit andloss account are as follows:2012 2011N’000 N’000Fees 1,500 2,500Other emoluments 15,534 13,57617,034 16,076The directors' remuneration shown above includes:Chairman- -Highest paid director 4,747 5,880Other directors received emoluments in the following ranges:Number2012 2011Nil 4 31,000,001 2,000,000 - 12,000,001 3,000,000 - -3,000,001 4,000,000 - 14,000,001 5,000,000 2 -5,000,001 6,000,000 - 236

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 201210 Earnings per share (EPS)(a)BasicBasic earnings per share of N0.81 (2011: N0.11) is based on profit attributable to ordinary shareholders ofN205,121,000 (2011: N27,110,000), and on the 253,988,672 ordinary shares of 50 kobo each, being the weightedaverage number of ordinary shares in issue during the year (2011: 253,988,672).2012 2011Profit for the year attributable to shareholders (expressed in Naira)Weighted average number of ordinary shares in issue205,121,000 615,624,000253,988,672 253,988,672Basic earnings per share (expressed in Naira per share) 0.81 2.42(b)Dividend declared per shareDividend declared per share of 70 kobo (2011: 125 kobo) is based on total declared dividend of N177.79 million(2011: N317.49 million) on 253,988,672 ordinary shares of 50 kobo each, being the ordinary shares in issue duringthe year (2011: 253,988,672).11 Taxation(a) Income tax expenseThe tax change for the year has been computed after adjusting for certain items of expenditure and income, whichare not deductible or chargeable for tax purposes, and comprises:2012 2011N’000 N’000Current tax expense:Income tax 353,460 998,026Tertiary education tax 31,107 76,328Capital gains tax - 733Prior year (over)/underprovision (48,047) 191,854336,520 1,266,941Deferred tax expense:Origination and reversal of temporary differences(162,886) (469,323)(162,886) (469,323)Tax expense from continuing operations 173,634 797,618Prior year over-provision of N48.05 million is as a result of tax benefit on prior year adjustmentsrecorded (see Note 30). The over-provision of N119.19 million is as a result of adjustments to taxpayable for the 2010 financial year.(b)Tax recognized in other comprehensive income:Tax of N1.6 million was recognised in other comprehensive income on actuarial gains recorded in theyear (2011: N17.2 million).37

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012(c ) Reconciliation of effective tax ratesThe tax on the company's profit before tax differs from the theoretical amount as follows:20122011% %Profit before income tax 378,755 1,413,242Income tax using thestatutory tax rate 30% 113,627 30% 423,973Effect of:Impact of capital gains tax 0% - 0% 733Impact of tertiary educationtax 8% 31,107 5% 76,328Effect of tax incentives -49% (185,114) 0%(3,575)Non deductible expenses 43% 162,633 15% 214,211Change in recognizeddeductible temporary 0% - -5%(77,717)Adjustment for priorperiods 0% - 14% 191,854Other diffrences 14% 51,382 -2% (28,188)Total income taxexpense in incomestatement 46% 173,634 56% 797,618(d)Movement in current tax liability2012 2011N’000 N’000Balance at beginning of the year 1,157,171 1,347,115Payments during the yearProvision for the year (Note 11 (a) )(976,442)336,520(1,295,850)1,266,941Withholding tax credit notes utilised(58,211) (9,900)Tax impact of prior year errors -(151,135)459,038 1,157,17138

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012(e) Recognised deferred tax assets and liabilitiesDeferred tax assets and liabilities are attributable to the following:Assets Liabilities Net2012 2011 1-Jan-11 2012 2011 1-Jan-11 2012 2011 1-Jan-11N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000Property, plant and equipment - - - (6,364,111) (6,709,741) (6,982,564) (6,364,111) (6,709,741) (6,982,564)Employee benefits 65,525 148,257 59,157 - - - 65,525 148,257 59,157Impairment loss - 67,104 77,707 - - - - 67,104 77,707Inventories 29,622 - - - - - 29,622 - -Others 37,429 94,490 194,310 (7,065) - (49,500) 30,364 94,490 144,810132,576 309,851 331,174(6,371,176) (6,709,741) (7,032,064) (6,238,600) (6,399,889) (6,700,890)(f) Movement in temporary differences during the yearRecognizedRecognizedin other Recognized in otherBalance Recognized in Comprehensive directly in Balance Recognized in Recognized Comprehensive Balance1-Jan-11 profit or loss income equity 31-Dec-11 profit or loss directly in equity income 31-Dec-12N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000Property, plant and equipment (6,982,564) 272,824 - - (6,709,741) 345,630 - - (6,364,111)Employee benefits 59,157 106,287 (17,187) - 148,257 (81,136) - (1,596) 65,525Impairment loss 77,707 (10,603) - - 67,104 (67,104)- - -Inventories - -- - - 29,622 - - 29,622Others 144,810 100,814 - (151,135) 94,490 (64,125)- - 30,364(6,700,890) 469,323 (17,187) (151,135) (6,399,889)162,886 - (1,596) (6,238,600)39

MRS OIL NIGERIA PLCNotes to the annual financial statementsFor the year ended 31 December 201212 Property, Plant and Equipment(a)The movement on these accounts was as follows:Land &BuildingsPlant &MachineryAutomotiveEquipmentComputer &OfficeEquipmentFurniture &FittingsCapital Work inProgressN’000 N’000 N’000 N’000 N’000 N’000 N’000Cost/deemed costBalance at 1 January 2012 14,381,518 9,748,547 1,399,996 672,212 188,771 54,810 26,445,854Additions - - - 60,950 - 278,674 339,624Transfers 6,686 128,021 42,429 28,118 2,531 (207,785)-Disposals - - (109,315)- - -(109,315)Balance at 31 December 2012 14,388,204 9,876,568 1,333,110 761,280 191,302 125,699 26,676,163Depreciation and impairment lossesBalance at 1 January 2012 922,487 922,915 895,880 429,291 102,313 - 3,272,886Charge for the year 289,897 927,389 145,242 96,169 17,784 - 1,476,481Disposal - - (86,772)- - -(86,772)Balance at 31 December 2012 1,212,384 1,850,304 954,350 525,460 120,097 - 4,662,595TotalLand &BuildingsPlant &MachineryAutomotiveEquipmentComputer &OfficeEquipmentFurniture &FittingsCapital Work inProgressN’000 N’000 N’000 N’000 N’000 N’000 N’000Cost/deemed costBalance at 1 January 2011 14,192,725 9,706,892 1,423,886 587,457 178,924 - 26,089,884Additions 184,884 32,581 - 73,952 1,689 104,546 397,652Transfers 4,048 9,074 17,318 11,138 8,158 (49,736)-Disposal (139)- (41,208)(335)- -(41,682)Balance at 31 December 2011 14,381,518 9,748,547 1,399,996 672,212 188,771 54,810 26,445,854Depreciation and impairment lossesBalance at 1 January 2011 633,950 - 852,858 396,596 90,534 - 1,973,938Charge for the year 288,542 922,915 74,121 32,932 11,779 - 1,330,289Disposal (5)- (31,099)(237)- -(31,341)Balance at 31 December 2011 922,487 922,915 895,880 429,291 102,313 - 3,272,886Carrying amountsAt 1 January 2011 13,558,775 9,706,892 571,028 190,861 88,390 - 24,115,946At 31 December 2011 13,459,031 8,825,632 504,116 242,921 86,458 54,810 23,172,968At 31 December 2012 13,175,820 8,026,264 378,760 235,820 71,205 125,699 22,013,568Total40

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012( b ) Impairment assessmentThe carrying amount of the Company's net assets exceeded its market capitalization as at the year end. As a result ofthis, management carried out an impairment testing as at 31 December 2012 . Based on results of the test, therecoverable amount of the Company's cash generating units (CGU) are higher than the carrying amount i.e value in useof the CGUs exceeds the carrying amount and as such no impairment loss has been recorded.( c ) Finance leaseThe Company holds various parcels of land under finance lease arrangements. The maximum tenor of the lease is 99years in line with the Land Use Act. The lease amounts were fully paid at the inception of the lease arrangements andthese are depreciated over the lease period.At 31 December 2012, the carrying amount of leased land was N8.26 billion (2011: N8.35 billion).(d) Capital commitmentsCapital expenditure commitments at the year end authorised by the Board of Directors comprise:(e) All depreciation expense is included as part of administrative expenses.31 Dec 2012 31 Dec 2011N’000 N’000Capital commitments 1,541,856 312,00013 Intangible assets 2012 2011N’000 N’000CostBalance at 1 January 165,830 -Additions 9,220 165,830Balance at 31 December 175,050 165,830AmortisationBalance at 1 January (3,189) -Charge for the year (31,301) (3,189)Balance at 31 December (34,490) (3,189)Carrying amount 140,560 162,641Amortisation of N31 million is included in 'administrative expenses' in the statement of comprehensive income (2011:N3 million).41

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 201214 Trade and other receivables 31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000Trade receivables 3,440,509 2,722,131 1,919,704Petroleum Equalisation Fund (PEF) 3,193,286 2,559,922 6,107,739Petroleum Support Fund (PSF) 8,627,610 7,119,146 1,189,294Loans to employees (Note 14 (a))27,337 425,896 538,327Interest receivable 2,159 1,745 -Interest paid in advance - 45,411 -Withholding tax receivable 71,990 100,115 82,131Due from joint venture partners 62,763 38,742 7,340Directors' debit balance - 100 1,300Receivables from registrar (Note 14 (b))214,697 231,206 309,778Receivables from related parties (Note 25)2,557,888 19,049,777 244,342Other debtors 215,475 160,501 42,05118,413,714 32,454,692 10,442,006Less: non-current portion : loans to employees (Note 14 (a))(7,507) (247,557) (280,858)Current portion 18,406,207 32,207,135 10,161,148For receivables that are classified as 'current', due to their short-term maturities, the fair value approximates theircarrying values.The Company's exposure to credit risk and impairment losses related to trade and other receivables are disclosed inNote 24 (a).(a)(b)Employee loans are various interest free loans granted to staff members and are usually secured by the employee'sretirement benefit obligations. The loans are usually repayable within 1 to 7 years. The fair value of the employee loansis based on cashflows discounted based on market borrowing rate . As at 31 December 2012, all employee loans are duewithin 2 years.Receivables from registrar represents funds paid to the registrar towards dividend payments to shareholders not yetpaid to the shareholders as at the year end.15 Inventories31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000Premium Motor Spirit (PMS) 872,340 1,623,300 1,777,550Lubricants and greases 1,722,285 2,952,721 1,008,504Aviation Turbine Kerosene (ATK) 1,307,816 1,201,337 418,055Automotive Gas Oil (AGO) 300,635 248,710 255,364Dual Purpose Kerosene (DPK) 126,371 15,972 13,670Packaging materials and other sundry stocks 2,286 10,293 10,909Work in progress - 25,482 19,060Inventories in transit - 2,216,375 5,062,6404,331,733 8,294,190 8,565,752Inventory amount of N447.87 (2011: N961.78 million) was held in a facility owned by MRS Oil and Gas Limited, arelated party (Note 25).42

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012The value of changes in products, packaging materials and work-in-progress included in cost of sales amounted toN74.01 billion (2011: N64.66 billion). In 2012, the write downs of inventory to net realizeable values amounted toN98.7 million (2011: N5.94 million). The write downs have been recorded in "cost of sales" in the statement ofcomprehensive income.16 Cash and cash equivalents31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000Cash and cash equivalents 1,155,398 6,513,027 1,649,395Short term deposits with banks (Note16(a)) 9,145,304 1,908,485 1,250,000Bank overdrafts used for cash management purposesCash and cash equivalents in the statement of cashflows10,300,702 8,421,512 2,899,395(1,413,789) (1,002,866) (517,347)8,886,913 7,418,646 2,382,048(a)Short term deposits with banks represent placements with commercial banks for period between 0 - 90 days. Includedin short term deposits are unclaimed dividends amounting to N255.98 million (2011: N240.71 million) held in separatebank accounts in accordance with guidelines issued by Securities and Exchange Commission. Also included in shortterm deposits with banks is an amount of N 8.9 billion (2011: N1.6 billion) being the balance on the sinking fundaccount. These amounts are restricted from use by the Company.17 Share Capital31 Dec 2012 31 Dec 2011 1 Jan 2011Authorised: N’000 N’000 N’000271,657,230 Ordinary shares of 50k each 135,829 135,829 135,829Issued and fully paid:253,988,672 Ordinary shares of 50k each 126,994 126,994 126,994Issued and fully alloted:253,988,672 Ordinary shares of 50k each 126,994 126,994 126,99418 Retained earnings2012 2011N’000 N’000At 1 January 18,861,691 18,512,872Profit for the year 205,121 615,624Defined benefit plan actuarial gain, net of tax 3,725 40,102Dividends declared (Note 21)Unclaimed dividend written back (Note 21)(177,792)34,271(317,486)10,579At 31 December 18,927,016 18,861,691Included in retained earnings is N14.40 billion which represents revaluation surplus. This amount is not available fordistribution.43

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 201219 Employee benefit obligations31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000Year end obligations for:Post-employment benefit (Note 19 (a)) 201,250 515,461 549,623Other long term employee benefits (Note 19 (b)) 17,165 36,019 31,296Total employee benefit liabilities 218,415 551,480 580,9192012 2011N’000 N’000Expense recognized in profit or loss:Post-employment benefit 102,473 86,720Other long term employee benefits 10,144 8,938Total amount recognised in profit or loss 112,617 95,658All the expenses have been included as part of administrative expenses.Actuarial gains and losses recognised in other comprehensive income:2012 2011N’000 N’000Amount accumulated in retained earnings at 1 January (10,155) (67,444)Recognized during the year 5,321 57,289Amount accumulated in retained earnings at 31 December (4,834) (10,155)(a)Post employment benefit obligation comprise of gratuity provision and is based upon independent actuarial valuationperformed by HR Nigeria Limited using the projected unit credit basis. The Company does not maintain any assets forthe gratuity plan but ensures that it has sufficient funds for the obligations as they crystallize.The movement in the defined benefit obligation during the year is as follows:2012 2011N’000 N’000At 1 January 515,461 549,623Current service cost 56,738 88,879Interest cost 45,735 55,130Actuarial losses/(gains) - change in assumption 26,460(54,928)Actuarial gains - experience adjustmentBenefits paid by the employer(31,781)(271,175)(2,361)(120,882)Curtailment gains (140,188)-At 31 December 201,250 515,46144

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012As a result of a curtailment in the gratuity arrangement for a number of employees, the Company's obligationdecreased by N140,188,000 (2011: Nil). A corresponding curtailment gain is included in the Company's statement ofcomprehensive income for the year ended 31 December 2012.The next valuation is due as at 31 December 2013.(b)The provision was based on independent actuarial valuation performed by HR Nigeria Limited using the projected unitcredit basis as at 31 December 2012. Other long term employee benefits comprise of long service awards and it isfunded on a pay as you go basis by the Company.The movement on the provision for other long term employee benefits was as follows:2012 2011N’000 N’000Balance at 1 January 36,019 31,296Provision for the yearCurrent service cost 6,987 6,373Interest cost 3,157 2,771Actuarial losses/(gains) - change in assumption 1,122(4,585)Actuarial (gains)/losses - experience adjustment (1,099)4,379Benefits paid by the employer(909)(4,215)Curtailment gains (28,112)-Balance at 31 December 17,165 36,019As a result of a curtailment in the long service award arrangement for a number of employees, the Company'sobligation decreased by N28,112,000 (2011: Nil). A corresponding curtailment gain is included in the Company'sstatement of comprehensive income for the year ended 31 December 2012.The next valuation is due as at 31 December 2013.(c)The balance and movement in the Company's pension payable account which represents amounts due to the pensionfund administrators which are yet to be remitted as at year end are shown in Note 22 (a).(d) Actuarial AssumptionsPrincipal actuarial assumptions at the reporting date (expressed as weighted averages):2012 2011Long-term average discount rate (p.a.) 13% 14%Future average pay increase (p.a.) 13% 13%Average rate of inflation (p.a.) 10% 10%Average Duration in years (Gratuity) 21.7 17Average Duration in years (Long Service Awards) 12.9 11These assumptions depict management’s estimate of the likely future experience of the Company.Due to unavailability of published reliable demographic data in Nigeria, the demographic assumptions regardingfuture mortality are based on the rates published jointly by the Institute and Faculty of Actuaries in the UK. The datawere rated down by one year to more accurately reflect mortality in Nigeria as follows:45

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012Mortality in Service20122011Sample ageNumber of deaths inyear out of 10,000 livesNumber of deaths in yearout of 10,000 lives25303577940 1445 261112131933Assumptions regarding future mortality rates are based on published statistics and mortakity tables by institute ofFaculty of Actuaries in the UK.Withdrawal from ServiceAge Band2012 2011Rates≤ 3031 - 3940 - 4445 - 600.5%0.5%0.5%0.0%0.5%0.5%0.5%0.0%It is assumed that all the employees covered by the defined end of service benefit scheme would retire at age 60 (2011:age 60).(e) Sensitivity AnalysisBelow is the sensitivity analysis of the principal actuarial assumptions adopted in determining the employee benefitliabilities:GratuityLong ServiceAwardNet periodicbenefit cost(Gratuity)Net periodicbenefit cost(LSA)N’000 N’000 N’000 N’000Discount rate -1% 232,855 18,434 94,298 9,561+1% 174,789 16,043 70,822 8,667Salary increase rate -1% 173,799 16,366 66,536 8,488+1% 233,579 18,048 90,949 9,488Inflation rate -1% 201,249 17,165 76,908 7,038+1% 201,249 17,165 76,908 7,488Mortality rate -1 year 201,694 17,185 81,222 9,092+1 year 201,242 16,318 80,475 8,73146

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 201220 Security depositsThese are collateral deposits paid by dealers who maintain credit facilities with the Company. These amounts arenetted off on a periodic basis to cater for operational losses. These deposits do not bear interest.The Company's exposure to currency and liquidity risks related to security deposits is disclosed in Note 24 (b).21 Dividends(a) Declared dividendsThe following dividends were declared and paid by the Company during the year.2012 201170 kobo per qualifying ordinary share (2011: 125 kobo) 177,792 317,486After the respective dates, the following dividends were proposed by the Directors. The dividends have not beenprovided for and there are no income tax consequences.2012 201123.34 kobo per qualifying ordinary share (2011: 70k) 59,281 177,792(b) Dividend payable(i)2012 2011N’000 N’000At 1 January 533,081 528,543Declared dividend 177,792 317,486PaymentsUnclaimed dividend transferred to retained earnings(202,660)(34,271)(302,369)(10,579)At 31 December 473,942 533,081Unclaimed dividend transferred to retained earnings represents dividend which have remained unclaimed for overtwelve (12) years and are therefore no longer recoverable or actionable by the shareholders in accordance with Section385 of the Companies and Allied Matters Act, Cap. C20, Laws of the Federal Republic of Nigeria, 2004.(ii)As at 31 December 2012, an amount of N214.7 million (2011: N231.2 million) of the total dividend payable is held withthe Company’s registrar, City Securities (Registrars) Limited. The remaining dividend payable of N259.2 million (2011:N301.9 million) represents unclaimed dividends, which have been returned to the Company by the Registrar.22 Trade and other payables31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000Trade payables 8,435,992 5,199,261 9,732,297Accrued expenses 2,662,679 3,440,258 1,932,411Amounts due to joint venture partners - 62,096 51,894Advances received from customers 1,429,200 472,414 1,028,399Bridging allowance 464,806 336,214 2,551,796Amounts due to related parties 1,146,307 13,542,005 2,047,873Pension payable (Note 22 (a)) 4,333 3,298 2,904Other liabilities 37,360 187,507 37,36014,180,677 23,243,053 17,384,93447

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012(a)The balance on the pension payable account represents the amount due to the Pension Fund Administrator which isyet to be remitted at year end. The movement on this account during the year was as follows:31 Dec 2012 31 Dec 2011N’000 N’000At 1 January 3,298 2,904Contributions during the year 85,202 155,080Payments during the year(84,167) (154,686)At 31 December 4,333 3,29823 Bank overdrafts and other short term borrowings31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000Bank overdrafts 1,413,789 1,002,866 517,347Bank borrowings (Import Finance Facility) 12,046,313 20,001,092 -Total Borrowings 13,460,102 21,003,958 517,347Total lines of credit available to the Company amounted to N11.5 billion (2011: N25.50 billion). Interest rates on thesefacilities ranged between 15 % to 20 % per annum (2011: 14 % to 19.75 % per annum ). The net interest expenseincurred in the year amounted to N294.76 million (2011: N269.73 million). These facilities are either secured withproducts financed, domiciliation of PPPRA payments or the Company’s sinking fund account with a balance of N8.9billion as at year end (2011: N1.6 billion). The sinking fund account is included in the short term deposits in Note 16.Import Finance Facilities represents short term borrowings obtained to fund letters of credits for product importation.Included in the prior year balance of N20 billion is an amount of N17.61 billion obtained on behalf of a related party ,MRS Oil and Gas Limited. No amount was obtained on behalf of MRS Oil and Gas Limited as at the year end. See Note25.The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant.24 Financial InstrumentsFinancial risk management overviewThe Company has exposure to the following risks from its use of financial instruments:· Credit risk· Liquidity risk· Market riskThis note presents information about the Company’s exposure to each of the above risks, the Company’s objectives,policies and processes for measuring and managing risk, and the Company’s management of capital. Furtherquantitative disclosures are included throughout these financial statements.Risk management frameworkThe Board of Directors has overall responsibility for the establishment and oversight of the Company’s riskmanagement framework. The Board has established the strategic and finance planning committee, which isresponsible for developing and monitoring the Company’s risk management policies. The committee reports regularlyto the Board of Directors on its activities.48

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to setappropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies andsystems are reviewed regularly by the strategic and finance planning committee to reflect changes in market conditionsand the Company’s activities. The Company, through its training and management standards and procedures, aims todevelop a disciplined and constructive control environment in which all employees understand their roles andobligationsThe Company’s Audit Committee oversees how management monitors compliance with the Company’s riskmanagement policies and procedures, and reviews the adequacy of the risk management framework in relation to therisks faced by the Company. Internal Audit undertakes both regular and ad hoc reviews of compliance with establishedcontrols and procedures, the results of which are reported to Senior Management of the Company and the auditcommittee.(a) Credit riskCredit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails tomeet its contractual obligations, and arises principally from the Company’s receivables from customers and otherrelated parties.The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to creditrisk at the reporting date was:Note 31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000Trade and other receivables 14 18,413,714 32,454,692 10,442,006Cash and cash equivalents 16 10,300,702 8,421,512 2,899,39528,714,416 40,876,204 13,341,401Trade and other receivablesManagement has credit policies in place and the exposure to credit risk is monitored on an ongoing basis by anestablished credit committee headed by the Managing Director. Under the credit policies all customers requiring creditover a certain amount are reviewed and new customers analysed individually for creditworthiness before theCompany’s standard payment and delivery terms and conditions are offered. The Company’s credit assessment processincludes specified cash deposits by new customers. Credit limits are established for qualifying customers and theselimits are reviewed regularly by the Credit Committee. Customers that fail to meet the Company’s benchmarkcreditworthiness may transact with the Company only on a prepayment basis.The Credit Committee reviews each customer’s credit limit in line with the customers’ performance, feedback fromsales team and perceived risk factor assigned to the customer.In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whetherthey are an individual or legal entity, whether they are a key distributor or retail distributor, geographic location, andexistence of previous financial difficulties. Trade and other receivables relate mainly to the Company’s wholesalecustomers. Customers with no trading activities for a period of up to one year are placed on a dormant customer list,and future sales are made on a prepayment basis only with approval of management.The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect oftrade and other receivables. The main components of this allowance are a specific loss component that relates toindividually significant exposures, customers with outstanding amounts but have not placed orders/traded for aprolonged period of time (usually one year) and a collective loss component established for groups of similar assets inrespect of losses that have been incurred but not yet identified. The collective loss allowance is determined based onhistorical data of payment statistics.49

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012The maximum exposure to credit risk for trade and other receivables at the reporting date by type of counterparty was:Trade receivables- Major customers- Others- Impairment- Other receivables (non-current)- Due from related parties- Due from regulators (Government entities)- Others31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’0002,646,282 2,163,668 1,617,283993,096 811,981 455,799(198,869) (253,518) (153,378)3,440,509 2,722,131 1,919,7047,507 247,557 280,8582,557,888 19,049,777 244,34211,820,896 9,679,068 7,297,033586,914 756,159 700,06918,413,714 32,454,692 10,442,006The aging of trade receivables at the end of the reporting period was as follows:2012 2011 1 Jan 2011N’000 N’000 N’0001 - 30 days 1,546,236 1,620,733 1,232,95931 - 60 days 940,403 524,427 398,95461 - 180 days 400,057 476,225 362,284More than 180 days 553,813 100,746 76,6423,440,509 2,722,131 2,070,839The movement in the allowance for impairment in respect of trade receivables during the year was as follows:2012 2011N’000 N’000Balance at 1 January 253,518 153,378Impairment loss recognised187,351 100,140Reversal of impairment losses (242,000)-Balance at 31 December 198,869 253,518The impairment loss as at 31 December 2012 relates to several customers that are not expected to be able to pay theiroutstanding balances, mainly due to economic circumstances. The Company believes that the unimpaired amounts arestill collectible, based on historic payment behaviour and extensive analyses of the underlying customers’ credit ratingswhen available. The impairment loss is included in administrative expenses on the statement of comprehensiveincome.50

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012Cash and cash equivalentsThe Company held cash and cash equivalents of N10.3 billion as at 31 December 2012 (2011: N8.4 billion), whichrepresents its maximum credit exposure on these assets. The cash and cash equivalents (with the exception of N3.4million held as cash by the company) are held by banks and financial institutions in Nigeria.(b) Liquidity riskLiquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with itsfinancial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managingliquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due,under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’sreputation.The Company has a clear focus on ensuring sufficient access to capital to finance growth and to refinance maturingdebt obligations. As part of the liquidity management process, the Company has various credit arrangements withsome banks which can be utilised to meet its liquidity requirements. At the year end, the Company had N1.41 billionutilized credit arrangements under overdraft agreements with it's bankers.Typically the credit terms with customers are more favourable compared to payment terms to its vendors in order tohelp provide sufficient cash on demand to meet expected operational expenses, including the servicing of financialobligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such asnatural disasters.The following are the contractual maturities of financial liabilities, including estimated interest payments andexcluding the impact of netting agreements.Non-derivative financialliabilitiesNotesContractualCarrying amount cash flows 6 months or lessN’000 N’000 N’0001 January 2011Overdraft and other Short-term borrowings 23 517,347 517,347 517,347Dividend payable 21 (b) 528,543 528,543 528,543Trade and other payables 22 17,384,934 17,384,934 17,384,934Security deposits 20 630,699 630,699 630,69919,061,523 19,061,523 19,061,52331 December 2011Overdraft and other Short-term borrowings 23 21,003,958 21,003,958 21,003,958Dividend payable 21 (b) 533,081 533,081 533,081Trade and other payables 22 23,243,053 23,243,053 23,243,053Security deposits 20 822,920 822,920 822,92045,603,012 45,603,012 45,603,01231 December 2012Overdraft and other Short-term borrowings 23 13,460,102 13,460,102 13,460,102Dividend payable 21 (b) 473,942 473,942 473,942Trade and other payables 22 14,180,677 14,180,677 14,180,677Security deposits 20 1,510,904 1,510,904 1,510,90429,625,625 29,625,625 29,625,62551

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012(c) Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity priceswill affect the Company’s income or the value of its holdings of financial instruments. The objective of market riskmanagement is to manage and control market risk exposures within acceptable parameters, while optimizing thereturn.The Company manages market risks by keeping costs low through various cost optimization programs. Moreover,market developments are monitored and discussed regularly, and mitigating actions are taken where necessary.Currency riskThe Company is exposed to currency risk on sales and purchases and borrowings that are denominated in a currencyother than the functional currency of the Company, primarily the Naira. The currency in which these transactionsprimarily are denominated is US Dollars (USD). The currency risk is the risk that the fair value or future cash flows of afinancial instrument will fluctuate due to the changes in foreign exchange rates.In managing currency risk, the Company aims to reduce the impact of short-term fluctuations on earnings. TheCompany’s has no export sales. Thus the exposure to currency risk in that regard is non existent. The Company’ssignificant exposure to currency risk relates to its importation of various raw materials. Although the Company hasvarious measures to mitigate exposure to foreign exchange rate movement, over the longer term, however, permanentchanges in exchange rates would have an impact on profit. The Company monitors the movement in the currency rateson an ongoing basis.Exposure to currency riskThe Company’s transactional exposure to US Dollar (USD) was based on notional amounts as follows:In thousands 31 Dec 2012 31 Dec 2011 1 Jan 2011USD USD USDFinancial assetTrade and other receivablesCash and cash equivalentFinancial liabilityShort- term borrowingsTrade and other payablesNet statement of financial position exposure23,011 108,284 2,0602,920 3,808 14,081(77,583) (112,040) (10,089)(8,889) (73,023) (12,068)(60,541) (72,971)(6,016)Sensitivity analysisA strengthening of the Naira, as indicated below against the Dollar at 31 December would have increased (decreased)profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that theCompany considered to be reasonably possible at the end of the reporting period and has no impact on equity. Theanalysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on thesame basis for 2011, albeit that the reasonably possible foreign exchange rate variances were different, as indicatedbelowIncrease/(decrease) in profit or loss31 December 2012 N’000USD (5 percent strengthening) 470,01031 December 2011USD (5 percent strengthening) 569,90452

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012A weakening of the Naira against the dollar at 31 December would have had the equal but opposite effect on the abovedollar to the amounts shown above, on the basis that all other variables remain constant.The following significant exchange rates were applied during the yearUS DollarAverage rateReporting date spot rate2012 2011 2012 2011N N N N155.44 151.82 155.27 156.2Interest rate risk profileIn managing interest rate risk, the Company aims to reduce the impact of short-term fluctuations in earnings.Dividend pay-out practices seek a balance between giving good returns to shareholders on one hand and maintaining asolid debt/equity ratio on the other handAt the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was:Carrying amount2012 2011N’000 N’000Fixed rate instrumentsFinancial liabilities 13,460,102 21,003,958The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss.Therefore a change in interest rates at the end of the reporting period would not affect profit or loss(d) Capital risk managementThe Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence andto sustain future development of the business. Management monitors the return on capital, which the Companydefines as result from operating activities divided by total shareholders’ equity. Management also monitors the level ofdividends to all shareholders.The Company’s debt to adjusted capital ratio at the end of the reporting period was as follows:31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000Total borrowings (Note 23) 13,460,102 21,003,958 517,347Less: Cash and cash equivalents (Note 16)Net debt(10,300,702)3,159,400(8,421,512)12,582,446(2,899,395)(2,382,048)Total equity 19,054,010 18,988,685 18,639,866Total capital Employed 22,213,410 31,571,131 16,257,818Debt to adjusted capital ratio 17% 66% -13%There were no changes in the Company's approach to capital management during the year.The Company is not subject to externally imposed capital requirements.53

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012(e)Fair valuesFair values versus carrying amountsThe fair values of financial assets and liabilities, together with the carrying amounts shown in the statement offinancial position, are as follows:Financial FinancialassetsLoans andliabilitiesAmortisedTotalreceivables Cost31 December 2012 N’000 N’000 N’000Financial assetsTrade and other receivables 18,413,714 - 18,413,714Cash and cash equivalents 10,300,702 - 10,300,70228,714,416 - 28,714,416Financial liabilitiesShort term borrowings - 13,460,102 13,460,102Trade and other payables - 14,180,677 14,180,677Security deposits - 1,510,904 1,510,904- 29,151,683 29,151,683The Company's financial instruments are categorised as follows:FinancialassetsLoans andreceivablesFinancialliabilitiesAmortisedcost31 December 2011 N’000 N’000 N’000Financial assetsTrade and other receivables 32,454,692 - 32,454,692Cash and cash equivalents 8,421,512 - 8,421,512Total40,876,204 - 40,876,204Financial liabilitiesShort term borrowings - 21,003,958 21,003,958Trade and other payables - 23,243,053 23,243,053Security deposits - 822,920 822,920- 45,069,931 45,069,931The Company's financial instruments are categorised as follows:FinancialassetsLoans andreceivablesFinancialliabilitiesAmortisedcostTotal1 January 2011 N’000 N’000 N’000Financial assetsTrade and other receivables 10,442,006 - 10,442,006Cash and cash equivalents 2,899,395 - 2,899,39513,341,401 - 13,341,401Financial liabilitiesShort term borrowings - 517,347 517,347Trade and other payables - 17,384,934 17,384,934Security deposits - 630,699 630,699- 18,532,980 18,532,98054

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012Trade and other receivables, security deposits, bank overdrafts and other short term borrowings are the Company’sshort term financial instruments. Accordingly, management believes that their fair values are not expected to bematerially different from their carrying values.The interest rates used to determine the discount estimated cash flows, where applicable are based on external sourcesand were as follows:31 Dec 2012 31 Dec 2011 1 Jan 2011Other receivables 18% 18% 18%25 Related party transactionsParent and ultimate controlling entityAs at the year ended 31 December 2012, MRS Africa Holdings Limited (incorporated in Nigeria) owned 60 % of theissued share capital of MRS Oil Nigeria Plc. The ultimate holding company of the Company is MRS Africa HoldingsLimited incorporated in Nigeria.The Company has transactions with its parent and other related parties who are related to the Company by virtue ofbeing members of the MRS Group. The total amounts due to related parties by the nature of the transactions areshown below:(a)Sales of Goods and Services2012 2011N’000 N’000Sales of goods:- MRS Oil and Gas Limited 4,990,266 2,440,000- Other related entities 245,880 -Sales of services- MRS Oil and Gas Limited 376,531 -Total 5,612,677 2,440,000(b)Purchases of goods and services2012 2011N’000 N’000Purchase of products- Petrowest Limited 6,471,922 28,928,946- MRS Oil and Gas Limited 13,171,703 1,640,160Purchase of Services- Management Fees 531,628 704,150- Storage Fees 832,296 741,690Total 21,007,549 32,014,94655

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012Net balances due (to)/ from related entities within the group are as follows:31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000Petrowest Limited - (11,232,801) (1,926,596)MRS Oil and Gas Limited 1,387,054 16,729,746 -MRS Africa Holdings Limited 49,454 68,359 210,375Other related entities(24,927) (57,532) (87,310)Total 1,411,581 5,507,772(1,803,531)All outstanding balances do not bear interest and exclude value of products stored by MRS Oil and Gas Limited for theCompany amounting to N447.87 million (2011: N961.78 million). During the year, the import finance facilities drawnby the Company on behalf of M.O.G in prior year was settled in full. At the year end, the Company wrote off an amountof N18.20 million relating to joint costs incurred on the completed SAP project which could not be allocated amongstthe related entities and N55.86 million relating to uncollectable amounts due from Petrowest limited.(c) Key management personnel compensationThe Company pays short term benefits to its directors as follows:2012 2011N’000 N’000Short term employee benefits 17,034 16,07626 Segment reportingIn accordance with the provisions of IFRS 8 – Operating Segments, the operating segments used to present segmentinformation were identified on the basis of internal reports used by the Company's Board of Directors to allocateresources to the segments and assess their performance. The Board of Directors is MRS Oil Nigeria Plc’s “chiefoperating decision maker” within the meaning of IFRS 8.Segment information is provided on the basis of product segments as the company manages its business through threeproduct lines - Retail/Commercial & Industrial, Aviation, and Lubricants. The business segments presented reflect themanagement structure of the Company and the way in which the Company’s management reviews businessperformance. The accounting policies of the reportable segments are the same as described in notes 2 and 3.The Company has identified three operating segments:(i)(ii)(iii)Retail/ Commercial & Industrial - this segment is responsible for the sale and distribution of petroleum products(white products) to retail customers and industrial customers.Aviation - this segment involves the sale of Aviation Turbine Kerosene (ATK).Lubricants - this segment manufactures and sells lubricants and greases.Segment assets and liabilities are not disclosed as these are not regularly reported to the Board of Directors.56

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012(a) Segment revenue and cost of sales2012RevenueCost of salesGross profitAmount % of Total Amount % of Total Amount % of TotalN’000 N’000 N’000Retail/C&I 67,146,616 84 62,419,474 84 4,727,142 83Aviation 10,120,921 13 9,304,720 13 816,201 14Lubes 2,459,812 3 2,291,293 3 168,519 3Total 79,727,349 100 74,015,487 100 5,711,862 1002011Revenue Cost of sales Gross profitAmount % of Total Amount % of Total Amount % of TotalN’000 N’000 N’000Retail/C&I 58,964,424 82 53,754,793 83 5,209,631 76Aviation 9,933,242 14 8,956,075 14 977,167 14Lubes 2,593,049 4 1,957,105 3 635,944 9Total 71,490,715 100 64,667,973 100 6,822,742 100(b) Segment profit before tax 31 Dec 2012 31 Dec 2011N’000 N’000Retail/C&I 317,410 924,193Aviation 50,876 332,299Lube 10,469 156,750378,755 1,413,24227 Contingencies(a) Pending litigation and claimsThere are certain lawsuits and claims pending against the Company in various courts of law which are being handledby external legal counsels. The contingent liabilities in respect of pending litigation and claims amounted toN12,471,106,206 as at 31st December 2012 (2011: N8,367,068,842). In the opinion of the Directors and based onindependent legal advice, the Company’s liabilities are not likely to be material, thus no provision has been made inthese financial statements.(b) Financial commitmentsThe Directors are of the opinion that all known liabilities and commitments, which are relevant in assessing the stateof affairs of the Company, have been taken into consideration in the preparation of these financial statements.(c) Guaranteesi During the year, the Company cancelled its agreement with a commercial bank to guarantee car and housing loans toemployees. The guarantee was up to a limit of N45 million. No loss was incurred on the cancellation.iiGuarantees obtained in the prior year in favour of major oil marketers for N409.35 million were extinguished duringthe year at no loss to the Company. No other guarantees exist at year end.57

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 201228 Operating leasesLeases as lesseeThe Company leases a number of buses for staff transportation under cancellable operating leases. During the yearended 31 December 2012, an amount of N68 million was recognized as an expense in profit or loss in respect of theoperating lease (2011: N 30 million). Lease rentals are paid on a monthly basis.In addition, the Company leases a number of filling stations, warehouses and offices under non-cancellable operatingleases. During the year ended 31 December 2012, an amount of N 102 million was recognized as an expense in profit orloss in respect of operating leases (2011: N 189 million). Lease rentals are paid upfront and included in prepayment,which are amortized to the profit or loss over the life of the lease.29 Subsequent eventsThere are no significant subsequent events, which could have had a material effect on the state of affairs of theCompany as at 31 December 2012 that have not been adequately provided for or disclosed in the financial statements.58

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 201230 Explanation of the transition to IFRSsAs stated in note 2(a), these are the Company's first financial statements prepared in accordancewith IFRS.The accounting policies set out in note 3 have been applied in preparing the financial statements forthe year ended 31 December 2012, the comparative information presented in these financialstatements for the year ended 31 December 2011 and in the preparation of an opening IFRSstatement of financial position at 1 January 2011 (the Company’s date of transition).In preparing its opening IFRS statement of financial position, the Company has adjusted amountsreported previously in financial statements prepared in accordance with previous Nigerian GAAP.An explanation of how the transition from previous Nigerian GAAP to IFRS has affected theCompany’s financial position, financial performance and cash flows is set out in the following tablesand the notes that accompany the tables.59

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 201230 Explanation of the transition to IFRSs (Cont'd)Reconciliation of Nigerian GAAP Statements to IFRSs(i) Statement of financial position as at 1 January 2011Effect ofNotes Nigerian GAAP Correction transition to(SAS) of errors IFRS IFRSN’000 N’000 N’000 N’000AssetsNon-current assetsProperty, plant and equipment (a), (b) 18,209,184 - 5,906,762 24,115,946Intangible assets - - - -Other receivables (i ), (d) - 280,858 280,858Prepayments (i ) 370,108 - (160,965)209,143Total non-current assets 18,579,292 - 6,026,655 24,605,947Current assetsInventories (b) 8,637,715 - (71,963) 8,565,752Trade and other receivables (c ), (d), (i), (j),(s) 10,719,360 (472,296) (85,916) 10,161,148Prepayments (i ) - - 98,071 98,071Due from related parties (j ) 244,342 - (244,342)-Cash and cash equivalents 2,899,395 - - 2,899,395Total current assets 22,500,812 (472,296) (304,150) 21,724,366Total assets41,080,104 (472,296) 5,722,505 46,330,313EquityShare capital 126,994 - - 126,994Revaluation reserve (a) 14,008,720 - (14,008,720)-Retained earnings (s), (q) 4,393,032 (389,091) 14,508,931 18,512,872Total equity 18,528,746 (389,091) 500,211 18,639,866LiabilitiesNon-current liabilitiesDeferred tax liability (s) 1,699,058 (183,102) 5,184,934 6,700,890Security deposits (k) 630,699 - (630,699)-Employee Benefit obligation 580,919 - - 580,919Total non-current liabilities 2,910,676 (183,102) 4,554,235 7,281,809Current liabilitiesSecurity deposits (k) - - 630,699 630,699Dividend payable 528,543 - - 528,543Trade and other payables (e), (j) 15,199,804 99,897 2,085,233 17,384,934Due to related parties (j ) 2,047,873 - (2,047,873)-Bank overdraft and short term borrowings 517,347 - - 517,347Tax payable 1,347,115 - - 1,347,115Total current liabilities 19,640,682 99,897 668,059 20,408,638Total Liabilities 22,551,358 (83,205) 5,222,294 27,690,447Total equity and liabilities 41,080,104 (472,296) 5,722,505 46,330,31360

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 201230 Explanation of the transition to IFRSs (Cont'd)Reconciliation of Nigerian GAAP Statements to IFRSs(ii) Statement of financial position as at 31 December 2011Effect ofNotes Nigerian GAAP Correction transition to(SAS) of errors IFRS IFRSN’000 N’000 N’000 N’000AssetsNon-current assetsProperty, plant and equipment (a) 17,676,983 - 5,495,985 23,172,968Intangible Asset 162,641 - - 162,641Other receivables (i ), (d) 243,612 - 3,945 247,557Prepayments (i ) - - 116,085 116,085Total non-current assets 18,083,236 - 5,616,015 23,699,251Current assetsInventories (b) 8,366,153 - (71,963) 8,294,190Trade and other receivables (c ), (d), (i), (j) 13,564,382 - 18,642,753 32,207,135Prepayments (i ) - - 78,150 78,150Due from related parties (j ) 19,049,777 - (19,049,777)-Cash and cash equivalents 8,421,512 - - 8,421,512Total current assets 49,401,824 - (400,837) 49,000,987Total assets 67,485,060 - 5,215,178 72,700,238EquityShare capital 126,994 - - 126,994Revaluation reserve (a) 13,045,781 - (13,045,781)-Retained earnings (l) 4,801,138 (118,180) 14,178,733 18,861,691Total equity 17,973,913 (118,180) 1,132,952 18,988,685LiabilitiesNon-current liabilitiesDeferred tax liability (a) 2,386,991 (31,967) 4,044,866 6,399,890Security deposits (k) 822,920 - (822,920)-Employee Benefit obligation 551,480 - - 551,480Total non-current liabilities 3,761,391 (31,967) 3,221,946 6,951,370Current liabilitiesSecurity deposits (k) - - 822,920 822,920Dividend payable 533,081 - - 533,081Trade and other payables (e), (j), (s) 9,513,541 150,147 13,579,365 23,243,053Due to related parties (j ) 13,542,005 - (13,542,005)-Bank overdraft and short term borrowings 21,003,958 - - 21,003,958Tax payable 1,157,171 - 1,157,171Total current liabilities 45,749,756 150,147 860,280 46,760,183Total Liabilities 49,511,147 118,180 4,082,226 53,711,553Total equity and liabilities 67,485,060 - 5,215,178 72,700,23861

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 201230 Explanation of the transition to IFRSs (Cont'd)Reconciliation of Nigerian GAAP Statements to IFRSs(iii) Statement of comprehensive income for the year ended 31 December 2011Effect ofNotes Nigerian GAAP Correction transition to(SAS) of errors IFRS IFRSN’000 N’000 N’000 N’000Revenue (g) 70,952,936 - 537,779 71,490,715Cost of Sales (f) (63,914,979) -(752,994) (64,667,973)Gross Profit 7,037,957 - (215,215) 6,822,742Other Income (f), (l) 147,411 - 785,662 933,073Selling and Distribution expenses (g ), (l), (s) (375,610) (50,250)(570,447)(996,307)General and Administrative expenses (a), (b), (c ), (d) (4,651,560)(335,181) (4,986,741)Results from operating activities 2,158,198 (50,250) (335,181) 1,772,767Finance income (d) 139,639 - 17,898 157,537Finance cost (h) (269,728) -(247,334)(517,062)Net finance (costs)/income (130,089) -(229,436) (359,525)Profit before tax 2,028,109 (50,250) (564,617)1,413,242Income tax expense (s) (991,935) 48,047 146,270(797,618)Profit for the year after tax 1,036,174 (2,203) (418,347)615,624Other comprehensive incomeActuarial (losses)/gains on post-employmentbenefit obligation (0) - - 40,102 40,102Total comprehensive income for the year 1,036,174 (2,203) (378,245)655,726Earnings per share (EPS)Basic earnings per share (Naira) 4.08 2.4262

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012Index to the notes to the reconciliationsNoteDeemed cost exemptionProperty Plant and Equipments (PPE) and InventoryGeneral provisions on trade receivables and impairment of receivablesEmployee ReceivablesAccumulating leave liabilityOther incomeFreight costs on non-regulated productsFinance CostsPrepaymentsDue to/from related partiesSecurity depositsPump repairs recoveryIntangible assetsDeferred tax liability on revaluation surplusActuarial GainDeferred tax liability/asset on other IFRS adjustmentsRetained earningsDeferred TaxCorrection of errorsabcdefghijklmnopqrs63

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 201230 Notes to the reconciliation of equity and profit(a) Deemed cost on certain items of PPEThe exemption in IFRS 1 allows entities to use a value that is not depreciated cost in accordance with IAS 16, asdeemed cost of items of property, plant and equipment on transition to IFRS. The Company has chosen the fair valueoption as the deemed cost of some of its items of property, plant and equipment (''plant & machinery'') . Anindependent valuer was used to determine the fair value. The fair values resulted in higher amounts than the NGAAPcarrying values for the plant and machinery items. In other instances ( "land and buildings), the Company elected toapply the optional exemption to use previous revaluation as the deemed cost under IFRS. As a result, the revaluationreserve amounting to N14,008,720,000 as at 1 january 2011 and N13,045,781,000 as at 31 December 2011 werereclassified to retained earnings. In addition, the fair value adjustments on 1 January 2011 relating to Plant andMachinery increased the property, plant and equipment by N5,906,762,000 with the corresponding impact increasingretained earnings by the same amount and a corresponding increase in deferred tax liability of N1,772,029. Theincrease in the asset value by the fair value adjustments together with changes in the residual values of the assetsincreased the attributable depreciation for the assets by N410,777,000 and reduced retained earning by the sameamount. The effect of these on the carrying value of the Property, Plant and equipment is summarised below:Statement of financial position31-Dec-111-Jan-11N’000 N’000Fair Value Adjustments 5,906,762 5,906,762Depreciation (410,777)-Net Impact on Carrying amount of PPE 5,495,985 5,906,762Defferred tax implicationNet Adjustment to retained earnings(1,648,796)3,847,189(1,772,029)4,134,733Statement of comprehensive income:Income tax expense31-Dec-11N’000(123,233)The impact of the reclassification of the revaluation reserve for the PPE to retained earnings is summarized below:Statement of financial position31-Dec-111-Jan-11N’000 N’000Revaluation reserve for PPE 13,045,781 14,008,720Net Adjustment to retained earnings 13,045,781(14,008,720)Statement of comprehensive income:31-Dec-11N’000Increase in depreciation expense 410,777Adjustment before income tax 410,777(b) Property, Plant and Equipment (PPE) and InventoryUnder the previous Nigerian GAAP, spare parts amounting to N71,963,000 intended for use with specialized trucksfor the transportation of ATK were classified as inventories. On transition to IFRS, the value of the spares werereclasified from inventories to PPE and as the items would have been fully depreciated as at the date of transiton,corresponding amounts were recorded as accumulated depreciation and a reduction to retained earnings.64

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012The impact is summarised as follows31-Dec-111-Jan-11N’000 N’000Increase in PPE cost 71,963 71,963Increase in Accumulated DepreciationNet Impact on carrying value of PPE(71,963)-(71,963)-Reduction in Inventory(71,963)(71,963)Net Adjustment to retained earnings(71,963)71,963(c) General provisions on trade receivables and impairment of receivablesUnder NGAAP, loans and receivable balances were subjected to provision for doubtful debts based on expected lossesby reference to ageing of such receivable balances. IFRS requires loans and receivables to be assessed for impairmentat reporting date and if there is an impairment, the recoverable value of the receivable is calculated using a presentvalue approach.As at 1 January 2011 and 31 December 2011, the Company had recorded general provisions of N 27,995,000 andN26,153,000 respectively in the NGAAP financial statements. However, based on collective impairment assessmentcarried out under IFRS, impairment losses of N153,377,707 and N253,518,000 were estimated as at 1 January 2011and 31 December 2011 respectively.The impact of reversal of general provisions and recognition of impairment loss based on collective impairmentassessment is summarized below:Statement of financial position:31-Dec-111-Jan-11N’000 N’000Reversal of general provisionsRecognition of impairment loss(26,153)253,518(27,995)153,378Net impact on carrying amount of receivables (227,365) 125,383Defferred tax implication (37,614)Net adjustment to retained earnings (227,365) 87,769Statement of comprehensive income31-Dec-11N’000Recognized impairment loss 101,982Adjustment before income tax 101,982(d ) Employee ReceivablesMRS advances loans to its employees at a zero percent (0%) interest rate. Under N-GAAP the loans are recognised atface value. Under IFRS, these loans should be recognized at fair value and the benefits the employees earn as a resultof receiving interest free loans accounted for as employee costs.The fair value of the loans were estimated as the present value of all future cash receipts discounted using theprevailing market rate of interest (18%) for similar instruments (same currency, term and other factors). Thedifference between the fair value of the loans (based on market rates) and actual value of the loan advanced is anemployee benefit to be recognised in the period that the employee receives the benefit which is the tenure of the loanor shorter if the employee terminates his employment before the tenure of the loan. Prepaid employee benefits areamortised as salary costs using a straight line method over the tenure of the loan or a shorter period where applicable.Amortisation of prepaid employee benefits are recognized in the profit or loss.As at 1 January 2011, the measurement exercise carried out on 'employee receivables' resulted in an excess of the valueof the loan advanced over the fair value of the loan - a prepaid employee benefit of N106,804,000 . This led to areclasification from 'trade and other receivables' - current to 'Other receivables' - non-current. As at 31 December2011, the reclassified amount was N104,577,000. This reclassification had no impact on retained earnings.The prepaid employee benefit was amortised from the inception of the loan to the transition date and this resulted in adecrease in retained earnings of N31,514,000. For the year ended 31 December 2011, the amortised amount wasN47,048,000 . The notional interest income on the loan from inception to transition date resulted in an increase inretained earnings of N44,603,000. As at 31 December 2011, the notional interest income recognised wasN62,501,000.65

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012The impact from the change is summarized as follows:Statement of comprehensive income31-Dec-11N’000Increase in employee BenefitsIncrease in finance income(15,534)17,898Adjustment before income tax 2,364Statement of financial position31-Dec-111-Jan-11N’000 N’000Increase in "Other receivables" - Non current 120,030 119,893Decrease in trade and other receivables currentNet adjustment to retained earnings(104,577)15,453(106,804)13,089(e) Accumulated leave liabilityThe Company has a scheme in place that allows employees to carry forward unused leave days, for more than thecurrent financial reporting period. No liability was recognized under NGAAP.IFRS requires that compensated short-term absences should be accrued for and recognised in the financialstatements. This measurement criteria resulted in an accrued leave liability of N37,360,000 with a consequentdecrease in retained earnings of the same amount. The same amount was recognised in the financial statements as at31 December 2011.The impact from the change is summarized as follows:Statement of financial position31-Dec-111-Jan-11N’000 N’000Increase in trade and other payables - current (37,360) (37,360)Defferred tax implication 11,208Decrease in retained earnings (37,360) (26,152)(f) Other incomeThe Company realises income from storage services provided to a third party. Under NGAAP, this income was used toreduce the Company's cost of sales. In accordance with IFRS, a reclassification was made to reclassify N 698,3000 from 'cost of sales' of to 'other income', with no net effect on profit.The impact of this reclassification is summarized as follows:Statement of comprehensive income31-Dec-11N’000Increase in other incomeIncrease in cost of sales(752,994)752,994Adjustment before income tax -(g) Freight costs on non-regulated productsThe Company had previously classified freight costs on transportation of non-regulated products as a reduction torevenue in the financial statements.In accordance with IFRS and the Company's accounting policy, the transportation costs of N537,779,000 has beenreclassified from revenue to selling and distribution expense with no net effect on profit.66

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012The impact of this reclassification is summarized as follows:Statement of comprehensive income31-Dec-11N’000Increase in revenueIncrease in selling and distribution expenses(537,779)537,779Adjustment before income tax -(h) Finance CostsThe Company had previously classified net foreign exchange loss and bank charges as general administrativeexpenses. In accordance with options available under IFRS and the Company's accounting policy, foreign exchangedifferences and bank charges amounting to N247,334,000 were reclassified from general administrative expenses tofinance costs with no net effect on profit.The impact of this reclassification is summarized as follows:Statement of comprehensive income31-Dec-11N’000Increase in finance cost 247,334Decrease in administrative expenses(247,334)Adjustment before income tax -(i) PrepaymentsUnder NGAAP, prepayments were included as part of trade and other receivables in the statement of financialposition. On transition to IFRS, prepayments were reclassified from trade and other receivables.The impact of this reclassification is summarized as follows:31-Dec-111-Jan-11N’000 N’000Prepayments - non-current 116,085 98,071Prepayments - current 78,150(160,965)(Decrease)/Increase in other receivables - non current (116,085)160,965Decrease in trade and other receivables - current(78,150)(98,071)Net adjustment to retained earnings - -(j) Due to/from related partiesUnder NGAAP, amounts due to/from related parties were disclosed separately in the statement of financial position.On transition to IFRS, amounts due to/from related parties have been included as part of trade and other payablesand trade and other receivables respectively. This reclassification had no effect on net assets or retained earnings. .The impact of this reclassification is summarized as follows:Statement of financial position:31-Dec-111-Jan-11N’000 N’000Increase in trade and other payables - currentDecrease in due to related parties(13,542,005)13,542,005(2,047,873)2,047,873Increase in trade and other receivables - current 19,049,777 244,342Decrease in due from related parties(19,049,777)(244,342)Net adjustment to retained earnings - -(k) Security depositsUnder NGAAP, security deposits paid by the Company's customers were classified as non-current liabilities. Inaccordance with IFRS , the security deposits have been reclassified to current liabilities with no effect on totalliabilities or retained earnings.67

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012The impact of this reclassification is summarized as follows:Statement of financial position:31-Dec-111-Jan-11N’000 N’000Increase in current liabilitiesDecrease in non- current liabilities(822,920)822,920(630,699)630,699Net adjustment to retained earnings - -(l) Pump repairs recoveryUnder NGAAP, the Company recorded recoveries earned from dealers on repair of pumps as a reduction to 'sellingand distribution expenses" . In accordance with IFRS and the Company's accounting policy, these have beenreclassified from selling and distribution expenses to other income with no net effect on profit.The impact of this reclassification is summarized as follows:Statement of comprehensive income31-Dec-11N’000Increase in other incomeIncrease in selling and distribution expenses(32,668)32,668Adjustment before income tax -(m) Intangible assetsUnder NGAAP, an impairment was recorded for the unamortised portion of a software (intangible assets) in 2011.Under IFRS, the impairment was reversed as there were no indicators of impairment as at 31 December 2011. Inaddition, as the amount relates to prepaid license fees for the software, it has been reclassified to prepayments andamortised accordingly.The impact of this reclassification is summarized as follows:Statement of financial position31-Dec-11N’000Increase on trade and other receivables 5,259AmmortizationImpact on trade and other rececivables(2,191)3,068Net adjustment to retained earnings(3,068)(n) Deferred tax liability on revaluation surplusUnder NGAAP, Leasehold land was not depreciated and deferred tax was not recognized on the revaluation surplusarising on land that was revalued under the NGAAP. IFRS requires that leasehold land is depreciated and deferred taxliability is recognized on revaluation surplus. The effect of recognising deferred tax liability on land is summarizedbelow:Statement of financial positionDeferred tax liabilityNet Adjustment to retained earnings31-Dec-111-Jan-11N’000 N’000(2,504,321) (3,461,727)2,504,321 3,461,727Statement of comprehensive income31-Dec-11N’000Income tax expense 5,53268

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012(o) Actuarial gainThe Company currently operates a defined benefit scheme for certain employees and the recognised liability isdetermined by an independent actuarial valuation every year using the projected unit credit method. Under NGAAP,actuarial gain arising from difference between the actual and expected outcome in the valuation of the obligation wasrecognised in the profit and loss account for the year. Under IFRS, the Company has selected the policy that allowsactuarial gains to be recognised in Other Comprehensive Income. The effect of recognising actuarial gain in OtherComprehensive Income net of deferred tax is as follows:Other comprehensive income31-Dec-11N’000Actuarial gains on post-employmentbenefit obligation 57,289Tax effectNet Adjustment to other comprehensiveincome(17,187)40,102(p) Deferred tax asset on other IFRS adjustmentsOn transition to IFRS, assessment of deferred tax impact on other IFRS adjustments was a deferred tax asset ofN77,392. The effect of recognizing this deferrred tax asset is summarized as follows:Statement of financial position31-Dec-11N’000Deferred tax liability 77,392Net Adjustment to retained earningsStatement of comprehensive incomeIncome tax expense(77,392)31-Dec-11N’000(28,569)(q) Retained earningsThe above changes decreased (increased) retained earnings (each net of related tax) as follows:Note 31-Dec-11 1-Jan-11N’000 N’000Deemed cost on PPEa(3,847,189)(4,134,733)Revaluation reserve for PPEa(13,045,781)(14,008,720)Deferred tax liability on revaluation surplus n 2,504,321 3,461,727Property Plant and Equipments (PPE) and Inventory b 71,963 71,963General provisions on trade receivables and impairment ofreceivablesc 227,365 87,769Employee Receivablesd(15,453)(13,089)Accumulated leave liability e 37,360 26,152Intangible assets m (3,068)-Tax effect on actuarial Gain o 17,187-Correction of errorss(48,047)Deferred tax liability/asset on other IFRS adjustmentsp(77,391)(14,178,733)(14,508,931)69

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012(r) Deferred TaxThe changes in deferred tax liability at 30% tax rate is attributable to:31-Dec-111-Jan-11N’000 N’000Deemed cost on PPEa(1,648,796)(1,772,029)Deferred tax liability on revaluation surplusn(2,504,321)(3,461,727)General provisions on trade receivables and impairment of rec c - 37,614Accumulated leave liability e - 11,208Tax effect on actuarial Gain o (17,187)-Correction of errors s 48,047Deferred tax asset on other IFRS adjustments p 77,392(4,044,865)(5,184,934)(s) Correction of errorsCorrection of errors relating to prior years comprise:31-Dec-11 1 Jan 2011N’000 N’000(i) Related party cost omitted - 472,296(ii) Pipeline usuage costs ommitted 50,250 99,897Total 50,250 572,193Income tax expense(48,047)2,203(183,102)389,091Deferred Tax Liability 48,047Net adjustment to retained earnings(48,047)(i)(ii)During 2011, the Company discovered that costs incurred on its behalf by a related party, MRS Oil and Gas Limitedamounting toN472.3 million, with respect to purchase of products that were sold in 2010 had not been recognized inprofit or loss as a liability to MOG as the respective sales were made. The costs should have been recognised in full inthe 2010 financial statements.During 2012, the Company discovered that expenses amounting to N150.15 million relating to the usage of pipelineshad not been recognized in profit or loss as the related expenses were incurred. The amount should be recognized asan expense of N50.25 million in 2011 ( included in 2011 profit or loss) and N99.9 million in 2009/2010 ( recognized asan adjustment to opening retained earnings as at 1 January 2011).Material adjustments to statement of cashflowsThere were no material differences between the statement of cash flows presented under IFRS and the statement ofcash flows presented under the previous NGAAP.70

Additional InformationValue Added StatementFor the year ended 31 December2012 2011N’000 N’000Revenue 79,727,349 71,490,715Bought in materials and services- Imported- Local(19,249,054) (46,993,841)(57,489,604) (20,580,797)2,988,691 3,916,077Other income 923,383 933,073Finance income 149,051 157,537Value added by operating activities 4,061,125 5,006,687Distribution of Value Added % %To Government as:Taxes and duties 173,634 4 797,618 16To Employees:Salaries, wages, fringe and end of service benefits 812,667 20 1,525,011 30To Providers of Finance:- Finance cost 1,358,196 33 517,062 10Retained in the BusinessTo maintain and replace:- Property, plant and equipment 1,476,481 36 1,330,289 27- Intangible assets 31,301 1 3,189 -Proposed dividend 59,281 2 177,792 4To augment retained earnings 149,565 4 655,726 13Value added 4,061,125 100 5,006,687 10071

Financial SummaryStatement of comprehensive income2012 2,011N’000 N’000Revenue 79,727,349 71,490,715Results from operating activities 1,587,900 1,772,767Profit before taxation 378,755 1,413,242Profit for the year 205,121 615,624Comprehensive income for the year 208,846 655,726RatiosEarnings per share (Kobo) 81 242Declared dividend per share (Kobo) 70 125Net assets per share (kobo) 7,502 7,476Statement of financial position31 Dec 2012 31 Dec 2011 1 Jan 2011Employment of Funds N’000 N’000 N’000Property, plant and equipment 22,013,568 23,172,968 24,115,946Intangible assets 140,560 162,641 -Other receivables 7,507 247,557 280,858Prepayment 236,673 116,085 209,143Net current assets 3,112,717 2,240,804 1,315,728Employee benefit obligationDeferred tax liability(218,415)(6,238,600)(551,480)(6,399,890)(580,919)(6,700,890)Net assets 19,054,010 18,988,685 18,639,866Funds EmployedShare capital 126,994 126,994 126,994Retained earnings 18,927,016 18,861,691 18,512,87219,054,010 18,988,685 18,639,86672