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MRS Oil Nigeria Plc - 2013 Annual Report & Accounts

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Brief on MRSMRS Oil Nigeria Plc is a subsidiary of MRS Holdings Limited, a Pan-African conglomerate of companies, diversified in activities, but focused on capturing the entire value chain in oil trading, shipping, storage, distribution and retailing. We have shown a capacity to generate strong results under adverse financial market conditions.

The MRS brand is one of the most efficient downstream players with solid roots in Nigeria and leading positions in local gasoline markets in Nigeria, Cameroon, Togo, Cote D’ Ivoire, Senegal and Benin as well as an active presence in all the spectrum of petroleum products in the international market.

As a growing company, MRS has great passion and commitment to Africa and its people. We are a Pan-African company with an eye to put MRS on the global listing of world class companies. Our trade mark is ‘excellence through partnership’.


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Our Values

1. Performing our job with the highest integrity and ethics2. Respecting the laws of the countries we operate in3. Training our people to become the best professionals4. Being fair and honest towards the stakeholders we deal with5. Applying our standards and procedures consistently across

the corporation6. Creating an attractive and competitive total shareholders’

return for our stakeholders

Our Mission

To become the preferred fuel marketer in the hearts and minds of the customers, mostly recognised because of the reliability, the quality, the cleanliness and the safety of the products and services offered.

Our Vision

To be the leading integrated African energy company recognised for its People, Excellence and Values.


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Notice of Annual General Meeting

Results at a Glance

Corporate Information

Leadership Team

2013 Board of Directors

Chairman’s Statement

PAUL BISSOHONG Managing DirectorANDREW O. GBODUME Executive Director (Finance & Administration)JAFOJO OLUWAKEMI M. Company SecretaryMARTIN OROGUN Finance ManagerJUBRIL HASSAN Treasury ManagerMORUF SOBOWALE Lubes Operations Manager

content

Revenue 87,786,323Profit Before income tax 1,407,143Income tax expense (772,725)Profit for the Year 634,418Proposed Dividend for the Year 190,314Earnings Per 50k share 2.5Declared Dividend per 50k share 23.34Net Assets per 50k share 7,728


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cont

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90 Proxy Form

21 Directors’ Report

41 Financial Statements

Statement of Profit or Loss and other � Comprehensive Income

Statement of Financial Position �Statement of Cash flows �Notes to the Financial Statements �

40 Report of the Independent Auditors

Corporate Directory

E-Dividend Form


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NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Forty-Fifth Annual General Meeting of MRS Oil Nigeria Plc. will be held at the Federal Palace Hotel, 6-8 Ahmadu Bello Way, Victoria Island, Lagos, on August 7, 2014 at 11:00 a.m. to transact the following businesses:-

1. Ordinary Business:

i. To lay the Audited Financial Statements for the year ended 31 December 2013 and the Report of the Directors and Auditors thereon.ii. To declare a Dividend.iii. To elect/re-elect Directors under

Art icles 90/91 and 95 of the Company’s Articles of Association.

iv. To authorize the Directors to fix the remuneration of the Auditors.

v. To elect the members of the Audit Committee.

2. Special Business:vii. To consider and if thought fit, pass

the following resolution as an ordinary resolution:

That the fees payable to the Non-Executive Directors of the Company be reviewed from N750,000.00 per annum to N1,000,000 per annum.

NOTES: -

1.Proxy:A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy in his/her stead. A proxy needs not be a member of the Company. All instruments of proxy should be duly stamped by the Commissioner of Stamp Duties and deposited at the Registrar’s Office, City Securities (Registrars) Limited, 358, Herbert Macaulay Street, Lagos, not later than 48 hours before the time for holding the meeting. A corporate body being a member of the Company is required to execute a proxy under seal.

2. Dividend Payment:If the dividend recommended is approved and declared by the members at the Annual General Meeting, the dividend warrants will be posted or shareholders accounts credited directly on August 8, 2014 to those shareholders, whose names appear in the Company’s Register of Members at the close of business on July 11, 2014.

3. Register of Members and Transfer Books:The Register of Members and Transfer Books of the Company will be closed from July 14, 2014 through July 18, 2014 (both dates inclusive)


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to enable the presentation of an up to date Register.

4. Nomination for the Audit Committee:In accordance with section 359(5) of the Companies and Allied Matters Act, any member may nominate a Shareholder as a member of the Audit Committee, by notice in writing of such nomination to the Company Secretary at least 21 days before the Annual General Meeting.

5. Unclaimed Dividend Warrants and Share CertificatesSeveral dividend warrants and share certificates remain unclaimed or are yet to be presented for payment or returned to the Company for revalidation despite our publication to shareholders to update their contact details. A list of members whose Annual reports for the year ended 31 December, 2012 and unclaimed dividend came back undelivered, was published in the national dallies on the 12th of May, 2014. We therefore urge all shareholders who are yet to update their contact details to kindly contact the Company’s Registrar or the Company Secretary.

6. Closure of Dividends 27 and 28.In accordance with Section 385 of the Companies and Allied Matters Act of 2004, the Board at its meeting of March 27, 2014 approved the recall of dividends 27 and 28 into the Company’s account effective August 7, 2014, in respect of dividends that remain unclaimed for twelve years. No further dividend will be paid to shareholders from these dividends.

By the Order of the Board

O.M. Jafojo (Mrs.)Company Secretary

Registered Office 8, Macarthy Street, Onikan Lagos, Nigeria


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YEAR ENDED 31 DECEMBER, 2013 2013 2012 N’000 N’000

Revenue 87,786,323 79,727,349

Profit Before income tax 1,407,143 378,755

Income tax expense (772,725) (173,634)

Profit for the Year 634,418 205,121

Proposed Dividend for the Year 190,314 59,281

Earnings Per 50k share 2.5 0.81

Declared Dividend per 50k share 23.34 70.00

Net Assets per 50k share 7,728 7,502

RESULTS AT A GLANCE


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CORPORATE INFORMATION

REGISTERED OFFICE8, Macarthy StreetOnikan, Lagos,NigeriaWebsite: http//mrsoilnigplc.net

REGISTRARCity Securities (Registrars) Limited358, Herbert Macaulay Street, Yaba, Lagos.Tel: 01-2666944 – 53; 01 – 2714729.Website: https//csrl.firstcitygroup.com

INDEPENDENT AUDITORSKPMG Professional ServicesKPMG Tower, Bishop Aboyade Cole Street, Victoria Island, PMB 40014, Falomo Lagos.Tel: 234 (1)2718955, 234 (1) 271 8599

BANKERSAccess Bank Plc

Standard Chartered Bank Nigeria Limited

Citi Bank Nigeria Limited

Sterling Bank Plc

First Bank of Nigeria Plc

Zenith Bank Plc

First City Monument Bank Plc

Alhaji Sayyu I. Dantata Chairman

Mr. Paul Bissohong Managing Director

Mr. Patrice AlbertiRepresentative of Pact Advisory, Management & Service SAS Non Executive Director

Mr. Andrew O. Gbodume Executive Director (Finance & Administration)

Dr. Samaila M. Kewa Non Executive Director

Alhaji Dahiru Mangal Barau Non Executive Director

Chief Sylvanus Ezendu (Deceased) Non Executive Director

Ms. Amina Maina Non Executive Director

COMPANY SECRETARYMrs. O.M. Jafojo

BOARD OF DIRECTORS


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Leadership TeamDecember 31, 2013

PAUL BISSOHONG Managing Director

ANDREW O. GBODUME Executive Director (Finance & Administration)

JAFOJO OLUWAKEMI M.Company Secretary

MARTINS OROGUN Finance Manager

JUBRIL HASSAN Treasury Manager

MORUF SOBOWALE Lubes Operations Manager

PETER ZIRA DIA Aviation Manager

PRISCILLIA THORPE MONCLUS Sales & Marketing Manager

AKINYEMI KOLA HSE Manager

HAJIA SAFIA MOHAMMED Human Resources Manager

ONUM ANDREW Chief Legal Counsel

MOHAMMED KOKI Operations Manager

CHARLES ONUM Lubes Sales and C & I Manager

OMOLOJA OLADIPO Marketing Support Manager

MISS GLORIA ATONG Procurement Manager

OGHENEKARO OLOGE Information Technology Manager

ABDULLAHI YUSUF DANIEL Internal Auditor


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2013 BOARD OF DIRECTORS

Alhaji Sayyu I. DantataChairman

Mr. Patrice AlbertiDirector

Mr. Andrew GbodumeExecutive Director

Mr. Paul BissohongManaging Director

Dr. Samaila KewaDirector

Alhaji Dahiru M. BarauDirector

Ms. Amina MainaDirector


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INTRODUCTIONDistinguished shareholders, invited guests, gentlemen of the press, ladies and gentlemen, on behalf of the board of directors and on my personal self, I welcome you all to this 45th Annual General Meeting (AGM) of our Company. I would like to share with you the highlights of the performance and other achievements of the Company during the last fiscal year. Before delving into the achievements of our company, let us look at some socio-political key factors that characterized the year under review.

THE OPERATING ENVIRONMENT IN 2013The operating environment for businesses in 2013, was quite difficult. The economy was inhibited by serious issues of infrastructure deficits, especially power supply, which operated less than 4000 megawatts; transportation, logistics, the quality of institutions, cost and access to funds etc. This situation has made the diversification of the economy very difficult and this poses a risk of vulnerability. Another notable challenge was the issue of insecurity in Nigeria. Businesses can only thrive in environments where the security of lives and property is guaranteed.

An unsecure environment drives away foreign investment. The high level of insecurity and inadequate infrastructure in the year under review, culminated into high costs of doing business and unattractive for foreign investments.

There were some key variables in our industry which impacted directly or indirectly on the operations of our Company worthy of a review. In 2013 there was decline in oil production. This decline was attributed to high incidence of production shutdowns, pipeline vandalisation and intensified oil theft incidents, which significantly disrupted production levels leading to some oil companies declaring a force majeure during the year. The disruption in production greatly impacted on government revenues despite relatively high international prices coupled with the relative stability in the exchange rate of Naira against the Dollar, which averaged at N155.23 during the year. The distortion in the distribution channel occasioned by pipeline vandalisation in no small measure adversely affected our company’s operations. I am of the strong view that the Federal Government, would intensify efforts to plug various leakages in order to further boost the nation’s


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the outlook in 2014 remains bright, as oil prices are expected to maintain their high levels given the gradual recovery of major oil consumers like the United States and China from the impact of the recent global financial crisis, thereby pushing up crude oil demand.

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oil production from current levels, particularly in view of the assumption of oil production estimate of 2.39 million barrels per day (mbpd) in the 2014 Budget.

THE ECONOMIC ENVIRONMENTGentlemen, at the global level, the second half of 2013 witnessed acceleration of global activity and world trade. According to the International Monetary Fund (IMF), global output expanded by 3.0% in 2013 representing 50 bps (basis points) lower than the initial projection of 3.5% at the beginning of 2013 and 10 bps lower than the growth rate recorded in 2012. The growth rate is projected to strengthen further in 2014 by 3.7%

I wish to state that a global economic recovery is underway as there are evidences of recovery prospects in many economies. The growth rate of the Europe strengthened to 3.0% in 2013. The upward growth course will be sustained going forward, as growth is projected to further strengthen by 1% in 2014. On the Sub-Saharan Africa (SSA) scene, 2013 was characterized by a relatively strong growth performance as indicated by an improvement in growth from 4.80% in 2012, to 5.10% in 2013. The growth recorded in SSA is expected to further strengthen to 6.10% in 2014.

Domestically, Nigeria experienced strong growth performance which was largely driven by the impressive growth recorded in the

fourth quarter of 2013. The 6.81% overall growth recorded by the Nigerian economy is higher than the 6.58% recorded in 2012. The non-oil sector maintained its position as the key driver of the growth in 2013. The nominal GDP recorded as at the third quarter of 2013 was estimated at N30.86 trillion against N20.81 trillion recorded in corresponding quarter of 2012. Agricultural sector was the dominant contributor (38.6%) followed by wholesale & retail trade (20.1%), crude petroleum and natural gas (13.4%) and telecommunication and post (8.2%).

Inflationary threats remained subdued throughout 2013. The deceleration in year-on-year (y/y) average headline inflation rate to 8.52% in 2013 is noteworthy, as there was a resurgence of inflationary threats in 2012; inflation fluctuated within the lower double-digits range averaging at 12.52%. I am glad to state that the headline inflation recorded single digit rates throughout 2013. The average inflation rate recorded in 2013 is the lowest in six years.

Nigeria’s external reserves as at 31 December 2013, stood at $42.85billion, down by 2.24% from the $43.83billion recorded in the corresponding period of 2012. The decline in terms of addition to reserves, a contrast when compared with the significant growth in reserves recorded in 2012 as external reserves stood at $43.83billion as at December 31, 2012 an upward trend from



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$32.9billion recorded in 2011. The increase in foreign reserves in 2012 was driven mainly by proceeds from crude oil, gas exports and crude-oil related taxes.

Exchange rate of NG naira to US dollar maintained a fairly stable trend from N155.27/$1 in 2012 to close in December at N155.20/$1 in 2013. The naira was aggressively defended by the Central Bank of Nigeria [CBN] in 2013, evidenced by the increase in the amount sold at the Wholesale Dutch Auction System (WDAS) auctions to a monthly average of $2.13billion, up from a monthly average of $1.58 billion in 2012.

It is important to elucidate on some of the key strategies the Federal Government instituted in 2013, to bring about positive transformation to the economy:

The introduction of cashless policy by CBN in seven states (Lagos, Abuja, Anambra, Kano, Abia, Rivers and Ogun) in Nigeria. The Federal Government’s initiative in this regard is highly commendable considering the resultant benefits; minimizes the use of cash, in day to day transactions, spurs financial inclusion, enhances effective transmission mechanism of monetary policy and impacts on overall financial stability.

An Agreement was signed in 2013 to set up a fertilizer plant in Nigeria - a step in the

right direction. Indorama Eleme Fertilizer and Chemicals Limited Nigeria (IEFCL), a subsidiary of the Indorama Corporation finalized plans to begin construction of fertilizer plant in Rivers State, Nigeria. The project upon completion which is estimated at US$1.2 billion would have an estimated production capacity of 1.4 million tonnes of fertilizer annually and direct job creation opportunity for 6,000 people. The plant is expected to commence operations in 2016. This development would also support other initiatives aimed at boosting agricultural sector.

The Nigerian Communication Commission (NCC) successfully implemented Mobile Network Portability (MNP) in the last fiscal year which was launched on the 22 of April, 2013. It is noteworthy to mention that Mobile Number Portability (MNP) has been implemented in about 55 countries worldwide. It is my candid opinion that one of the merits of the MNP implemented is to create increased competition in the telecommunications sector, which will invariably bring to bear quality assurance and improved service from network providers; users can switch from one network to another without a change in telephone numbers. Quality communication is essential to business operations.

The Nigeria Sovereign Investment


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Authority (NSIA) which is responsible for the management of the Sovereign Wealth Fund (SWF) has reported a total income of N505.69 million for the 15 months ended 31 December, 2013. NSIA reported a gross operating income of N1.47 billion and non-operating income of N495 million, bringing the total gross income to N1.96 billion. The NSIA is a saving fund sponsored by the Federal Government and created by an Act of National Assembly in May 2011. Its mission is to build a savings base for future generations of Nigerians, enhance the development of Nigerian infrastructure and promote fiscal stability for the country in times of economic stress. This fund is indeed a step in the right direction towards building and protecting the Nation’s economy.

I am very optimistic that the gains accruable from the foregoing measures would in no small degree impact positively on the overall national output which would drill down to our industry. I strongly believe that Nigeria remains a key investment destination, considering the huge Foreign Direct Inflows (FDI) of US$7.029billion. This further reinforces the resilience of the economy and vast potentials for higher growth.

THE POLITICAL ENVIRONMENT2013, was shaped by several political developments, some of which have continued to heat up the polity ahead of the 2015 general elections. It is important to highlight some of the majors events that impacted on the operations of our Company.

In 2013, a 13-man Advisory Committee (headed by Femi Okurounmu) was inaugurated by the Federal Government, to establish modalities for a national conference aimed at resolving issues that currently cause friction in the polity. The President after receiving reports of the committee made a formal announcement scheduling the proposed national dialogue to be convened early 2014.

Following the calls from many quarters for amicable resolution of the Boko Haram uprising, the Jonathan led administration

constituted a 26-member committee headed by the Minister for Special Duties, Tanimu Turaki, on April 17, 2014 to initiate dialogue with members of the faction, to work out modalities for granting the insurgents amnesty. The committee has concluded and submitted its report.

However, despite the spirited efforts of the Federal Government to negotiate peace with the Boko Haram sect, the activities of the group are on the increase. In May, the President declared a state of emergency in Borno, Yobe and Adamawa States, ensuing from sundry reports of the increased terrorist attacks by the extremist Islamist group, especially in states in the North-East. This action became necessary because the group’s activities have largely become a challenge, to the sovereignty of the Nigerian state.

The administration of President Jonathan has put in some creditable and continuous measures to curb terrorism and other criminal acts. It is important to note that terrorism is a global stigma and no one nation can successfully contain terrorism without the close cooperation of other nations. On this note, I therefore concur to the Federal Government’s exploration of international cooperation especially with neighboring nations (Cameroon, Niger and Chad).

THE INDUSTRY The downstream petroleum sector has been entangled in a series of probes relating to fuel subsidy payments. Consequently, this led to the delay in disbursements of payments by the Ministry of Finance and slowly, the growth potential of the sector. However, the subsequent payments of subsidy arrears in the year under review after thorough reconciliation by the Finance Ministry, enabled some of the companies pay back loans owed to banks; thus reducing finance cost and boosting operational performance as demonstrated by the sector’s overall financial performance.

The Federal Government in keeping with the economic reform programme approved the privatization of the nation’s four refineries in 2013. As part of transformation agenda, this would catalyze and provide an enabling



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environment for the private sector to be the drivers of economic growth in the country. For the downstream sector, this is a welcome development because it is a window of investment opportunity for the downstream players. The four refineries are Port Harcourt Refining Company Ltd. (PHRC) (two refineries), Kaduna Refining and Petrochemical Company Ltd. (KRPC) and Warri Refining and Petrochemical Company Ltd. (WRPC).

Ladies and Gentlemen, I am obliged to let you know about the planned construction of a US$9bn refinery/petrochemical and fertilizer plant by the Dangote Group, Nigeria’s largest industrial conglomerate. This 400,000-barrel per day oil refinery project is expected to be Africa’s largest refinery, petrochemicals and fertilizer manufacturing complex and would make the Dangote Group the largest player in Nigeria’s currently state-controlled downstream sector. Currently, Nigeria’s four NNPC-owned refineries operate at around 20% of their 445,000 barrel per day combined installed capacity. This massive investment would be significant to the boosting of business activities in our downstream sector and growth of the Nigerian and African economy.

This gigantic project with proposed refining capacity of 400,000 barrels of crude oil per day and 2.8 million tonnes of urea is expected to create about 9,500 direct and 25,000 indirect jobs, reduce the importation of refined Petroleum products for local consumption by 50% and effectively stop the importation of fertilizer. This plant would further entrench Nigeria and Africa’s role on the global map as a valued contributor for natural resources and a competent manufacturer of refined products and fertilizer. Gentlemen, you would agree with me that this singular huge investment holds a bright future for our nation and Africa.

OUR COMPANY

FINANCIAL RESULTSIn spite of the aforementioned socio-political challenges in the year under review, our Company’s performance significantly

improved. Year on year performance comparison shows that the Company recorded a turnover of N87.8 billion in 2013 against N79.7 billion in 2012 which translates to a 10% increase. This improvement in turnover was spurred by increase in Premium Motor Spirit (PMS) and Automotive Gas Oil (AGO) sales resulting from the implementation of strategic initiatives aimed at capturing market share. Expenses which include selling and distribution expenses, administrative expenses and net finance cost stood at N4.0 billion in 2013 representing a decrease of 37% of N6.3 billion in 2012 occasioned by PPPRA reimbursement on interest and foreign exchange differential cost claims. Profit before tax significantly increased by 250% in 2013 from N0.4 billion in 2012 to N1.4 billion, also Profit after tax witnessed the same significant improvement from N0.2 billion in 2012 to N0.6 billion in 2013 reflecting increase of 200%. Total comprehensive income for the year stood at N0.6 billion in 2013 as against N0.2 billion in 2012, translating to an increase of 200%.

CAPITAL EXPENDITUREIn 2013, N901 million was expended on capital items, against N340 million in 2012 which translates to a 165% increase. The addition in 2013 cut across land and building, plant and machinery, computer and office equipment and automotive equipment.

DIVIDEND DECLARATIONThe board is pleased to recommend for your approval, a total dividend payment of N190.3 million which represents 74.93 kobo per

It is worthy of note that the transformation measures of the FGN are targeted at increasing the production of rice, sugar, cassava, wheat, cocoa, and fertilizers.

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I will continue to solicit your support as we take this Company, to a higher platform in the years ahead. 2014 has great transformational potentials for this Company; as we run with our vision, I look forward and I am committed, to reporting an outstanding performance in 2014.

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deductions. This recommendation reflects the resilience of the results and in keeping with our commitment to deliver reasonable returns to shareholders’ investment.

THE OUTLOOK FOR 2014 In the fiscal space, the outlook in 2014 remains bright, as oil prices are expected to maintain their high levels given the gradual recovery of major oil consumers like the United States and China from the impact of the recent global financial crisis, thereby pushing up crude oil demand. Though the discovery of shale oil in the US may adversely affect Nigeria’s crude oil demand, the impact may not significantly reduce oil demand for now, because the cost of extracting shale oil is more costly than the production of conventional crude oil both financially and in terms of its environmental impact. Thus, the relatively high international price of crude oil

which has remained substantially above the budget benchmark price of US$79 per barrel through to the period end of 2013 is likely to be sustained in 2014, provided that the threats of pipelines vandalism, leakages and oil theft are effectively contained. However, given that 2015 is an election year, Government spending is expected to rise in 2014, due to the financing of election activities which may expectedly worsen the liquidity conditions in the system leading to inflationary pressures.

The passage of the Petroleum Industry Bill (PIB) in 2014 will usher the sector into another growth path. I see a possible removal of subsidy; post 2015 elections which will increasingly bring about more competition and firm repositioning in the downstream oil and gas sector.

The privatization of the power generation and distribution companies erstwhile owned and operated by the Power Holding Company of Nigeria (PHCN) has set the tone for the eventual turn-around and increased growth in the output potential of the Nigerian economy in the medium-to-long term. The supply of adequate and consistent electricity would help to galvanise activities, both in the formal and informal sectors of the economy, with a spill-over to the formal sector by the reduction in operating costs and higher consumption by the populace at reduced prices. The multiplier effect of a stable power supply in Nigeria is high, as manufacturing firms expand production and financial institutions increase lending activities, which will help to boost growth in the finance and insurance sector.


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Also, we expect more small scale businesses to spring up in the country due to improved and stable power supply. Large firms will also increase production because, they will be able to produce more efficiently. The import substitution policy and other fiscal measures of the Federal Government aimed at encouraging the development of the agriculture sector and agro-allied activities will boost output, of the sector. Also, the grant of soft loans by the Central Bank of Nigeria (CBN) and the Bank of Industry (BOI), to operators will boost outputs. It is worthy of note that the transformation measures of the FGN are targeted at increasing the production of rice, sugar, cassava, wheat, cocoa, and fertilizers.

The increasing interest of local investors to take up divestment from International Oil Companies (IOCs) would increase the contribution of the oil sector to GDP, because the local investors have more understanding of local conditions. Also, the increase in the activities of local investors at the marginal fields could help to reduce the shortages arising from oil theft, as most operators in this area are locals, who have an intricate knowledge of the operating environment. The sector should enter into another growth path as soon as the Petroleum Industry Bill (PIB) is approved and signed into law.

The National Bureau of Statistics (NBS) began the process of rebasing the nation’s GDP in 2013. The classification of GDP by economic activity has been expanded to 46, up from

33 previously reported. Whilst most countries rebase periodically to reflect changes, particularly in production and consumption patterns; Nigeria has not rebased her national account estimates in about twenty three years. Therefore, the calculation of the Nation’s real GDP which has been based on 1990 prices will now be revised upwards to 2010 thereby taking into account new sectors of the economy that have emerged over the period whilst also incorporating changes in patterns and classification of sectors, sub-sectors and their regrouping due to the adoption of the latest System of National Accounts (SNA) of the United Nations.

The following economic indicators are expected in 2014:

Forecast GDP growth rate for Nigeria, is 7.59%. We however believe that Nigeria will be able to attain this double digit GDP growth rate if the reform in the power sector is successfully accomplished in 2014.

The forecast is that external reserve would increase from US$43.61bn at the end of 2013, to US$49.72bn in 2018. Meanwhile, there would be a decline of 2.50% from 2013 figure to US$42.52bn in 2014 which will be triggered by CBN dogged determination to defend the naira at the expense of the foreign exchange reserves.

We expect a headline inflation rate single digit in the region of 6% to 9%, in 2014.

Bearing in mind the need for Government to continue to provide and improve upon


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a number of social goods and services, it is expected that the Public Debt will grow to N9.2 trillion.

Forecast exchange rate for 2014 is N159.19 per US$1.

Let me conclude under this section by stating that while the overall economic outlook for 2014 appears mixed, there is need to sustain and consolidate current efforts to address the lingering challenges of insecurity, infrastructural deficits as well as the threats to oil production, which are pipeline vandalism, crude oil theft, amongst others. There is also the need to give greater attention to the diversification of the Nigerian economy away from the current over-dependence on Oil export, in order to avoid the vagaries in the international oil market and their attendant adverse effects on the domestic economy.

BOARD CHANGES There were a few changes on the Board in 2013. We lost a valued and treasured member of the board, Chief Sylvanus Chukwuemeka, Ezendu on March 17, 2013. He has since been buried. On the 6th of November, 2013, the board appointed Ms. Amina Maina as a Non-Executive Director.

CONCLUSIONI would like to take this opportunity to thank our shareholders (individuals and associations) for their faith and support to this Company. The same measure of appreciation goes out to our contractors, management and staff of our Company for their unwavering commitment and professionalism. My profound gratitude goes to my colleagues on the board of this Company, for their commitment and wise counsel to the actualisation of our corporate values and goals.

Finally my unreserved appreciation and gratitude go to our valued customers for their patronage, support and confidence reposed in MRS Oil Nigeria Plc.

I will continue to solicit your support as we take this Company, to a higher platform in the years ahead. 2014 has great transformational potentials for this Company; as we run with our vision, I look forward and I am committed, to reporting an outstanding performance in 2014.

Once more thank you for your attention.

ALHAJI SAYYU I. DANTATAChairman



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For the year ended 31 December 2013

Directors’ Report The Directors present their Annual Report on the state of affairs of the Company, together with the Audited Financial Statements for the year ended 31 December 2013.

Incorporation and Legal Status of the CompanyThe Company was incorporated as a privately owned Company in 1969, and was converted to a Public Limited Liability Company quoted on the Nigerian Stock Exchange in 1978, as a result of the 1977 Nigerian Enterprises Promotions Decree. The Company is domiciled in Nigeria and its shares are listed on the Nigerian Stock Exchange (NSE).

The marketing of products in Nigeria commenced in 1913 under the Texaco brand, when they were distributed exclusively by CFAO a French multinational retail company. In 1964 Texaco Africa Limited started direct marketing of Texaco products selling through service stations and kiosks acquired from the said multinational retail company, on lease terms. It also entered into the aviation business.

On 12 August 1969 Texaco Nigeria Limited was incorporated as a wholly-owned subsidiary

of Texaco Africa Limited, thus inheriting the business formerly carried out in Nigeria by Texaco Africa Limited. With the promulgation of the Nigeria Indigenization decree in 1978, 40% of Texaco Nigeria Limited was sold to Nigerian individuals and organizations by Texas Petroleum Company.

In 1990, the Companies and Allied Matters Decree came into force and this necessitated the removal of ‘Limited’ from the company’s corporate name to the prescribed ‘Public Limited Liability Company’(PLC) with its shares quoted on the Nigerian Stock Exchange.

Following the creation of ChevronTexaco in 2001 from the merger between Chevron Corporation and former Texaco Inc., Texaco Nigeria Plc became an integral part of the new corporation. As ChevronTexaco considered the acquisition of former Union Oil Company of California (UNOCAL), the board of ChevronTexaco decided to eliminate ‘Texaco’ from the corporate name and retain only Chevron as the new name of the enlarged corporation.

Effective 1 September 2006, the company’s name changed from Texaco Nigeria Plc to


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Chevron Oil Nigeria Plc following a directive from Chevron Corporation’s headquarters to all affiliate companies. This was designed to present a clear, strong and unified presence of Chevron Corporation throughout the world.

On 20 March 2009 there was an acquisition of Chevron Africa Holdings Limited, (a Bermudian Company) by Corlay Global SA of Moffson Building, East 54th Street, Panama, Republic of Panama. By virtue of this foreign transaction, MRS Africa Holdings Limited gained control of all assets of Chevron Nigeria Holdings Limited, Bermuda. The new management of the Company announced a change of name of the Company from Chevron Oil Nigeria Plc to MRS Oil Nigeria Plc (“MRS”) effective 2 December 2009 following the ratification of the name change of the Company at the 40th Annual General Meeting of the Company on 29 September 2009.

Currently about 253,988,672 shares are held by about 23,820 Nigerian shareholders and 1 foreign shareholder (MRS Africa Holdings Limited, Bermuda) in MRS Oil Nigeria Plc, a company with the main business of marketing and/or manufacture of petroleum related products in Nigeria. With about 138 active Company owned operating outlets and more than 255 third party owned operating outlets, MRS Oil Nigeria Plc is a major player in Nigeria’s petroleum products marketing industry. MRS is also a leading producer of quality lubricating oils and greases.

Principal Activities: The Company remains principally engaged in the business of marketing and distribution of refined petroleum products, blending of lubricants and manufacturing of greases.

The summary of results of the company as included in the financial statements are as follows:

Dividend:The Board proposes to pay 74.93 kobo per share, as final dividend (2012: 23.34kobo per share). The proposed dividend which amounts to approximately 190.31 million will, if approved at the Annual General Meeting of the Company, be paid on 8th Aug. 2014 to shareholders on the register of the Company at the close of business on 11 July 2014 and is subject to appropriate withholding tax (2012: N 177.79 million).

Going Concern:Nothing has come to the attention of the Directors to inform them, that the Company will not remain a going concern in the next twelve months.

The Directors:The Directors in office during the year are listed below and except where stated, served on the board in 2013:

YEAR ENDED 31 DECEMBER, 2013

2013 2012

N’000 N’000

Revenue 87,786,323 79,727,349Profit Before income tax 1,407,143 378,755Income tax expense (772,725) (173,634)Profit for the Year 634,418 205,121Proposed Dividend for the Year 190,314 59,281Earnings Per 50k share 2.5 0.81Declared Dividend per 50k share 23.34 70.00Net Assets per 50k share 7,728 7,502

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NAME NATIONALITY DESIGNATION Appointment/Resignations (A/R)

Alhaji. S. I. Dantata Chairman March 20, 2009 (A)

Mr. P. Bissohong Cameroonian Managing Director December 5, 2012 (A)

Mr. P. Alberti French Director March 20, 2009 (A)

Mr. A.O. Gbodume Executive Director (F & A) May 12, 2011 (A)

Dr. S. Kewa Non-Executive Director March 7, 2007 (A)

Ms. A. Maina Non- Executive Director November 6, 2013 (A)

Mr. Lawal Mangal Alternate Director May 10, 2012 (A)

*Mr. Lawal Mangal is the Alternate of Alhaji Dahiru Mangal Barau who was appointed to the board on the 20th of March, 2009

Board Changes:Ms. Amina Maina was appointed a Non – Executive Director of the Company, to fill the casual vacancy on the Board. In the year under review, we lost a valued and treasured member of the board, Chief Sylvanus Chukwuemeka Ezendu. He will be remembered for his commitment to the growth of the business and dedication to board issues.

Election/Re-election of Directors:In accordance with Articles 90/91 and 95 of the Company’s Article of Association, Mr. Patrice Alberti and Dr. Samaila M. Kewaretire by rotation and being eligible, offer themselves for re-election.

In accordance with Articles 95 of the Company’s Articles of Association, Ms. Amina Maina, being the only director appointed since the last Annual General Meeting retires and being eligible offers herself for re-election.

Directors’ Interest in the Issued Share Capital of the Company:The direct and indirect interests of Directors in the issued share capital of the Company as recorded in the register of directors’ shareholdings and/or as notified by the Directors for the purposes of Sections 275 of the Companies and Allied Matters Act of 2004 and the listing requirements of the Nigerian Stock Exchange are as follows:

Directors Total No. of Shares Total No. of Shares as at 31/03/2014 as at 31/12/2013

S. Dantata (Indirect holdings) 152,393,190 152,393,190P. Bissohong - -P. AlbertiRepresentative of Pact Advisory, Management & Service SAS - -A.O. Gbodume - -D.M. Barau - -S. C. Ezendu (Indirect holdings)(Deceased) 47,368 47,368S.M Kewa 1,989 1,989A. Maina - -

Directors’ Interest in Contract:In accordance with Section 277 of the Companies and Allied Matters Act 2004, none of the Directors have notified the Company of any direct or indirect interest in any contract or proposed contract with the Company.

Major Shareholders:According to the Register of Members as at 31 December 2013, the following shareholders of the Company hold more than 10% of the issued ordinary share capital of the Company.

Directors’ Report


24

Name Units Percentage %

MRS Africa Holdings Limited 152,393,190 60%

Analysis of Shareholding:According to the Register of Members at 31 December 2013, the spread of shareholding in the Company is presented below:

Number of holding Number of Number of Percentage ofLocal shareholders: shareholders shares held shareholding

1 - 500 8,823 2,019,056 0.79%501 - 1,000 3,745 2,821,178 1.11%1,001 - 5,000 8,734 20,279,589 7.99%5,001 - 50,000 2,356 27,877,879 10.98%50,001 - 100,000 96 6,794,725 2.68%100,001 - 500,000 58 10,569,898 4.16%500,001 - 1,000,000 5 3,514,020 1.38%1,000,001 - 50,000,000 3 27,719,137 10.91%

Total 23,820 101,595,482 40%

Foreign shareholders

Over

50,000,001 - 253,988,672 1 152,393,190 60%

TOTAL 23,821 253,988,672 100%

Acquisition of Its Own Shares:The Company did not acquire its shares during the year.

Corporate Governance:The Board considers the maintenance of high standards of corporate governance, central to achieving the Company’s objective of maximizing shareholder value. The Board has a schedule of matters reserved specifically for its decision. The Directors have access to learning appropriate professional skills and knowledge development.

The Company’s Board currently comprises of a Non-Executive Chairman, Executive Directors and Non-Executive Directors. The Executive Directors have extensive knowledge of the oil and gas industry, while the Non-Executive Directors bring in their broad knowledge of business, financial, commercial and technical experience to the board.

Annually, the Board routinely reviews the board structure to ensure that there is a satisfactory balance of Executive and Non-Executive Directors in the Company. However, this balance may be reviewed on an ongoing basis, bearing in mind the size of the Company and its ownership structure.

In the year under review, there were 7 Directors on the Board of the Company; each Director bringing their wealth of experience to bear on deliberations at Board Meetings.

The Board meets at least four times a year for regular scheduled meetings to review the Company’s operations and trading performance, to set and monitor strategy as well as consider new business options. The Board also meets for unscheduled meetings, if there are specific matters that require its attention.

The attendance of Directors at board meetings in the year under review is noted below:

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*Ms. Amina Maina was appointed to the Board on 6 November, 2013.

MRS Oil Nigeria Plc - 2013 Board MeetingsDIRECTORS DESIGNATION Feb 27 April 18 May 15 August 14 Nov 6,

‘13 ‘13 ‘13 ‘13 ‘13

Alhaji Sayyu I. Dantata Chairman X X

Mr. Paul Bissohong Managing Director X X X X X

Mr. Patrice Alberti Director X X X X X

Mr. Andrew O. Gbodume Executive Director X X X X X

Chief Sylvanus C. Ezendu (Deceased) Director X

Dr. Samaila M. Kewa Director X X X X X

Ms. Amina Maina *Director

Mr. Lawal Mangal Alternate Director X X X

Board Performance Appraisal:The Board did not undertake any formal evaluation of its performance, individual or collective in the year under review.

A process exists for the follow up on all matters of concern or potential improvement which may 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 the Board. Currently, there are 4 sub-committees

AuditCommittee Members Designation Feb, 27 April 17 May 14 Aug 13 October 29 ‘13 ‘13 ‘13 ‘13 ‘13

Engr. Tunji Ijaiya Chairman X X X X X

BaaleIsiaka Saliu Member X X X X X

Chief Vincent Barrah Member X X X X X

Chief Sylvanus C. Ezendu (Deceased) Member X

Mr. Andrew Gbodume Member X X X X X

Dr. Samaila M. Kewa Member X X X X X

Mr. Lawal Mangal Member (Appointed to the Committee on April 18, 2013)

1. The Audit Committee

of the Board and the Chairman is not on any of the Committees. The sub-committees are established to assist the Board to effectively and efficiently perform guidance and oversight functions, amongst others.

The terms of reference for all the committees are available for inspection at the registered office of Company.

The current composition of the Board Sub-committees and attendance at meetings in the year under review are as follows:-

The Audit Committee is chaired by a shareholder representative. On the invitation of the Chairman of the Audit Committee, representatives of Management and the External Auditors attend meetings. The Audit Committee is responsible for the review of the quarterly and annual financial reports of the

Company before submission to the Board. The Audit Committee makes recommendations on the appointment of the External Auditors and reviews the nature and scope of their work as well as recommendations on the company’s accounting procedures and internal controls.

Directors’ Report


26

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 proposing candidates for appointment to the board, bearing in mind the balance and structure of the Board. The board also considers corporate governance issues, ensures strict

compliance and makes recommendation to the Board (on issues regarding but not limited to) the membership of the Audit, Strategic & Finance Planning and the Human Resources Committee in consultation with the Chairman of each Committee.

In the year under review, the Board Nominations and Corporate Governance Committee did not meet.

3. The Strategic and Finance Planning Committee

Strategic Planning and Finance Designation November 6, ‘13Committee:Members

Dr. Samaila M. Kewa Chairman X

Mr. Paul Bissohong Member X

Mr. Andrew O. Gbodume Member X

The Committee is responsible for assisting the Board of Directors in performing its guidance and oversight functions effectively and efficiently, and is specifically charged with defining the Company’s strategic objectives, determining its financial and operational priorities, making recommendations

regarding the Company’s dividend policy and evaluating the long-term productivity of the Company’s operations.

In the year under review, the Strategic Planning and Finance Committee Members met once.

Human Resources Committee Members Designation April 16, ‘13 May 15, ‘13

Dr. Samaila M. Kewa Chairman X X

Mr. Paul Bissohong Member X X

Mr. Andrew O. Gbodume Member X X

4. Human Resources Committee

The Human Resources Committee is responsible for reviewing the contract terms, remuneration and other benefits of the Executive Directors and Senior Management of the Company. The Committee also reviews the reports of external consultants for services rendered, which assist the Committee in their duties.

The Chairman and other Directors may be invited to attend meetings of the Committee, but do not take part in any decision making directly affecting their own remuneration.

The Committee undertakes an external and independent review of remuneration levels on a periodic basis, to ensure that employment policies are strictly adhered to. In the year under review, the Human Resources Committee met twice.

Meetings:The register of attendance at meetings is available for inspection during normal business hours at the registered office of the Company and at each Annual General Meeting of the Company.

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Employment Policy:The Company is committed to selecting and employing the best qualified individuals for positions, consistent with the Company’s long term best interest. The determining factors in recruiting, 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 that there is an alignment between the Company’s business plan and shareholder objectives.

The Company maintains a fair policy in considering job applications of physically challenged persons having regard to their abilities and aptitude. The policy prohibits any form of discrimination 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 other basis in the recruitment, training and career development of employees. The Company did not employ any physically challenged person during the year.

The Company provides a working environment that promotes diversity within its workforce and enables 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 its employees, suppliers, customers and the public in line with best global HSE standards. In the year under review, consistent Health Safety and Environment (HSE) standards continued to guide the Company’s operations and activities.

In 2013, the Company continued to improve on the service deliveries through the Health Management Organizations (HMOs), engaged to provide health care to employees and their families. Employee/HMOs interactive sessions were organized during the year. The Apapa complex in-house clinic was operational and

accessible to employees throughout the year, during business hours, while the Head Office clinic was temporarily shut down to enable management review the process and address some administrative lapses.

The HSE department organized the Annual Safety Week with the theme: “Emergency Preparedness” at all MRS operational facilities/offices. The event received the cooperation and participation of the top executive and management team, employees, business partners and regulatory agencies.

In the year under review, the following statutory reports were submitted to the relevant government agencies in compliance to regulatory requirements.1. Environmental Audit/Assessment

Reports on COROs (Oyo, Delta and Lagos States).

2. Risk Assessment Reports on Lube and Fuel Terminal, Apapa.

3. Operational Safety Case/Risk Assessment Reports on Aviation depots (Ikeja, Abuja and Kano).

The Company is committed to its regulatory requirements and will ensure continuous improvement and best practices in her HSE performance, in all its business and operational units.

Employees Involvement, Training and Development:In the year under review, various employees took part in various training and development programs. An in-house training was conducted for the Sales & Marketing team as well as the Operations department. There was also a staff induction training conducted for new employees. Other trainings organized within the year under review include Sales Management training, Project Management training, Fleet Process Management training, Facility Management training and Executive Management training, to mention a few.

Contributions and Charitable Donations:During the year, the Company made the following donations/ contributions in fulfillment of its Corporate Social Responsibility:

Directors’ Report


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STAFF TRAINING FOR 31 TEACHERS REPRESENTING EACH OF THE 31 PUBLIC PRIMARY SCHOOLS IN IKEJA NAME AMOUNT

1. Bola Memorial Primary School, Ikeja. 26,500

2. Olusosun Primary School, Oregun 26,500

3. Olusosun Wright Estate Primary School, Oregun 26,500

4. 9 Brigade Primary School, Ikeja. 26,500

5. Brigade Primary School, Ikeja. 26,500

6. Army Model Primary School, Ikeja. 26,500

7. Army Children Primary School, Ikeja. 26,500

8. Army Barracks Primary School, Ikeja. 26,500

9. Military Primary School, Ikeja. 26,500

10. Military Cantonment Primary School, Ikeja. 26,500

11. Central Primary School, Ikeja. 26,500

12. Local Government Primary School, GRA, Ikeja. 26,500

13. Ikeja Primary School. 26,500

14. Opebi Primary School. 26,500

15. GRA Primary School, GRA, Ikeja. 26,500

16. Wasimi Community Primary School, Maryland. 26,500

17. Lagos State Model Nursery and Primary School. 26,500

18. Adeniyi Jones Primary School, Adeniyi Jones. 26,500

19. Agidingbi Primary School, Agidingbi. 26,500

20. Anifowoshe Primary School, Oba Akran. 26,500

21. Estate Primary School, Ogba. 26,500

22. Ogba Primary School, Ojodu. 26,500

23. Ojodu I Primary School, Ojodu. 26,500

24. Ojodu II Primary School, Ojodu 26,500

25. Oke-Ira Primary School, Ogba. 26,500

26. Onilekere Primary School, Cement, Abeokuta Expressway. 26,500

27. Shogunle Primary School. 26,500

Directors’ Report


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STAFF TRAINING FOR 31 TEACHERS REPRESENTING EACH OF THE 31 PUBLIC PRIMARY SCHOOLS IN IKEJA

NAME AMOUNT

28. State Primary Scool, Mangoro. 26,500

29. St. Peters Anglican Primary School, Alausa. 26,500

30. CorrectionalCentre (Boys) Oregun. 26,500

31. Tokunbo Alli Primary School, John Olugbo. 26,500

TOTAL 821,500

CASH DONATION TO ORPHANAGE HOMES/CHARITY ORGANISATIONS

32. The Zumar Institute(School for Autism), Abuja. 100,000

33. Poorest of the Poor, Abuja. 100,000

34. Kwara State School for the Handicap, Ilorin. 100,000

34. Esther Orphanage Home, Benin City, Benin. 100,000

35. Motherless Babies Home, Total Garden, Ibadan. 100,000

37. OluyoleCheschire Home, Ibadan. 100,000

38. Du Mercy Children’s Home, Kaduna. 100,000

39. Hearts of Gold children, Surulere. 100,000

40. Motherless Babies Home, Lekki, Lagos. 100,000

41. Oransanye Orphanage Home, Benin City, Benin. 100,000

42. Scholarship Project “No Excuses” Educating Future Leaders, Victoria Island. 168,500

43. Mamman Jamila, Kano. 100,000

44. Society for Orphans Welfare, Ikoyi. 100,000

TOTAL 1,368,500

GRAND TOTAL 2,190,000

Donations made in 2013 amounted to N2,190,000.

In accordance with Section 38(2) of the companies and Allied Matters Act, the Company did not make any donations or gift to any political party, political association or for any political purpose in the course of the year under review.

Information Technology Upgrades:The Company is committed to the provision of regular upgrade of its information technology (IT) infrastructure for its head office and field locations to assist with online monitoring of its field transactions. All activities performed by

Directors’ Report


30

IT, are tailored to support the business, create and add value. Achievements in the year under review include:

1. Installation of a new firewall to secure the MRS network.

2. Installation of a new Network attached storage (TURBONAS) for improved backup of MRS network database.

3. Upgrade of client systems from Windows 7 to Windows 8.

4. Installation of a new VPN server for usage of Network facilities in the field offices and other locations.

5. Modification of the MRS password policy and guidelines.

6. Modification of the MRS Information and Security policy to secure the operation and management of the information technology used, administered, and/or maintained by MRS for the protection of MRS information assets.

7. Upgrade of SAP installed in 2012, to include prior procedures such as; SAP account activation procedure, SAP account de-activation procedure, data transfer to SAP and display of SAP client on desktop.

Appointments and Promotions:The Company is committed to attracting, recruiting and retaining skilled and experienced 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 2013, the Company employed several new employees to strengthen its operations.

Staff Strength:As at 31 December 2013, the Company’s staff strength was 88. This number excludes expatriates and employees on secondment from MRS Holdings Limited. Four (4) employees were promoted in the year under review.

Property, Plant and Equipment:Information relating to changes in the Company’s property, plant and equipment is given in Note 13 to the financial statements. In the Directors opinion, the market value of the Company’s properties is not less than the value shown in the financial statements during the year.

Auditors:In accordance with Section 357(2) of the Companies and Allied Matters Act of Nigeria,the auditors, KPMG Professional Services have indicated their willingness to continue in office as auditors.

By the Order of the Board

O.M. JAFOJO (MRS.)Company Secretary

Directors’ Report


31

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RELATION TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

The directors accept responsibility for the preparation of the annual financial statements set out on pages 41 to 80 that give a true and fair view in accordance with the International Financial Reporting Standards and in the manner required by the Companies and Allied Matters Act of Nigeria and the Financial Reporting Council of Nigeria Act, 2011.

The directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied Matters Act of Nigeria and for such internal control as the directors determine is necessary to enable the preparation of financial statements 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 going concern and have no reason to believe the Company will not remain a going concern in the year ahead.

SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY:

Mr. Paul Bissohong Mr. Andrew Gbodume(Managing Director) (Executive Director, Finance & Administration) FRC/2013/IOD/00000003841 FRC/2012/ICAN/00000000534

27 March, 2014 27 March, 2014


32

The Directors in office during the year are listed below. The biographies of all the Directors appear

under this section for your information.

DIRECTORS


33

ALHAJI SAYYU IDRIS DANTATAChairman

Alhaji Sayyu Idris Dantata is a Mechanical Engineer. He started his career as the Transport Director with the Dangote Group, one of Nigeria’s leading conglomerates and rose through the organization.

Thereafter, he started his own business and currently sits as the Chief Executive Officer of MRS Group. The MRS group of companies has interests in Oil & Gas, Shipping, Construction and Property Development amongst other Investments.

With an exceptional vision and world class business skill, Alhaji Dantata has led the Group to remarkable and unprecedented success in the history of Nigeria’s independent petroleum marketing. This has made MRS the leading supplier of petroleum products in Nigeria and the West African Sub-Region.

MR. PAUL BISOHONGManaging Director Mr. Bissohong holds a degree in Electro – Mechanics from the University of Yaounde –Ecole Nationale Superieure Polytechnique. He also holds a certificate as an Inspector of Telecommunication from the National Institute of Telecommunications, Evry - France and a Certified Lubrication Specialist from the Society of Tribologysts and Lubrication Engineers (Illinois Chicago – USA). Mr. Bissohong started his career at the International Telecommunications of Cameroon Company – Intelcam in 1981 and has worked in many organizations with varied training and professional experiences spanning a period of 32 years.

He joined Texaco Cameroon in 1987 and was seconded to Texaco Nigeria Limited in 1998, where he held various positions of increasing responsibility within the organization (Texaco – ChevronTexaco – Chevron West Africa) till 2008 when he was appointed Managing Director of Chevron Ivory Coast in Abidjan. Following a change in management in March 2009, Mr. Bissohong was seconded to MRS Group, to head the Business development unit of MRS Holdings Limited.

He was appointed Managing Director of MRS Oil Nigeria Plc, on December 5, 2012. Mr. Bissohong is a Director on the Board of HAE (Hydro Alternative Energy) Miami, USA and Chairman of the Corporate Capital Stewardship Committee of MRS Holdings Limited.


34

MR. PATRICE ALBERTIDirector

Mr. Alberti holds a Bachelors Degree in Economics from the Paris Academy and has been with the MRS Group since 2004. He is currently the Group Managing Director of MRS Group of Companies and a Director on the Board of Corlay Global S.A.

Prior to joining MRS Group, he held a number of positions over a period of 20 years in various banks in Europe namely: BNP Paribas, Paribas, Banque Arabe Internationale D’Investitssment, Banco Central SA, to mention a few.

MR. ANDREW OGHENEVO GBODUMEExecutive Director

Mr. Gbodume, holds a Masters degree from the Ahmadu Bello University, Zaria. He is a fellow of the Institute of Chartered Accountants of Nigeria and an Associate member, Nigerian Institute of Management as well as Nigeria Institute of Taxation.

He is a financial and economic consultant with many years of experience. Prior to joining MRS Oil Nigeria Plc, his experience cut across finance, audit, insurance and banking. He had a stint with African International Bank (AIB) where he rose to the position of an Assistant General Manager, Financial Control and Management, a position he held for over 5 years. He joined MRS Oil and Gas Co. Ltd as Assistant General Manager, Finance and Corporate Planning in 2007. A year after, the position was re-designated as Deputy General Manager. Also in 2008, he was elevated to the position of Director, Special Duties. As a result of his excellent performance, he was appointed Ag. Managing Director MRS Investment Co. Ltd in July 2010, before his secondment to MRS Oil Nigeria Plc. He was appointed Executive Director Finance & Administration on May 12, 2011.


35

Ms. AMINA MAINADirector

Ms. Maina holds a degree in Business Administration from the Ahmadu Bello University, Zaria. She is currently the Group Executive Director (Supply & Trading) of MRS Holdings Limited, Executive Director of MRS Oil & Gas Company Limited.

Prior to joining the MRS Group, she was an Executive Director/Vice President of Energy Solutions Integrated Services Limited, Junior Crude Oil trader at Aurora Energy Trading Limited, to mention a few.

She was appointed to the Board of the Company on November 6, 2013.

DR. SAMAILA MUSA KEWADirector

He holds a Doctorate Degree In Economics From Binghamton University and has worked in various organizations prior to his appointment on the Board of the Company. He was a member of the Plateau State Executive Council and Commissioner for Finance and Commissioner for Education from 1986 – 1988.

He was seconded from Nigerian National Petroleum Corporation in 2003 to Nigerian LNG Limited as the Deputy Managing Director/ CEO and to National Oil and Chemicals Marketing Plc in 1990 as the Executive Director, Chemical Marketing.

He was appointed to the board of Chevron Oil Nigeria Plc, now MRS Oil Nigeria Plc on March 7, 2007.


36

ALHAJI DAHIRU MANGAL BARAUDirector

Alhaji Barau is the Chairman and Chief Executive of Afdin Group of Companies Nigeria Limited, Max Air Limited and Katsina Dyeing and Printing Textiles Limited.

He is an Executive Director on the Board of Massanawa Travel & Tours and Massanawa Enterprises Limited, amongst others.

He was appointed to the Board of the Company on March 20, 2009.

Following Alhaji D.M. Barau’s nomination to the board for the appointment of an alternate Director in his stead; the board approved the appointment of MR. LAWAL MANGAL as an alternate of Alhaji D.M. Barau on MAY 10, 2012.


37


38

TO THE MEMBERS OF MRS OIL NIGERIA PLC

In accordance with Section 359(6) of the Companies and Allied Matters Act 2004, we the Members of the Audit Committee of MRS Oil Nigeria Plc, have reviewed the audited financial statements of the Company for the year ended 31 December 2013 and based on the documents and information available to us, report as follows:

(a) We ascertained that the accounting and reporting policies of the Company are in accordance with legal requirements and agreed ethical practices;

(b) We have reviewed the scope and planning of the audit requirements;

(c) We have reviewed the findings on management matters in conjunction with the external auditor and departmental responses thereon;

(d) We have kept under review the effectiveness of the Company’s system of accounting and internal control.

ENGR. TUNJI IJAIYAChairman, Audit Committee

FRC/2014/COREN /00000007638

Members of the Audit Committee1. Engr. Tunji Ijaiya - Chairman2. Baale Isiaka Saliu - Member3. Chief V. Barrah - Member4. Mr. A.O. Gbodume - Executive Director (F & A)5. Dr. S.M. Kewa - Director6. Mr. Lawal Mangal - Alternate Director

REPORT OF THE AUDIT COMMITTEEFor the year ended 31 December, 2013


39

MRS Oil Nigeria PlcFinancial Statements - 31 December 2013Together with Directors’ and Auditor’s Reports


40

INDEPENDENT AUDITOR’S REPORT


41

As At 31 DecemberStatement of Financial Position

Notes 2013 2012

N’000 N’000Assets Property, plant and equipment 13 21,351,269 22,013,568 Intangible assets 14 81,320 140,560 Loans and receivables 17 655,229 - Prepayments 303,594 236,673 Trade and other receivables 16 5,361 7,507 Total non-current assets 22,396,773 22,398,308 Inventories 15 7,723,595 4,331,733 Loans and receivables 17 975,541 - Trade and other receivables 16 21,256,088 18,406,207 Prepayments 228,003 158,738 Cash and cash equivalents 18 13,114,626 10,300,702 Total current assets 43,297,853 33,197,380 Total assets 65,694,626 55,595,688 Equity Share capital 19(a) 126,994 126,994 Retained earnings 19(b) 19,502,153 18,927,016 Total equity 19,629,147 19,054,010 Liabilities Employee benefit obligations 20 15,541 218,415 Deferred tax liability 12(e) 5,981,619 6,238,600

Total non-current liabilities 5,997,160 6,457,015 Security deposits 21 1,572,949 1,510,904 Dividend payable 22(b) 465,759 473,942 Trade and other payables 23 20,952,759 14,180,677 Bank overdraft and short term borrowings 24 15,811,212 13,460,102 Tax payable 12(d) 1,265,640 459,038

Total current liabilities 40,068,319 30,084,663 Total liabilities 46,065,479 36,541,678 Total equity and liabilities 65,694,626 55,595,688 Approved by the Board of Directors on March 27, 2014 and signed on its behalf by:

Mr. Paul Bissohong Mr. Andrew Gbodume(Managing Director) (Executive Director, Finance & Administration) FRC/2013/IOD/00000003841 FRC/2012/ICAN/00000000534

The notes on pages 45 to 80 are an integral part of these financial statements.


42

For The Year Ended 31 December

Statement of Profit or Loss and Other Comprehensive Income

Notes 2013 2012 N’000 N’000

Revenue 6 87,786,323 79,727,349 Cost of Sales 8 (83,010,060) (74,015,487)

Gross profit 4,776,263 5,711,862

Other income 7 612,395 923,383 Selling and distribution expenses 8 (938,130) (709,665)Administrative expenses 8 (5,543,146) (4,337,680)

Operating (loss)/profit (1,092,618) 1,587,900

Finance income 9 3,284,269 149,051 Finance cost 9 (784,508) (1,358,196)Net finance income/(costs) 9 2,499,761 (1,209,145)Profit before income tax 10 1,407,143 378,755 Income tax expense 12(a) (772,725) (173,634)

Profit for the year 634,418 205,121

Other Comprehensive Income, net of income tax Items that will never be reclassified subsequently to profit or loss: Actuarial gains on post-employment benefit obligation - 5,321 Income tax effect 12(b) - (1,596)Other comprehensive income, net of tax - 3,725 Total comprehensive income for the year 634,418 208,846

Earnings per share (EPS) Basic earnings per share (Naira) 11(a) 2.50 0.81 The notes on pages 45 to 80 are an integral part of these financial statements.


43


Statement of Changes in Equity

Share Retained Total Notes capital earnings equity N’000 N’000 N’000

Balance as at 1 January 2013 126,994 18,927,016 19,054,010

Total comprehensive income: Profit for the year - 634,4186 34,418 Other comprehensive income - - - Total comprehensive income - 634,418 634,418 Transactions with owners of the Company Contributions and Distributions Dividends 22 - 59,281) 59,281)Total transactions with owners of the Company - (59,281) (59,281) Balance as at 31 December 2013 126,994 19,502,153 19,629,147

Share Retained Total Notes capital earnings equity N’000 N’000 N’000

Balance as at 1 January 2012 126,994 18,861,691 18,988,685 Total comprehensive income: Profit for the year - 205,121 205,121 Other comprehensive income - 3,725 3,725 Total comprehensive income for the year - 208,846 208,846 Transactions with owners of the Company Contributions and Distributions Dividends 22 - (177,792) (177,792)Unclaimed dividend written back (statute barred) 22 - 34,271 34,271 Total transactions with owners of the Company - (143,521) (143,521) Balance as at 31 December 2012 126,994 18,927,016 19,054,010 The notes on pages 45 to 80 are an integral part of these financial statements.


44


Statement of cash flows

Notes 2013 2012 N’000 N’000

Cash flows from operating activities: Profit after tax 634,418 205,121 Adjustments for : Depreciation 13(a) 1,563,330 1,476,481 Amortisation of intangible assets 14 59,240 31,301 Finance income 9 (3,284,269) (149,051)Finance cost 328,980 501,835 (Gain)/loss on sale of property, plant and equipment (22) 15,875 Provision for long-term service award 2,536 10,167 Curtailment gains on long-term service award 20(b) (3,820) (28,112)Provision for gratuity - 97,152 Impairment loss on trade receivables 211,673 Reversal of loss on inventory (18,199) - Surplus on settlement of gratuity (23,949) - Tax expense 12(a) 772,725 173,634 Curtailment gains of gratuity provision 20(a) - (140,188) 242,643 2,194,215 Changes in: - Inventories (3,373,663) 3,962,457 - Trade and other receivables (3,195,594) 13,841,961 - Security deposits 62,045 687,984 - Trade and other payables 16,525,408 (9,024,677)Cash generated from operating activities 10,260,839 11,661,940 Income taxes paid 12(d) (212,456) (976,442)Withholding tax credit notes utilised 12(d) (10,648) (58,211)Long-term service award paid 20(b) (340) (909)Gratuity settlement paid 20(a) (177,301) (271,175)Value added tax paid (215,170) (77,789)Net cash generated from operating activities 9,644,924 10,277,414 Cash flows from investing activities: Proceeds from sale of property, plant and equipment 288 6,668 Purchase of property, plant and equipment 13(f) (870,989) (339,624)Purchase of intangible assets 14 - (9,220)Amount advanced to transporters 17 (1,961,323) - Repayment received on amount advanced to transporters 17 330,553 - Interest received 9 3,284,269 146,892 Net cash generated from / (used in) investing activities 782,798 (195,284) Cash flows from financing activities: Net repayment on short term borrowings (7,148,000) (7,954,779)Dividends paid 22(b) (67,464) (202,660)Interest paid (328,740) (456,424)Net cash used in financing activities (7,544,204) (8,613,863) Net change in cash and cash equivalents 2,883,518 1,468,267 Cash and cash equivalents at 1 January 8,886,913 7,418,646 Effect of movements in exchange rates on cash held (240) - Cash and cash equivalents at 31 December 18 11,770,191 8,886,913

The notes on pages 45 to 80 are an integral part of these financial statements.


45

For The Year Ended 31 December 2013

Notes Page

Reporting entity 46

Basis of preparation 46

Significant accounting policies 47

New standards and interpretations not yet adopted 55

Measurement of fair values 56

Revenue 57

Other income 57

Expenses by nature 58

Finance income and costs 58

Profit before income tax 59

Earnings per share (EPS) and Dividend per share 60

Income Taxes 60

Property, plant and equipment 63

Intangible assets 64

Inventories 64

Trade and other receivables 65

Loans and receivables 65

Cash and cash equivalents 66

Capital and reserves 66

Employee benefit obligations 67

Security deposits 69

Dividends 69

Trade and other payables 70

Bank overdraft and other short term borrowings 70

Financial risk management & financial instruments 71

Related party transactions 78

Segment reporting 79

Subsequent events 80

Contingencies 80

Operating leases 80

Index to notes to the Financial Statements


46

NOTES TO THE FINANCIAL STATEMENTS

1. REPORTING ENTITYThe Company was incorporated as Texaco Nigeria Limited (a privately owned Company) on 12 August 1969 and was converted to a Public Limited Liability company quoted on the Nigerian Stock Exchange in 1978, as a result of the 1977 Nigerian Enterprises Promotions Decree. The Company is domiciled in Nigeria and its shares are listed on the Nigerian Stock Exchange (NSE). The Company’s name was changed to Texaco Nigeria Plc. in 1990 and again on 1 September 2006 to Chevron Oil Nigeria Plc.

On 20 March, 2009 there was an acquisition of Chevron Africa Holdings Limited, (a Bermudian Company) by Corlay Global SA of Moffson Building, East 54th Street, Panama, Republic of Panama. By virtue of this foreign transaction, M.R.S. Africa Holdings Limited gained control of all assets of Chevron Nigeria Holdings Limited, Bermuda.

The new management of the Company announced a change of name of the Company from Chevron Oil Nigeria Plc to MRS Oil Nigeria Plc (“MRS”) effective 2 December, 2009 following the ratification of the name change of the Company at the 40th Annual General Meeting of the Company on

29 September, 2009. The Company is domiciled in Nigeria and has its registered office address at:

8, Macarthy StreetOnikan, Lagos, Nigeria The Company is principally engaged in the business of marketing and distribution of refined petroleum products, blending of lubricants and manufacturing of greases.

2 BASIS OF PREPARATION (a) Statement of compliance These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs). The financial statements were authorised for issue by the Board of Directors on 27th March 2014 . Details of the Company’s significant accounting policies are included in Note 3. (b) Basis of measurement The financial statements have been prepared


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on the historical cost basis except for defined benefit obligations (Note 20). (c) Functional and presentation currency These financial statements are presented in Nigerian naira, which is the Company’s functional currency. All financial information presented in naira have been rounded to the nearest thousand unless stated otherwise. (d) Use of estimates and judgements The preparation of annual financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

(i) Judgements Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements is included in Note 9(a) with respect to recognition of income on foreign exchange and interest reimbursement on government grant. (ii) Assumptions and estimation uncertainties Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 December, 2013 is included in the following notes: Note 13 - Impairment test, key assumptions underlying recoverable amounts. Note 20 - Measurement of employee benefits obligations; key actuarial assumptions. 3 . SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these financial statements. The Company has adopted the following new

standard(s) and amendment(s) to standards including any consequential amendments to other standards, with a date of initial application of 1 January, 2013. The nature and effects of the changes are explained below: (i) Presentation of items of other comprehensive income (Amendments to IAS 1) As a result of the amendments to IAS 1, the Company has modified the presentation of items of other comprehensive income in its statement of profit or loss and other comprehensive income, to present separately, items that would be reclassified to profit or loss from those that would never be Comparative information. This has been re-presented accordingly. (ii) IFRS 13 Fair value measurement IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements when such measurements are required or permitted by other IFRSs. It unifies the definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7. As a result, the Company has included additional disclosures in this regard (see note 25 (e)). In accordance with the transitional provisions of IFRS 13, the Company has applied the new fair value measurement guidance prospectively and has not provided any comparative information for new disclosures. Notwithstanding the above, the change had no significant impact on the measurements of the Company’s assets and liabilities.

(a) Foreign currency transactions Transactions denominated in foreign currencies are translated and recorded in Nigerian Naira at the actual exchange rates as of the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the rates of exchange prevailing at that date. Non-monetary assets and liabilities denominated in foreign currencies that are

Notes to the Financial Statements


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measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognized in profit or loss, except for qualifying cash flow hedges, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction .i.e. they are not retranslated.

(b) Financial instruments The Company classifies non-derivative financial assets into loans and receivables. The Company classifies non-derivative financial liabilities into the other financial liabilities category. i. Non-derivative financial assets and financial liabilities - recognition and derecognition The Company initially recognises loans and receivables on the date when they are originated. Financial liabilities are initially recognised on the trade date. The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or it neither transfers nor retains substantially all the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised financial assets that is created or retained by the Company is recognised as a separate asset or liability. The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expired. Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

ii Non-derivative financial assets - measurementThe Company initially recognizes loans and receivables on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss, if any) are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. The Company has only loans and receivables as non-derivative financial assets. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Short term receivables that do not attract interest are measured at original invoice amount where the effect of discounting is not material. Cash and cash equivalents Cash and cash equivalents comprise cash on hand; cash balances with banks and call deposits with original maturities of three months or less. Bank overdrafts that are



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repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of statement of cash flows. iii Non-derivative financial liabilities - measurementNon-derivative financial liabilities are initially recognized at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method. The Company has the following non-derivative financial liabilities: loans and borrowings, trade and other payables. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method. Short term payables that do not attract interest are measured at original invoice amount where the effect of discounting is not material. iv Share capitalThe Company has only one class of shares, ordinary shares. Ordinary shares are classified as equity. When new shares are issued, they are recorded in share capital at their par value. The excess of the issue price is recorded in the share premium reserve. Incremental costs directly attributable to the issue of ordinary shares, net of any tax effects are recognised as a deduction from equity. (c) Property, plant and equipment i Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of certain items of PPE at 1 January 2011, the Company’s date of transition to IFRS, was determined with reference to their fair value at that date. Cost includes expenditure that is directly attributable to the acquisition of the asset. Property, plant and equipment under construction are disclosed as capital work-in-progress. The cost of self-constructed assets

includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use including, where applicable, the costs of dismantling and removing the items and restoring the site on which they are located and borrowing costs on qualifying assets.

Purchased software that is integral to the functionality of the related equipment is capitalized as part of the equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing 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 costs The cost of replacing a part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred. iii Depreciation Depreciation is calculated to write off the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment which reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term in which case the assets are depreciated over the useful life.



50

The estimated useful lives for the current and comparative periods are as follows: Land and Buildings: -Leasehold Land Lease period-Buildings 10 to 25 yearsPlant and Machinery 10 to 20 yearsFurniture and Fittings 5 years Automotive equipment 4 to 10 yearsComputer equipment 3 yearsOffice equipment 5 years

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate. Capital work-in-progress is not depreciated. The attributable cost of each asset is transferred to the relevant asset category immediately the asset is available for use and depreciated accordingly. (d) Intangible assets Intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.

The Company’s intangible assets with finite useful lives comprise acquired software. Subsequent expenditure Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific intangible asset to which it relates. All other expenditure is recognized in profit or loss as incurred. Amortisation of intangible assets Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value. Amortisation is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use, since this most closely reflects 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) Leases i Determining whether an arrangement

contains a lease At inception of an arrangement, the Company determines whether such an arrangement is or contains a lease. At inception or on reassessment of the arrangement, the Company separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Company concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the Company’s incremental borrowing rate. ii Leased assets Assets held by the Company under leases that transfer to the Company substantially all of the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Assets held under other leases are classified as operating leases and are not recognised in the Company’s statement of financial position. iii. Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. (f) Inventories Inventories are measured at the lower of cost and net realizable value. The cost of inventories



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includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred 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 overheads based on normal operating capacity. (g) Impairment i Non-derivative financial assets Financial assets not classified as at fair value through profit or loss are assessed at each reporting date to determine whether there is objective evidence of impairment.

Objective evidence that financial assets are impaired includes: default or delinquency by a debtor; restructuring of an amount due to the

Company on terms that the Company would not consider otherwise;

indications that a debtor or issuer will enter bankruptcy;

adverse changes in the payment status of borrowers or issuers;

the disappearance of an active market for a security; or

observable data indicating that there is measurable decrease in expected cash flows from a group of financial assets

The basis of costing inventories are as follows: Product Type Cost Basis Refined Petroleum Products Weighted Average Cost of costs incurred ( AGO, ATK, PMS , DPK) (for deregulated products reduced by the value of subsidies due)

Packaging Materials, Weighted Average Cost Lubricants and Greases Inventories-in-transit Purchase cost incurred to date Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Inventory values are adjusted for obsolete, slow-moving or defective items.

Financial assets measured at amortised costThe Company considers evidence of impairment for these assets at both an individual asset and collective level. All individually significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are not individually significant are collectively assessed for impairment. Collective assessment is carried out by grouping together assets with similar risk characteristics. In assessing collective impairment, the Company uses historical information on timing of recoveries and the amount of loss incurred, and makes adjustment if current economic and credit conditions are such that

the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss is calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account. When the Company considers that there are no realistic prospect of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through profit or loss.



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ii Non-financial assets At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For impairment testing, assets are group together into the smallest group of assets that generates cash flows from continuing use that are largely independent of the cash flows of other assets or CGUs.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (h) Employee benefits i Defined contribution plan A defined contribution plan is a post-employment benefit plan (pension fund) under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the 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 defined contribution pension scheme for its permanent staff. Employees contribute 3 % each of their Basic salary, Transport and Housing Allowances to the Fund on a monthly basis. The Company’s contribution is 12 %

of each employee’s Basic salary, Transport and Housing Allowances. Staff contributions to the scheme are funded through payroll deductions while the Company’s contribution is recognised in profit or loss as employee benefit expense in the periods during which services are rendered by employees. ii Defined benefit plan The Company operated one gratuity scheme which was a defined benefit scheme for certain employees. This scheme was however terminated in February and all qualifying employees under the scheme were paid off. See note 20.

The Company’s net obligation in respect of defined benefit scheme was calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods and that benefit was discounted to determine its present value. In determining the liability for employee benefits under the defined benefit scheme, consideration was given to future increases in salary rates and the Company’s experience with staff turnover.

The recognised liability was determined by an independent actuarial valuation every year using the projected unit credit method. HR Nigeria Limited was engaged as the independent actuary in the prior years. Actuarial gains and losses arising from differences between the actual and expected outcome in the valuation of the obligation were recognised fully in Other Comprehensive Income. The effect of any curtailment is recognised in full in profit or loss immediately the curtailment occurs. The discount rate is the yield on Federal Government of Nigeria issued bonds that have maturity dates approximating the terms of the Company’s obligation. Although the scheme was not funded, the Company ensured that adequate arrangements were in place to meet its obligations under the scheme. iii Other long-term employee benefitsThe Company’s other long-term employee benefits represents a Long Service Award scheme instituted for all permanent employees. The Company’s obligations in respect of this scheme is the amount of future benefits that employees have earned



53

in return for their service in the current and prior periods. The benefit is discounted to determine its present value. The discount rate is the yield at the reporting date on Federal Government of Nigeria issued bonds that have maturity dates approximating the term of the Company’s obligation. The calculation is performed using the Projected Unit Credit method. Remeasurements are recognised in profit or loss in the period in which they arise.

iv Termination benefits Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and when the Company recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the end of the reporting period, then they are discounted. v Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonuses if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. (i) Provisions and contingent liabilities Provisions A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. A provision for restructuring is recognised when the Company has approved a detailed and formal restructuring 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 the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognizes any impairment loss on the assets associated with that contract. Contingent liabilities A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company, or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability. Contingent liabilities are only disclosed and not recognised as liabilities in the statement of financial position. (j) Revenue Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of value added tax, sales returns, trade discounts and volume rebates. Revenue for regulated products equates the amounts that accrue to the Company directly net of amounts the Company collects from regulators on behalf of third parties i.e. dealer commissions and transport costs. Revenue is recognized when persuasive evidence exists that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable and there is no continuing management involvement with the goods and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.



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The timing of the transfer of risks and rewards varies depending on whether the customer collects the products himself or the Company delivers to the customer using the third party transporters. For the former, revenue is recognized when the customer picks up the products from the Company’s depots and the later, when delivery is made. (k) Rental income Rental income is recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognized as an integral part of the total rental income, over the term of the lease. Rental income is recognized as other income. (l) Finance income and finance costs Finance income comprises interest income on funds invested, foreign currency gain on financial assets and financial liabilities, and reimbursement of any foreign exchange gain or loss or interest from Petroleum Product Pricing Regulatory Agency (PPPRA). Finance income is recognized as it accrues in profit or loss, using the effective interest method. Finance costs comprises interest expense on borrowings, bank charges, foreign currency loss on financial assets and financial liabilities, unwinding of the discount on provisions except finance costs that are directly attributable to the acquisition, construction or production of a qualifying asset which are capitalised as 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. (m) Income and deferred tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly 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, using tax rates statutorily enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in profit or loss account except to the extent that it relates to a transaction that is recognised directly in equity. A deferred tax asset is recognised only to the extent that it is probable 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 benefit will be realised. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset only if certain criteria are met. Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the initial recognition of assets or liabilities in a transaction that is not a business 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. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares. Diluted earnings per share is only disclosed when there is a dilutive impact. (o) Segment reporting An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses. All operating segments’ operating results are reviewed regularly by the Board of Directors to make decisions about resources to be allocated to the segment and assess its performance, and for which



55

discrete financial information is available.

Segment results that are reported to the Board of Directors include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. (p) Statement of cash flows The statement of cash flows is prepared using the indirect method. Changes in statement of financial position items that have not resulted in cash flows such as translation differences and other non-cash items, have been eliminated for the purpose of preparing the statement. Dividends paid to ordinary shareholders are included in financing activities. Finance costs paid is also included in financing activities while finance income is included in investing activities. (q) Government grants Petroleum Products Pricing Regulatory Agency (PPPRA) subsidies which compensate the Company for losses made on importation of certain refined petroleum products are recognised when there is reasonable assurance that they will be recovered and the Company has complied with the conditions attached to receiving the subsidy. The subsidies are recognised as a reduction to the landing cost of the subsidised petroleum product. (r) Joint arrangement The Company’s joint arrangement is in respect of its interests in joint aviation facilities held with other parties. These Financial Statements include the Company’s share of assets, liabilities, revenue and expenses of the joint operation. 4 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2013, and have not been applied in preparing these financial statements. Those which may be relevant to the Company are set out below. The Company does not plan to adopt these standards early. These will be adopted in the period that they become mandatory unless otherwise indicated.

Effective for the financial year commencing 1 January 2014 IAS 32 Offsetting Financial Assets and Financial Liabilities

IFRIC 21 Levies Effective for the financial year commencing 1 January 2015

IFRS 9 Financial Instruments All Standards and Interpretations will be adopted at their effective date (except for those Standards and Interpretations that are not applicable to the entity). IFRS 10, IFRS 12 and IAS 27 amendment Investment entities, Recoverable Amount Disclosures for Non-Financial Assets (Amendment to IAS 36), Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39), Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) are not applicable to the business of the entity and will therefore have no impact on future financial statements. The directors are of the opinion that the impact of the application of the remaining Standards and Interpretations will be as follows:

Amendments to IAS 32 Financial Instruments: Presentation: Offsetting Financial Assets and Financial Liabilities

The amendments clarify when an entity can offset financial assets and financial liabilities. This amendment will result in the Company no longer offsetting two of its master netting arrangements. This amendment is effective for annual periods beginning on or after 1 January 2014 with early adoption permitted. IFRIC 21 Levies Levies have become more common in recent years, with governments in a number of jurisdictions introducing levies to raise additional income. Current practice on how to account for these levies is mixed. IFRIC 21 provides guidance on accounting for levies in accordance with IAS 37 Provisions, Contingent Liabilities and Assets. The Interpretation is effective for annual periods commencing on or after 1 January 2014 with retrospective application.



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IFRS 9 Financial InstrumentsIFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 (2009), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 (2010) introduces additions relating to financial liabilities. The IASB currently has an active project to make limited amendments to the classification and measurement requirements of IFRS 9 and add new requirements to address the impairment of financial assets and hedge accounting. The effective date of IFRS 9 was 1 January 2015. The effective date has been postponed to 1 January 2018. The Company will adopt the standard in the first annual period beginning on or after the mandatory effective date (once specified). The impact of the adoption of IFRS 9 has not yet been estimated as the standard is still being revised and impairment and macro-hedge accounting guidance is still outstanding. The Company will assess the impact once the standard has been finalised and becomes effective. 5 MEASUREMENT OF FAIR VALUES Some of the Company’s accounting policies and disclosure require the measurement of fair values, for both financial and non-financial assests and liabilities.

The Company has an established control framework with respect to the measurement of fair values. The CFO has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the Board of Directors.

The CFO regularly reviews significant unobservable inputs and adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the CFO assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified. Significant valuation issues are reported to the Board of Directors.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2: input other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognises transfers between levels of the fair value hierarchy at the reporting period during which the change has occured.



57

6. Revenue 2013 2012

N’000 N’000

Premium Motor Spirit (PMS) 63,509,044 58,922,799

Aviation Turbine Kerosene (ATK) 10,580,545 10,120,921

Automotive Gas Oil (AGO) 9,717,370 6,281,355

Lubricants and greases 2,902,370 2,459,812

Dual Purpose Kerosene (DPK) 1,076,994 1,713,289

Low Pour Fuel Oil (LPFO) - 229,173

87,786,323 79,727,349

7. Other income 2013 2012

N’000 N’000

Rental and lease income (Note 7(a)) 110,641 136,591

Gains/(loss) on disposal of property, plant & equipment 22 (15,875)

Sundry income 180,011 377,258

Income on storage services 321,721 425,409

Total 612,395 923,383

a. Rental and lease income relates to income earned on assets that are on lease (finance and operating leases) to third parties. Assets on lease include filling stations and related equipment (generators and dispenser pumps).


58

8. Expenses by nature 2013 2012 N’000 N’000

Depreciation 1,563,330 1,476,481Amortization of intangible assets 59,240 31,301Changes in inventories of lubes, greases and white products 82,337,775 73,231,224Rental of service stations, buildings and equipment 216,483 220,767Advertising expense 57,161 10,361Consultancy expense 707,260 158,602Maintenance expense 275,660 260,770Throughput expense 774,427 874,853Freight expense 650,337 463,826Impairment of deferred intercompany charges - 18,207Management fees (Note 26 (b)) 631,119 531,628Director’s remuneration 9,360 17,034Employee benefit expense (Note 10 (b)) 588,927 812,667Auditor’s remuneration 24,914 24,914Impairment loss on other receivables 31,871 - Impairment loss/(reversal of) on trade receivables 179,802 (54,649)Local and international travel 111,183 122,616Office expenses and supplies 218,533 257,531Communication and postage 222,129 171,951Fines and penalties 34,460 - Insurance premium 120,301 108,508Other expenses 677,064 324,240Total cost of sales, selling and distribution expenses 89,491,336 79,062,832

and administrative expenses

9. Finance income and finance costs 2013 2012

N’000 N’000Finance income Interest income on short-term bank deposits 115,182 147,721PPPRA reimbursement on interest and foreign 3,111,107 - exchange differential (Note (9(a)) Interest income on loans to transporters (Note 17) 53,338 -Other interest income 4,642 1,330 Total finance income 3,284,269 149,051 Finance cost Interest expense 245,501 249,756Bank charges 83,239 252,079Net foreign exchange loss 455,768 856,361Total finance costs 784,508 1,358,196

Net finance (income) /cost (2,499,761) 1,209,145

a. This amount represents net interest / foreign exchange differential cost claims received from PPPRA arising

from delayed subsidy payments relating to products imported between 2011 and 2012.



59

10. Profit before income tax 2013 2012 N’000 N’000a. Profit before income tax is stated after charging/(crediting): Depreciation (Note 13) 1,563,330 1,476,481Amortisation of intangible assets (Note 14) 59,240 31,301Management fees (Note 26(b)) 631,119 531,628Service charge (Note 26(b)) 422,715 -Director’s remuneration 9,360 17,034Employee benefit expense 588,927 812,667Auditor’s remuneration 24,914 24,914(Gain)/ loss on disposal of property, plant and equipment (22) 15,875 PPPRA reimbursement on interest and foreign (3,111,107) - exchange differential (Note (9 (a)) Foreign currency exchange loss 455,768 856,361 b. Directors and employeesi. Employee costs during the year comprise: 2013 2012 N’000 N’000

Salaries and wages 360,419 581,257Other employee benefits 199,345 54,351Employer’s pension contribution 47,277 64,442(Reversal of) / post employment benefit charge (23,949) 102,473Other long term employee benefit charge 5,835 10,144 588,927 812,667 ii. The average number of full-time persons employed during the year (other than executive directors) was as follows: Number Number 2013 2012Administration 26 23Technical and production 2 19Operations and distribution 30 35Sales and marketing 30 32 88 109 iii. Higher-paid employees of the Company, other than directors, whose duties were wholly or mainly discharged in Nigeria, received remuneration in excess of N1,000,000 (excluding pension contributions) in the following ranges: Number Number 2013 20121,000,001 - 2,000,000 1 - 2,000,001 - 3,000,000 23 13,000,001 - 4,000,000 32 194,000,001 - 5,000,000 7 505,000,001 - 6,000,000 13 106,000,001 - 7,000,000 6 107,000,001 - 8,000,000 1 128,000,001 - 9,000,000 1 29,000,001 - 10,000,000 - 1Above - 10,000,000 4 4 88 109



60

iv. Directors’ remuneration for directors of the Company charged to profit or loss account are as follows: 2013 2012 N’000 N’000

Fees 2,250 1,500Other emoluments 7,110 15,534 9,360 17,034 The directors’ remuneration shown above includes: Chairman - - Highest paid director 5,600 4,747 Other directors received emoluments in the following ranges: Number Number 2013 2012Nil 2 21,000,001 - 2,000,000 3 2 11. Earnings per share (EPS) and Dividend declared per share a. Basic EPS Basic earnings per share of N2.50 (2012: N0.81) is based on profit attributable to ordinary shareholders of N634,418,000 (2012: N205,121,000), and on the 253,988,672 ordinary shares of 50 kobo each, being the weighted average number of ordinary shares in issue during the year (2012: 253,988,672). 2013 2012

Profit for the year attributable to shareholders (expressed in Naira) 634,418,000 205,121,000 Weighted average number of ordinary shares in issue 253,988,672 253,988,672Basic earnings per share (expressed in Naira per share) 2.50 0.81 b. Dividend declared per share Dividend declared per share of 23.34 kobo (2012: 70 kobo) is based on total declared dividend of N59.28 million (2012: N177.79 million) on 253,988,672 ordinary shares of 50 kobo each, being the ordinary shares in issue during the year (2012: 253,988,672 ordinary shares).

12. Income taxes a. Income tax expense The tax charge for the year has been computed after adjusting for certain items of expenditure and income, which are not deductible or chargeable for tax purposes, and comprises: Amounts recognized in profit or loss 2013 2012 N’000 N’000Current tax expense: Income tax 953,087 353,460Tertiary education tax 76,619 31,107Prior year over provision - (48,047) 1,029,706 336,520

Deferred tax expense: Origination and reversal of temporary differences (256,981) (162,886) (256,981) (162,886)Tax expense on operations 772,725 173,634



61

b. Tax recognized in other comprehensive income:

No tax was recognised in other comprehensive income during the year (2012: N1.60 million).

c. Reconciliation of effective tax rates

The tax on the Company’s profit before tax differs from the theoretical amount as follows:

% 2013 % 2012

Profit before income tax 1,407,143 378,755

Income tax using the statutory tax rate 30 422,143 30 113,627

Effect of:

Impact of tertiary education tax 6 76,619 8 31,107

Effect of tax incentives (1) (8,181) (49) (185,114)

Non deductible expenses 19 264,787 43 162,633

Other differences 1 17,357 14 51,382

Total income tax expense in income statement 55 772,725 46 173,634

d. Movement in current tax liability

2013 2012

N’000 N’000

Balance at 1 January 459,038 1,157,171

Payments during the year (212,456) (976,442)

Provision for the year 1,029,706 336,520

Withholding tax credit notes utilised (10,648) (58,211)

Balance at 31 December 1,265,640 459,038

The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its

assessment of many factors, including interpretations of tax laws and prior experience.



62

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64

(b) Impairment assessment The carrying amount of the Company’s net assets exceeded its market capitalization as at the year end. As a result of this, management carried out an impairment test as at 31 December 2013.

Based on results of the test, the recoverable amount of the Company’s cash generating units (CGU) are higher than the carrying amount and as such no impairment loss has been recorded. (c) The Company holds various parcels of

land under finance lease arrangements. The maximum tenor of the lease is 99 years in line with the Land Use Act. The lease amounts were fully paid at the inception of the lease arrangements and these are depreciated over the lease period. At 31 December 2013, the carrying amount of leased land was N8.18 billion (2012: N8.26 billion). (d) Capital commitments Capital expenditure commitments at the year end authorised by the Board of Directors comprise:

(e) Depreciation expense is included as part of administrative expenses. (f) Included in additions to property, plant and equipment of N901,297,000 are items not

yet paid for as at the year end amounting to N30.31 million (2012: Nil). These amounts are included in accrued expenses (See Note 23) and have been adjusted for in the statement of cashflows.

2013 2012 N’000 N’000

Capital commitments 1,606,756 1,541,856

14 Intangible assets 2013 2012

N’000 N’000 Cost

Balance as at 1 January 175,050 165,830 Additions - 9,220 Balance as at 31 December 175,050 175,050

Accumulated amortisation Balance as at 1 January 34,490 3,189

Charge for the year 59,240 31,301 Balance as at 31 December 93,730 34,490

Carrying amount 81,320 140,560 Amortisation of N59.24 million is included in ‘administrative expenses’ in the statement of profit or loss and other comprehensive income (2012: N31.30 million). 15 Inventories

2013 2012 N’000 N’000

Premium Motor Spirit (PMS) 4,228,581 872,340 Lubricants and greases 2,416,035 1,722,285 Aviation Turbine Kerosene (ATK) 501,527 1,307,816 Automotive Gas Oil (AGO) 423,608 300,635 Dual Purpose Kerosene (DPK) 127,024 126,371 Packaging materials and other sundry stocks 26,820 2,286 7,723,595 4,331,733



65

Inventory amounting to N3.4 billion (2012 : N447.87 million) was held in a facility owned by MRS Oil and Gas Limited, a related party (Note 26).

The value of changes in products, packaging materials and work-in-progress included in cost of sales amounted to N82.34 billion (2012: N73.23 billion).

In 2013, the write downs of inventory to net realizable values recognised in prior year was reassessed and resulted in a write-back amounting to N18.19 million (2012: charge of N98.7 million). The write-back/charge has been recorded in “cost of sales” in the statement of Profit or Loss and Other Comprehensive Income.

16 Trade and other receivables 2013 2012

N’000 N’000

Trade receivables 4,935,456 3,440,509 Petroleum Equalisation Fund (PEF) 2,978,583 3,193,286 Petroleum Support Fund (PSF) 5,793,454 8,627,610 Loans to employees 43,042 27,337 Interest receivable - 2,159 Withholding tax receivables 119,378 71,990 Due from joint operation partners 39,882 62,763 Receivables from registrar (Note 22 (b(ii))) 88,095 214,697 Receivables from related parties (Note 26) 7,163,265 2,557,888 Other debtors 100,294 215,475

21,261,449 18,413,714 Less: non-current portion (5,361) (7,507)

Current portion 21,256,088 18,406,207

For receivables that are classified as ‘current’, due to their short-term maturities, the fair value approximates their carrying values. The Company’s exposure to credit risk and impairment losses related to trade and other receivables are disclosed in Note 25 (a).

17 Loans and receivables During the year, the Company purchased tankers from a related party (Rosscourt International Limited) amounting to N2.64 billion (Note 26). The Company, then entered into an arrangement with some of its transporters to provide these tankers to them, at cost of the tankers plus an interest of 17% per annum. The transporters are expected to repay from freight costs charged to the Company for services rendered and repayment periods range from 12 to 24 months. The transporters

made a 20% contribution at the commencement of the arrangement. Outstanding balance on the tankers are secured by the Company’s retention of title to the tankers. On the basis of retention of title as well as historical payment behaviours of the respective transporters (including continuing business as of date as adequate insurance cover on the tankers), the Company does not believe that the amounts are impaired and as such no impairment loss has been recorded. The analysis of the loans was as follows:”

N’000Cost of trucks (including other incidental costs incurred) 2,640,373 Less 20% down payment from the transporters (679,050)Total amount advanced to transporters 1,961,323 Repayments received (330,553)Balance as at 31 December 2013 1,630,770 Less non current portion (655,229)Current portion 975,541 Interest income earned on this amounting to N53.34 million has been included as part of finance income in profit or loss. (Note 9).



66

18 Cash and cash equivalents 2013 2012

N’000 N’000

Cash in hand and cash at bank 1,268,260 1,155,398 Short term deposits with banks (Note 18 (a)) 11,846,366 9,145,304 13,114,626 10,300,702 Bank overdrafts used for cash management purposes (Note 24) (1,344,435) (1,413,789) Cash and cash equivalents in the statement of cash flows 11,770,191 8,886,913

(a) Short term deposits with banks represent placements with commercial banks for periods between 0 - 90 days. Included in short term deposits are unclaimed dividends amounting to N263.26 million (2012: N255.98 million) held in separate bank accounts in accordance with guidelines issued by Securities and Exchange

Commission. This amount is restricted from use by the Company. Also included in short term deposits with banks is an amount of N9.1 billion (2012: N8.9 billion) being the balance on the sinking fund account. The sinking fund account is used to finance import finance facilities held with the Company’s Bankers, (Note 24).

19 Capital and reserves (a) Share capital 2013 2012 Authorised: N’000 N’000

271,657,230 Ordinary shares of 50k each 135,829 135,829 Issued and fully paid: 253,988,672 Ordinary shares of 50k each 126,994 126,994 Issued and fully allotted: 253,988,672 Ordinary shares of 50k each 126,994 126,994 (b) Retained earnings 2013 2012 N’000 N’000

Balance as at 1 January 18,927,016 18,861,691 Profit for the year 634,418 205,121 Defined benefit plan actuarial gain, net of tax - 3,725 Dividends declared (59,281) (177,792) Unclaimed dividend written back - 34,271 Balance as at 31 December 19,502,153 18,927,016 Included in retained earnings is N14.40 billion (2012: N14.40 billion) which represents revaluation surplus transferred at IFRS transition date. The Company has opted not to distribute this amount.



67

20 Employee benefit obligations During the year, the Company terminated the gratuity scheme available to its employees. This resulted in the Company being required to settle all obligations under the scheme. The pay-out to qualifying employees amounted

to N177.30m and was less than the carrying amount of the liability. As such a net amount of N23.95m was written back to profit or loss. The amounts outstanding at the end of the year with respect to employee benefit obligations is shown below:

2013 2012 N’000 N’000Year end obligations for: Post-employment benefit (Note 20 (a)) - 201,250 Other long term employee benefits (Note 20 (b)) 15,541 17,165

Total employee benefit liabilities 15,541 218,415

(a) Post employment benefit obligation comprise of gratuity provision and was based upon independent actuarial valuation performed by HR Nigeria Limited using the projected unit credit basis. The gratuity scheme was terminated during the year. The

Company did not maintain any assets for the gratuity plan but ensured that it had sufficient funds for the obligations as they crystallize. The movement in the defined benefit obligation during the year is as follows:

2013 2012 N’000 N’000

Balance as at 1 January 201,250 515,461 Current service cost - 56,738 Interest cost - 45,735 Remeasurement gains - (5,321)Gratuity paid (177,301) (271,175)Surplus on settlement of gratuity (23,949) - Curtailment gains - (140,188)Balance as at 31 December - 201,250

(b) The provision was based on independent actuarial valuation performed by HR Nigeria Limited using the projected unit credit as at December 2013. Last valuation was as at 31 December 2013. Other long term employee benefits comprise of long service awards and

it is funded on a pay as you go basis by the Company. The movement on the provision for other long term employee benefits was as follows:

2013 2012 N’000 N’000

Balance as at 1 January 17,165 36,019

Provision for the year Current service cost 4,479 6,987 Interest cost 1,356 3,157 Remeasurement (gains)/ losses (3,299) 23 Benefits paid by the employer (340) (909)Curtailment gains (3,820) (28,112)

Balance as at 31 December 15,541 17,165



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As a result of a curtailment in the long service award arrangement for a number of employees, the Company’s obligation decreased by N3.82 million (2012 : N28.11 million). A corresponding curtailment gain is included in the Company’s statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2013.

(c) The balance and movement in the Company’s pension payable account which represents amounts due to the pension fund administrators which are yet to be remitted as at year end are shown in Note 23 (a).

(d) Actuarial Assumptions Principal actuarial assumptions at the reporting date (expressed as weighted averages): 2013 2012

Long-term average discount rate (p.a.) 14% 13%Future average pay increase (p.a.) 13% 13%Average rate of inflation (p.a.) 9% 10%Average Duration in years (Gratuity) *N/A 21.7Average Duration in years (Long Service Awards) 12.9 12.9

* Not applicable These 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 regarding future mortality are based on the rates published jointly by the Institute and Faculty of Actuaries in the UK. The data were rated down by one year to more accurately reflect mortality in Nigeria as follows:

Mortality in Service

Sample age 2013 2012 Number of deaths in Number of deaths in year out of 10,000 lives year out of 10,000 lives

25 7 7 30 7 735 9 940 14 1445 26 26

Assumptions regarding future mortality rates are based on published statistics and mortality tables by institute of Faculty of Actuaries in the UK. Withdrawal from Service

Age Band 2013 2012

Rates Rates

≤ 30 0.5% 0.5%31 - 39 0.5% 0.5% 40 - 44 0.5% 0.5%45 - 60 0.0% 0.0%

It is assumed that all the employees covered by the long service award scheme would retire at age 60 (2012: age 60).



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Sensitivity Analysis

Below is the sensitivity analysis of the principal actuarial assumptions adopted in determining the employee benefit liabilities:

Long Service Award Net periodic benefit cost (LSA) N’000 N’000

Discount rate -1% 18,434 9,561

+1% 16,043 8,667

Salary increase rate -1% 16,366 8,488 +1% 18,048 9,488

Inflation rate -1% 17,165 7,038 +1% 17,165 7,488

Mortality rate -1 year 17,185 9,092 +1 year 16,318 8,731

21 Security deposits These are collateral deposits paid by dealers who maintain credit facilities with the Company. These amounts are net-off on a periodic basis to cater for operational losses. These deposits do not bear interest. These amounts are refundable to the dealers at the termination of the business arrangements. The Company’s exposure to liquidity risks related to security deposits is disclosed in Note 25 (b). 22 Dividends (a) Declared dividends The following dividends were declared and paid by the Company during the year. 2013 2012 23.34 kobo per qualifying ordinary share (2012: 70 kobo) 59,281 177,792 After the respective dates, the following dividends were proposed by the Directors. The dividends have not been provided for and there are no income tax consequences. 2013 2012 74.93 kobo per qualifying ordinary share (2012: 23.34 kobo) 190,314 59,281

(b) Dividend payable 2013 2012 N’000 N’000

Balance as at 1 January 473,942 533,081 Declared dividend 59,281 177,792 Payments (67,464) (202,660) Unclaimed dividend written back on retained earnings - (34,271) Balance as at 31 December 465,759 473,942 (i) Unclaimed dividend transferred to retained earnings represents dividend which have remained unclaimed for over twelve (12) years and are therefore no longer recoverable or actionable by the shareholders in accordance with Section 385 of the Companies and Allied Matters Act, Cap. C20, Laws of the Federal Republic of Nigeria, 2004.



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(ii) As at 31 December 2013, an amount of N88.10 million (2012: N214.7 million) of the total dividend payable was held with the Company’s registrar, City Securities (Registrars) Limited. The remaining dividend payable of N377.7 million (2012: N259.2 million) represents unclaimed dividends, which have been returned to the Company by the Registrar. 23 Trade and other payables 2013 2012 N’000 N’000

Trade payables 11,192,693 8,435,992 Accrued expenses 850,190 2,662,679 Amounts due to joint venture partners 66,780 - Advances received from customers 966,383 1,429,200 Bridging allowance 1,633,939 464,806 Amounts due to related parties 6,239,990 1,146,307 Pension payable (23(a)) 2,784 4,333 Other liabilities - 37,360

20,952,759 14,180,677 (a) The balance on the pension payable account represents the amount due to Pension Fund Administrators which are yet to be remitted at year end. The movement on this account during the year was as follows: 2013 2012 N’000 N’000

Balance as at 1 January 4,333 3,298 Contributions during the year 59,186 85,202 Payments during the year (60,735) (84,167) Balance as at 31 December 2,784 4,333 24 Bank overdrafts and other short term borrowings 2013 2012 N’000 N’000

Bank overdraft (Note 18) 1,344,435 1,413,789 Bank borrowings (Import Finance Facilities) 14,466,777 12,046,313 Total Borrowings 15,811,212 13,460,102


Interest rates on these facilities ranged between 18% to 20% per annum (2012: 15% - 20%). However, for the bank overdraft, as a result of an agreement with one of the bankers, interest is calculated net of the amount of fixed deposits held with the banker. Where, the fixed deposit held is in excess of the overdraft, interest income is earned. There is no right of offset between the overdraft and the deposits held. The net interest expense incurred in the year relating to overdrafts and short term borrowings amounted to N242.44 million (2012: N294.76 million). Import Finance Facilities represents short term borrowings obtained to fund letters of credits

for product importation. Included in the balance of N14.47 billion is an amount of N9.57 billion obtained on behalf of a related party , MRS Oil and Gas Limited (MOG) (2012: Nil). See Notes 25 and 26 for further details. This amount is included as part of the receivable from MOG at the year end. These facilities are either secured with products financed, domiciliation of Petroleum Products Pricing Regulatory Agency (PPPRA) payments or the Company’s sinking fund account with a balance of N11.85 billion as at year end (2012: N9.14 billion). The sinking fund account is included in the short term deposits, (Note 18).


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The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant. 25 Financial Risk Management & Financial Instruments The Company has exposure to the following risks from its use of financial instruments:

Credit risk Liquidity risk Market risk This 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. Further quantitative disclosures are included throughout these financial statements.

Risk management framework The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board has established the strategic and finance planning committee, which is responsible for developing and monitoring the Company’s risk management policies. The committee reports regularly to the Board of Directors on its activities. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk

Note 2013 2012 N’000 N’000

Trade and other receivables* 16 21,142,071 18,341,724Loans and receivables 17 1,630,770 - Cash and cash equivalents 18 13,110,757 10,297,348 35,883,598 28,639,072*Excludes withholding tax receivable


limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly by the strategic and finance planning committee to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Company’s Audit Committee oversees how management monitors compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. Internal Audit undertakes both regular and ad hoc reviews of compliance with established controls and procedures, the results of which are reported to Senior Management of the Company and the audit committee. (a) Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and other related parties. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Trade and other receivables Management has credit policies in place and the exposure to credit risk is monitored on an ongoing basis by an established credit committee headed by the Managing Director. Under the credit policies all customers requiring

credit above a certain amount are reviewed and new customers analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered.


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2013 2012 N’000 N’000

Trade receivables - Major customers 3,365,802 2,646,282 - Others 1,948,325 993,096 - Impairment (378,671) (198,869) 4,935,456 3,440,509

- Due from related parties 7,163,265 2,557,888 - Due from regulators (Government entities) 8,772,037 11,820,896 - Others 271,313 522,431 21,142,071 18,341,724 All the Company’s trade receivables are due from customers within Nigeria. As at year end, the aging of trade receivable that were not impaired was as follows: 2013 2012 N’000 N’000 Neither past due nor impaired 2,360,811 1,030,824 Past due 0-30 days 1,443,098 515,412 Past due 31-90 days 288,633 940,403 Past due 91-120 days 190,926 400,057 Past due 120 days and above 651,988 752,682 4,935,456 3,639,378


the Company’s standard payment and delivery terms and conditions are offered. The Company’s credit assessment process includes collecting cash deposits from customers. These deposits are non interest bearing and refundable, net of any outstanding amounts (if any) upon termination of the business relationship and are classified as current liability (Note 21). Credit limits are established for qualifying customers and these limits are reviewed regularly by the Credit Committee. Customers that fail to meet the Company’s benchmark creditworthiness 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 from sales team and perceived risk factor assigned to the customer. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, whether they are a key distributor or retail distributor, geographic location, and existence

of previous financial difficulties. 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 of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, customers with outstanding amounts that have not placed orders/traded for a prolonged period of time and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics. The maximum exposure to credit risk for trade and other receivables at the reporting date by type of counterparty was:


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The movement in the allowance for impairment in respect of trade receivables during the year was as follows: 2013 2012 N’000 N’000

Balance as at 1 January 198,869 253,518 Impairment loss recognised 269,455 187,351 Reversal of impairment losses (89,653) (242,000) Balance as at 31 December 378,671 198,869


The impairment loss as at 31 December 2013 relates to several customers that are not expected to be able to pay their outstanding balances, mainly due to economic circumstances. The Company believes that the unimpaired amounts are still collectible, based on historic payment behaviour and extensive analyses of the underlying customers’ credit ratings when available. Impairment calculated also takes into consideration the value of the security deposits held by the Company on a customer by customer basis. The impairment loss is included in administrative expenses. Due from Government entities This comprises amount due from PPPRA with respect to subsidies/PSF receivable on imported products as well as amounts receivable from PEF with respect to bridging claims. Determination of amounts due are based on existing regulations/ guidelines and impairment is only recognized when changes occur to the regulations/ guidelines that prohibit or limit recovery of previously recognized amounts. For bridging claims amounting to N2.98 billion recognized as receivable, possibilities exist depending on negotiations that settlement will occur via a set off to the extent of bridging allowances amounting to N1.63 billion recorded as a liability (Note 23). However, as the right of set off do not exist, the amounts have been presented gross in these financial statements. Dues from related parties The Company has transactions with its parent and other related parties who are related to the Company by virtue of being members of the MRS Group. Payment terms are usually not established for transactions within the Group companies and amounts receivable from

members of the Group are not impaired except the member is facing bankruptcy. In the directors view, all amounts are collectible. No impairment was recorded with respect to amounts due from related parties in the current year (2012: N18.21 million). Other receivables Other receivables includes staff debtors and other sundry receivables. The Company reviews the balances due from this category on a periodic basis taking into consideration functions such as continued business/employment relationship and ability to offset amounts against transactions due to these parties. Where such does not exist, the amounts are impaired. Impairment loss recognised in this category was N31.87 million as at year end (2012: Nil). Loans and receivables Loans and receivables comprise amounts loaned to some of the Company’s transporters. See Note 17. All the transporters still carry out business with the Company as at the year end and repayments have been consistent with the terms of the agreements. In addition, the balance due as at year end, is secured with title to the tankers that were financed. As such, management does not believe that the amounts are impaired. Cash and cash equivalents The Company held cash and cash equivalents of N13.11 billion as at 31 December 2013 (2012: N10.30 billion), which represents its maximum credit exposure on these assets. The cash and cash equivalents (with the exception of N3.87 million held as cash by the Company) are held by banks and financial institutions in Nigeria.


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Carrying Contractual 6 months amount cash flows or less Notes N’000 N’000 N’000

Non-derivative financial liabilities

31 December 2012 Overdraft and other Short-term borrowings 24 13,460,102 1 3,460,102 13,460,102 Dividend payable 22 473,942 473,942 473,942Trade and other payables* *23 12,751,477 12,751,477 12,751,477Security deposits 21 1,510,904 1,510,904 1,510,904 28,196,425 28,196,425 28,196,425

31 December 2013 Overdraft and other Short-term borrowings 24 15,811,212 15,811,212 15,811,212Dividend payable 22 465,759 465,759 465,759Trade and other payables* *23 19,986,376 19,986,376 19,986,376Security deposits 21 1,572,949 1,572,949 1,572,949 37,836,296 37,836,296 37,836,296*Excludes advances received from customer


(b) Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity 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’s reputation. The Company has a clear focus on ensuring sufficient access to capital to finance growth and to refinance maturing debt obligations. As part of the liquidity management process, the Company has various credit arrangements with

some banks which can be utilised to meet its liquidity requirements. Typically the credit terms with customers are more favourable compared to payment terms to its vendors in order to help provide sufficient cash on demand to meet expected operational expenses, including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

Included in overdraft and short term borrowings for 2013 is N9.57 billion (Note 24), representing amounts obtained on behalf of a related party, MRS Oil and Gas (MOG). Ordinarily, the Company expects the timing of its settlement of this liability to the banks to match receipt of the receivables from the related party. This does not however, always occur. The Company settles the liability on due date or as soon as it can to avoid any additional costs/charges irrespective of whether it has received the outstanding amounts from the related party. No interest is charged by the Company to the related party

with respect to outstanding balances that are due, post settlement of the borrowings by the Company. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return


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In thousands 2013 2012 USD USD Financial assets Trade and other receivables 66,311 23,011 Cash and cash equivalents 3,426 2,920

Financial liabilities Short- term borrowings (92,733) (77,583) Trade and other payables (62,076) (8,889) Net statement of financial position exposure (85,072) (60,541) Sensitivity analysis A strengthening of the Naira, as indicated below against the Dollar at 31 December would have increased profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Company considered to be reasonably possible at the end of the reporting period and has no impact on equity. The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2013, albeit that the reasonably possible foreign exchange rate variances were different, as indicated below: Increase in profit or loss N’000 31 December 2013 USD (5 percent strengthening) 660,155 31 December 2012 USD (5 percent strengthening) 470,010 A weakening of the Naira against the dollar at 31 December would have had the equal but opposite effect to the amounts shown above, on the basis that all other variables remain constant.


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 risk The Company is exposed to currency risk on sales and purchases and borrowings that are denominated in a currency other than the functional currency of the Company, primarily the Naira. The currency in which these transactions primarily are denominated is US Dollars (USD). The currency risk is the risk that the fair value or future cash flows of a financial 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. The Company has no export sales, thus the exposure to currency risk in that regard is non existent. The Company’s significant exposure to currency risk relates to its importation of various products for resale or for use in production. Although the Company has various measures to mitigate exposure to foreign exchange rate movement, over the longer term, however, permanent changes in exchange rates would have an impact on profit. The Company monitors the movement in the currency rates on an ongoing basis. Exposure to currency risk The Company’s transactional exposure to US Dollar (USD) was based on notional amounts as follows:


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The following significant exchange rates were applied during the year Average rate Average rate Reporting date spot rate Reporting date spot rate 2013 2012 2013 2012 N N N N US Dollar 155.23 155.44 155.2 155.27

2013 2012 N’000 N’000

Total borrowings (Note 24) 15,811,212 13,460,102 Less: Cash and cash equivalents (Note 18) (13,114,626) (10,300,702)

Net debt 2,696,586 3,159,400 Total equity 19,629,147 19,054,010 Total capital Employed 22,325,733 22,213,410 Debt to adjusted capital ratio 14% 17% 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.


Interest rate risk profile In 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 a

solid debt/equity ratio on the other hand At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was:

Carrying amount Carrying amount 2013 2012 N’000 N’000 Fixed rate instruments

Financial liabilities 15,811,212 13,460,102

The 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 management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future

development of the business. Management monitors the return on capital, which the Company defines as result from operating activities divided by total shareholders’ equity. Management also monitors the level of dividends to all shareholders. The Company’s debt to adjusted capital ratio at the end of the reporting period was as follows:


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(e) Fair values Fair values versus carrying amounts The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are as follows:

It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximate of fair value. Carrying amount Loans and Other financial Total receivables liabilities 31 December 2012 N’000 N’000 N’000 Financial assets not measured at fair value Trade and other receivables 18,341,724 - 18,341,724 Cash and cash equivalents 10,300,702 - 10,300,702

28,642,426 - 28,642,426 Financial liabilities not measured at fair value Short term borrowings - 13,460,102 13,460,102 Trade and other payables - 12,751,477 12,751,477 Security deposits - 1,510,904 1,510,904 - 27,722,483 27,722,483 The Company’s financial instruments are categorised as follows: Carrying amount Loans and Other financial Total receivables liabilities 31 December 2013 N’000 N’000 N’000 Financial assets not measured at fair value Trade and other receivables 21,142,071 - 21,142,071 Loans and receivables 1,630,770 - 1,630,770 Cash and cash equivalents 13,114,626 - 13,114,626

35,887,467 - 35,887,467 Financial liabilities not measured at fair value Short term borrowings - 15,811,212 15,811,212 Trade and other payables - 19,986,376 19,986,376 Security deposits - 1,572,949 1,572,949

- 37,370,537 37,370,537

Trade and other receivables, security deposits, bank overdrafts and other short term borrowings are the Company’s short term financial instruments. Accordingly, management believes that their fair values are not expected to be materially different from their carrying values.



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The interest rates used to determine the discounted estimated cash flows, where applicable are based on external sources and were as follows: 2013 2012 Loans and receivables 17% - Other receivables 18% 18% 26 Related party transactions Parent and ultimate controlling entity As at the year ended 31 December 2013, MRS Africa Holdings Limited (incorporated in Nigeria) owned 60% of the issued share capital of MRS Oil Nigeria Plc. The ultimate holding company of the Company is MRS Africa Holdings Limited incorporated in Nigeria.

The Company has transactions with its parent and other related parties who are related to the Company by virtue of being members of the MRS Group. The total amounts due to related parties by the nature of the transactions are shown below: (a) Sales of Goods and Services 2013 2012 N’000 N’000 Sales of goods: - MRS Oil and Gas Limited 5,347,598 4,990,266 - Other related entities 96,925 245,880 Sales of services - MRS Oil and Gas Limited - 376,531 Total 5,444,523 5,612,677 (b) Purchases of goods and services 2013 2012 N’000 N’000 Purchase of products - Petrowest Limited - 6,471,922 - MRS Oil and Gas Limited 2,194,400 13,171,703 Purchase of Services - Management Fees 631,119 531,628 - Storage Fees 735,245 832,296 - Service fee (Petrowest Limited) 422,715 -

Other purchases (Tankers) - Rosscourt International Limited 2,652,517 - Total 6,635,996 21,007,549 Net balances due (to)/ from related entities within the group are as follows: 2013 2012 N’000 N’000

Petrowest Limited (422,715) - MRS Oil and Gas Limited 3,125,035 1,387,054 MRS Africa Holdings Limited 84,995 49,454 Other related entities (1,864,040) (24,927) Total 923,275 1,411,581



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Segment revenue and cost of sales 31-Dec-13 Revenue Cost of sales Gross profit N’000 % of Total N’000 % of Total N’000 % of Total

Retail/C&I 74,303,408 85 71,155,981 86 3,147,427 66Aviation 10,580,545 12 9,684,533 11 896,012 19Lubes 2,902,370 3 2,169,546 3 732,824 15Total 87,786,323 100 83,010,060 100 4,776,263 100 31-Dec-12 Revenue Cost of sales Gross profit N’000 % of Total N’000 % of Total N’000 % of Total

Retail/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 5,711,862 100


All outstanding balances do not bear interest and exclude value of products stored by MRS Oil and Gas Limited for the Company amounting to N3.4 billion (2012: N447.87 million). As at the

year end, the Company drew down on some of its import finance facilities on behalf of MOG. Import facilities drawn down as at the year end for MOG amounted to N9.57 billion (Note 24).

(c) Key management personnel compensation The Company pays short term benefits to its directors as follows: 2013 2012 N’000 N’000

Short term employee benefits 9,360 17,034

The managing director and executive director, finance and administration are seconded from a related party (MRS Oil and Gas Limited as part of the management fees agreement existing between the Company and MRS Holdings. 27 Segment reporting In accordance with the provisions of IFRS 8 – Operating Segments, the operating segments used to present segment information were identified on the basis of internal reports used by the Company’s Board of Directors to allocate resources to the segments and assess their performance. The Board of Directors is MRS Oil Nigeria Plc’s “Chief Operating 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 three product lines - Retail/Commercial & Industrial, Aviation, and Lubricants. The business segments presented reflect the management structure of the

Company and the way in which the Company’s management reviews business performance. The accounting policies of the reportable segments are the same as described in note 3. The Company has identified three operating segments: (i) Retail/ Commercial & Industrial - this segment is responsible for the sale and distribution of petroleum products (white products) to retail customers and industrial customers. (ii) Aviation - this segment involves the sale of Aviation Turbine Kerosene (ATK). (iii) 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.


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28 Subsequent events There are no significant subsequent events, which could have had a material effect on the state of affairs of the Company as at 31 December 2013. 29 Contingencies (a) Pending litigation and claims There are certain lawsuits and claims pending against the Company in various courts of law which are being handled by external legal counsels. The contingent liabilities in respect of pending litigation and claims amounted to N11.61 billion as at 31st December 2013 (2012: N12.47 billion). In the opinion of the Directors and based on independent legal advice, the Company’s liabilities are not likely to be material, thus no provision has been made in these financial statements.

(b) Financial commitments The Directors are of the opinion that all known liabilities and commitments, which are relevant in assessing the state of affairs of the Company, have been taken into consideration in the preparation of these financial statements. 30 Operating leases Leases as lessee The Company leases a number of offices, buses, warehouses and service stations under both cancellable and non-cancellable leases. During the year, an amount of N216.48 million was recognized as an expense in profit or loss in respect of operating leases (2012:N220.77 million). Lease rentals are paid upfront and included in prepayments, which are ammortised to the profit or loss over the life of the lease except for leases for buses that are paid in arrears on a monthly basis.



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Other Financial Information Value Added Statement For the year ended 31 December 2013 2012 N’000 N’000

Revenue 87,786,323 79,727,349 Bought in materials and services - Imported (17,798,548) (19,252,779) - Local (69,481,291) (57,489,604) 506,484 2,984,966

Other income 612,395 923,383 Finance income 3,284,269 149,051

Value added by operating activities 4,403,148 4,057,400

Distribution of Value Added % % To Government as: Taxes and duties 772,725 18 173,634 4 To Employees: Salaries, wages, fringe and end of service benefits 588,927 13 812,667 20 To Providers of Finance: - Finance cost 784,508 18 1,358,196 33 Retained in the Business To maintain and replace: - Property, plant and equipment 1,563,330 36 1,476,481 36 - Intangible assets 59,240 1 31,301 1 Proposed dividend 190,314 4 59,281 2 To augment retained earnings 444,104 10 145,840 4 Value added 4,403,148 100 4,057,400 100


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Other Financial Information cont’d.

Financial Summary Statement of comprehensive income 2013 2012 2011 N’000 N’000 N’000 Revenue 87,786,323 79,727,349 71,490,715 Results from operating activities (1,092,618) 1,587,900 1,772,767 Profit before taxation 1,407,143 378,755 1,413,242 Profit for the year 634,418 205,121 615,624 Comprehensive income for the year 634,418 208,846 655,726 Ratios Earnings per share (Kobo) 250 81 242 Declared dividend per share (Kobo) 23.34 70 125 Net assets per share (kobo) 7,728 7,502 7,476 Statement of financial position 31 Dec 2013 31 Dec 2012 31 Dec 2011 1 Jan 2011Employment of Funds N’000 N’000 N’000 N’000

Property, plant and equipment 21,351,269 22,013,568 23,172,968 24,115,946 Intangible assets 81,320 140,560 162,641 - Loans and receivables 655,229 - - - Trade and other receivables 5,361 7,507 247,557 280,858 Prepayment 303,594 236,673 116,085 209,143 Net current assets 3,229,534 3,112,717 2,240,804 1,315,728 Employee benefit obligation (15,541) (218,415) (551,480) (580,919)Deferred tax liability (5,981,619) (6,238,600) (6,399,890) (6,700,890)Net assets 19,629,147 19,054,010 18,988,685 18,639,866 Funds Employed Share capital 126,994 126,994 126,994 126,994Retained earnings 19,502,153 18,927,016 18,861,691 18,512,872 19,629,147 19,054,010 18,988,685 18,639,866 The financial information presented above reflects historical summaries based on International Financial Reporting Standards. Information related to prior periods has not been presented as it is based on a different financial reporting framework (Nigerian GAAP) and is therefore not directly comparable.


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Shareholder InformationShare Capital History:

Year Capital Mode of Acquisition

1978 - 1979 13,606,536 Initial Share Capital

1980-1982 27,213,072 Bonus 1980 (1:1) – 13,606,536 shares

1983-1985 45,355,120 Bonus 1983 (2:3) – 18,141,048 shares

1986-1988 68,032,680 Bonus 1986(1:2) – 22,677,560 shares

1989 90,710,240 Bonus 1989(1:3) – 22,677,560 shares

1990-1996 113,387,800 Bonus 1990 (1:4) –22,677,560 shares

1997-2001 151,183,734 Bonus 1997 (1:3) – 37,795,934 shares

2002-2003 181,420,480 Bonus 2002 (1:5) – 30,236,746 shares

2004-till date 253,988,672 Bonus 2004 (2:5) – 72,568,192 shares

The following dividends were declared by the Company between 1994 and 2013. Our records show that several dividends and share certificates remain unclaimed despite publications in the Newspaper to our shareholders and the circulation of the e-dividend forms. Affected

shareholders are urged to kindly update their records to enable the Registrars complete the e-dividend process. The e-dividend form is attached overleaf for your necessary and urgent attention.

DIVIDEND DATE DECLARED AMOUNT

Dividend 23 (Final) August 2, 1999 11,389,065.75

Dividend 24 (Interim) March 20, 2000 9,500,076.92

Dividend 25 (Final) June 9, 2000 10,698,481.80

Dividend 26 (Interim) October 11, 2000 16,856,918.30

Dividend 27 (Final) May 14, 2001 20,589,111.90

Dividend 28 (Interim) November 30, 2001 16,140,722.40

Dividend 29 (Final) May 29, 2002 19,393,233.15

Dividend 30 (Interim) December 16, 2002 20,112,253.83


Dividend 32 (Final) September 13, 2005 55,700,752.15

Dividend 33 (Final) July 25, 2006 32,010,760.08






Dividend 39 (Final) August 14, 2013 7,601,286.74

For further information on the unclaimed dividend/certificates, please contact the Company’s Registrar at City Securities (Registrars) Limited, 358, Herbert Macaulay Street, Yaba, Lagos.


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Share Price Movement

Shareholders can receive information or contact the Company about any questions (regarding the financial results and up-to-date share price information), through the Company’s website (www.mrsoilnigplc.com).


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NAME DESIGNATION ADDRESS

ADOLF HYMAN NIG LTD Distributor 5 Red Cross Road, Ogbete, Enugu

ANGELA ADELOLA LTD Distributor Km 3 Ondo RoadAkure

ANGUS NNOLIM C Distributor Angus West Africa Angus Filling Station 1 Airport Road, Maiduguri

ARONU MOTORS CO.(NIG) LTD Distributor 71, Jubilee Road, Aba

CEERO ALLIANCE LTD Distributor Airforce-Airport Road, By Airforce Fly Over, Port Harcourt

CY GENERAL ENTERPRISES Distributor 126 Industrial Rd OlodiApapa By Trinity B/S, Lagos DANBERTON INT NIG Distributor Zone D Block5 Shop 55 Tradefair Lagos

EZEANOCHIE FELIX, CHIEF Distributor 19 Beach Road Opp. Union Bank, Jos

HAMISU DAN TINKI MOTORS Distributor Naibawa Motor Park Km 7, Zaria Road, Kano

JEZCO OIL NIGERIA LTD Distributor 13 Numan Road, Jimeta, Yola

JOHN AND ROSE VENTURES LTD Distributor Beside Uncle T Bakery, Ibafo, Ogun State

MATRIX PETRO - CHEM LTD Distributor 3 Wilmer Street Off Town Planning Way, Ilupeju, Lagos.

NECIT NIGERIA LTD Distributor Hajiya Halima Estate Opp KofarK alambaina Sokoto Central Market

ONUORAH JOSEPHINE MRS Distributor B 6/4 New Spare Parts, Onitsha R. N. IWOBI Distributor MRS Warehouse 127 Club Road, Kano

LIST OF DISTRIBUTORS


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SIMITAL NIG LTD Distributor I4 Ogooluwa Shopping Complex Challenge, Ibadan

T.O EWEH & SONS LTD Distributor A17/4 Etomekpe, Duke Town Drive State Housing, Calabar.

UNLIMITED OIL SERVICES LTD Distributor 37 AmedOhibudo Street Victoria Island, Lagos

WOOPET OGBUS VENTURES LIMITED Distributor Ajase-Ipo Road, Offa-Garrage, Ilorin


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LAGOS HEADQUARTERS8, Macarthy Street, OnikanP. O. Box 166, LAGOSTel: 4614500Fax: 01-4614602

PORT HARCOURT4, Reclamation RoadPORT HARCOURT PMB 5369, email: [email protected]

WARRI 305, Warri /Sapele RoadP. O. Box 165, WARRITel: 053-254505, Fax: 053-254505

Corporate Directory

ENUGU Km 8, Abakaliki ExpresswayEmene, EnuguP. O. Box 650, ENUGUTel: 08035250912

KADUNA2, Akilu RoadP. O. Box 71, KADUNAemail: [email protected]

KANO 19b Club RoadKANOemail: [email protected]

APAPA Fuels Terminal / Manufacturing Apapa Complex5, Alapata Street Apapa, LagosP.M.B. 1083, Lagos.email: [email protected]

JOS19, Beach Road,P.O. Box 457Jos,PlateauStateemail: [email protected]


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We the undersigned hereby certify the following with regards to our financial report for the year ended December 31, 2013 that:

(a) We have reviewed the report;

(b) To the best of our knowledge, the report does not contain: (i) Any untrue statement of a material fact, or (ii) Omit to state a material fact, which would make the statements, misleading in the light of the circumstances under which such statements were made;

(c) To the best of our knowledge, the financial statement and other financial information included in the report fairly present in all material respects the financial condition and results of operation of the Company as of and for the periods presented in the report.

(d) We: (i) Are responsible for establishing and maintaining internal controls. (ii) Have designed such internal controls to ensure that material information relating to the Company, particularly during the period in which the periodic reports are being prepared;

(e) We have disclosed to the auditors of the company and the audit committee: (i) Any fraud, whether or not material, that involves management or other employees who have significant roles in the Company’s internal controls;”

Executive Director Managing DirectorFinance & Admin. 27 March, 2014

CERTIFICATION PURSUANT TO SECTION 60(2) OF INVESTMENT AND SECURITIES ACT NO. 29 OF 2007

Dear Sir,

I/We hereby request that all dividend(s) due to me/us from my/our holding in MRS Oil Nigeria Plc be paid directly to my/our Bank named below:

NAME OF BANK BRANCH

BANK ADDRESS

BANK ACCOUNT NO

SHAREHOLDERS FULL NAME

SURNAME

TITLE

OTHER NAMES

FULL ADDRESS:

MOBILE (GSM) NO LAND LINE

EMAIL FAX

SHAREHOLDER’S SIGNATURE(S) BANK’S AUTHORISED SIGNATURES/STAMP

1. 3.

2. 4.

Company Seal

-------------------------------------------------------------------------------------------------------------Please fill out and send this form to the Registrar’s address above

E-Dividend FormThe Registrar, P.O. Box 9117, LagosCity Securities (Registrars) Limited, Tel: 01–2665944-53, 01-2641298, 358 Herbert Macaulay Street, 01–7924462 Fax: 01-2714729

Yaba, Lagos

I/We*__________________________________________________________________of______________________

____________________________being amember/members of MRS OIL NIGERIA PLC hereby appoint** _____

_________________________________________________________________or failing him/her, the Chairman of

the meeting as my/our proxy to act and vote for me/us on my/our behalf at the Annual General Meeting of the

Company to be held on Thursday, August 7, 2014 and adjournment thereof.

Dated this ________________________________ day of _________________ 2014

Signature____________________________________________

PROPOSED RESOLUTIONS FOR AGAINST

1. To receive the report of the Audit Committee

2. To declare a dividend

3. To re-elect Directors under Articles 90/91 and 95 of the

Company’s Articles of Association.

I. Dr. Samaila Kewa

II. Mr. Patrice Alberti

III. Ms. Amina Maina

4. To re-appoint the Auditors

5. To authorize the Directors to fix the remuneration of the Auditors.

6. To elect members of the Audit Committee.

7. To consider and if thought fit, pass the following resolution

as an ordinary resolution:

That the fees payable to the Non-Executive Directors of the Company be reviewed from N750,000.00 per annum to N1,000,000 per annum.

NOTE: A member who is unable to attend an Annual General Meeting is entitled by law to vote by proxy. A proxy form has been prepared to enable you exercise your right in case you cannot personally attend the meeting. The proxy form should not be completed if you will be attending the meeting. If you are unable to attend the meeting, read the following instructions carefully:

(a) Write your name in BLOCK CAPITALS on the proxy form where marked * (b) Write the name of your proxy **, and ensure the proxy form is dated and signed by you. The common seal should be affixed on the proxy form if executed by a corporation.

The proxy form must be posted to reach the address below not later than 48 hours before the time for holding the meeting.

PROXY CARDTHE ANNUAL GENERAL MEETING OF MRS OIL NIGERIA PLC (THE COMPANY) WILL BE HELD AT

FEDERAL PALACE HOTEL, 6-8 AHMADU BELLO WAY, VICTORIA ISLAND, LAGOS, ON AUGUST 7, 2014, 2014 AT 11.00 A.M. (THE MEETING).

THE REGISTRARSCity Securities (Registrars) Limited

358, Herbert Macaulay Street, Onikan, Lagos.

ADMISSION CARD

MRS OIL NIGERIA PLCAnnual General Meeting to be held at Federal Palace Hotel, 6-8, Ahmed Bello Way, Victoria, Lagos On the Thursday, 7 August, 2014 at 11.00 a.m.

NAME OF SHAREHOLDER:_______________________________________SIGNATURE OF PERSON ATTENDING: ________________________

NOTE: The shareholder or his/her proxy must produce this admission card in order to be admitted at the meeting. Shareholders or their proxies are requested to sign the admission card at the entrance in the presence of the Registrar on the day of the Annual General Meeting.


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