Report of the supervisory board

Report of the Supervisory Board and the Audit Committee on the 2011 financial statements and the proposal for the distribution of profit after taxation

The Supervisory Board and the Audit Committee performed its duties in full accordance with its statutory obligations, held 5 meetings during the year, regular agenda points of the meetings include the quarterly report of the Board of Directors on Company’s operations and the reports of Internal Audit, Corporate Security and Audit Committee. In addition, the Supervisory Board reviewed the proposals for the Annual General Meeting. The report of the Supervisory Board has been prepared pursuant to the report of the Board of Directors, the opinion of the auditors, the scheduled regular midyear reviews and the work of the Audit Committee. On its meetings during 2011, the Supervisory Board dealt in detail with the business situation of the MOL Group, the strategic development of the Group and its Divisions. The Supervisory Board regularly got information about the decisions of the Board of Directors and issues concerning the Company.    

MOL, with its USD 7.5 billion market capitalisation, is a leading integrated, upstream-driven company in the region and the largest company in Hungary. In 2010, the weighted average stock exchange price of MOL shares was HUF 19,505 while in 2011 it increased to HUF 19,735. On the other hand the year end closing price decreased. At the end of 2010 the share price closed at HUF 20,790 , while in 2011 HUF 17,350 was the closing price.

The Company’s 2011 financial statements - in accordance with Accounting Law - provide a true and fair picture of its economic activities and were audited by Ernst & Young Kft. The accounting methods applied in developing the financial reports are supported by the report of the Audit Committee, comply with the provisions of the Accounting Act and are consistent with the accounting policies of the Company. All figures in the balance sheet are supported by analytical registration. Assessment and payment of tax obligations were implemented as prescribed by law.

A total of 129 companies were fully, and a further 13 companies were partially consolidated in MOL Group, using the equity method. Last year the ownership structure changed: at the end of 2011, compared to the end of last year the shareholding of foreign institutional investors decreased from 26.1% to 25.5%, while the ownership of domestic institutional and private investors decreased from 8.3% to 7.8%. According to the received request for the registration of the shares and the published shareholders notifications the Company had seven shareholders that held more than 5% voting rights on the 31st December 2011. Our largest shareholder is the Hungarian State holding 24.6% of MOL shares. The Company held 5.5% treasury shares at the end of December 2011.

Despite mixed business environment MOL closed another successful year in 2011. High crude oil prices supported Upstream results, however external conditions were unexpectedly tough for Downstream operation. Despite the developments in Syria and the further tightening regulatory environment, we were able to grow further in 2011. More than 70% of Group EBITDA was generated by Upstream segment, while half of the operating result came outside Hungary as the share of international operations increased year by year.

The Upstream division as the main profit contributor of the Group achieved record high EBITDA in 2011. An important achievement is the more than 200% reserve replacement ratio which boosted SPE 2P reserves to 682 MMboe as a result of earlier exploration successes in Kazakhstan and extensive field development in Russia. The elevated reserves level will provide good basis for mid-term production growth.

In 2011, Downstream suffered from extraordinarily unfavourable developments in the external environment and some unplanned refinery stoppages in Croatia which together put unusually heavy pressure on Downstream profitability. However, the two largest refineries performed relatively well, which emphasizes the strength of these complex assets.

During the year MOL further strengthened its financial position as evidenced by lower gearing and net debt to EBITDA level. The investment grade credit rating was reinforced by Fitch, which also underlined MOL’s strong financial position. In a tough environment, MOL remained disciplined and financed its capital expenditure requirements from operating cash flow. MOL is highly committed to maintaining this strong financial position in the coming years.

In the field of sustainable development, MOL reached exceptional results as well. In 2011, MOL Group was included into Dow Jones Sustainability World Index for the second time as the first and sole company from the region.

2012 will be a challenging year (i.e. force majeure notice in Syria, depressed refinery environment year-to-date), however MOL Group is targeting to deliver outstanding growth in mid-term.

The Supervisory Board endorses the recommendation of the Board of Directors to pay out HUF 45 billion dividend in 2012 connected to the year ended 31 December 2011.

The Supervisory Board proposes that the General Meeting approves the audited financial statements of MOL Plc for 2011, with a balance-sheet total of HUF 3,168 billion, net income of HUF 150 billion, and tie-up reserve of HUF 104 billion and the audited consolidated financial statements of the MOL Group for 2011, with a balance sheet total of HUF 4,993 billion and profit attributable to equity holders of HUF 154 billion.

Budapest, 29th March, 2012

For and on behalf of the Supervisory Board and Audit Committee of MOL Plc:


György Mosonyi  dr. Attila Chikán
Chairman of the Supervisory Board   Chairman of the Audit Committee





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