KURWITU VENTURES LIMITED

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2017

KURWITU VENTURES LIMITED
Annual Report and Financial Statements
For the year ended 31 December 2017

Table of contents

Corporate information 1

Directors’ report 2-3

Statement of directors’ responsibilities 4

Report of the independent auditor 5-7

Financial statements:

Consolidated statement of comprehensive income 8

Company statement of comprehensive income 9

Consolidated statement of financial position 10

Company statement of financial position 11

Consolidated statement of changes in equity 12 - 13

Company statement of changes in equity 14 - 15

Consolidated statement of cash flows 16

Consolidated statement of cash flows 17

Notes 18 – 42
KURWITU VENTURES LIMITED
Corporate Information
For the year ended 31 December 2017

CORPORATE INFORMATION

COMPANY SECRETARY

Isaac M. Nduru
Certified Public Secretaries
Africa Alliance YMCA, Ground Floor
State House Crescent Road
P.O Box 100803-00101
Nairobi, Kenya.

AUDITOR

Abdulhamid & Company

Certified Public Accountants
Ramco Court-Unit 25
Opposite Capital Centre, Mombasa Road
P.O Box 23005-00100
Nairobi, Kenya.

REGISTERED OFFICES

Kurwitu Ventures Limited

Woodland Office Park, Suite 2B
Woodlands Road, Hurlingham
P.O Box 105028-00101
Nairobi, Kenya.

NOMINATED ADVISOR

ABC Capital Limited

ABC Bank House
Mezzanine Floor
Woodvale Grove, Westlands
P.O Box 34137-00100
Nairobi, Kenya.

1
KURWITU VENTURES LIMITED
Directors’ Report
For the year ended 31 December 2017

The report and financial statements have been prepared in accordance with section 147 to
163 of the repealed companies Act Cap 486, which remain inforce under the transition rules
contained in the sixth schedule, the transition and saving provisions of the companies Act
2015.

PRINCIPAL ACTIVITIES

The principal activity of the Group is to provide sharia compliant investment products. Sharia
compliant investment products are products that meet the requirements of Sharia law and
the principles articulated for Islamic finance. The Group consists of Kurwitu Ventures
Limited (the “Company”) and Kurwitu Asset Management Limited, which is a wholly owned
subsidiary of the Company and whose principal activity is to carry out the business of asset
management, provide asset management services, investment advisory services and real
estate investment trust management. The subsidiary has not begun operations.

An example of a Sharia compliant investment product that Kurwitu Ventures Limited is

offering is Sukuk Securities (Islamic Bond) which are structured securities to comply with
Islamic investment principles that prohibit charging and paying of interest. Sukuk structuring
is done by attaching real assets of the holders of Sukuk instruments who get in return a form
of rental payment or profit share.

As a hybrid of both private equity and venture capital investments, Kurwitu Ventures Limited
invests in opportunities that provide a reasonable amount of management control. Kurwitu
Ventures Limited invests in all sectors of the economy, but with a key focus on the
agricultural sector which employs the majority of Kenyans. Agriculture is the top foreign
exchange earner in the Kenyan economy yet it is plagued with several structural
inefficiencies. Addressing these inefficiencies could provide superior returns. While the key
investment focus is on agriculture, Kurwitu Ventures Limited will also invest in non-
agricultural ventures that meet the key sharia compliance test and have the potential to post
attractive returns on capital.

Kurwitu Ventures Limited may also provide investment products jointly with others as a
“pass through”. Such products may not be featured on the group’s and balance sheet and
would be in the form of asset backed securities, real estate investment trusts and
investment notes. The group has a social objective of broadening and deepening the capital
markets by introducing innovative products to meet the diverse goals of sharia compliant
investors.

Kurwitu Ventures Limited is a pioneer in its chosen field as a provider of sharia compliant
investment products. It is the first company listed on the Nairobi Securities Exchange (NSE)
with a focus of attracting Islamic investors into the capital markets.

Kurwitu Ventures Limited strives to offer its clients premier investment products, whilst
adhering to good corporate governance and sustainability as the core of its values and
visions. Although the financial products are sharia compliant, the company does not intend
to deter potential investors and welcomes all investors interested in being part of developing
this new investment frontier.

RESULTS AND DRAWINGS

The net loss for the year of KShs 10,834,180 (2016: KShs 14,490,605) has been added to
accumulated losses. During the year, no interim dividend was paid (2016: nil). The directors
do not recommend the approval of a final dividend.

2
KURWITU VENTURES LIMITED
Directors’ Report
For the year ended 31 December 2017

DIRECTORS

The directors who held office during the year and to the date of this report were:

Mr. Abdikadir H. Mohamed Chairman

Mr. Abdikadir M. Haji Vice Chairman
Mr. Abdirahman Abdillahi Managing Director
Ms. Sumayya Hassan
Mr. Mohammed A Hassan
Mr. Isaak Jamal Ibrahim
Mr. Chris Maranga Executive Director

NOMINATED ADVISORS

ABC Capital Limited

BANKERS

The bankers of the group are:-

Stanbic Bank Limited

Gulf African Bank Limited

AUDITOR

The Company’s auditor, Abdulhamid & Company CPA (K), continues in office in accordance
with Section 159 (2) of the repealed Companies Act (Cap 486).

By order of the Board

SECRETARY

______________ 2018

3
KURWITU VENTURES LIMITED
Statement of directors’ responsibilities
For the year ended 31 December 2017

The Company’s Act 2015 requires the directors to prepare financial statements for each
financial year which give a true and fair view of the financial position of the group and the
company at the end of the financial year and its financial performance for the year then
ended. The directors are responsible for ensuring that the group and the company keep
proper accounting records that are sufficient to show and explain the transactions of the
group and the company; disclose with reasonable accuracy at any time the financial position
of the group and the company; and that enables them to prepare financial statements of the
group and the company that comply with prescribed financial reporting standards and the
requirements of the Company’s Act. They are also responsible for safeguarding the assets
of the group and the company and for taking reasonable steps for the prevention and
detection of fraud and other irregularities.

The directors accept responsibility for the preparation and presentation of these financial
statements in accordance with International Financial Reporting Standards and in the
manner required by the Companies Act 2015. They also accept responsibility for:

(i) Designing, implementing and maintaining internal control as they determine

necessary to enable the preparation of financial statements that are free from
material misstatements, whether due to fraud or error;
(ii) Selecting suitable accounting policies and then apply them consistently; and
(iii) Making judgements and accounting estimates that are reasonable in the
circumstances

In preparing the financial statements, the directors have assessed the Company’s ability to
continue as a going concern and disclosed, as applicable, matters relating to the use of
going concern basis of preparation of the financial statements. Nothing has come to the
attention of the directors to indicate that the group and the company will not remain a going
concern for at least the next twelve months from the date of this statement.

The directors acknowledge that the independent audit of the financial statements does not
relieve them of their responsibility.

Approved by the board of directors on ________________ 2018 and signed on its behalf
by:

_______________________ _______________________
Chairman Managing Director
Mr. Abdikadir H. Mohamed Mr. Abdirahman Abdillahi

_______________2018

4
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF
KURWITU VENTURES LIMITED

Our opinion

We have audited the accompanying consolidated financial statements of Kurwitu Ventures

Limited (the Company) and its subsidiary (together, the Group), as set out on pages 8 to 42.
These financial statements comprise the consolidated statement of financial position at 31
December 2017 and the consolidated statement of comprehensive income, statement of changes
in equity and the statement of cash flows for the year then ended, together with the statement of
comprehensive income, statement of financial position of the Company standing alone at 31
December 2017 and the statement of changes in equity of the company for the year then ended,
and a summary of significant accounting policies and other explanatory notes.

In our opinion the accompanying financial statements give a true and fair view of the state of
financial affairs of the company as at 31 December 2017 and of its financial performance and
cash flows for the year then ended in accordance with International Financial Reporting
Standards and the Kenyan Companies Act.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Financial Statements section of our report. We are independent of the Company
in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code) together with the ethical requirements that are relevant
to our audit of the financial statements in Kenya, and we have fulfilled our ethical responsibilities
in accordance with these requirements and the IESBA Code. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other information

The Directors are responsible for the other information. Other information comprises the
information included in the Annual Report, but does not include the financial statements and our
auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other
information and in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude that there is material
misstatement of this other information we are required to report that fact. We have nothing to
report in this regard.

Directors’ responsibilities for the financial statements

The Directors are responsible for the preparation and fair presentation of the financial statements
that give a true and fair view in accordance with the International Financial Reporting Standard for
Small and Medium-sized Entities, 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.

5
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF
KURWITU VENTURES LIMITED (continued)
Directors’ responsibilities for the financial statements (continued)

In preparing the financial statements, the directors are responsible for assessing the company’s
ability to continue as a going concern, disclosing as applicable, matters related to the going
concern and using the going concern basis of accounting unless the directors intend to liquidate
the Company or to cease operations or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists.

Misstatements can arise from fraud or error and are considered material, if individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:

 Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for
our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations or the override of internal control;

 Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company’s internal control;

 Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by management;

 Conclude on the appropriateness of management’s use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast a significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures or in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence up to the date of the auditor’s report.
However, future events or conditions may cause the Company to cease to continue as a
going concern; and

 Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.

6
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF
KURWITU VENTURES LIMITED (continued)

Report on other legal requirements

The Kenyan Companies Act requires that in carrying out our audit we consider and report to you
on the following matters. We confirm that:
i) we have obtained all the information and explanations which to the best of our knowledge
and belief were necessary for the purposes of our audit;
ii) in our opinion proper books of account have been kept by the company, so far as appears
from our examination of those books; and
iii) The company’s balance sheet is in agreement with the books of account.

The engagement partner responsible for the audit resulting in this independent auditor's report
was CPA Hamid Ibrahim of Practising Certificate No.1788.

Certified Public Accountants

Nairobi

2018

7
 KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Consolidated statement of comprehensive income

Year ended 31 December
Notes 2017 2016
KShs KShs

Foreign exchange gain - 13,572

Interest income 317 7,313

Revenue 317 20,885

Staff costs 18 (5,497,748) (13,216,443)

Administrative expenses 19 (7,808,313) (4,759,730)

Other operating expenses 20 (2,074,245) (2,745,576)

Total expenses (15,380,306) (20,721,749)

Operating loss before taxation 5 (15,379,989) (20,700,864)

Income tax credit 7 4,545,809 6,210,259

Loss for the year (10,834,180) (14,490,605)

Other comprehensive income net of income

tax -
-

Total comprehensive loss for the year (10,834,180) (14,490,605)

Attributable to:

Equity holders of the Company (10,834,180) (14,490,605)

Non-controlling interest - -

(10,834,180) (14,490,605)

Earnings per share for profit attributable to

the equity holders of the Company

- basic (KShs per share) 8 (106) (142)

- diluted (KShs per share) 8 (71) (105)

The notes on pages 18 to 42 are an integral part of these financial statements.

8
 KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Company statement of comprehensive income

Year ended 31 December

Notes 2017 2016
KShs KShs

Foreign exchange gain - 13,572

Interest income 317 7,313

Revenue 20,885

Staff costs 18 (5,497,748) (13,216,443)

Administrative expenses 19 (7,777,671) (4,751,144)

Other operating expenses 20 (2,074,245) (2,745,576)

Total expenses (15,349,664) (20,713,163)

Operating loss before taxation 5 (15,349,347) (20,692,279)

Income tax credit 7 4,604,804 6,207,684

Loss for the year (10,744,543) (14,484,595)

Other comprehensive income net of income

tax - -

Total comprehensive loss for the year (10,744,543) (14,484,595)

Earnings per share for profit attributable to

the equity holders of the Company

- basic (KShs per share) 8 (105) (142)

- diluted (KShs per share) 8 (73) (104)

The notes on pages 18 to 42 are an integral part of these financial statements.

9
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Consolidated statement of financial position

31 December 31 December
Notes 2017 2016
KShs KShs
Capital and reserves attributable to the
Company’s equity holders
Share capital 9 10,227,200 10,227,200
Share premium 10 99,692,870 99,692,870
Accumulated losses (43,935,029 ) (33,100,849)

Attributable to company’s equity holders 65,985,041 76,819,221

Non-controlling interest - -

Total equity 65,985,041 76,819,221

Non-current liabilities
Shareholders’ loans 11 70,439,744 50,553,613

Total non-current liabilities 70,439,744 50,553,613

Total equity and non-current liabilities 136,424,785 127,372,834

Non-current assets
Property, plant and equipment 13(a) 2,292,267 2,616,091
Freehold land 13(b),13(c) 105,906,750 105,906,750
Deferred income tax asset 12 20,164,595 15,618,786

128,363,612 124,141,627
Current assets
Receivables and prepayments 14 1,857,013 1,367,976
Cash and cash equivalents 15 10,215,703 3,136,655

12,072,716 4,504,631
Current liabilities
Payables and accrued expenses 16 4,011,543 1,273,424

4,011,543 1,273,424

Net current assets 8,061,173 3,231,207

136,424,785 127,372,834

The financial statements on pages 8 to 42 were approved for issue by the Board of Directors
on ________________2018 and signed on its behalf by:

__________________ _________________
Chairman Managing Director
Mr. Abdikadir H. Mohamed Mr. Abdirahman Abdillahi

The notes on pages 18 to 42 are an integral part of these financial statements.

10
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Company statement of financial position

31 December 31 December
Notes 2017 2016
KShs KShs
Capital and reserves attributable to the
Company’s equity holders
Share capital 9 10,227,200 10,227,200
Share premium 10 99,692,870 99,692,870
Accumulated losses (43,680,277 ) (32,935,734)

Attributable to company’s equity holders 66,239,793 76,984,336

Non-controlling interest - -

Total equity 66,239,793 76,984,336

Non-current liabilities
Shareholders’ loans 11 62,317,463 51,385,863
Loan from subsidiary 5,000,000 4,000,000

Total non-current liabilities 67,317,463 55,385,863

Total equity and non-current liabilities 133,557,256 132,370,199

Non-current assets
Property, plant and equipment 13(a) 2,292,267 2,616,091
Freehold land 13(b),13(c) 102,000,000 102,000,000
Investment in subsidiary 1.1 9,990,000 9,990,000
Deferred income tax asset 12 20,152,827 15,548,024

134,435,094 130,154,115
Current assets
Receivables and prepayments 14 1,857,413 1,367,976
Cash and cash equivalents 15 1,276,291 2,121,532

3,133,704 3,489,508
Current liabilities
Payables and accrued expenses 16 4,011,542 1,273,424

4,011,542 1,273,424

Net current (liabilities)/ assets (877,838) 2,216,084

133,557,256 132,370,199

The financial statements on pages 8 to 42 were approved for issue by the Board of Directors
on ________________2018 and signed on its behalf by:

__________________ _________________
Chairman Managing Director
Mr. Abdikadir H. Mohamed Mr. Abdirahman Abdillahi

The notes on pages 18 to 42 are an integral part of these financial statements.

11
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Consolidated statement of changes in equity

Notes Attributable to equity holders of the Company
Share Share Accumulated Proposed Non-controlling Total
capital premium losses dividends interest equity
KShs KShs KShs KShs KShs KShs
Year ended 31 December 2017
At start of year 10,227,200 99,692,870 (33,100,849) - - 76,819,221

Total comprehensive income for the year

Loss for the year - - (10,834,180) - - (10,834,180)

Total other comprehensive income - - - - - -

Total comprehensive income for the year 10,227,200 99,692,870 (43,935,029) - - 65,985,041

Transactions with owners, recorded directly in equity

Contributions by and distributions to owners: - - - - - -
Dividends:
- Final for 2016 - - - - - -
- Proposed final for 2017 - - - - - -

Total contributions by and distributions to owners - - - - - -

At end of the year 10,227,200 99,692,870 (43,935,029) - - 65,985,041

The notes on pages 18 to 42 are an integral part of these financial statements.

12
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Consolidated statement of changes in equity

Notes Attributable to equity holders of the Company
Share Share Accumulated Proposed Non-controlling Total
capital premium losses dividends interest equity
KShs KShs KShs KShs KShs KShs
Year ended 31 December 2016
At start of year 10,227,200 99,692,870 (18,610,244) - - 91,309,826

Total comprehensive income for the year

Loss for the year - - (14,490,605) - - (14,490,605)

Total other comprehensive income - - - - - -

Total comprehensive income for the year - - (14,490,605) - - (14,490,605)

Transactions with owners, recorded directly in equity

Contributions by and distributions to owners: - - - - - -
Dividends:
- Final for 2015 - - - - - -
- Proposed final for 2016 - - - - - -

Total contributions by and distributions to owners - - - - - -

At end of the year 10,227,200 99,692,870 (33,100,849) - - 76,819,221

The notes on pages 18 to 42 are an integral part of these financial statements.

13
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Company statement of changes in equity

Notes Attributable to equity holders of the Company
Share Share Accumulated Proposed Non-controlling Total
capital premium losses dividends interest equity
KShs KShs KShs KShs KShs KShs
Year ended 31 December 2017
At start of year 10,227,200 99,692,870 (32,935,734) - - 76,984,336

Total comprehensive income for the year

Loss for the year - - (10,744,543) - - (10,744,543)

Total other comprehensive income - - - - - -

Total comprehensive income for the year 10,227,200 99,692,870 (43,680,277) - - 66,239,793

Transactions with owners, recorded directly in equity

Contributions by and distributions to owners: - - - - - -
Dividends:
- Final for 2016 - - - - - -
- Proposed final for 2017 - - - - - -

Total contributions by and distributions to owners - - - - - -

At end of the year 10,227,200 99,692,870 (43,680,277) - - 66,239,793

The notes on pages 18 to 42 are an integral part of these financial statements.

14
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Company statement of changes in equity

Notes Attributable to equity holders of the Company
Share Share Accumulated Proposed Non-controlling Total
capital premium losses dividends interest equity
KShs KShs KShs KShs KShs KShs
Year ended 31 December 2016
At start of year 10,227,200 99,692,870 (18,451,139) - - 91,468,931

Total comprehensive income for the year

Loss for the year - - (14,484,595) - - (14,484,595)

Total other comprehensive income - - - - - -

Total comprehensive income for the year - - (14,484,595) - - (14,484,595)

Transactions with owners, recorded directly in equity

Contributions by and distributions to owners: - - - - - -
Dividends:
- Final for 2015 - - - - - -
- Proposed final for 2016 - - - - - -

Total contributions by and distributions to owners - - - - - -

At end of the year 10,227,200 99,692,870 (32,935,734) - - 76,984,336

The notes on pages 18 to 42 are an integral part of these financial statements.

15
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Consolidated statement of cash flows

Year ended 31 December
Notes 2017 2016
KShs KShs

Cash utilised in operating activities

Loss before tax (15,379,989) (20,700,864)

Adjusted for: Depreciation 13(a) 356,875 414,400
Unrealised foreign exchange loss 2 -
Changes in working capital
Receivables and prepayments (489,037) 274,610
Payables and accrued expenses 2,738,119 (159,621)

Net cash utilised in operating activities (12,774,030) (20,171,475)

Cash utilised in investing activities

Purchase of property, plant and equipment 13(a) (33,051) (254,819)

Net cash used in investing activities (33,051) (254,819)

Cash generated from financing activities

Proceeds from shareholder loans 11 19,886,131 3,640,000

Net cash generated from financing activities 19,886,131 3,640,000

Net increase/ (decrease) in cash and cash equivalents 7,079,050 (16,786,293)

Movement in cash and cash equivalents

At start of year 3,136,653 19,922,948

Increase/(decrease) 7,079,050 (16,786,293)

At end of year 15 10,215,703 3,136,655

The notes on pages 18 to 42 are an integral part of these financial statements.

16
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Company statement of cash flows

Year ended 31 December
Notes 2017 2016
KShs KShs

Cash utilised in operating activities

Loss before tax (15,349,347) (20,692,279)

Adjusted for: Depreciation 13(a) 356,875 414,400
Changes in working capital
Receivables and prepayments (489,437) 274,610
Payables and accrued expenses 2,738,118 (159,621)

Net cash utilised in operating activities (12,743,791) (20,162,889)

Cash utilised in investing activities

Purchase of property, plant and equipment 13(a) (33,051) (254,819)

Investment in Kurwitu Asset Management Limited 1.1 - (10,000)

Net cash used in investing activities (33,051) (244,819)

Cash generated from financing activities

Proceeds from shareholder loans 11 10,931,600 3,630,000

Loan from Kurwitu Asset Management Limited 1,000,000 4,000,000

Net cash generated from financing activities 11,931,600 7,630,000

Net decrease in cash and cash equivalents (845,242) (12,777,707)

Movement in cash and cash equivalents

At start of year 2,121,533 14,899,240

Decrease (845,242) (12,777,707)

At end of year 15 1,276,291 2,121,533

The notes on pages 18 to 42 are an integral part of these financial statements.

17
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes

1 Reporting Entity

Kurwitu Ventures Limited with its subsidiary, Kurwitu Assets Management Limited offers sharia
compliant investment and asset management services. Kurwitu Ventures Limited is
incorporated in Kenya under the Companies Act as a limited liability company.

The company listed its shares on the Growth Enterprise Market Segment (GEMS) of the
th
Nairobi Securities Exchange on 13 November 2014.

The address of the registered office of the company is:

Woodland Office Park, Suite 2B

Woodlands Road, Hurlingham
P.O Box 105028-00101
Nairobi, Kenya.

The consolidated financial statements of the company and its subsidiary, Kurwitu Asset
Management Limited together referred to as “Group” and individually as “Company”.

1.1 Kurwitu Asset Management Limited

th
The company was incorporate on 11 March 2015 in Kenya under company number
CPR/2015/180452 with a nominal share capital of Kenya Shillings ten million (KShs
10,000,000) divided into ten thousand (10,000) shares of shillings one thousand (KShs
1,000) each. The shareholders at incorporation were as follows:
Company
Country of %
incorporation interest 2017 2016
/citizenship
Held Shares Shares

Kurwitu Ventures Limited Kenya 99.9% 9,990 9,990

Abdirahman Abdillahi Kenya 0.1% 10 10

100.0% 10,000 10,000

The principal activity is to carry on the business of asset management, for providing asset
management services, investment advisory services and real estate investment trust
management. The subsidiary has not started trading activities.

In the opinion of the Directors the carrying amount of debtors and other receivables
represent their fair value and the group's exposure to debts is limited.

18
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

2 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial
statements are set out below. These policies have been consistently applied to all years
presented, unless otherwise stated.

(a) Basis of preparation

The financial statements are prepared in compliance with International Financial Reporting
Standards (IFRS). The measurement basis applied is the historical cost basis, except where
otherwise stated in the accounting policies below. The financial statements are presented in
Kenya Shillings (KShs).

The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of
applying the Group’s accounting policies. The areas involving a higher degree of judgement or
complexity, or where assumptions and estimates are significant to the financial statements, are
disclosed in Note 3.

Changes in accounting policy and disclosures

(i) New and amended standards adopted by the Company

The following standards and amendments have been applied by the company for the first time
for the financial year beginning 1 January 2016:

Amendments to IAS 1, ‘Presentation of Financial Statements’: The amendments are made in the
context of the IASB’s Disclosure Initiative, which explores how financial statement
disclosures can be improved. The amendments, effective 1 January 2016, provide clarifications on
a number of issues, including:
 Materiality – an entity should not aggregate or disaggregate information in a manner that
obscures useful information. Where items are material, sufficient information must be provided
to explain the impact on the financial position or performance.

 Disaggregation and subtotals – line items specified in IAS 1 may need to be disaggregated
where this is relevant to an understanding of the entity’s financial position or performance.
There is also new guidance on the use of subtotals.

 Notes – confirmation that the notes do not need to be presented in a particular order.
 OCI arising from investments accounted for under the equity method – the share of OCI
arising from equity-accounted investments is grouped based on whether the items will or will
not subsequently be reclassified to profit or loss. Each group should then be presented as a
single line item in the statement of other comprehensive income.

19
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

2 Summary of significant accounting policies (continued)

(i) New and amended standards adopted by the Company (continued)

 IFRS 7 – that the additional disclosures relating to the offsetting of financial assets and
financial liabilities only need to be included in interim reports if required by IAS 34.

 IAS 19 – that when determining the discount rate for post-employment benefit obligations, it is
the currency that the liabilities are denominated in that is important and not the country where
they arise.

 IAS 34 – what is meant by the reference in the standard to ‘information disclosed elsewhere in
the interim financial report’ and adds a requirement to cross-reference from the interim financial
statements to the location of that information and make the information available to users on
the same terms and at the same time as the interim financial statements.

Amendment to IAS 16 and IAS 41; IAS 41 Agriculture now distinguishes between bearer plants
and other biological asset. Bearer plants must be accounted for as property plant and equipment
and measured either at cost or revalued amounts, less accumulated depreciation and impairment
losses.

A bearer plant is defined as a living plant that:

 is used in the production or supply of agricultural produce
 is expected to bear produce for more than one period, and
 has a remote likelihood of being sold as agricultural produce, except for incidental scrap
sales.
 Agricultural produce growing on bearer plants remains within the scope of IAS 41 and is
measured at fair value less costs to sell with changes recognised in profit or loss as the
produce grows.

Amendment to IAS 27;The IASB has made amendments to IAS 27 Separate Financial Statements
which will allow entities to use the equity method in their separate financial statements to measure
investments in subsidiaries, joint ventures and associates.

IAS 27 currently allows entities to measure their investments in subsidiaries, joint ventures and
associates either at cost or as a financial asset in their separate financial statements. The
amendments introduce the equity method as a third option. The election can be made
independently for each category of investment (subsidiaries, joint ventures and associates). Entities
wishing to change to the equity method must do so retrospectively.

The financial statements are prepared in compliance with International Financial Reporting
Standards (IFRS). The measurement basis applied is the historical cost basis, except where
otherwise stated in the accounting policies below. The financial statements are presented in
Kenya Shillings (KShs).

The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of
applying the Group’s accounting policies. The areas involving a higher degree of judgement or
complexity, or where assumptions and estimates are significant to the financial statements, are
disclosed in Note 3.

20
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

2 Summary of significant accounting policies (continued)

(i) New and amended standards adopted by the Company(continued)

Amendments to IFRS 11; The amendments to IFRS 11 clarify the accounting for the acquisition of
an interest in a joint operation where the activities of the operation constitute a business. They
require an investor to apply the principles of business combination accounting when it acquires an
interest in a joint operation that constitutes a business.

This includes:
 measuring identifiable assets and liabilities at fair value
 expensing acquisition-related costs
 recognising deferred tax, and
 recognising the residual as goodwill, and testing this for impairment annually.

Existing interests in the joint operation are not re-measured on acquisition of an additional interest,
provided joint control is maintained.

The amendments also apply when a joint operation is formed and an existing business is
contributed.

Amendments to IAS 16 and IAS 38; The IASB has amended IAS 16 Property, Plant and
Equipment to clarify that a revenue-based method should not be used to calculate the depreciation
of items of property, plant and equipment.

IAS 38 Intangible Assets now includes a rebuttable presumption that the amortisation of intangible
assets based on revenue is inappropriate. This presumption can be overcome if either

 The intangible asset is expressed as a measure of revenue (ie where a measure of revenue
is the limiting factor on the value that can be derived from the asset), or

 It can be shown that revenue and the consumption of economic benefits generated by the
asset are highly correlated.

Amendments made to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in

associates and joint ventures clarify that:

 The exception from preparing consolidated financial statements is also available to

intermediate parent entities which are subsidiaries of investment entities

 An investment entity should consolidate a subsidiary which is not an investment entity and
whose main purpose and activity is to provide services in support of the investment entity’s
investment activities.
An investment entity should consolidate a subsidiary which is not an investment entity and whose
main purpose and activity is to provide services in support of the investment entity’s investment
activities.
 Entities which are not investment entities but have an interest in an associate or joint venture
which is an investment entity have a policy choice when applying the equity method of
accounting. The fair value measurement applied by the investment entity associate or joint
venture can either be retained, or a consolidation may be performed at the level of the
associate or joint venture, which would then unwind the fair value measurement.

As these amendments merely clarify the existing requirements, they do not affect the company’s
accounting policies or any of the disclosures.

21
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

2 Summary of significant accounting policies (continued)

(ii) New standards and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for
annual periods beginning after 1 January 2016, and have not been applied in preparing these
financial statement. None of these is expected to have a significant effect on the financial
statements of the Company, except the following set out below

IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of

financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014.
It replaces the guidance in IAS 39 that relates to the classification and measurement of financial
instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three
primary measurement categories for financial assets: amortised cost, fair value through OCI and
fair value through P&L. The basis of classification depends on the entity’s business model and
the contractual cash flow characteristics of the financial asset. Investments in equity instruments
are required to be measured at fair value through profit or loss with the irrevocable option at
inception to present changes in fair value in OCI not recycling. There is now a new expected
credit losses model that replaces the incurred loss impairment model used in IAS 39. For
financial liabilities there were no changes to classification and measurement except for the
recognition of changes in own credit risk in other comprehensive income, for liabilities designated
at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by
replacing the bright line hedge effectiveness tests. It requires an economic relationship between
the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one
management actually use for risk management purposes.

Contemporaneous documentation is still required but is different to that currently prepared under
IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018.
Early adoption is permitted though the Company has not taken up this option.

IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes
principles for reporting useful information to users of financial statements about the nature, amount,
timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
Revenue is recognised when a customer obtains control of a good or service and thus has the
ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS
18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is
effective for annual periods beginning on or after 1 January 2018 and earlier application is
permitted. Early adoption is permitted though the Company has not taken up this option.

IFRS 16,’Leases’ After ten years of joint drafting by the IASB and FASB they decided that
lessees should be required to recognise assets and liabilities arising from all leases (with limited
exceptions) on the balance sheet. Lessor accounting has not substantially changed in the new
standard.

The model reflects that, at the start of a lease, the lessee obtains the right to use an asset for a
period of time and has an obligation to pay for that right. In response to concerns expressed
about the cost and complexity to apply the requirements to large volumes of small assets, the
IASB decided not to require a lessee to recognise assets and liabilities for short-term leases (less
than 12 months), and leases for which the underlying asset is of low value (such as laptops and
office furniture).

22
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

2 Summary of significant accounting policies (continued)

(ii) New standards and interpretations not yet adopted (continued)

A lessee measures lease liabilities at the present value of future lease payments. A lessee
measures lease assets, initially at the same amount as lease liabilities, and also includes costs
directly related to entering into the lease. Lease assets are amortised in a similar way to other
assets such as property, plant and equipment.
This approach will result in a more faithful representation of a lessee’s assets and liabilities and,
together with enhanced disclosures, will provide greater transparency of a lessee’s financial
leverage and capital employed.

One of the implications of the new standard is that there will be a change to key financial ratios
derived from a lessee’s assets and liabilities (for example, leverage and performance ratios).

IFRS 16 supersedes IAS 17, ‘Leases’, IFRIC 4, ‘Determining whether an Arrangement contains a
Lease’, SIC 15, ‘Operating Leases – Incentives’ and SIC 27, ‘Evaluating the Substance of
Transactions Involving the Legal Form of a Lease’. The standards is effective for annual periods
beginning 1 January 2019. Early adoption is permitted only if IFRS 15 is adopted at the same
time.

Recognition of Deferred Tax Asset for Unrealised Losses-Amendment to IAS 12;Amendments

made to IAS 12 in January 2016 clarify the accounting for deferred tax where an asset is measured
at fair value and that fair value is below the asset’s tax base. Specifically, the amendments confirm
that:

 A temporary difference exists whenever the carrying amount of an asset is less than its tax
base at the end of the reporting period.
 An entity can assume that it will recover an amount higher than the carrying amount of an
asset to estimate its future taxable profit.
 Where the tax law restricts the source of taxable profits against which particular types of
deferred tax assets can be recovered, the recoverability of the deferred tax assets can only be
assessed in combination with other deferred tax assets of the same type.
 Tax deductions resulting from the reversal of deferred tax assets are excluded from the
estimated future taxable profit that is used to evaluate the recoverability of those assets.

The amendment to IAS 12 is effective 1 January 2017.

Disclosure Initiative – Amendments to IAS 7; Effective 1 January 2017, entities will be required to
explain changes in their liabilities arising from financing activities. This includes changes arising
from cash flows (e.g. drawdowns and repayments of borrowings) and on cash changes such as
acquisitions, disposals, accretion of interest and unrealized exchange differences.

Changes in financial assets must be included in this disclosure if the cash flows were, or will be
included in cash flows from financing activities. This could be the case, for example, for assets that
hedge liabilities arising from financing liabilities.

Entities may include changes in other items as part of this disclosure, for example, by providing a
net debt reconciliation. However, in this case the changes in other items must be disclosed
separately from the changes in liabilities arising from financing activities. The information may be
disclosed in tabular format as a reconciliation from opening and closing balances, but a specific
format is not mandated.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be
expected to have a material impact on the Company.

23
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

2 Summary of significant accounting policies (continued)

(b) Consolidation

(i) Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and
operating policies generally accompanying a shareholding of more than one half of the voting
rights. Subsidiaries are fully consolidated from the date on which control is transferred to the
Group. They are de-consolidated from the date the control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by
the Group. The cost of an acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at the date of exchange, plus
costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair
values at the acquisition date, irrespective of the extent of any minority interest. The excess
of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets
acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognised directly in the income
statement.

Inter-company transactions, balances and unrealised gains on transactions between Group

companies are eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.

(ii) Associates

Associates are all entities over which the Group has significant influence but not control,
generally accompanying a shareholding of between 20% and 50% of the voting rights.
Investments in associates are accounted for by the equity method of accounting and are
initially recognised at cost. The Group’s investment in associates includes goodwill (net of
any accumulated impairment loss) identified on acquisition.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the
income statement, and its share of post-acquisition movements in reserves is recognised in
reserves. The cumulative post-acquisition movements are adjusted against the carrying
amount of the investment. When the Group’s share of losses in an associate equals or
exceeds its interest in the associate, including any other unsecured receivables, the Group
does not recognise further losses, unless it has incurred obligations or made payments on
behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to
the extent of the Group’s interest in the associates. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the asset transferred. Results
of associates as reported in the Group’s financial statements have been changed where
necessary to ensure consistency with the accounting policies adopted by the Group.

(c) Functional currency and translation of foreign currencies

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured
using the currency of the primary economic environment in which the entity operates (‘the
functional currency’). The consolidated financial statements are presented in Kenya
Shillings, which is the Group’s functional and presentation currency.

24
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

2 Summary of significant accounting policies (continued)

(c) Functional currency and translation of foreign currencies (continued)

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency of the
respective entity using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the statement of comprehensive
income.

Foreign exchange gains and losses that relate to borrowings and cash and cash
equivalents are presented in the statement of comprehensive income within ‘finance
income or cost’. All other foreign exchange gains and losses are presented in the
statement of comprehensive income within ‘other expenses’.

(d) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision-maker. The chief operating decision-maker,
who is responsible for allocating resources and assessing performance of the operating
segments, has been identified as the Executive Committee that makes strategic
decisions.

The directors consider the Group to be comprised of one operating segment. The
financial statements are presented on the basis that risks and rates of return are related
to this one reportable segment.

(e) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and
represents amounts receivable for goods supplied, stated net of value-added tax (VAT),
returns, rebates and discounts.

The Company recognises revenue when the amount of revenue can be reliably measured,
it is probable that future economic benefits will flow to the Company and when specific
criteria have been met for each of the Company’s activities as described below. The
Company bases its estimates on historical results, taking into consideration the type of
customer, the type of transaction and the specifics of each arrangement.

Revenue is recognised as follows:

(i) Sales of goods are recognised in the period in which the Company has delivered
products to the customer, the customer has full discretion over the channel and price
to sell the products, and there is no unfulfilled obligation that could affect the
customers’ acceptance of the products. Delivery does not occur until the products
have been accepted by the customer.

Accumulated experience is used to estimate and provide for discounts and returns.
The volume discounts are assessed based on anticipated annual purchases.

(ii) Sales of services are recognised in the period in which the services are rendered, by
reference to completion of the specific transaction assessed on the basis of the actual
service provided as a percentage of the total services to be provided.

25
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

2 Summary of significant accounting policies (continued)

(f) Property, plant and equipment

All categories of property, plant and equipment are initially recorded at cost and subsequently
depreciated

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the statement of comprehensive income during the financial
period in which they are incurred.

Depreciation is calculated using the straight line method to write down the cost of each asset to
its residual value over its estimated useful life as follows:

Computer equipment 30.0%

Furniture, fittings and equipment 12.5%
Motor vehicles 25.0%
Capital work in progress, which represents additions to property and equipment that have not
yet been brought into use, is not depreciated. Additions are transferred into the above
depreciable asset classes once they are brought into use.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at
each balance sheet date.

Property and equipment are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and
value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units). Gains and losses on
disposal of property and equipment are determined by reference to their carrying amounts and
are taken into account in determining operating profit.

(g) Accounting for derivative financial instruments and hedging activities

Derivatives, which comprise solely forward foreign exchange contracts, are initially
recognised at fair value on the date the derivative contract is entered into and are
subsequently measured at fair value. The fair value is determined using forward exchange
market rates at the balance sheet date. The derivatives do not qualify for hedge accounting.
Changes in the fair value of derivatives are recognised immediately in statement of
comprehensive income.

(h) Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment. Assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately identifiable cash flows (cash-
generating units). Non-financial assets other than goodwill that suffered impairment are
reviewed for possible reversal of the impairment at each reporting date.
26
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

2 Summary of significant accounting policies (continued)

(i) Accounting for leases

Leases in which a significant portion of the risks and rewards of ownership are retained by
the lessor are classified as operating leases. Payments made under operating leases are
charged to the statement of comprehensive income on a straight-line basis over the period
of the lease.

(j) Receivables

Receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method. A provision for impairment of receivables is
established when there is objective evidence that the Group will not be able to collect all the
amounts due according to the original terms of receivables. The amount of the provision is
the difference between the carrying amount and the present value of estimated future cash
flows, discounted at the effective interest rate. The amount of the provision is recognised in
the statement of comprehensive income.

(j) Payables

Payables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method.

(k) Share capital

Ordinary shares are classified as equity.

Ordinary shares are classified as ‘share capital’ in equity. Any premium received over and
above the par value of the shares is classified as ‘share premium’ in equity.

Ordinary shares represent the residual economic value of a company. They carry rights to
distribution of profits through dividends, to the surplus assets of a company on a winding
up and to votes at general meetings of the company.

There are no differences in the voting rights of the shares held by the major shareholders
of the Group.

Non-participating preference shares have the right to preference in the payment of the
paid up par value in the event of liquidation of the Group and may be redeemed at any
time by the Board of the Group subject to the provisions of the Companies Act.

(l) Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other
short term highly liquid investments with original maturities of three months or less, and
bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the
balance sheet.

27
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

2 Summary of significant accounting policies (continued)

(m) Employee benefits

(i) Retirement benefit obligations

The Group operates a defined contribution retirement benefit scheme for its employees. A
defined contribution plan is a pension plan under which the Group pays fixed contributions
into a separate entity. The Group has no legal or constructive obligation 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.

The assets of the scheme are held in separate trustee administered funds, which are funded
by contributions from both the Group and employees. The Group and all its employees also
contribute to the National Social Security Fund, which is a defined contribution scheme.

The Group’s contributions to the defined contribution schemes are charged to the profit and
loss account in the year to which they relate.

(ii) Other entitlements

The estimated monetary liability for employees’ accrued annual leave entitlement at the
balance sheet date is recognised as an expense accrual.

(iii) Employee share options

During the year the Group set up an Employee Share Ownership Plan (ESOP) under which,
subject to vesting conditions, eligible employees are entitled to purchase units in a separately
administered trust, each unit in the trust representing one share in the Company.

The shares that will be issued to the trust upon the expiry of the vesting period will be allocated
from existing authorised but unissued shares of the Company. On vesting, eligible employees
will purchase the units in the trust at the grant price.

The fair value of the options is measured using the intrinsic method and charged to the
statement of comprehensive income over the vesting period.

(n) Income tax

Income tax expense is the aggregate of the charge to the statement of comprehensive
income in respect of current income tax and deferred income tax.

Current income tax is the amount of income tax payable on the taxable profit for the year
determined in accordance with the Kenyan Income Tax Act.

Deferred income tax is provided in full, using the liability method, on all temporary differences
arising between the tax bases of assets and liabilities and their carrying values for financial
reporting purposes. However, if the deferred income tax arises from the initial recognition of an
asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit nor loss, it is not accounted for.

28
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

2 Summary of significant accounting policies (continued)

(n) Income tax (continued)

Deferred income tax is determined using tax rates enacted or substantively enacted at the
balance sheet date and are expected to apply when the related deferred income tax liability is
settled.

Deferred income tax assets are recognised only to the extent that it is probable that future
taxable profits will be available against which the temporary differences can be utilised.

(o) Borrowings

Borrowings are recognised initially at fair value including transaction costs and subsequently
stated at amortised cost using the effective interest method. Any differences between
proceeds (net of transaction costs) and the redemption value is recognised in the statement
of comprehensive income over the period of the borrowings.

Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the balance sheet date.

(p) Dividends

Dividends payable to the Group’s shareholders are charged to equity in the period in which
they are declared. Proposed dividends are shown as a separate component of equity until
declared.

3 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience
and other factors, including experience of future events that are believed to be reasonable
under the circumstances.

(i) Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual results. The
estimates and assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year are addressed
below.

Fair value estimation

The fair value of financial instruments that are not traded in an active market is determined by
using valuation techniques. The Group uses its judgement to select a variety of methods and
make assumptions that are mainly based on market conditions existing at the balance sheet
date.

Income taxes

Significant judgment is required in determining the Group’s provision for income taxes. There
are many transactions and calculations for which the ultimate tax determination is uncertain
during the ordinary course of business. The Group recognises liabilities for anticipated tax
audit issues based on estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were initially recorded, such
differences will impact the income tax and deferred tax provisions in the period in which such
determination is made.
29
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

3 Critical accounting estimates and judgements (continued)

(ii) Critical judgements in applying the entity’s accounting policies

In the process of applying the Group’s accounting policies, management has made
judgements in determining:
 the classification of financial assets and leases
 whether assets are impaired.

4 Financial risk management

The Group’s activities expose it to a variety of financial risks, including credit risk and the
effects of changes in foreign currency exchange rates and interest rates. The Group’s
overall risk management programme focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on its financial performance.

Financial risk management is carried out by the finance department under policies approved
by the Board of Directors. The finance department identifies, evaluates and hedges
financial risks. The Board provides written principles for overall risk management, as well
as written policies covering specific areas such as foreign exchange risk, interest rate risk,
credit risk, use of derivative and non-derivative financial instruments and investing excess
liquidity.

Market risk

(i) Foreign exchange risk

The Group is exposed to foreign exchange risk arising from various currency exposures,
primarily, with respect to the US dollar. Foreign exchange risk arises from future
commercial transactions, recognised assets and liabilities.

The Group manages foreign exchange risk by holding foreign currency bank accounts
which act as a natural hedge for purchases of future foreign currency denominated
transactions

At 31 December 2017, if the Shilling had weakened/strengthened by 10% against the US

dollar with all other variables held constant, consolidated post tax profit for the year would
have been KShs 221,259 (2016:KShs 137,956) higher/lower, mainly as a result of US dollar
receivables and bank balances.

(ii) Price risk

The Group does not hold investments that would be subject to price risk.

30
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

4 Financial risk management (continued)

Credit risk

Credit risk is managed on a Group basis. Credit risk arises from deposits with banks, as
well as trade and other receivables. The Group has no significant concentrations of credit
risk. The Group’s Managing Director assesses the credit quality of each customer, taking
into account its financial position, past experience and other factors. Individual risk limits
are set based on internal or external ratings in accordance with limits set by the Board. The
utilisation of credit limits is regularly monitored.

The amount that best represents the Group’s and Company’s maximum exposure to credit
risk at 31 December 2017 is made up as follows:
Group Company
2017 2016 2017 2016
KShs KShs KShs KShs

Cash equivalents 10,215,703 3,136,655 1,276,291 2,121,532

Trade receivables 1,857,013 1,367,976 1,857,413 1,367,976

12,072,716 4,504,631 3,133,704 3,489,508

None of the above assets are either past due or impaired.

Liquidity risk

Liquidity risk includes the risk of being unable to meet the Company's financial obligations as
they fall due because of inability to liquidate assets at a reasonable price and in an
appropriate time frame.

The Group continually assesses liquidity risk by identifying and monitoring changes in
funding required in meeting business goals and targets set in terms of the overall Group
strategy. In addition, the Group holds a portfolio of liquid assets as part of its liquidity risk
management strategy.

The table below analyses the Group’s and the Company’s financial assets and liabilities that
will be settled on a net basis into relevant maturity groupings based on the remaining period
at the balance sheet date to the contractual maturity date..

The amounts disclosed in the table below are the contractual undiscounted cash flows.
Balances due within 12 months equal their carrying balances, as the impact of discounting is
not significant

31
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

4 Financial risk management (continued)

Less than 1 Between 1 Between 2 Total

year and 2 years and 5 years
(a) Group
KShs KShs KShs KShs
At 31 December 2017:
Liabilities
- shareholders’ loans - - 70,439,744 70,439,744
- payables and accruals 4,011,542 - - 4,011,542

Total financial liabilities 4,011,542 - 70,439,744 74,451,286

(contractual maturity dates)
Assets
- cash and bank balances 10,215,703 - - 10,215,703
- receivables and prepayments 1,857,013 - - 1,857,013

Total financial assets (expected 12,072,716 - - 12,072,716

maturity dates)

Less than 1 Between 1 Between 2 Total

year and 2 years and 5 years
KShs KShs KShs KShs
At 31 December 2016:
Liabilities
- shareholders’ loans - - 50,553,613 50,553,613
- payables and accruals 1,273,424 - - 1,273,424

Total financial liabilities 1,273,424 - 50,553,613 51,827,037

(contractual maturity dates)
Assets
- cash and bank balances 3,136,655 - - 3,136,655
- receivables and prepayments 1,367,976 - - 1,367,976

Total financial assets (expected 4,504,631 - - 4,504,631

maturity dates)

32
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

4 Financial risk management (continued)

Less than 1 Between 1 Between 2 Total

year and 2 years and 5 years
(b) Company
KShs KShs KShs KShs
At 31 December 2017:
Liabilities
- shareholders’ loans - - 62,317,463 62,317,463
- loan from subsidiary - - 5,000,000 5,000,000
- payables and accruals 4,011,542 - - 4,011,542

Total financial liabilities 4,011,542 - 67,317,463 71,329,005

(contractual maturity dates)
Assets
- cash and bank balances 1,276,291 - - 1,276,291
- receivables and prepayments 1,857,413 - - 1,857,413

Total financial assets (expected 3,133,704 - - 3,133,704

maturity dates)

Less than 1 Between 1 Between 2 Total

year and 2 years and 5 years
KShs KShs KShs KShs
At 31 December 2016:
Liabilities
- shareholders’ loans - - 51,385,863 51,385,863
- loan from subsidiary - - 4,000,000 4,000,000
- payables and accruals 1,273,424 - - 1,273,424

Total financial liabilities 1,273,424 - 55,385,863 56,659,287

(contractual maturity dates)
Assets
- cash and bank balances 2,121,532 - - 2,121,532
- receivables and prepayments 1,367,976 - - 1,367,976

Total financial assets (expected 3,489,508 - - 3,489,508

maturity dates)

33
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

4 Financial risk management (continued)

Capital management

The Group’s objectives when managing capital are to safeguard its ability to continue as a
going concern in order to provide returns for shareholders and to maintain an optimal capital
structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to shareholders.

The Group has a dividend policy that permits dividends to be paid if the Board of Directors
finds that the payments are sustainable, after taking into account the sufficiency of
distributable reserves and liquidity in order to ensure the Group’s operational needs and/or
business growth are not limited by the unavailability of funds, as well as the Groups known
contingencies and compliance with any funding facility covenants.

The first priority of the Group will be to maintain sufficient distributable reserves and liquidity to
ensure that operational needs and/or business growth are not limited by the unavailability of
funds and also that facilities are available to cover all known contingencies. Additionally, any
dividends will only be declared and paid where allowable under any covenants included in any
funding facilities.

Subject to this, the Group intends to operate a progressive distribution policy based on what it
believes to be sustainable levels of dividend payments.

Whenever possible, it will be the Group’s intention to, at least, maintain annual dividend
payments at the level declared in the previous year. However, with respect to the initial
dividend payment under the current policy, such dividends will not necessarily be at the level
declared in the previous years, as the Group’s previous dividend policy was based on other
considerations and past dividend payments should not be taken as an indication of future
payments.

The Group’s focus is to minimise funds tied up in working capital, whilst ensuring that the
Company has sufficient financial ability to meet its liabilities as and when they fall due.

2017 2016
KShs KShs
(a) Group
Total borrowings 70,439,744 50,553,613
Less: cash and cash equivalents (10,215,703) (3,136,655)

Net debt 60,224,041 47,416,958

Total equity 65,985,041 76,819,221

Total capital 65,760,920 76,819,221

Gearing ratio 91.3% 61.7%

34
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

4 Financial risk management (continued)

2017 2016
KShs KShs
(b) Company
Total borrowings 67,317,463 55,385,863
Less: cash and cash equivalents (1,276,291) (2,121,532)

Net debt 66,041,172 53,264,331

Total equity 66,239,792 76,984,336

Total capital 66,239,792 76,984,336

Gearing ratio 99.7% 69.2%

Operational risk

The overall responsibility of managing operational risks-the risk arising from failed or
inadequate internal processes, people, systems and external events - is vested with the
Board of Directors. The Board issues policies that guide management on appropriate
practices on operational risk mitigation. The Managing Director assures the Board Risk
Committee of the implementation of the said policies.

The following are key measures that the Group undertakes when managing operational
risks:

 Documentation of procedures and controls, including regular review and updates to

reflect changes in the dynamic business environment;
 Appropriate segregation of duties, including the independent authorization of
transactions;
 Reconciliation and monitoring of transactions;
 Compliance with regulatory and other legal requirements;
 Reporting of operational losses and ensuring appropriate remedial action to avoid
recurrent;
 Training and professional development of employees to ensure they are well equipped
to identify and mitigate the operational risks in a timely manner; and
 Establishment of ethical practices at business and individual employee's level.

The entire operational risk management framework is subjected to periodic independent

audits (internal) in order for the company to obtain independent opinion of the
effectiveness and efficiency of the framework. Further, the findings of the internal Audit
department are reviewed by the Board Audit Committee and recommendations made
implemented in line with the agreed timeframe.

Compliance and regulatory risk

Compliance and regulatory risk includes the risk of bearing the consequences of non-
compliance with regulatory requirements. The Compliance function is responsible for
establishing and maintaining an appropriate frame work of Company compliance policies
and procedures. Compliance with such policies and procedures is the responsibility of all
managers.
35
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

5 Operating loss

The following items have been charged in arriving at the loss before income tax:

Group Company
2017 2016 2017 2016
Notes KShs KShs KShs KShs

Staff costs 18 5,497,748 13,216,443 5,497,748 13,216,443

Administrative expenses 19 7,808,313 4,759,730 7,777,671 4,751,144
Other operating expenses 20 2,074,245 2,745,576 2,074,245 2,745,576

6 Staff costs

The following items have been included within staff costs:

Group Company
2017 2016 2017 2016
KShs KShs KShs KShs

Salaries and wages 5,475,262 12,586,924 5,475,262 12,586,924

National Social Security
Fund 22,486 24,400 22,486 24,400
Medical fees - 605,119 - 605,119

5,497,748 13,216,443 5,497,748 13,216,443

7 Income tax expense

Represents 30% of the loss reported:

Group Company
2017 2016 2017 2016
KShs KShs KShs KShs

Net loss as per accounts (15,379,989) (20,700,864) (15,349,347) (20,692,279)

Add back:
Depreciation 356,875 414,400 356,875 414,400

(15,023,113) (20,286,464) (14,992,472) (20,277,878)

Less:
Wear and tear allowance (356,875) (414,400) (356,875) (414,400)

Taxable loss for the year (15,379,989) (20.700.864) (15,349,347) (20.692,279)

Current tax credit @ 30% (4,613,997) (6,210,259) (4,604,804) (6,207,684)

Deferred tax prior year
overprovision 68,188 - - -

(4,545,809) (6,210,259) (4,604,804) (6,207,684)

36
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

8 Earnings per share

Basic earnings per share are calculated by dividing the loss attributable to equity
holders of the Company by the weighted average number of ordinary shares in issue
during the year.

(a) Group 2017 2016

Loss attributable to equity holders of the Group (KShs) (10,834,180) (14,490,605)

Weighted average number of ordinary shares in issue

(Basic) 102,272 102,272
Weighted average number of ordinary shares in issue
(Diluted) 152,586 138,382

Basic earnings per share (KShs) (106) (142)

Diluted earnings per share (KShs) (71) (105)

(b) Company 2017 2016

Loss attributable to equity holders of the Group (KShs) (10,744,543) (14,484,595)

Weighted average number of ordinary shares in issue

(Basic) 102,272 102,272
Weighted average number of ordinary shares in issue
(Diluted) 146,784 138,976

Basic earnings per share (KShs) (105) (142)

Diluted earnings per share (KShs) (73) (104)

The potential dilution is calculated by adjusting the number of ordinary shares outstanding
during the year to assume conversion of dilutive potential ordinary shares. If conversion of
the shareholders’ loans was to be done, the maximum number of ordinary shares realised
from the shareholders’ loans would be 50,314 shares (2016: 36,110 shares). These have
been added to the existing issued and paid up shares of 102,272 shares.

9 Share capital Number of Number Authorised Issued

authorised of issued capital capital
shares shares KShs KShs

Balance at 1 January 2016 125,000 102,272 12,500,000 10,227,200

Balance at 1 January 2017 125,000 102,272 12,500,000 10,227,200

Balance at 31 December 125,000 102,272 12,500,000 10,227,200

2017

The par value of each share is KShs 100.

The Company’s ordinary shares are traded at the Nairobi Security Exchange.

37
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

10 Share premium

Group Company
2017 2016 2017 2016
KShs KShs KShs KShs

At start of the year 99,692,870 99,692,870 99,692,870 99,692,870

Issue of shares during the
year - - - -

99,692,870 99,692,870 99,692,870 99,692,870

st
The share premium arose out of the shares issued during the year ended 31 December
2013 for which payment was done through transfer of land. The excess value between the
par value and the value of the land was treated as share premium.

11 Shareholders’ loans

Group Company
2017 2016 2017 2016
KShs KShs KShs KShs

At start of the year 50,553,613 46,913,613 51,385,863 47,755,863

Injections during the year 19,886,131 3,640,000 10,931,600 3,630,000

70,439,744 50,553,613 62,317,463 51,385,863

The shareholders’ loan agreements provide that the loan can be converted into ordinary
shares at par value of KShs 1,400 or is paid back to the shareholder in full or partly.
Shareholders’ loans are interest free with no set repayment date. The loans are non-yielding
loans.

12 Deferred income tax

Deferred income tax is calculated using the enacted income tax rate of 30% (2016: 30%)
depending on the period of expected realisation. The movement on the deferred income tax
account is as follows:
Group Company

2017 2016 2017 2016

KShs KShs KShs KShs

At start of the year (15,618,786) (9,408,527) (15,548,023) (9,340,339)

Credit to statement of
comprehensive
income (Note 7) (4,545,809) (6,210,259) (4,604,804) (6,207,684)

(20,164,595) (15,618,786) (20,152,827) (15,548,023)

38
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

13(a) Property, plant and equipment

Motor Furniture &

(a) Group and vehicle Computers Fittings & Total
Company office
equipment
KShs KShs KShs KShs
At 1 January 2017
Cost 200,000 213,839 3,631,354 4,045,193
Accumulated (101,563) (137,114) (1,190,425) (1,429,102)
depreciation

Net book amount 98,437 76,725 2,440,929 2,616,091

Year ended 31
December 2017
Opening net book
amount 98,437 76,725 2,440,929 2,616,091
Additions - - 33,051 33,051
Disposal - - - -
Depreciation charge (24,609) (23,018) (309,248) (356,875)

Closing net book 73,828 53,707 2,164,732 2,292,267

amount

At 31 December 2017
Cost 200,000 213,839 3,664,405 4,078,244
Accumulated
depreciation (126,172) (160,132) (1,499,673) (1,785,977)

Net book amount 73,828 53,707 2,164,732 2,292,267

Year ended 31
December 2016
KShs KShs KShs KShs
Opening net book 131,250 61,008 2,583,414 2,775,672
amount
Additions - 48,599 206,220 254,819
Disposal - - - -
Depreciation charge (32,813) (32,882) (348,705) (414,400)
Depreciation on - - - -
disposal

Closing net book 98,437 76,725 2,440,929 2,616,091

amount
At 31 December 2016
Cost 200,000 213,839 3,631,354 4,045,193
Accumulated (101,563) (137,114) (1,190,425) (1,429,102)
depreciation

Net book amount 98,437 76,725 2,440,929 2,616,091

39
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

13(b) Freehold land (Kurwitu Ventures Limited)

In 2013, the company acquired property in Lamu: Lamu/Hindi Magongoni/599, 782 and 783
for a total of KShs 102,000,000.

The fair value model has been applied for the property. The company commissioned Knight
Frank Valuers Limited in financial year 2013 to determine the fair value of the property. The
open market value of all properties was determined using the prevailing market values at
that time.

13(c) Freehold land (Kurwitu Asset Management Limited)

In 2015, the company acquired property in Lamu/Lake Kenyatta 11/509 for a total of KShs
3,906,750.

14 Receivables and prepayments

Group Company
2017 2016 2017 2016
KShs KShs KShs KShs

Rent deposits 689,130 689,130 689,130 689,130

VAT receivable 1,145,133 656,096 1,145,533 656,096
Withheld tax 22,750 22,750 22,750 22,750

1,857,013 1,367,976 1,857,413 1,367,976

In the opinion of the directors, the carrying amounts of receivables and prepayments
represent their fair value and the Group’s exposure to debt is limited.

40
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

15 Cash and cash equivalents

Group Company
2017 2016 2017 2016
KShs KShs KShs KShs

Cash at bank-unrestricted 6,050,209 3,135,518 1,233,247 2,120,395

Cash at bank-restricted
cash guarantee 4,122,450 - - -
Cash in hand 43,044 1,137 43,044 1,137

10,215,703 3,136,655 1,276,291 2,121,532

For the purposes of the cash flow statement, cash and cash equivalents comprise the
following:

Group Company
2017 2016 2017 2016
KShs KShs KShs KShs

Cash and bank balances 10,215,703 3,136,655 1,276,291 2,121,532

as above
Bank overdrafts - - - -

10,215,703 3,136,655 1,276,291 2,121,532

16 Payables and accrued expenses

Group Company
2017 2016 2017 2016
KShs KShs KShs KShs

Audit fees 220,000 200,000 220,000 200,000

Accounts payables 3,552,706 1,053,202 3,552,706 1,053,203
Payroll statutory
deductions 30,128 - 30,128 -
Directors’ advances to the
Company 208,708 20,220 208,708 20,220

4,011,542 1,273,422 4,011,542 1,273,423

Payables and accrued expenses are stated at their nominal value. Directors’ advances to
the Company attract no interest payable.

17 Currency

The financial statements are prepared in Kenya Shillings (KShs). All foreign currency
transactions have been converted into Kenya Shillings using the rate at the closing rate in
accordance with International Accounting Standard No.21.

41
KURWITU VENTURES LIMITED
Financial Statements
For the year ended 31 December 2017

Notes (continued)

18 Staff Costs Group Company

2017 2016 2017 2016
KShs KShs KShs KShs

Salaries and wages 5,475,262 12,586,924 5,475,262 12,586,924

N.S.S.F Contributions 22,486 24,400 22,486 24,400
Medical fees - 605,119 - 605,119

5,497,748 13,216,443 5,497,748 13,216,443

19 Administrative expenses Group Company

2017 2016 2017 2016
KShs KShs KShs KShs

Professional fees 2,735,055 230,100 2,735,055 230,100

Audit & accounting fees 540,000 200,000 540,000 200,000
Printing and stationery 102,042 195,301 102,042 195,301
Postage and telephone 18,050 45,920 18,050 45,920
Newspapers and periodicals 28,080 31,140 28,080 31,140
Internet and computer expenses 169,688 128,935 169,688 128,935
Bank charges 47,822 25,522 17,180 16,937
Utilities 100,956 102,709 100,956 102,709
Office expenses 383,519 285,026 383,519 285,026
Depreciation 356,875 414,400 356,875 414,400
Rent & Rates 3,319,926 3,076,476 3,319,926 3,076,476
Repairs and maintenance 6,300 24,200 6,300 24,200

Total administrative expenses 7,808,313 4,759,730 7,777,671 4,751,144

20 Other operating expenses Group Company

2017 2016 2017 2016
KShs KShs KShs KShs

Licenses & permits 172,500 137,500 172,500 137,500

Nominated advisors fees 385,821 424,300 385,821 424,300
Insurance - 12,086 - 12,086
Motor vehicle expenses 12,550 8,965 12,550 8,965
Travel and accommodation 396,074 653,186 396,074 653,186
Project facilitation expenses 600,000 712,000 600,000 712,000
Entertainment expenses 7,850 170,692 7,850 170,692
Penalties - 2,687 - 2,687
Donation - 7,313 - 7,313
Website development - 44,364 - 44,364
Advertisement and marketing 372,255 200,861 372,255 200,861
Conference and meeting expenses 127,195 371,622 127,195 371,622

2,074,245 2,745,576 2,074,245 2,745,576

42