WUYI DECORATION ENGINEERING (K) LIMITED

REPORT AND FINANCIAL STATEMENTS

31 DECEMBER 2021

KAGO MUKUNYA & ASSOCIATES

CERTIFIED PUBLIC ACCOUNTANTS

Wuyi Decoration Engineering (K) Company Ltd

REPORT AND FINANCIAL STATEMENTS - 31 DECEMBER 2021

CONTENTS PAGES

Directors and other particulars 1

Report of the directors 2

Statement of directors' responsibilities 3

Independent auditors' report 4&5

Statement of profit or loss and other comprehensive income 6

Statement of financial position 7

Statement of changes in equity 8

Statement of cash flows 9

Accounting policies and notes to the financial statements 10 - 15

Wuyi Decoration Engineering (K) Company Ltd

DIRECTORS AND OTHER PARTICULARS - 31 DECEMBER 2021

DIRECTORS Yi Rencai
Lin Yuli
Li Jinbiao

REGISTERED OFFICE L.R. No. 209/904

1st Parklands Avenue
P.O BOX 41374 - 00100
Nairobi,
Kenya.

INDEPENDENT AUDITORS Kago Mukunya & Associates

Certified Public Accountants
P O Box 30362-00100
NAIROBI

PRINCIPAL BANKER Standard Chartered

Nairobi

Legal Advisor Ngugi Kariuki & Co.

Advocates
P.O Box 28916-00100
Nairobi,
Kenya

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Wuyi Decoration Engineering (K) Company Ltd

REPORT OF THE DIRECTORS

The directors have pleasure in presenting the annual report together with the audited
financial statements of the company for the year ended 31 December 2021.

PRINCIPAL ACTIVITY

The principal activity of the company is retail and wholesale of safaricom airtime and Mpesa services.

RESULTS

The profit for the year amounting to K Sh 20,102,847 (2020: Profit: K Sh 12,790,826) has
been adjusted to the revenue reserves.

DIVIDEND

The directors do not recommend the payment of any dividend in the year under review.

DIRECTORS

All present directors continue in office in the ensuing year.

INDEPENDENT AUDITORS

Kago Mukunya & Associates appointed during the year are eligible for re-appointment as
independent auditors in accordance with Section 717 (2) of the Companies Act, 2015.

ON BEHALF OF THE BOARD

_______________
DIRECTOR
NAIROBI Date: _______________

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Wuyi Decoration Engineering (K) Company Ltd

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

FOR THE YEAR ENDED 31 DECEMBER 2021

The Kenyan Companies Act, 2015 requires the directors to prepare financial statements for each
financial year, that give a true and fair view of the financial position of the company as at the end of
the financial year and of its profit and loss for the year. It also requires the directors to ensure that the
company keeps proper accounting records that:

a) show and explain the transactions of the company;

b) disclose, with reasonable accuracy, the financial position of the company; and

c) enable the directors to ensure that every financial statement required to be prepared complies
with the requirements of the Companies Act, 2015.

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
Kenyan Companies Act, 2015. They also accept responsibility for:.

i) design, implementing and maintaining such internal controls as they determine necessary to
enable the presentation of the financial statements that are free from material misstatements,
whether due to fraud of error;

ii) selecting suitable accounting policies and applying them consistently

iii) making accounting estimates and judgments that are reasonable in the circumstances.

Having made an assessment of the company's ability to continue as a going concern, the directors
are not aware of any material uncertainties related to events or conditions that may cast doubt upon
the company's ability to continue as a going concern.

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

Approved by the board of directors on…………………………………………..2022 and signed on its

behalf by:

____________________

Director

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REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF
WUYI DECORATION ENGINEERING (K) COMPANY LTD
Opinion

We have audited the accompanying financial statements of Wuyi Decoration Engineering (K) Co.
Ltd set out on pages 6 to 15. These financial statements comprise the statement of financial position
as at 31 December 2021, the statement of profit or loss and other comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, and notes,
including a summary of significant accounting policies.

In our opinion the accompanying financial statements give a true and fair view of the financial
position of the company as at 31 December 2021 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, 2015.

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. 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.

Directors' responsibility 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 International Financial Reporting Standards and the
requirements of the Kenyan Companies Act, 2015. and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.

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 going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibility for 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 judgement 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.

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REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF
WUYI DECORATION ENGINEERING (K) COMPANY LTD

Auditor's responsibility for the financial statements (continued)

● 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 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 in the financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained 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.

● 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.

Report on other legal requirements

As required by the Kenyan Companies Act, 2015 we report to you, based on our audit, 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 statement of financial position and statement of profit or loss and other
comprehensive income are in agreement with the books of account.

The engagement partner responsible for the audit resulting in this independent auditor's report
was CPA M.M.K Mukunya, Practising Certificate No. P007.

Kago Mukunya & Associates

Certified Public Accountants

Nairobi

…………………..2022

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Wuyi Decoration Engineering (K) Company Ltd

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2021

2021 2020
Notes K Sh K Sh

Turnover 365,976,417 322,059,181

Cost of sales (282,293,976) (264,841,935)
----------------- -----------------
Gross profit 83,682,442 57,217,246

Administration costs (25,516,115) (18,583,459)

Staff expenses (27,334,700) (21,265,612)
Selling and distribution expenses (1,863,495) -
Finance expenses (249,779) (131,240)
-------------- --------------
Operating profit 2 28,718,353 17,236,935
-------------- --------------
Profit before tax 28,718,353 17,236,935

Tax 3 (8,615,506) (4,446,109)

-------------- --------------
Profit after tax 20,102,847 12,790,826
-------------- --------------

Independent auditors' report - page 4 & 5

The accounting policies and notes on pages 10 to 15 form an integral part of these
financial statements.

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Wuyi Decoration Engineering (K) Company Ltd

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021

2021 2020
ASSETS Notes Kshs kshs

Non-current assets
Vehicles, computers & office equipments 4 6,157,439 4,510,465
-------------- --------------
6,157,439 4,510,465
-------------- --------------
Current assets
Trade and other receivables 5 88,462,370 80,530,145
Cash and cash equivalents 6 28,704,194 27,377,163
Inventory & Work in progress 105,907,968 74,357,937
---------------- ----------------
223,074,533 182,265,245
---------------- ----------------
Total assets 229,231,972 186,775,710
========= =========
EQUITY AND LIABILITIES

Capital and reserves

Share capital 7 10,000,000 10,000,000
Revenue reserve 83,561,075 76,249,054
Equity Contribution - 19,893,696
--------------- ---------------
93,561,075 106,142,750
--------------- ---------------
Current liabilities
Trade and other payables 8 127,055,390 68,911,718
Tax Payable 8,615,506 11,721,191
---------------- ----------------
135,670,896 80,632,960
---------------- ----------------

Total equity and liabilities 229,231,972 186,775,710

========= =========

Independent auditors' report - page 4 & 5

The accounting policies and notes on pages 10 to 15 form an integral part of these financial statements.

The financial statements were approved by the Board of Directors on ……..…………..........2022

and signed on its behalf by:-

__________________ __________________
DIRECTOR DIRECTOR

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Wuyi Decoration Engineering (K) Company Ltd

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2021

Share Revenue Total

capital reserve
Kshs Kshs kshs

As at 1 January 2021 10,000,000 63,458,228 73,458,228

Total comprehensive income - 20,102,847 20,102,847

----------- --------------- ---------------

As at 31 December 2021 10,000,000 83,561,075 93,561,075
'========= '========= '=========

Share Revenue Total

capital reserve
Kshs Kshs kshs

As at 1 January 2021 10,000,000 63,458,228 73,458,228

Total comprehensive income - 12,790,826 12,790,826

----------- --------------- ---------------

As at 31 December 2021 10,000,000 76,249,054 86,249,054
'========= '========= '=========

Independent auditors' report - page 4 & 5

The accounting policies and notes on pages 10 to 15 form an integral part of these financial
statements.

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Wuyi Decoration Engineering (K) Company Ltd

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2021

2021 2020
Notes kshs kshs
Operating activities
Cash used in operations 10 35,891,003 (4,935,493)
Tax Paid (11,721,191) (8,978,152)
--------------- ---------------
Net cash (used in) / generated from operating activities 24,169,812 (13,913,645)
--------------- ---------------

Investing activities
Purchase of asset 4 (2,849,651) (159,649)
Proceeds from Sale of Motor Vehicle 690,000
----------------- -------------
Net cash used in investing activities (2,849,651) 530,351
----------------- -------------
Financing activities
Directors account (19,893,696) -
Forex (99,433) 3,824
------------- -------------
(19,993,129) 3,824
------------- -------------
(Decrease) / increase in cash and cash equivalents 1,327,032 (13,379,470)
========= =======
Movement in cash and cash equivalents

At start of the year 27,377,162 40,756,632

(Decrease) / increase during the year 1,327,032 (13,379,470)
-------------- ---------------
At end of the year 7 28,704,194 27,377,162
========= =========

Independent auditors' report - page 4 & 5

The accounting policies and notes on pages 10 to 15 form an integral part of these financial statements.

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Wuyi Decoration Engineering (K) Company Ltd

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

1. ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these financial

statements are set out below:

a) Accounting convention
These financial statements were prepared under the historical cost convention. They
are in compliance with International Financial Reporting Standards.

b) Depreciation
Depreciation is provided on fixed assets so as to write off their costs over their
estimated useful lives using the reducing balance method. The annual rates used are
as under: -

Computers & peripherals 30 %

Offfice equipment 12.5 %
Motor Vehicle 25%
Furniture, Fittings & Equipment 12.5%
c) Trade receivables
Trade receivables are carried at original invoiced amounts less provision for
impairment. A provision for impairment is established when there is objective
evidence that the company will not be able to collect amounts due. Such provisions
are recognised in the statement of profit or loss and other comprehensive income as
bad debts in the year in which they are identified.

d) Cash and cash equivalents

Cash and cash equivalents include cash in hand and cash at bank.
e) Trade and other payables
Liabilities for trade and other amounts payable are carried at cost, which is the fair
value of the consideration to be paid in the future for goods and services received,
whether or not billed to the company.

f) Taxation
Tax is provided at the rate of thirty per cent based on the results for the year as
adjusted in accordance with the current tax legislation.

g) Deferred tax
Deferred tax is provided, using the liability method, for all temporary differences
arising between the tax bases of assets and liabilities and their carrying values for
financial reporting purposes. Currently enacted tax rates are used to determine
deferred tax.
h) Revenue recognition
Sales represents invoices raised during the year net of value added tax and discounts.
Interest income is accounted on accrual basis. Other income is accounted on receipt
basis.

i) Comparative figures
Comparative figures are adjusted, wherever necessary, to adapt to the changes in
presentation in the current year.

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Wuyi Decoration Engineering (K) Company Ltd

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
2. OPERATING PROFIT K Sh K Sh
is stated after charging:

Auditors' remuneration 150,000 180,000

Depreciation 1,202,676 501,163
-------------- --------------
1,352,676 681,163
======== ========
3. TAX
This comprises
Current tax for the year - 4,446,109
-------------- --------------
Tax charge - 4,446,109
======== ========
The tax on the company's loss before tax differs from the theoretical amount that would arise using the basic
tax rate as follows:
Net profit before tax 28,718,353 17,236,935
------------- -------------
Tax calculated at the rate of 30%
Tax effects of :-
-------------- --------------
Tax (credit) / charge - -
======== ========
4. OFFICE EQUIPMENT & VEHICLE

Motor Computer Furniture & Total

Vehicles Equipment
Equipment Fittings
COST Kshs Kshs Kshs Kshs
At 1 January 2021 9,053,499 163,844 2,278,814 11,496,157
Additions 2,750,000 99,651 - 2,849,651
Disposal (stolen vehicle) 1,950,000 1,950,000
--------------- --------------- --------------- ---------------
At 31 December 2021 9,853,499 263,495 2,278,814 12,395,808
--------------- --------------- --------------- ---------------
DEPRECIATION
At 1 January 2021 5,642,213 143,792 1,199,688 6,985,693
Stolen Vehicle 1,950,000 1,950,000
Charge for the year 1,052,822 14,963 134,891 1,202,676
----------- ----------- ----------- -------------
At 31 December 2021 4,745,035 158,755 1,334,579 6,238,369
----------- ----------- ----------- -------------
NET BOOK VALUES
At 31 December 2021 5,108,464 104,740 944,235 6,157,439
======= ====== ======= =======
At 31 December 2020 3,411,286 20,052 1,079,126 4,510,464
====== ====== ======= =======

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Wuyi Decoration Engineering (K) Company Ltd

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
Kshs Kshs
5. TRADE AND OTHER RECEIVABLES

Trade receivables 88,462,370 80,530,145

Prepayment & deposits - -
---------------- ----------------
88,462,370 80,530,145
======== ========

6. CASH AND CASH EQUIVALENTS

Cash at bank 28,704,194 27,377,163

Mpesa - -
---------------- ----------------
28,704,194 27,377,163
======== ========
For the purpose of the statement of cash flows, cash and cash equivalents comprise of:

Cash and bank balances 28,704,194 27,377,163

-------------- -------------
28,704,194 27,377,163
======== =======

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Wuyi Decoration Engineering (K) Company Ltd

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
7. SHARE CAPITAL Kshs kshs

Authorized share capital:

1,000 Ordinary Shares of K Sh 100 each 10,000,000 10,000,000
====== ======
Issued and Fully Paid
500 Ordinary Shares of K Sh 100 each 10,000,000 10,000,000
===== =====

8 TRADE AND OTHER PAYABLES

Trade payables 125,962,891 67,136,107

Accruals and provisions 275,592 667,299
Value Added Tax 816,907 1,108,313
---------------- -----------------
127,055,390 68,911,719
======== ========

RELATED PARTY

Directors current account 19,893,696

----------------- -----------------
- 19,893,696
======== ========
Tax Payable
Balance brought forward 11,721,191 -
Provision for the year 8,615,506 -
Withholding tax paid during the year (11,721,191) 11,721,191
----------------- -----------------
Balance carried forward 8,615,506 11,721,191
======== ========
9. CASH USED IN OPERATIONS

Reconciliation of net profit before tax to cash used in operations:

Net profit before tax 20,102,847 17,236,935

Adjustments for:
Depreciation 1,202,676 501,163
Changes in receivables (7,932,225) (21,438,528)
Changes in payables 58,143,672 (532,258)
Changes in inventory (35,625,967) (1,250,305)
Loss on disposal of motor vehicle - 547,500
----------------- -----------------
Cash generated from / (used in) operations 35,891,003 (4,935,493)
======== =========

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Wuyi Decoration Engineering (K) Company Ltd

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

11. INCORPORATION AND DOMICILE

The Company is incorporated in Kenya under the Companies Act and is domiciled in Kenya.

12. CURRENCY

These financial statements are presented in Kenya Shillings (Kshs).

13. FINANCIAL RISK MANAGEMENT POLICIES

The company's activities expose it to a variety of financial risks including credit and
liquidity risks, effects of changes in foreign currency, interest rates as well as changes
in market prices of company's products. The company's overall risk management
programme focuses on unpredictability of changes in business environment and seeks
to minimise the potential adverse effects of such risks on its performance by setting
acceptable levels of risk. The company's financial risk management objectives and

a) Capital risk
The company manages its capital to ensure that it will be able to continue as a going
concern while maximising the return through the optimum use of the available
resources. The capital structure of the company consists of paid up capital, retained
earnings and external borrowings. The company endeavours to maximise the return on
each component. The overall capital management strategy remained the same as the
prior year and is expected to continue so in the next financial year.

b) Credit risk
The company's credit risk is primarily attributable to trade receivables and trade
payables. The company constantly monitors its credit risks on these aspects in line with
its overall risk management policies and responds to specific situations within the
parameters set. The company does not hedge any risks and has in place policies to
ensure that credit is extended to customers with established credit history.

c) Interest rate risk

The interest rate risk exposure arises mainly from interest rate movements on the
company's borrowings. Further, the company, from time to time, in order to position
itself for expected demand for liquid funds, holds deposits with institutions which also is
a subject of interest rate risk. The company manages the risk by constant contact with
the financial markets in order to optimise its revenue and expense and responds to any
adverse situations in accordance with the general trends in financial markets.

- 14 -
Wuyi Decoration Engineering (K) Company Ltd

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

13. FINANCIAL RISK MANAGEMENT POLICIES (CONTD)

The company manages its liquidity risk by intelligent treasury management practices,
formulated on the basis of constant assessment of its requirements, present and future
and sourcing of funds - internal or external including ploughing back of its own financial
resources.

e) Market risk
The company's market risk stems from procurement of its inputs and distribution of its
finished products. The company closely monitors the implementation of its procurement
policy, inventory policy as well as credit policy with a view to optimise its market share
as well as to respond to external threats. The company regularly reviews its core
strengths and seeks to put them such strengths to optimum use to maintain its niche in
the market - present and future.

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Wuyi Decoration Engineering (K) Company Ltd

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2021

2021 2021
Kshs Kshs
Income

Turnover 365,976,417 322,059,181

------------------- -------------------
365,976,417 322,059,181
------------------- -------------------
Less: Cost of sales
Cost of sales 282,293,976 264,841,935

----------------- -----------------
Gross profit 83,682,442 57,217,246

----------------- -----------------
83,682,442 57,217,246
Less: Expenses

Administration 25,516,115 18,583,459

Staff expenses 27,334,700 21,265,612
Selling and distribution expenses 1,863,495 -
Finance expenses 249,779 131,240
----------------- -----------------
54,964,088 39,980,311
----------------- -----------------

Net (loss) / profit before tax 28,718,353 17,236,935

----------------- -----------------
Wuyi Decoration Engineering (K) Company Ltd

SCHEDULE OF EXPENSES
FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
Kshs Kshs
ADMINISTRATION
Office rent and service charges 4,137,931 3,641,793
Postage and telephone 468,355 680,553
Water and electricity charges 1,186,961 1,064,621
Security expenses 3,317,547 3,317,547
Office expenses 1,145,535 955,012
Audit fees 150,000 150,000
Insurance 444,253 306,253
Depreciation 1,202,676 501,163
Transport and travelling 4,041,674 1,163,790
Repairs & maintenance 154,254 45,360
Proffessional Fees 1,545,000 1,065,000
Vehicle Expenses 3,347,275 1,275,340
Licences and permits 4,056,466 4,056,466
Email and internet 298,188 340,560
Legal fees 20,000 20,000
-------------- --------------
25,516,115 18,583,459
-------------- --------------
Staff expenses
Salaries and wages 26,482,146 20,833,492
Staff welfare 852,554 432,120
------------- -------------
27,334,700 21,265,612
------------- -------------
Selling and distribution
Commissions - -
Distribution and delivery 1,863,495 -
------------- -------------
1,863,495 -
------------- -------------
Finance expenses
Bank charges 150,346 131,240
Forex loss 99,433 -
------------- -------------
249,779 131,240
------------- -------------