SEPYANA OIL EAST AFRICA LIMITED

MANAGEMENT REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 22 MARCH 2017 Sepyana Oil East Africa Limited Management report and financial statements For the year ended 22 March 2017 CONTENTS

Page No. Corporate information 1

Report of the directors 2

Statement of directors responsibility 3

Independent auditor's report 4

Financial Statements:-

Statement of comprehensive income 5

Statement of financial 6

Statement of changes in equity 7

Statement of cash flows 8

Notes to the financial statements 9-18

The following pages do not form an integral part of these financial statements

Manufacturing account Annexe i

Schedule of expenditure Annexe ii Sepyana Oil East Africa Limited Management report and financial statements For the year ended 22 March 2017 CORPORATE INFORMATION

Directors Mr Abdolaziz Abdolrahman Jamshidi Iranian Mr Abdollah Asgharzadeh Iranian Mr Mohammed Jalal Shahrizi Iranian

Company Secretary Sheba Mohamud Mohamed P.O Box 55358 - 00200 Nairobi

Independent auditor Baker Tilly Merali's Certified Public Accountants New Rehema House Raphta road, Westlands P.O. Box 67486 - 00200 Nairobi

Registered office 205 / 49 Riverside Drive P.O Box 55358 - 00200 Nairobi

Principal place of business 205 / 49 Riverside Drive P.O Box 55358 - 00200 Nairobi

Banker Equatorial Commercial Bank P.O Box 52467 Nairobi

1

Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME

2017 2016 Note Kshs Kshs Revenue 4. 231,465,962 80,656,234

Cost of sales (161,404,505) (82,258,530)

Gross profit/(loss) 70,061,457 (1,602,296)

Other income 5. 66,760 1,060,564

Administration expenses (128,522,371) (43,901,136)

Establishment expenses (34,091,827) (38,110,118)

Operating loss (92,485,981) (82,552,986)

Finance cost 6. - -

Loss before tax (92,485,981) (82,552,986)

Tax charge 8. - -

Net loss after tax (92,485,981) (82,552,986)

Other comprehensive income - -

Total comprehensive loss for the year (92,485,981) (82,552,986)

5

Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 STATEMENT OF CHANGES IN EQUITY

Share Share Retained Total Capital Deposits Earnings Equity Year ended 22 March 2016 Kshs Kshs Kshs Kshs

As at 23 March 2015 76,600,000 1,793,282 (187,402,522) (109,009,240)

Net loss for the year - - (82,552,986) (82,552,986)

As at 22 March 2016 76,600,000 1,793,282 (269,955,508) (191,562,226)

Year ended 22 March 2017

At 23 March 2016 76,600,000 1,793,282 (269,955,508) (191,562,226)

Net loss for the year - - (92,485,981) (92,485,981)

At 22 March 2017 76,600,000 1,793,282 (362,441,489) (284,048,207)

7 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 STATEMENT OF CASH FLOWS

2017 2016 Note Kshs Kshs Operating Activities

Cash used in operating activities 21. (93,379,528) (106,817,317) Tax paid - (11,691)

Net cash used in operating activities (93,379,528) (106,829,008)

Investing Activities Purchase of fixed assets (983,197) 1,195,299 Purchase of intangible assets - - Interest received - 0 Net cash used in investing activities (983,197) 1,195,299

Financing Activities Working capital financing 160,927,862 93,416,536

Net cash generated from financing activities 160,927,862 93,416,536

Net increase/(decrease) in cash and cash equivalents 66,565,138 (12,217,173)

Movement in cash and cash equivalents

Cash and bank balances at start of year 3,263,139 15,480,312 Net increase/ (decrease) in cash and cash equivalents 66,565,138 (12,217,173)

Cash and bank balances at year end 13. 69,828,277 3,263,139

8 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 NOTES TO THE FINANCIAL STATEMENTS

1 Incorporation SepYana Oil East Africa Limited is incorporated in Kenya under the Companies Act as a private limited company, limited by shares and is domiciled in Kenya. The address of its registered office and principal place of business is stated on page 1.

2 Significant accounting policies (continued)

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. a) Basis of preparation The financial statements are prepared in compliance with International Financial Reporting Standards under the historical cost basis of accounting. The presentation currency used in the preparation of the financial statements is the Kenya Shilling, which is the functional currency. (the currency of the primary economic environment in which the entity operates). The financial statements comprise a statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows, and notes. Income and expenses, excluding the components of other comprehensive income, are recognised in the statement of comprehensive income. Other comprehensive income is recognized in the statement of comprehensive income and comprises items of income and expense (including reclassification adjustments) that are not recognized in the statement of comprehensive income as required or permitted by International Financial Reporting Standard (IFRS). Reclassification adjustments are amounts reclassified to the statement of comprehensive income in the current period that were recognized in other comprehensive income in the current or previous periods. Transactions with the owners of the group in their capacity The preparation of financial statements in conformity with International Financial Reporting Standards requires the use of estimates and assumptions. It also requires management to exercise its judgment in the process of applying the accounting policies adopted by the group. Although such estimates and assumptions are based on the directors' best knowledge of the information available, actual results may differ from those estimates. The judgments and estimates are reviewed at the end of each reporting period, and any revisions to such estimates are recognized in the year in which the revision is made. b) New and revised standards

i) Adoption of new and revised standards

The following new and revised standards and interpretations have also become effective for the first time and have been adopted by the company where relevant to its operations:

• Amendments to IAS 19 titled Defined Benefit Plans: Employee Contributions - The amendments, applicable retrospectively to annual periods beginning on or after 1 July 2014, clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In particular, contributions that are independent of the number of years of service can derecognized as a reduction in the service cost in the period in which the related service is rendered (instead of attributing them to the periods of service) • Amendment to IAS 16 and IAS 38 (Annual Improvements to IFRSs 2010–2012 Cycle) – The amendment, applicable to annual periods beginning on or after 1 July 2014, clarifies how the gross carrying amount and the accumulated depreciation/amortization are treated where an entity uses the revaluation model.

• Amendment to IAS 24 (Annual Improvements to IFRSs 2010–2012 Cycle) - The amendment, applicable to annual periods beginning on or after 1 July 2014, clarifies how payments to entities providing management services are to be disclosed. • Amendment to IFRS 8 (Annual Improvements to IFRSs 2010–2012 Cycle) - The amendment, applicable to annual periods beginning on or after 1 July 2014, requires disclosure of the judgments made by management in applying the aggregation criteria to operating segments, and clarifies that reconciliations of the total of the reportable segments' assets to the entity's assets are required only if the segment assets are reported regularly.

• Amendment to IAS 40 (Annual Improvements to IFRSs 2011–2013 Cycle) - The amendment, applicable to annual periods beginning on or after 1 July 2014, clarifies that IFRS 3 and IAS 40 are not mutually exclusive: while IAS 40 assists preparers to distinguish between investment property and owner-occupied property, IFRS 3 helps them to determine whether the acquisition of an investment property is a business combination.

9 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 NOTES TO THE FINANCIAL STATEMENTS (Continued)

2 Significant accounting policies (continued) b) New and revised standards (continued) ii) New and revised standards and interpretations which have been issued but are not effective

• Amendment to IFRS 13 (Annual Improvements to IFRSs 2011–2013 Cycle) - The amendment, applicable to annual periods beginning on or after 1 July 2014, clarifies that the portfolio exception in IFRS 13 - allowing an entity to measure the fair value of a group of financial assets and financial liabilities on a net basis - applies to all contracts (including non-financial) within the scope of IAS 39 / IFRS 9.

The following revised standards and interpretations have been published but are not yet effective for the year beginning 1 January 2015. The company has not early adopted any of these amendments or interpretations.

• IFRS 14 Regulatory Deferral Accounts (issued in January 2014) - The new standard, effective for annual accounting periods beginning on or after 1 January 2016, defines a regulatory deferral account balance and allows entities to continue to apply their existing policy for regulatory deferral account balances, but requires certain disclosures. • Amendments to IAS 16 and IAS 38 titled Clarification of Acceptable Methods of Depreciation and Amortization (issued in May 2014) – The amendments add guidance and clarify that (i) the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset, and (ii) revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset; however, this presumption can be rebutted in certain limited circumstances. They are prospectively effective for annual periods beginning on or after 1 January 2016.

• Amendments to IAS 16 and IAS 41 titled Agriculture: Bearer Plants (issued in June 2014) – The amendments, applicable to annual periods beginning on or after 1 January 2016, define bearer plants – i.e. living plants which are used solely to grow produce over several periods and usually scrapped at the end of their productive lives (e.g. grape vines, rubber trees, oil palms) - and include them within IAS 16’s scope while the produce growing on bearer plants remains within the scope of IAS 41.

• IFRS 15 Revenue from Contracts with Customers (issued in May 2014) - The new standard, effective for annual periods beginning on or after 1 January 2018, replaces IAS 11, IAS 18 and their interpretations (SIC-31 and IFRIC 13, 15 and 18). It establishes a single and comprehensive framework for revenue recognition to apply consistently across transactions, industries and capital markets, with a core principle (based on a five-step model to be applied to all contracts with customers), enhanced disclosures, and new or improved guidance.

• IFRS 9 Financial Instruments (issued in July 2014) – This standard will replace IAS 39 (and all the previous versions of IFRS 9) effective for annual periods beginning on or after 1 January 2018.It contains requirements for the classification and measurement of financial assets and financial liabilities, impairment, hedge accounting and derecognition. • Amendment to IAS 19 (Annual Improvements to IFRSs 2012–2014 Cycle, issued in September2014) - The amendment, applicable to annual periods beginning on or after 1 January 2016, clarifies that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid. • Amendment to IFRS 5 (Annual Improvements to IFRSs 2012–2014 Cycle, issued in September2014) - The amendment, applicable prospectively to annual periods beginning on or after 1 January2016, adds specific guidance when an entity reclassifies an asset (or a disposal group) from held for sale to held for distribution to owners, or vice versa, and for cases where held-for-distribution accounting is discontinued. • Amendments to IFRS 10, IFRS 12 and IAS 28 titled Investment Entities: Applying the Consolidation Exception (issued in December 2014) – The amendments, applicable to annual periods beginning on or after 1 January 2016, clarify the application of the consolidation exception for investment entities • Amendments to IAS 1 titled Disclosure Initiative (issued in December 2014) – The amendments, applicable to annual periods beginning on or after 1 January 2016, clarify guidance on materiality and aggregation, the presentation of subtotals, the structure of financial statements ad the disclosure of accounting policies 10 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 NOTES TO THE FINANCIAL STATEMENTS (continued)

2. Significant accounting policies

ii) New and revised standards and interpretations which have been issued but are not effective

The Directors have assessed the potential impact of the above and expect that they will not have a significant impact on the company's financial statements for 2017. c) Revenue Recognition Revenue is measured at the fair value of the consideration received /receivable and presents amount receivable for goods sold in the normal course of the business, net of discounts and sales related taxes. Sales of goods are recognised upon delivery of products and customer acceptance. Interest Income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset 's net carrying amount. d) Property, plant and equipment All property, plant and equipment is initially recorded at cost and thereafter stated at historical cost less depreciation. Historical cost comprises expenditure initially incurred to bring the asset to its location and condition ready for its intended use. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that the future economic benefit associated with the item will flow to the company and the cost can be reliably measured. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial year in which they are incurred.

Depreciation on assets is calculated on the reducing balance basis method to write down the cost of each asset, or the revalued amount, to its residue value over its estimated useful life using the following annual rates:

Rate % Plant and machinery 12.5 Motor vehicles 25 Furniture and fittings 12.5 Oil Tanks 12.5 Office equipment 12.5 Computer equipment 30 The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds with the carrying amount and are taken into account in determining operating profit/loss. On disposal of revalued assets, amounts in the revaluation reserve relating to that asset are transferred to retained earnings in the statement of changes in equity. e) Intangible Assets Computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives which are estimated to be 5 years. f) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on direct purchase value and all costs attributable to bringing the inventory to its current location and condition and is stated on a weighted average basis. Net realisable value is the estimate of the selling price in the ordinary course of business and less the selling expense.

11 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 NOTES TO THE FINANCIAL STATEMENTS (continued)

2. Significant accounting policies g) Trade and other receivables

Trade receivables are carried at original invoiced amount less specific provision for all known doubtful debtors based on a review of all outstanding amounts at the year end. Bad debts are written off in the year in which they are identified when all the reasonable steps to recover them have been taken without success. h) Taxation Tax on the profit for the year comprises current tax, which is provided in the year as shown in the financial statements adjusted in accordance with tax legislation . Deferred tax is not provided for. i) Cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents comprise cash in hand and deposits held at call with banks, net of bank overdrafts. j) Translation of foreign currencies Translation in foreign currencies during the year are converted into Kenya Shillings at the exchange rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities are translated at the exchange rate ruling at the balance sheet date. Resulting exchange differences are recognised in the income statement for the year. Non- monetary assets and liabilities denominated 'in foreign currency are recorded at the exchange rate ruling at the date of transaction. k) Trade and other payables Payables are recorded at their undiscounted amount of cash and cash equivalents expected to be paid or the fair value of the consideration received in exchange of the obligation. l) Ordinary shares are classified as 'share capital' in equity. Any amounts received over and above the par value of the shares issued are classified as 'share premium' in equity. m) Share deposit Contribution towards share capital are classified as 'share deposit' in equity. Financial n) instruments

Financial assets and liabilities are recognised when the company becomes a party to the contractual provisions of the instrument. Management determines the classification of financial instruments at the time of initial recognition. o) Retirement benefit obligations

The company and its employees contribute to the National Social Security Fund (NSSF), a statutory defined contribution scheme registered under the NSSF Act. The company’s contributions to the defined contribution scheme are charged to profit or loss in the year to which they relate.

3. Financial risk and business risk management a) Financial risk management. The company's activities expose it to a variety of financial risks including credit, liquidity and market risk. The company risk limits are regularly assessed to ensure alignment with the company objectives and prevalent market conditions. The Directors are closely involved in ensuring a variety of techniques are used to assess and manage the said risks. The company does not hedge against any risks.

12 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 NOTES TO THE FINANCIAL STATEMENTS (continued)

3. Financial risk and business risk management (continued) a) Financial risk management (continued)

i) Credit risk: Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Credit risk mainly arises from financial assets, and is managed on a company-wide basis. The company does not grade the credit quality of financial assets that are neither past due nor impaired.

Credit risk on financial assets with banking institutions is managed by dealing with institutions with good credit ratings and placing limits on deposits that can be held with each institution. Credit risk on trade receivables is managed by ensuring that credit is extended to customers with an established credit history. The credit history is determined by taking into account the financial position, past experience and other relevant factors. Credit is managed by setting the credit limit and the credit period for each customer. The utilisation of the credit limits and the credit period is monitored by management on a monthly basis.

The credit exposure of the company as at the statement of financial position date is as follows:

Fully Past due but Past due and performing not impaired impaired Total 22 March 2017 Kshs. Kshs. Kshs. Kshs. Trade receivables 56,255,400 - - 56,255,400 Other receivables 22,050,280 - - 22,050,280 Cash at bank 69,828,277 - - 69,828,277

Gross financial assets 148,133,957 - - 148,133,957

22 March 2016 Trade receivables 20,829,517 - - 20,829,517 Other receivables 21,059,838 - - 21,059,838 Cash at bank 3,263,139 - - 3,263,139

Gross financial assets 45,152,494 - - 45,152,494

ii) Liquidity risk

Liquidity risk is the risk that the company will encounter difficulty in meeting obligations associated with financial liabilities. The board has developed a risk management framework for the management of the company's , medium and -term liquidity requirements thereby ensuring that all financial liabilities are settled as they fall due. The company manages liquidity risk by continuously reviewing forecasts and actual cash flows, and maintaining banking facilities to cover any shortfalls.

Less than Between Between 1 month 1-3 month 3-12 month Total 22 March 2017 Kshs. Kshs. Kshs. Kshs. Trade and other payables - - - - Related party - - 613,930,844 613,930,844

- - 613,930,844 613,930,844

13 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 NOTES TO THE FINANCIAL STATEMENTS (continued)

3. Financial risk and business risk management (Continued) ii) Liquidity risk (continued)

Less than Between Between 1 month 1-3 month 3-12 month Total 22 March 2016 Kshs. Kshs. Kshs. Kshs. Trade and other payables 143,424,383 - 125,277 143,549,660 Borrowings; - bank - - -

143,424,383 - 125,277 143,549,660

iii) Market risk Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market price and comprises three types of risks: currency risk, interest rate risk and other price risk.

Interest rate risk: The company is exposed to cash flow interest risk on its borrowings because of changes in the market interest rates. The company manages this exposure by maintaining a high interest cover ratio, which is the extent to which profits are available to service borrowing costs. Currency risk: Currency risk is the risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates. The company is exposed to currency risk on sales and purchases that are denominated in currency other than its functional currency, primarily the Kenya Shillings (Kshs).

Price risks: Price risk arises from the fluctuation in the prices of the commodities that the company deals in. Sale and purchase prices are determined by the market forces and other factors that are not within the control of the company. The company does not anticipate that its products prices will decline significantly in the foreseeable future and therefore has not entered into derivative or other contracts to manage the risk of a decline in the prices. The company reviews its outlook for its products prices regularly in considering the need for active financial risk management.

b) Capital management

The company's objective in managing its capital is to ensure that it supports the development of its business and is able to continue as a going concern, while at the same time maximise the return to its shareholders. The company manages its capital by evaluating the working capital requirements and investment in non-current assets before borrowings and based on this requirement, setting an internal debt to equity ratio of which it monitors on a regular basis.

14 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 NOTES TO THE FINANCIAL STATEMENTS (continued)

4. Revenue 2017 2016 Kshs Kshs Sales 231,465,962 80,656,234

231,465,962 80,656,234

5. Other Income Foreign exchange gain - - Sale of drums 66,760 1,060,564 Interest income - -

66,760 1,060,564

6. Finance cost Realised foreign exchange gain/ loss - - Unrealised foreign exchange gain/ loss - -

- -

7. Operating profit/(loss) The following items have been charged/(credited) in arriving at operating profit/(loss):

Depreciation on property, plant and equipment (Note 9) 16,015,243 18,359,034 Auditors' remuneration 350,000 206,500 Staff cost (Appendix 1) 45,685,579 17,166,407

8. Tax account

Tax expense - -

15 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 NOTES TO THE FINANCIAL STATEMENT( Continued)

9. Property, plant and equipment Furniture, Motor Plant and fittings & Oil Tanks Forklifts Vehicles Computers Machinery equipment Totals Kshs Kshs Kshs Kshs Kshs Kshs Kshs Year Ended 22 March 2016 Cost / valuation At 23 March 2015 55,893,997 # 3,526,205 4,200,000 3,269,859 82,749,314 27,653,198 177,292,572 Additions - (469,431) - (44,594) 613,871 (1,295,145) (1,195,299)

55,893,997 3,056,774 4,200,000 3,225,265 83,363,185 26,358,052 176,097,273 Depreciation At 23 March 2015 (6,986,750) (2,222,002) (1,850,000) (1,648,590) (18,971,757) (3,772,793) (35,451,892)

Charge for the year (6,113,406) (313,039) (587,500) (473,003) (8,048,929) (2,823,157) (18,359,034)

(13,100,156) (2,535,041) (2,437,500) (2,121,593) (27,020,686) (6,595,950) (53,810,926)

Net Book Value At 23 March 2016 42,793,841 # 521,732 1,762,500 1,103,673 56,342,500 19,762,102 122,286,347

Year Ended 22 March 2017 Cost / valuation At 23 March 2016 55,893,997 # 3,056,774 4,200,000 3,225,265 83,363,185 26,358,052 176,097,273 Additions - 469,431 (1,000,000) 44,594 (398,827) 1,867,999 983,197

At 22 March 2017 55,893,997 3,526,205 3,200,000 3,269,859 82,964,358 28,226,051 177,080,470

Depreciation At 23 March 2016 (13,100,156) (2,535,041) (2,437,500) (2,121,593) (27,020,686) (6,595,950) (53,810,926) Disposal 250,000 250,000 Charge for the year (5,349,230) (371,686) (253,125) (344,480) (6,992,959) (2,703,763) (16,015,243)

At 22 March 2016 (18,449,386) (3,039,673) (2,440,626) (2,475,437) (36,556,254) (6,645,821) (69,607,197)

Net book value At 22 March 2017 37,444,611 486,532 759,374 794,422 46,408,104 21,580,230 107,473,273

16 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 NOTES TO THE FINANCIAL STATEMENTS (continued)

10. Intangible Assets - Software 2017 2016 Cost Kshs Kshs As start of year 1,400,407 1,400,407 Additions - -

At end of year 1,400,407 1,400,407

Amortisation At start of year 756,519 504,346 Charge for the year 287,041 252,173

At end of year 1,043,560 756,519 Net Book Value As at 22 September 356,847 643,888

11. Inventories Raw materials 59,059,929 142,605,452 Finished goods 17,460,843 36,873,010 Inventory work in progress - 57,274,451

76,520,772 236,752,913

12. Trade and other receivables Trade debtors 56,255,400 20,829,517 Deposit and other receivables 22,050,280 21,059,838

78,305,681 41,889,355

Included in the deposits and other receivables is Kshs10,000,000 performance bond in favour of National Oil Corporation. 13. Cash and cash equivalents The cash and cash equivalents included in the statement of cash flow comprise of: -

Cash and bank balances 69,828,277 3,263,139

69,828,277 3,263,139

For the purpose of the statement cash flow, the year end cash and cash equivalents comprise the following:

Cash and bank balances 69,828,277 3,263,139

69,828,277 3,263,139

14. Tax payable As at 1 January (138,691) (166,465) Charge for the year Tax paid - 11,691 As at 22 September (138,691) (154,774)

15. Share Capital Authorised share capital 80,000 Ordinary shares of Kshs 1,000/= each 80,000,000 80,000,000

Issued and fully paid 76,600 Ordinary shares of Kshs 1,000/= each 76,600,000 76,600,000

16. Share deposits By Sepahan Oil Company 1,793,282 1,793,282

1,793,282 1,793,282

17 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 NOTES TO THE FINANCIAL STATEMENTS (continued)

17. Trade and other payables 2017 2016 Kshs Kshs Trade Payables - 143,424,383 Accruals 2,740,901 125,277

2,740,901 143,549,660

18. Working capital financing Sepahan Oil 613,930,844 453,002,982

613,930,844 453,002,982

19. Currency The financial statements are presented in Kenya Shillings (Kshs) and have been rounded off to the nearest whole one shilling. 20. Related party transactions The company is related to other companies which are related through common shareholding or common directorships. The following transactions were carried out with related parties. 2017 2016 i) Purchase of goods Kshs Kshs

Sepahan Oil - 133,587,438 - - 133,587,438

ii) Sale of goods; Mweiga Estate ltd 323,234 251,720 Warren enterprises 912,273 349,714 Yana Tyre Centre -Galleria - 105,360 Ryce East Africa Limited 1,166,802 3,963,532 Sameer Africa Limited 1,013,465 1,679,623 Sasini Tea and coffee Limited 473,814 509,194

3,889,588 6,859,144

Sales and purchases to/from related parties were made at terms and conditions similar to those offered to/by major customers/suppliers.

18 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 NOTES TO THE FINANCIAL STATEMENTS (continued)

21. (a) Reconciliation of the net loss before tax 2017 2016 to cash used in operations Kshs Kshs

Net loss before tax (92,485,981) (82,552,986) Add Net loss for the period from 1 January to 22 March - (18,541,389) Loss on disposal of motor vehicle 50,000 - Depreciation of property plant and equipment 16,015,243 18,359,034 Amortisation of intangible assets 287,041 280,081 Interest income - - Cash used in operations before working capital changes (76,133,696) (82,455,260)

Working capital changes : Trade and other receivables (36,669,215) 16,945,809

Inventories 160,232,141 (151,532,865) Trade and other payables (140,808,759) 110,224,999

Cash used in operations (93,379,528) (106,817,317)

22. Contingent liabilities The directors are not aware of any contingent liability as at the close of the year.

Financial and business risk management The company risk limits are regularly assessed to ensure alignment with the company objectives and prevalent market conditions. The directors are closely involved in ensuring a variety of techniques are used to assess and

23. Employees The average number of permanent employees during the year were 20 (2016: 22)

24. Comparatives Where necessary comparative figures have been adjusted to conform to changes in presentation in the current year.

25. Going concern Although the company's current assets exceed its current liabilities, there exists a deficiency in the shareholders funds amounting to Kshs 256,960,672 (2016: 191,562,226). However, the financial statements have been prepared on a going concern basis on the assumption that continued financial support will be made available by the shareholders.

26. Ultimate holding company The company is 100% owned by Eurosia Nemoneh Kish Co. which acquired 76,600 issued ordinary shares in 2014.

26.

19 Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 MANUFACTURING ACCOUNT

1. Cost of sales 2017 2016 Kshs Kshs

Cost of raw and packing materials consumed (1.1) 161,069,212 81,625,078 Direct production costs (1.2) 335,293 633,452

161,404,505 82,258,530

1.1 Cost of consumable inventories

Purchases 161,069,212 81,625,078

161,069,212 81,625,078

1.2 Direct production cost

Label origination costs 38,300 48,000 Machine running expenses 229,392 585,452 Production wastage 67,601 -

335,293 633,452

Appendix i Sepyana Oil East Africa Limited Financial statements For the year ended 22 March 2017 SCHEDULE OF EXPENDITURES

1. Administrative expenses 2017 2016 Kshs Kshs Employment: Salaries and wages 40,081,764 11,881,377 Other staff cost 5,603,815 5,285,030

Total employment cost 45,685,579 17,166,407

Other administration expenses: Directors remuneration - Marketing and advertising 1,947,586 19,517,972 Audit fees 350,000 206,500 Bank charges 94,977 103,088 Baddebts 136,323 49,393 Debt Recovery Services 186,007 - Import clearing charges 66,042,135 - Travelling and accommodation 569,338 567,547 Telephone, postage and internet 1,053,079 717,957 Entertainment 2,116,537 - Motor vehicle expenses 3,394,556 1,416,040 Export expenses - 10,500 Office expenses 933,181 986,953 Legal fees 4,961,680 2,372,359 Subscription 58,000 58,000 Computer expenses 268,165 577,700 Donations, fines and penalties 10,000 20,000 Medical expenses 214,278 130,720 KEBS Standards Levy Expense 450,949 - Loss on disposal of motor vehicle 50,000 -

Total other administrative expenses 82,836,791 26,734,729

Total administrative expenses 128,522,371 43,901,136

2. Establishment expenses Utilities 1,193,451 1,379,271 Rent expenses 12,842,280 11,999,070 Insurance expenses 308,141 1,213,170 Security fees 530,200 520,592 Licenses - 330,559 Repair and maintenance 2,915,471 4,028,341 Amortisation of intangible asset 287,041 280,081 Depreciation of property plant and equipment 16,015,243 18,359,034

34,091,827 38,110,118

Appendix ii