IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as...

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Transcript of IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as...

Page 1: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

Cipl

aQCI

L IP

O P

rosp

ectu

s

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This Prospectus provides detailed information about the Company and the Offer. Potential investors in respect of the Offer Shares are advised to read this document carefully and retain it for future reference. In the event that a potential investor is not clear about the action to take, he/she should consult his/her stockbroker, banker, lawyer, auditor and/or

other financial, legal and tax advisor for guidance and carefully review the risks associated with an investment in the Company.

CiplaQCIL Prospectus

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CiplaQCIL IPO Prospectus

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Application has been made to the Uganda Securities Exchange (“USE”) for the listing of the shares on the USE’s Main Investment Market Segment (“MIMS”). Admission to the Official Lists of the USE are expected to become effective on 17 September 2018.

Monies paid in respect of any application for Offer Shares will be returned if the Listing does not become effective.

The fact that the USE may admit the securities of the Company for listing is not to be taken in any way as an indication of the merits of the Company or the listed securities. The USE takes no responsibility for the contents of this document, make no representations as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon any part of the contents of this document.

The Directors of CiplaQCIL, whose names are given in Section 11 of this Prospectus, accept full responsibility for the accuracy of the information contained herein and have taken all reasonable care to ensure that the facts stated, and the opinions expressed herein are true and accurate in all material respects and that there are no other material facts, the omission of which would make any statement herein, whether of fact or opinion, misleading.

The Offer Shares will carry the right to vote and to participate in any future dividends to be declared and paid on the ordinary share capital of the Company. The Offer Shares rank pari passu with other shares, are freely transferable and are not subject to any restrictions on marketability or any pre-emptive rights.

The Lead Transaction Advisor, Lead Sponsoring Broker, Legal Advisor, Reporting Accountant, Receiving Bank and Share Registrar have each consented in writing to act in their respective capacities stated herein and to their names being included in this Prospectus and have not withdrawn their consents prior to the publication of this Prospectus.

CAUTION: This document is important and requires your careful attention.

This document is a prospectus inviting the public to acquire the Offer Shares under the terms of application set out herein. If you wish to apply for the Offer Shares, then you must complete the procedures for application and payment set out in Section 19 of this document.

A copy of this Prospectus has been delivered to the CMA for approval and to the Uganda Registration Services Bureau, the Registrar of Companies. The Uganda Registration Services Bureau has not checked and will not check the accuracy of any statements made and accepts no responsibility for it or for financial soundness of the Company or the value of the securities concerned. The securities offered have not been approved or disapproved by the CMA. Prospective investors should carefully consider the matters set forth under the caption “Risk Factors”.

Your attention is also drawn to the selling restrictions and other information in the “Important Information” Section of this Prospectus.

This Prospectus is issued in compliance with the requirements of the following Ugandan legislation: Capital Markets Authority Act Cap 84, as amended; Capital Markets (Prospectus Requirements) Regulations, 2001 as amended; Uganda Securities Exchange Listing Rules 2003; and Companies Act 2012. The CMA has approved the offer to the public of the Shares that are the subject of the Offer. As a matter of policy, the CMA assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar of Companies has not checked and will not check the accuracy of any statements made and accepts no responsibility for it or for the financial soundness of the Company or the value of the securities concerned.

PROSPECTUS

Cipla Quality Chemical Industries Limited

(formerly Quality Chemical Industries Limited)

(“CiplaQCIL” or “Company”)

incorporated 10 June 2005

In accordance with the Laws of Uganda, with number P.558

Offer for Sale

of

657,179,319 ORDINARY SHARES WITH A PAR VALUE OF UGX12.50 EACH

AT AN OFFER PRICE OF UGX 256.5 PER SHARE and

Listing of the entire issued share capital of the Company on

the Uganda Securities Exchange.

This Prospectus is dated 10 August 2018 and is valid for six months from this date.

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CiplaQCIL IPO Prospectus

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Lead TransacTion advisor and soLe Bookrunner

Lead sponsoring Broker LegaL counseL

reporTing accounTanTs receiving Bank

share regisTrars MarkeTing & pr

ADVISORS TO THE TRANSACTION

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Potential investors are expressly advised that an investment in the Offer Shares entails certain risks and that they should therefore carefully review the entire contents of this Prospectus. Furthermore, before making an investment decision, potential investors should consult their stockbroker, banker, lawyer, auditor and/or other financial, legal and tax advisors for guidance and carefully review the risks associated with an investment in the Company.

This Prospectus was approved by the Board of Directors of the Company in the English language.

Responsibility StatementsThe Directors of the Company, having made all reasonable inquiries, confirm that this Prospectus contains all information with respect to the Company and the Offer Shares that is material in the context of the Offer Shares.

The Directors of the Company further confirm that the information contained in this Prospectus regarding the Company is true and accurate in all material respects and is not misleading and have taken all reasonable care to ensure that facts stated and the opinions expressed in this Prospectus are true and accurate and that there are no other material facts, the omission of which would make any of such information or the expression of any such opinions misleading. The Directors of the Company accept responsibility accordingly.

Renaissance Capital (Kenya) Limited is acting as lead transaction advisor and sole bookrunner in connection with the arrangements set out in this Prospectus. It is not acting for anyone other than the Company and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Renaissance Capital (Kenya) Limited or for providing advice in relation to the contents of this Prospectus. Neither Renaissance Capital (Kenya) Limited nor the Promoters are making any representation or warranty, express or implied, as to the contents of this Prospectus and accepts no liability for the accuracy of any information or opinions contained in or for the omission of any material information from this Prospectus, for which the Company and the Directors are solely responsible.

Selling Restrictions Summary

A description of these and certain other restrictions to which the Offer and sale of the Offer Shares are subject are set out in full in the Section of this Prospectus entitled “Selling and Transfer Restrictions”.

Potential investors should not assume that the information in this Prospectus is accurate as at any date other than the date of this Prospectus. No person is or has been authorised to give any information or make any representation in connection with the Offer and Listing, other than as contained in this Prospectus. Delivery of this Prospectus at any time after the date hereof will not under any circumstances, create any implication that there has been no change or that the information set out in this Prospectus is correct at any time since its date. This Prospectus does not constitute an offer to issue or sell, or the solicitation of an offer to subscribe for or purchase, any shares in the capital of the Company to any person in any jurisdiction where it would be unlawful to make such offer or solicitation in such jurisdiction.

No Offer Shares have been marketed to, nor are they available for purchase in whole or in part by, the public in any jurisdiction other than Uganda in conjunction with the Offer. In particular, Offer Shares do not qualify for distribution under any of the relevant securities laws of Canada, Australia and Japan, nor has any prospectus in relation to the Offer Shares been lodged with or registered by the Australian Securities and Investments Commission or the Japanese Ministry of Finance. Accordingly, subject to certain exceptions, the Offer Shares may not be, directly or indirectly, offered, sold, taken up, delivered or transferred in or into or within Canada, Australia and Japan.

The Offer consists of an offering outside the United States of America, its territories and possessions, any state of the United States, and the District of Columbia (the “United States”) of Shares pursuant to Regulation S (“Regulation S”) under the US Securities Act 1933, as amended (the “Securities Act”). The Offer Shares have not been and will not be registered under the Securities Act or under the securities laws of any state of the United States. Accordingly, subject to certain exceptions, the Offer Shares may not be, directly or indirectly, offered, sold, pledged, taken up, delivered or otherwise transferred in or into or within the United States absent registration or an exemption from registration under the Securities Act.

IMPORTANT INFORMATION

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This Prospectus is only addressed to and directed at persons in member states of the European Economic Area (the “EEA”) who are “qualified investors” within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC as amended, including by Directive 2010/73/EC) and related implementation measures (“Qualified Investors”).

This Prospectus must not be acted on or relied on (i) in the United Kingdom, by persons who are not Relevant Persons (as defined below), and (ii) in any member state of the EEA other than the United Kingdom, by persons who are not Qualified Investors. Any investment or investment activity to which this Prospectus relates is available only to Relevant Persons in the United Kingdom and Qualified Investors in any member state of the EEA other than the United Kingdom and will be engaged in only with such persons.

This Offer does not constitute a public offer or the solicitation of a public offer in the United Kingdom to subscribe for or purchase any Offer Shares. To the extent that any Offer Shares are made available for purchase to persons in the United Kingdom, they shall only be made available to Qualified Investors (i) who are persons who have professional experience in matters relating to investments falling within the definition of “investment professionals” in article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the “FPO”); (ii) who are high net worth bodies corporate, unincorporated associations and partnerships or the trustees of high value trusts falling within article 49(2)(a) to (d) of the FPO, or (iii) who are other persons to whom it may otherwise lawfully be communicated (“Relevant Persons”).

The Offer does not constitute an ‘‘offer to the public’’ (as such expression is defined in the South African Companies Act and this Prospectus does not, nor is it intended to, constitute a ‘‘registered prospectus’’ (as that term is defined in the South African Companies Act) prepared and registered under the South African Companies Act. Accordingly, to the extent that the Offer Shares are offered for subscription or sale in South Africa, such Offer is made: (i) only to selected persons falling within one of the specified categories listed in Section 96(1)(a) of the South African Companies Act; and/or (ii) selected persons, acting as principal, acquiring Offer Shares for a total acquisition cost of ZAR1,000,000 or more, as contemplated in terms of Section 96(1)(b) of the South African Companies Act, and to whom the Offer will specifically be addressed, and only by whom the Offer will be capable of acceptance (“Appropriate Persons”).

Supplementary ProspectusIf, prior to the Listing of the Shares, a significant new development occurs in relation to the information contained in this Prospectus or a material mistake or inaccuracy is found in this Prospectus that may affect the assessment of the Company, a supplement to this Prospectus will be published.

Statements contained in any such supplement (or contained in any document incorporated by reference therein) shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede statements contained in this Prospectus or in a document that is incorporated by reference in this Prospectus. Any statements so modified or superseded shall not, except as so modified or superseded, constitute a part of this Prospectus.

Forward-Looking StatementsThis Prospectus contains forward-looking statements relating to the Company, its business and other matters specified. These forward-looking statements can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “is expected to”, “will”, “will continue”, “should”, “would be”, “seeks” or “anticipates” or similar expressions or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans or intentions.

These statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements that may be expressed or implied by such forward-looking statements.

Some of these factors are discussed in more detail under Risk Factors (see Section 14). Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Prospectus as anticipated, believed, estimated or expected.

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Without prejudice to any requirements under applicable laws and regulations in Uganda, the Company, its Shareholders, Directors and the Promoters do not intend, and do not assume any obligation, to update any industry information or forward-looking statements set out in this Prospectus or to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which a forward-looking statement is based.

Industry, Economic, Statistical and Other InformationThe Company obtained the market and competitive position data, including market forecasts, used throughout this Prospectus from and has made statements based upon internal surveys, market research, publicly available information, industry publications and other third-party sources. Although we have no reason to believe that any of this information or these reports are inaccurate in any material respect, we have not independently verified the competitive position, market share, market size, market growth or other data provided by third parties or by industry or other publications. The Company, its Shareholders, Directors, the Promoters and the Lead Transaction Advisor do not make any representation as to the accuracy of such information and/or consequently, any statements based upon such information.

Therefore, discussions of matters in the Prospectus relating to Uganda, different markets within SSA, their respective economies and the healthcare industry are subject to the caveat that the statistical and other data on which such discussions are based may be incomplete or unreliable.

Economic and Political Environment

The Company’s business is affected by general financial, economic and external events beyond the Company’s control. Unfavourable economic and external conditions may negatively affect CiplaQCIL’s operations. In particular, demand for its products and services could decrease significantly as a result of such unfavourable conditions. The performance of Uganda’s economy is dependent to some extent on economic reforms, and if these reforms slow down or stop, then this may adversely affect economic growth.

Presentation of Financial InformationThe financial information of the Company set forth herein has, unless otherwise indicated, been derived from the Company’s audited statements of financial position and statements of comprehensive income, cash flows and changes in shareholders’ equity as of and for the years ended 31 December 2013 and 31 March 2015, 2016, 2017 and 2018. As a result of the Company effectively becoming a subsidiary of Cipla in 2013, the financial year end changed, in 2014, from 31 December to 31 March to align it to the financial year end of the effective majority shareholder Cipla (whose WOS, Meditab and Cipla EU, hold Shares in the Company). Therefore, the comparative balances for the 12-month period in 2013 are compared to the 15-month period ended in 31 March 2015. The Company’s annual financial statements were prepared on the basis of IFRS and in a manner required by the Companies Act.

Presentation of Numerical Amounts and Figures Certain amounts that appear in this Prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the precise arithmetic sum of the figures that precede them.

Currency and Exchange RatesIn this Prospectus, all references to “Ugandan Shilling”, “UGX” or “UShs” are to the lawful currency of the Republic of Uganda; all references to “Dollars”, “US Dollar”, “USD” or “US$” are to the lawful currency of the United States of America.

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The following table sets forth, for the periods indicated, the average and period-end foreign exchange rates.

Ugandan Shilling per US Dollar

High Low Average Period End

1 Apr 2017 – 31 Mar 2018 3,687 3,589 3,623 3,687

1 Apr 2016 – 31 Mar 2017 3,630 3,311 3,452 3,587

1 Apr 2015 – 31 Mar 2016 3,695 2,970 3,374 3,374

1 Apr 2014 – 31 Mar 2015 3,027 2,511 2,698 2,971

1 Jan 2014 – 31 Mar 20151 3,027 2,453 2,659 2,971

1 Jan 2013 – 31 Dec 2013 2,717 2,498 2,586 2,528

Note: Exchange rates are rounded off to the nearest whole numberSource: Central Bank of Uganda

Solely for the convenience of the reader, this Prospectus contains translations of certain amounts into US Dollars at exchange rates effective as of the date of the relevant financial information. The foregoing exchange rates may differ from the actual rates used in the preparation of the financial information appearing in this Prospectus. The inclusion of these exchange rates is not meant to suggest that the amounts actually represent such US Dollar amounts or that such amounts could have been converted into US Dollars at any particular rate or at all.

ConsentsRenaissance Capital (Kenya) Limited as Lead Transaction Advisor, Crested Capital as Lead Sponsoring Broker; Bowmans (AF Mpanga Advocates) as Legal Advisor; Ernst & Young Certified Public Accountants of Uganda as Reporting Accountant; Standard Chartered Bank as the Receiving Bank and C&R Group as Registrar of the Company have consented in writing to act in the stated capacities and to their names being included in this Prospectus and have not withdrawn their consent prior to the publication of this Prospectus.

None of the above advisors have been employed on a contingent basis by the Company and none of them own Shares in the Company which would be material to that person or has a material, direct or indirect economic interest in the Company.

Legal OpinionsBowmans (AF Mpanga Advocates) have given and have not withdrawn their consent to the inclusion in this Prospectus of their Legal Opinion, and the references to its name, in the form and context in which it appears, and it has authorised the contents of the said Legal Opinion.

Reporting Accountant’s Report

Ernst & Young, the Reporting Accountants, have given and not withdrawn their consent to the issue of the said report in the form and context in which they are included in this Prospectus.

1 Covers a 15-month period as the Company changed its year end from 31 December to 31 March to be the same as Cipla’s.

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1 Terms and Definitions ...........................................................................................................................................10

2 Corporate Directory ..............................................................................................................................................14

3 Advisors to the Transaction ..................................................................................................................................17

4 Offer Timetable .....................................................................................................................................................18

5 Offer Statistics ........................................................................................................................................................19

6 Directors’ Statement .............................................................................................................................................20

7 Letter from the Executive Chairman ...................................................................................................................21

8 Executive Summary ...............................................................................................................................................23

9 Summary of the Offer ............................................................................................................................................31

10 Overview of CiplaQCIL .........................................................................................................................................43

11 CiplaQCIL’s Corporate Governance ....................................................................................................................73

12 Uganda’s Macroeconomic Environment .............................................................................................................83

13 SSA and Ugandan Healthcare Industry Overview .............................................................................................93

14 Risk Factors ...........................................................................................................................................................103

15 Taxation on Income on Offer Shares .................................................................................................................115

16 Statutory and Other Information .......................................................................................................................117

17 Uganda Legal Opinion on CiplaQCIL ...............................................................................................................137

18 Reporting Accountant’s Report..........................................................................................................................145

19 Procedures, Terms and Conditions of the Offer ..............................................................................................197

20 USE Trading Outline ............................................................................................................................................205

21 Sample Application Form ...................................................................................................................................207

22 Authorised Selling Agents ..................................................................................................................................209

Table of Contents

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Term Definition“ACT” Artemisinin-based combination therapies, the recommended therapy by the WHO for

non-complicated malaria

“Admission” Admission of the Shares to the MIMS of the USE

“AIDS” Acquired immunodeficiency syndrome, an infectious disease caused by the human immunodeficiency virus (“HIV”)

“Amistad” Amistad, a company organised and existing under the laws of Mauritius (number 097156C1/GBL), whose registered address is Suite 605, 6th Floor, St James Court, St Denis Street, Mauritius

“API” Active pharmaceutical ingredient, the ingredient in a pharmaceutical drug that is biologically active and therefore responsible for the beneficial health effects of the drug

“Applicant” A legal entity or natural person who applies for Offer Shares in accordance with the process set out in the Prospectus

“Application” or “Application Form”

The form on which an Applicant applies for Offer Shares in accordance with the process set out in the Prospectus

“Articles” The articles of association of the Company

“ARV” Antiretroviral medications that are used for the treatment of HIV/AIDS

“ASA” Authorised Selling Agent (in Uganda)

“Auditor” or “Reporting Accountant”

Ernst & Young Certified Public Accountants of Uganda

“Bookrunner” or “Lead Transaction Advisor”

Renaissance Capital (Kenya) Limited (“Renaissance Capital”)

“BOU” Bank of Uganda, the Central Bank of the Republic of Uganda

“CAGR” Compound annual growth rate

“Capitalworks” Capitalworks SSA 1, a company organised and existing under the laws of Mauritius (number 091966), whose registered address is Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius

“CEO” Chief Executive Officer of CiplaQCIL

“CFO” Chief Financial Officer or Head of Finance of CiplaQCIL

“Cipla” Cipla Limited, a company incorporated in India, having its registered office at Cipla House, Peninsula Business Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400013, India; is a pharmaceutical manufacturing company (whose WOS, Meditab and Cipla EU, hold shares in CiplaQCIL) thereby effectively holding a majority of the shares in CiplaQCIL

“Cipla EU” Cipla (EU) Limited, a company incorporated in the United Kingdom, and having its registered office at Dixcart House, Addlestone Road, Bourne Business Park, Addlestone, Surrey, KT15 2LE, United Kingdom, and is the wholly owned subsidiary of Cipla

“CiplaQCIL” or “the Company”

Cipla Quality Chemical Industries Limited, a company incorporated under the laws of Uganda with registration number P.558

“CMA” The Capital Markets Authority established under the Capital Markets Authority Act (Chapter 84 of the Laws of Uganda) and having registered office at 8th Floor, Jubilee Insurance Centre, 14, Parliament Avenue, Kampala, Uganda

“Companies Act” The Companies Act, 2012 of Uganda

“East African” or “EAC nationals”

A citizen of one of the member states of the East African Community and bodies corporate established or incorporated in an East African Community member state under the provisions of any written law

1 TermsandDefinitions

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Term Definition

“East African Community” or “EAC”

The regional intergovernmental organisation, whose current partner states include the Republic of Uganda, the Republic of Kenya, the United Republic of Tanzania, the Republic of Rwanda, the Republic of Burundi, and the Republic of South Sudan set up by treaty, with its headquarters in Arusha, Tanzania

“EBITDA” Earnings before interest, taxation, depreciation and amortisation

“EBITDA Margin” EBITDA divided by total revenue, expressed as a percentage

“EFT” Electronic fund transfer

“EGM” Extraordinary General Meeting

“EPS” Earnings per share

“Foreign Investors” International Institutional Investors and any other investors not registered or domiciled in Uganda, or in the EAC, as may be applied

“GDP” Gross domestic product

“GDP per capita” GDP divided by the population of the country

“Global Fund” The Global Fund to Fight AIDS, Tuberculosis and Malaria

“GLP” Good laboratory practices, a set of principles intended to assure the quality and integrity of non-clinical laboratory studies that are intended to support research or marketing permits for products regulated by government agencies

“GMP” or “cGMP” Good manufacturing practices, a system for ensuring that products are consistently produced and controlled according to quality standards. It is designed to minimise the risks involved in any pharmaceutical production that cannot be eliminated through testing the final product

“GOU” Government of Uganda

“GOZ” Government of Zambia

“HIV” Human immunodeficiency virus, the causative agent of AIDS

“IFRS” International Financial Reporting Standards, which include International Accounting Standards, IFRS pronouncements and interpretations issued by the International Accounting Standards Board

‘’IMF’’ International Monetary Fund

“Inflation” Annual percent change in consumer prices compared with the previous year’s consumer prices

“Institutional Investor” or “QII”

Investor established either as a fund manager, an asset manager, an insurance company, a bank or a licensed financial institution

“Institutional Pool” Offer Shares set aside for Institutional Investors and persons who are not Retail Investors that are entitled to apply for Offer Shares as per Section 9.12.2

“International Institutional Investors”

Institutional Investors that are not registered or domiciled in Uganda or in any other EAC state

“IP” Intellectual property

“IP Agreements” The Technology Licence Agreement, Product Trademark Licence Agreement and the CIPLA Name Licence Agreement

“LDCs” Least developed countries which have been designated as such by the United Nations

“Legal Advisors” Bowmans

“Listing” The listing of the Shares on the USE

“Listing Date” The day on which the Offer Shares will commence trading on the USE

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Term Definition

“Listing Regulations” The Ugandan Capital Markets Authority Act (Cap. 84 of the Laws of Uganda) and the Capital Markets (Prospectus Requirements) Regulations SI 84-2 as amended and all subsidiary legislation and regulations, rules and guidelines promulgated thereunder

“Listing Rules” The regulations, rules and guidelines of the USE and all subsidiary regulations, rules and guidelines, including USE Listing Rules 2003

“Lock-in” Periods during which certain Shareholders agree not to sell their respective Shares in the Company and the Company agrees not to issue new Shares

“Meditab” Meditab Holdings Limited, a company incorporated in Mauritius having its registered office at C/o SSG Corporate Services (Mauritius) Ltd, 33 Edith Cavell Street, Port Louis, 11324, Mauritius, and is the wholly owned subsidiary of Meditab Specialities

“Meditab Specialities”

Meditab Specialities Private Limited, a company incorporated in India having its registered office at C1-Pooja Apartment, 17, Hariyali Estate Vikhroli (West), Mumbai - 400 083, Maharashtra, India, and is the wholly owned subsidiary of Cipla

“MHZ” Ministry of Health, Zambia

“MIMS” The Main Investment Market Segment of the USE

“NDP” The National Development Plans, for a five-year term, produced by the GOU to guide towards the achievement of the Vision 2040. The second plan, NDP II, was launched in June 2015, covering the fiscal years 2015-16 to 2019-20

“NMS” National Medical Stores

“Offering”, “Offer”, “Transaction”

The sale of the Offer Shares, as described in Section 9, Summary of the Offer

“Offer Price” UGX 256.5 per Offer Share, par value UGX 12.50 each

“Offer Shares” 657,179,319 Shares of the Company to be offered for sale by the Selling Shareholders under this Prospectus

“Offer Timetable” Timetable as set in Section 4

“Promoter(s)” Any person(s) who is instrumental in the formulation of a plan or programme under which shares are to be offered to the public for subscription or purchase under the Transaction and where a body corporate is a promoter, such promoter includes every person who is a director of that body corporate, as defined under Section 90A of the Uganda Capital Markets Authority (Amendment) Act, 2011

“Prospectus” This document dated 10 August 2018 issued by the Company in respect of the Offer

“Public Debt” The cumulative total of all government borrowings, less repayments that are denominated in a country’s home currency. It should be noted that public debt should not be confused with external debt, which reflects the foreign currency liabilities of both the private and public sector and must be settled with foreign exchange earnings

“Quality Chemicals Limited” or “QCL”

A company incorporated in Uganda having its registered office at Quality Chemicals House, Plot 64/65 Katwe Road, P.O. Box 3381, Kampala, Uganda, which is one of the founding shareholders of CiplaQCIL that unbundled its shareholding in CiplaQCIL in favour of Uganda Founders and Cipla EU

“Real GDP Growth” The annual percentage change of the nominal value of GDP, adjusted to take account of inflation

“Receiving Bank” Standard Chartered Bank Uganda Limited, a company incorporated under the laws of Uganda with the registration number 4226 that is licensed and regulated by the BOU

“Retail Investor” An individual who is a citizen, or a body corporate that is established, incorporated and registered under the Companies Act or under the provisions of any written law of a Member State of the EAC.

“Retail Offer” The period when applications for the Retail Pool are accepted as per the timetable set out in Section 4

“Retail Pool” Offer Shares set aside for Retail Investors

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Term Definition

“SCD” Securities Central Depository, operated by the USE

“SCD 1 Form” The form required to be duly completed and submitted in order to open an SCD Account. There are two types of forms, depending upon the customer: SCD 1a for individuals and SCD 1b for organisations

“SCD Account” Securities depository account, a securities account in the SCD held through an SCD Agent for the purposes of recording and dealing in approved securities by the SCD

“Securities Account” An SCD Account

“Selling Shareholders” or “Vendors”

Cipla EU, Capitalworks, Uganda Founders and TLG, who are selling a portion of their Shares

“Settlement System” As the context so requires, the central depository system operated in Uganda by the SCD

“Lead Sponsoring Broker”

Crested Capital, a trade name of Crested Stocks and Securities Limited, a company incorporated under the laws of Uganda with registration number 65644

“SSA” Sub-Saharan Africa

“Shares” or “Ordinary Shares”

Ordinary shares in the capital of the Company

“Shareholders” Persons who are on the register of members of the Company

“Share Registrars” or “Registrar”

Custody and Registrars Services Limited, a company incorporated under the laws of Kenya and registered in Uganda with the registration number F.2306, which is responsible for keeping records of all shareholders of the Company whose shares are traded on the USE

“South African Companies Act”

The South African Companies Act, No. 71 of 2008 (as amended)

“TLG” or “TLG Capital”

A private equity fund that is a beneficial holder of 12.5% of the Shares in CiplaQCIL, through Amistad Limited

“TRIPS” The Agreement on Trade-Related Aspects of Intellectual Property Rights, administered by the WTO

“Uganda Founders” Messrs Emmanuel Katongole, Frederick Mutebi Kitaka and George Baguma

“UGX” or “UShs” Ugandan Shilling, the official currency of the Republic of Uganda

“UN” United Nations

“US FDA” United States Food and Drug Administration

“US$”, “USD“ or “US Dollar”

United States Dollar, the official currency of the United States of America

“USE” Uganda Securities Exchange

“WHO“ World Health Organisation

“WHO-certified” Being cGMP-compliant as determined by WHO inspection and as published on the WHO’s website in the Public Inspection Report (“PIR”) section

“WOS” Wholly owned subsidiary/ies

“WTO” World Trade Organisation

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1.1 Name of Issuer Cipla Quality Chemical Industries Limited (formerly “Quality Chemical Industries Limited”)

1.2 Country of Incorporation The Republic of Uganda

1.3 Date of Incorporation 10 June 2005

1.4 Company Number P.558

1.5 Registered/HeadOffice Cipla Quality Chemical Industries LimitedLuzira Industrial ParkP.O. Box 34871Kampala, Uganda

1.6 Authorised Share Capital UGX 45,648,865,000

1.7 Issued and Paid-up Share Capital UGX 45,648,865,000

1.8 Financial Calendar 31 March year end

1.9 Website www.ciplaqcil.co.ug

2.10 Directors

Name Board Designation

Nationality Address Profession Age

Mr. Emmanuel Katongole

Executive Chairman

Ugandan P.O. Box 34871,Kampala, Uganda

Business Executive

56

Mr. Nevin Bradford CEO British P.O. Box 34871,Kampala, Uganda

Chief Executive Officer

61

Mr. George Baguma Executive Director

Ugandan P.O. Box 34871,Kampala, Uganda

Business Executive

58

Mr. Frederick Mutebi Kitaka

Alternate to Mr. George Baguma

Ugandan P.O. Box 34871,Kampala, Uganda

Business Executive

55

Ms. Beth Mandel Director American C apital Hill, 7th Floor, 6 Benmore Road, Benmore, Sandton, 2010 South Africa

Business Executive

53

Mr. Zain Latif Director British 34 Lombard Rd, London SW11 3RF, UK

Business Executive

34

Dr. Ranjana Pathak Director American Cipla House, Peninsula Business Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400 013

Quality Specialist

59

Mr. Paul Miller Director South African

1474 South Coast Road, Mobeni, 4052, South Africa

Business Executive

53

Mr. Chandru Chawla Director Indian Cipla House, Peninsula Business Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400 013

Business Executive

52

2CorporateDirectory

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Mr. Nishant Saxena Director Indian Cipla House, Peninsula Business Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400 013

Business Executive

41

Mr. Mark Daly Director South African

1474 South Coast Road, Mobeni, 4052, South Africa

Business Executive

38

Mr. Samuel Opio Director Ugandan P.O. Box 34871, Kampala, Uganda

Pharmacist 38

Dr. Abofele Bogosi Khoele

Alternate to Dr. Ranjana Pathak

South African

1474 South Coast Road, Mobeni, 4052, South Africa

Medical Doctor

43

Independent Directors (appointment is effective upon Listing)Prof Peter Mugyenyi* Director Ugandan P.O. Box 4967,

Kampala, UgandaMedical Doctor

70

Mr. Joseph Baliddawa* Director Ugandan P.O. Box 33566, Kampala, Uganda

Accounting Executive

65

*Appointment of Independent Directors is conditional to the Listing and becomes effective on the Listing Date.

2.11 Company SecretaryMs. Terry Nantongo KajobaCipla Quality Chemical Industries LimitedLuzira Industrial ParkP.O. Box 34871Kampala, Uganda

2.12 Reporting Accountants and AuditorErnst & YoungCertified Public Accountants of UgandaErnst & Young House18 Clement Hill Road, Shimoni Office VillageP.O. Box 7215Kampala, Uganda

2.13 Principal BankersBarclays Bank of Uganda Limited Standard Chartered Bank Uganda LimitedHannington Road Speke RoadP.O. Box 7101 P.O. Box 7111Kampala, Uganda Kampala, Uganda

2.14 LawyersKalenge, Bwanika & Co. Advocates MMAKS Advocates 3rd Floor, Ruth Towers 3rd Floor, DTB Centre Plot 15A Clement Hill Road Plot 17/19, Kampala RoadP.O. Box 8352 P.O.Box 7166, Kampala Kampala, Uganda

K & K Advocates (Formerly Kiwanuka & Karugire)SRK House, Plot 67 Lugogo BypassP.O.Box 6061, Kampala

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2.15 Structure of Group of Undertakings of Cipla

Structure as of the date of this Prospectus

Cipla Limited

India

Meditab SpecialitiesPrivate Limited

India

Meditab HoldingsLimited

Mauritius

Emmanuel KatongoleExecutive Chairman

Frederick MutebiKitaka

Executive Director

George WilliamBaguma

Executive Director

Capitalworks SSA1Mauritius

AmistadMauritius

Cipla (EU)UK

Cipla Qualities Chemical Industries LimitedUganda

12.50%14.40%3.60%3.60%3.60%11.25%51.05%

100%

100% 100%

Note: Amistad is controlled by TLG Capital

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LEAD TRANSACTION ADVISOR, SOLE BOOKRUNNER LEAD SPONSORING BROKER

Renaissance Capital (Kenya) Limited6th Floor Purshottam Place, Westlands Road

P.O. Box 40560-00100Nairobi, Kenya

Tel: +254 (0)20 368 2000Email: [email protected]

Website: www.rencap.com

Crested Capital1stFloor, Impala House

Plot 13/15 Kimathi AvenueP.O. Box 31736, Kampala, Uganda

Tel: +256 312 230900 / 414 230 900 / 758 230900Email: [email protected]

Website: www.crestedcapital.com

LEGAL COUNSEL SHARE REGISTRARS

Bowmans4th Floor, DFCU Towers,Plot 26 Kyadondo Road,

P.O Box 1520, Kampala, Uganda

Tel: +256 (0)41 425 4540 / 423 3616Email: [email protected]

[email protected]: www.bowmanslaw.com

Custody and Registrars Services Limited4th Floor, DTB Centre

P.O Box 74895Kampala, Uganda

Tel: +256 414 237 504Email: [email protected]

Website: www.crsltd.co.ke

RECEIVING BANK REPORTING ACCOUNTANT

Standard Chartered Bank Uganda Limited2nd Floor, Standard Chartered House

Plot 5, Speke Road,P.O. Box 7111, Kampala, Uganda

Tel: +256 31 329 4379Email: [email protected]

Website: www.sc.com/ug

Ernst & YoungCertifiedPublicAccountantsofUganda

Plot 18, Clement Hill Road,Kampala, Uganda

Tel: +256 414 343 520/4Email: [email protected]

Website: www.ey.com

COMMUNICATIONS AGENCY

LiveWorks Inc. Ltd99 Bukoto Street, Kamwokya

P.O. Box 10086, Kampala, UgandaTel: +256 393 215 013

Email: [email protected]

3AdvisorstotheTransaction

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Bookbuilding opens (Institutional Pool) Thu 26 Jul 10:00am

Bookbuilding closes (Institutional Pool) Thu 9 Aug 05:00pm

Offer opens (Retail Pool) Tue 14 Aug 10:00am

Offer closes (Retail Pool) Fri 24 Aug 05:00pm

Last date for payment of Offer Shares for Institutional Pool investors Wed 12 Sep 04:00pm

Announcement of allotment results Fri 14 Sep

Dispatch of SCD and CDS Statements and any refund money disbursed Fri 14 Sep

Admission to Listing, and commencement of trading on the USE Mon 17 Sep

Notes:The Offer timetable and, in particular, the Offer period are subject to amendment and extension if agreed by CiplaQCIL, the CMA and the USE. Any such amendment or extension will be announced publicly through a press statement.All times throughout this Prospectus refer to local Uganda time.

4OfferTimetable

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Offer Price per Offer Share UGX 256.5

Par value of each Offer Share UGX 12.50

Authorised share capital of the Company UGX 45,648,865,000

Total issued Shares Number 3,651,909,200

Issued share capital of the Company UGX 45,648,865,000

Total Offer Shares Number 657,179,319

Total Offer Shares as a percentage of issued Shares of the Company

% 18.00%2

Gross proceeds of the Offer* UGX 168,566,495,324

Company Statistics

Net profit for the year ended 31 March 2018 UGX thousands 44,627,240

EBITDA for the year ended 31 March 2018** UGX thousands 53,246,262

EPS for the year ended 31 March 2018 UGX/share 12.22

Dividends paid during the year ended 31 March 2018***

UGX thousands 10,892,826

* CiplaQCIL will not receive any proceeds from the sale of the Offer Shares, as the funds will be distributed to the Selling Shareholders

** Excluding IPO-related costs*** Paid in May and August 2017

2 The Company has received a waiver to offer a free float of 18.00% with a commitment to increase this to 20% as per the Listing Regula-tions within 24 months from the Listing Date.

5OfferStatistics

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The Directors of CiplaQCIL, whose names are given in Section 11 of this Prospectus collectively and individually accept full responsibility for the information contained in this document. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the Capital Markets (Prospectus Requirements) Regulations, facts and does not omit anything likely to affect the import of such information. The Directors confirm that in their opinion, based on the business as is currently carried on, the working capital available to CiplaQCIL is sufficient for the Company’s requirements for at least 12 months from the Listing Date.

The Directors are further of the opinion that the issued and fully paid up share capital is adequate for the Company for the foreseeable future. The Directors confirm that CiplaQCIL will comply, where applicable, with the Capital Markets Authority Act (Chapter 84, as amended, of the Laws of Uganda); Capital Markets (Prospectus Requirements) Regulations, 2001 as amended; the Uganda Securities Exchange Listing Rules 2003; and the Companies Act.

Emmanuel Katongole Frederick Mutebi KitakaExecutive Chairman Director

6Directors’Statement

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7LetterfromtheExecutiveChairman

Dear Stakeholder

On behalf of the Board of Directors of Cipla Quality Chemical Industries Limited, it gives me great pleasure to present you with this Prospectus for the opportunity to invest in our Company.

CiplaQCIL is a WHO-certified, cGMP-compliant pharmaceutical manufacturing company founded by me and Executive Directors, Messrs Frederick Mutebi Kitaka and George Baguma, and Messrs Francis X. Kitaka (Chairman Emeritus), Edward Martin and Randall Tierney (through our company, QCL), and our world class technical partner, Cipla Limited of India. Since our humble beginning 13 years ago, we have begun to make a meaningful impact in the global effort to save lives by arresting the scourge of dreaded diseases, such as malaria, HIV/AIDS and hepatitis B. Importantly, as these diseases are particularly burdensome in Africa, we do this entirely from our African manufacturing base, with zero tolerance for any compromise in quality.

It is our deep desire to provide self-sufficiency to the people of Uganda and the region for the treatment of these diseases. When we started, Uganda was fully reliant on imported drugs for HIV/AIDS, hepatitis and relevant anti-malarial treatments. With the ratification of TRIPS, we were cognisant that India, the biggest source of pharmaceuticals for Africa, could cease to be a reliable supplier of quality affordable new critical medicines.

It was out of this concern that we, working closely with the GOU, entered into a collaboration with Cipla as the technical partner, with the aim to obtain critical technology transfer that would enable Uganda, as a LDC, to take advantage of the flexibilities availed by TRIPS. We later attracted two private equity investors, namely Capitalworks and TLG Capital, who have played an invaluable role in our development and growth. In recognition of our contribution to the development of Uganda’s economy and healthcare industry, our offtake agreement with the GOU has been extended periodically and now prevails until 2029. We are gratified that the Government’s early and ongoing support to the Company has enabled us to establish and grow this world-class facility that now supplies many other countries.

CiplaQCIL is committed to achieving the vision of the African Union’s Pharmaceutical Manufacturing Plan for Africa and the EAC’s Pharmaceutical Manufacturing Plan of Action and, in so doing, assisting in meeting the UN’s Millennium Development Goals. The Company currently concentrates on the manufacture of WHO-recommended treatments of three of Africa’s most terrible diseases, HIV/AIDS, malaria and hepatitis B, and will soon manufacture a cure for hepatitis C. CiplaQCIL is the only WHO cGMP-compliant pharmaceutical plant in SSA that manufactures WHO-prequalified first-line treatments for both HIV/AIDS and malaria. Our facility is now approved in 13 countries (compared to eight countries in March 2016), enabling us to spread our impact throughout the region. Our ambition is to be registered in 19 SSA countries by December 2020.

This Offer is a sale of Shares by the Selling Shareholders. The Company is well capitalised, is cash generative and has sufficient resources to self-fund its growth and, as such, does not anticipate the need to raise any primary capital at this time.

Through this Prospectus, the Company and Selling Shareholders are inviting investors to apply for 657,179,319 Offer Shares, at an Offer Price of UGX 256.5 per Share (before costs and expenses of the Offer).

This Prospectus contains detailed information about the Company’s operations, financial performance, management team and expansion plans. It also outlines the risks to which CiplaQCIL’s business is exposed and key dependencies relevant to the Company. I encourage you to read and understand this Prospectus in its entirety and seek independent professional advice, as necessary, before making an investment decision.

We are listing at a particularly exciting time in the evolution and development of the Company. Our mission to provide “Access to Quality Affordable Medicines” has never been more relevant. We see tremendous potential for growth, geographically and in the scope and breadth of our product offering. All of us at the Company are fully committed to our vision to transform and, indeed, save lives. We believe we can stay true to our values and at the same time deliver compelling returns for our new and current shareholders.

We look forward to you joining us as shareholders for the next stage of our development and growth.

Yours faithfully,

Emmanuel KatongoleExecutive Chairman

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THIS SUMMARY MUST BE READ AS AN INTRODUCTION TO THIS PROSPECTUS, AND ANY DECISION TO INVEST IN CIPLAQCIL’S SHARES SHOULD BE BASED ON THE CONSIDERATION OF THE PROSPECTUS IN ITS ENTIRETY

8.1 Company History and Business Overview

CiplaQCIL is a Ugandan-based pharmaceutical manufacturing company focused on the production of high quality and affordable life-saving medicines. CiplaQCIL was established in 2005 by leveraging the local presence and knowledge of QCL of Uganda with technical know-how from Cipla. This collaboration attracted two international investors, namely, TLG Capital in 2009 and Capitalworks in 2010. The Company’s facility was approved as being compliant with the cGMP standards of WHO in 2010, and in the same year CiplaQCIL became the first company in Africa to manufacture WHO-prequalified ARV and ACT products at its facility3. WHO-prequalification of a product means that the product and the associated manufacturing site is compliant with the directives issued by the WHO following an assessment of the quality, safety and efficacy of the medicinal product4. Later in the same year, the Company also signed a contract with the Global Fund to supply anti-malaria medications, making it the first company in Africa to supply to the Global Fund. In 2013, Meditab, Cipla’s WOS, increased its interest in the Company and acquired a majority shareholding, in an effort to enhance technology and knowledge transfer. In 2014, the Company changed its name from Quality Chemical Industries Limited to Cipla Quality Chemical Industries Limited. In 2015, Cipla’s effective stake increased to 62.3% by virtue of its WOS, Cipla EU acquiring a 51% stake in QCL.

The Company’s current portfolio comprises nine branded generics for the treatment of malaria, HIV/AIDS and hepatitis B. All of these treatments are WHO-recommended therapeutic regimens.

The Company’s state-of-the-art manufacturing facility was commissioned in 2009 and is approved for compliance with GMP standards by WHO. The Company has a history of increasing efficiencies and capacity with relatively limited additional capital expenditure and is currently implementing further such initiatives. In addition, the Company has space on its existing manufacturing site to build a second manufacturing facility, as well as space on the adjacent land leased to CiplaQCIL for further expansion, when appropriate.

CiplaQCIL is managed by a highly experienced team that has an established local and international track record in the pharmaceutical sector and a world-class technical partner and majority shareholder, Cipla, a leading global pharmaceutical producer in India, which provides significant benefits to the business such as technology transfer, procurement efficiency and operational excellence.

8.2 Financial Performance Summary

This Section should be read together with the Reporting Accountant’s Report.

3 WHO-prequalification of ACT and ARV products is based on the WHO prequalification of Cipla’s ARV and ACT products in respect of its additional manufacturing site, i.e. CiplaQCIL’s facility in Uganda.4 WHO Prequalification of medicines by WHO (Fact sheet N°278).

8 Executive Summary

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8.3 Summary of Five-Year Income StatementsThe summarised statements of comprehensive income of CiplaQCIL for the five financial years ended 31 March 2018 are as follows:

Table 1: Five-year comprehensive income statement

12 months ended

12 months ended

12 months ended

12 months ended

12 months ended

UGX millions_ 31-Dec-13 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 Revenue 89,788 116,965 164,050 211,733 227,315 Cost of sales (53,422) (55,866) (85,514) (116,511) (130,868) Gross profit 36,366 61,099 78,536 95,223 96,447 Other income 109 33 279 604 165 Net foreign exchange gains/(losses) 136 2,294 626 3,054 1,176 Administration expenses (7,802) (7,621) (9,671) (13,681) (14,711) Staff expenses (12,741) (15,825) (20,658) (26,830) (29,147) IPO-related expenses - - - (6,584) (2,623) Other operating expenses (1,872) (328) (262) (501) (685) Operating profit before depreciation and amortisation (EBITDA)5 14,197 39,653 48,849 57,869 53,246 Amortisation and depreciation (5,193) (5,698) (5,790) (6,043) (6,630) Operating profit 9,004 33,954 43,059 45,242 43,993 Finance expense (724) (290) (216) – – Profit before tax 8,280 33,665 42,843 45,242 43,993 Income tax credit/(expense) – – – (3,068) 634 Profit after tax 8,280 33,665 42,843 42,174 44,627 Other comprehensive income, net of tax – – – – – Total comprehensive income for the year 8,280 33,665 42,843 42,174 44,627 Earnings per share (UGX)6 2.3 9.2 11.7 11.5 12.2

Results in the most recent financial year (ending 31 March 2018) were impacted, among others, by the following items:

· There were no intercompany sales to Cipla (contract manufacturing) in 2017/18. In the past, intercompany sales were conducted in circumstances where Cipla had capacity constraints. Year-on-year revenue growth rate excluding sales to Cipla was over 13% in UGX terms.

· In Q4 2017/18, NMS made a supplementary order of UGX 19 billion, of which UGX 9 billion was supplied by the Company in Q4 2017/18 and the balance of UGX 10 billion in April 2018.

The Company has a tax holiday that is expiring in June 2019.

5 Excludes IPO-related expenses for Transaction Advisor, Legal Counsel, Reporting Accountant and other relevant expenses incurred in 2016/17 and 2017/18.6 Calculated using Total Issued Shares of 3,651,909,200.

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8.4 Summary of Five-Year Balance SheetsThe summarised balance sheets of CiplaQCIL for the five financial years ended 31 March 2018 are as follows:

Table 2: Five-year balance sheet

As at As at As at As at As atUGX millions 31-Dec-13 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18

ASSETS Non-current assets Property, plant and equipment 30,901 29,565 29,568 30,926 31,299 Capital work-in-progress 1,641 5,565 3,848 3,615 24,153 Leasehold land 2,776 2,776 2,776 2,776 2,776 Intangible assets 1,995 1,250 708 871 369

37,313 39,156 36,901 38,189 58,597 Current assets Inventories 17,513 17,106 19,916 28,233 37,218 Amounts due from shareholders 29,505 - - - - Fixed deposit - - - - 11,078 Trade and other receivables 12,944 32,150 83,543 88,361 91,845 Cash and bank balances 9,485 4,804 6,787 13,823 10,558

69,447 54,060 110,246 130,417 150,699 Total assets 106,760 93,216 147,146 168,606 209,296

EQUITY AND LIABILITIES Equity Issued capital 45,649 45,649 45,649 45,649 45,649 Capital grant 2,275 2,275 2,275 2,275 2,275 Retained earnings 21,473 32,527 75,370 92,431 126,165

69,397 80,451 123,294 140,355 174,089 Non-current liabilities Loans and borrowings 3,248 - - - - Deferred income tax liability - - - 3,068 2,434

3,248 – – 3,068 2,434 Current liabilities Loans and borrowings 9,993 - - - - Trade and other payables 24,122 12,765 23,852 25,183 32,773

34,115 12,765 23,852 25,183 32,773 Total equity and liabilities 106,760 93,216 147,146 168,606 209,296

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8.5 Summary of Five-Year Cash Flow StatementsThe summarised cash flows of CiplaQCIL for the five financial years ended 31 March 2018 are as follows:

12 months ended

12 months ended

12 months ended

12 months ended

12 months ended

31-Dec-13 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 UGX millions Operating activities Profit before tax 8,280 33,665 42,843 45,242 43,993

Foreign exchange (gain) / loss on borrowings and fixed deposits

(1,028) 890 1,098 – (144)

Depreciation 4,580 5,095 5,248 5,548 6,090 Amortisation of intangible assets 613 604 542 495 540 Provision for bad debts – – – – 204 Provision for obsolete inventories – 264 – 741 64 Stock write-off – – (264) – (741)Asset write-off – – – – 221 (Gain)/ loss on disposal of property, plant & equipment

– 17 (198) (17) 87

Interest income (105) (16) (29) (511) (88)Interest expense 724 290 216 – –

Cash flow before working capital changes 13,064 40,808 49,456 51,498 50,226 (Increase)/ decrease in inventories 1,317 (6,391) (2,546) (9,058) (8,308)(Increase)/ decrease in trade and other receivables

8,473 (19,215) (51,392) (4,819) (3,688)

Increase/ (decrease) in trade and other payables

(3,479) 1,738 11,087 1,331 7,590

Interest received 105 16 29 511 59 Interest paid (758) (290) (216) – –

18,723 16,666 6,417 39,464 45,878

Investing activities Purchase of property, plant & equipment (189) (944) (564) (1,750) (1,430)Investment in capital work in progress (6,426) (6,928) (2,971) (5,162) (25,887)Investment in fixed deposit – – – – (10,905)Purchase of intangible assets (166) – – (420) (38)Proceeds from disposal of property & equipment

– 140 198 17 10

(6,781) (7,733) (3,337) (7,314) (38,251)

Financing activities Proceeds from bank loans 3,345 – 9,117 – – Repayment of bank loans (8,747) (9,174) (10,215) – – Dividends paid to equity owners – – – (25,113) (10,893)

(5,402) (9,174) (1,098) (25,113) (10,893)

Net (decrease)/increase in cash and cash 6,540 (240) 1,982 7,037 (3,266) Cash (beginning of period) 2,945 5,045 4,804 6,787 13,823

Cash and cash equivalent for period 9,485 4,804 6,787 13,823 10,558

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In accordance with the Company’s stated dividend policy, the Board and Shareholders of CiplaQCIL have paid the following dividends7:

· UGX 11,118 million (UGX3.04 per share) in the current financial year;

· UGX 10,893 million (UGX3.0 per share) in the year ended 31 March 2018;

· UGX 25,113million (UGX 6.9 per share) in the year ended 31 March 2017.

In July 2015, the Company settled the balance of its outstanding debt (taken to finance construction of the manufacturing facility in 2008/09) and has been debt free ever since.

8.6 Transaction Summary

The Company Cipla Quality Chemical Industries Limited

The Shares The authorised share capital of the Company is 45,648,865,000 divided into 3,651,909,200 Ordinary Shares, each with par value of UGX 12.50. As at the date of this Prospectus, the number of issued and fully paid Ordinary Shares is 3,651,909,200.

The Company is not issuing new Shares to be placed in the Offer or otherwise.

Offer Shares 657,179,319 Shares of the Company, which represent 18.00% of the Company’s issued share capital

Selling Shareholders Offer Shares will comprise Shares offered by Cipla EU, Capitalworks, Uganda Founders and Amistad

Offer Price UGX 256.5 per Offer Share

Securities Exchange Listing It is expected that the Admission of the Shares to trading on the USE will occur on 17 September 2018

Settlement The Offer Shares will be issued as dematerialised securities. The Offer Shares will be registered in the Securities Account of each Applicant held with the SCD. No physical share certificates will be issued.

The Institutional Pool 591,461,386 Offer Shares are allocated for sale in the Institutional Pool for Institutional Investors and persons who are not Retail Investors that are entitled to apply for Offer Shares as per Section 9.12.2.

The minimum number of Shares per application is 1,000 Offer Shares. Applicants applying for more than the minimum number of Offer Shares may apply for such higher number in multiples of 100 Offer Shares.

The total number of Shares allocated for the Institutional Pool may change as a result of the claw back arrangement and/or any reallocation of unsubscribed Retail Pool shares as described in paragraph 9.7 below. As set out in paragraph 9.7 below, the Company has established a clawback mechanism for the Retail Pool that increases the number of Offer Shares that can be allocated to investors in the Retail Pool up to 20% of the Offer Shares.

7 All per share values in this paragraph were calculated using total Issued shares of 3,651,909,200

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The Retail Pool 65,717,933 Offer Shares are allocated for sale in the Retail Pool to Retail Investors.

The minimum number of Shares per application is 1,000 Offer Shares. Applicants applying for more than the minimum number of Offer Shares may apply for such higher number in multiples of 100 Offer Shares.

The total number of Retail Pool Shares may be increased as a result of the claw back arrangement as described above.

Lock-in Uganda Founders and Meditab have agreed with the Lead Transaction Advisor to a Lock-in agreement whereby, subject to certain exceptions, they undertake not to sell or otherwise dispose of Shares for a period of 24 months, commencing on the date of Listing.

The Company has agreed with the Lead Transaction Advisor, subject to certain exceptions, not to offer, sell, or dispose of any Shares of the Company’s share capital for a period of 24 months, commencing on the date of Listing.

The Shares owned by TLG Capital will be locked in pursuant to a Lock-in agreement for a period of six months from the date of Listing. Under the Lock-in agreement, TLG may pledge some or all of its Shares in connection with financing transactions (or permit such a pledge to subsist) and transfer such Shares to pledgees upon an enforcement of a pledge agreement, provided that any person acquiring an ownership interest in Shares as a result of such an enforcement first agrees to be locked in for a period of three months, from the date of Listing.

The Shares owned by Capitalworks will be locked in pursuant to a Lock-in agreement for a period of six months from the date of Listing.

Lock-in agreement does not apply to the Offer Shares outlined in Section 9.4.

Security Codes/Ticker on USE CQCIL

8.7 How to Apply for Shares – Institutional Pool Bookbuild

As noted in Section 9, the Offer will open initially to the Institutional Pool only through a bookbuilding process (the “Bookbuild”). The Bookbuild is a process by which applications for the Offer Shares are elicited and compiled from investors to determine a clearing price for the Offer Shares. The clearing market price discovered through the Bookbuild will be the Offer Price that is fixed for the Retail Pool.

The Bookrunner will have primary responsibility for the Bookbuild and will invite Institutional Investors and persons who are not Retail Investors that are entitled to apply for Offer Shares as per Section 9.12.2 to participate, subject to the selling restrictions set out in Section 9. To bid in the Bookbuild, investors will place their orders for the Offer Shares directly with the Bookrunner (through a recorded message, via the Internet or recorded telephone line), stating the number of Offer Shares that the prospective investor wishes to acquire at either the Offer Price, which is ultimately established by the Bookrunner in consultation with the Company and the Selling Shareholders, as noted below, or at prices up to a price limit specified in its bid. An Application Form should be submitted to the Bookrunner prior to the close of the Bookbuild. At the close of the Bookbuild period and, following a review of the orders received, each prospective investor’s allocation will be determined at the discretion of the Bookrunner in accordance with the criteria disclosed in Section 9.14.3. These allocations will be confirmed by the Bookrunner, as soon as practicable, following the close of the Bookbuild. The Offer Price will be determined by the Bookrunner in its discretion, following consultation with the Company and the

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Selling Shareholders. The last date for payment is 12 September 2018, two days in advance of announcement of the final allocation results.

8.8 How to Apply for Shares – Retail Pool

The Offer to the Retail Pool will open subsequent to the Bookbuild with the Offer Shares fixed at the Offer Price. To apply through the Retail Pool, the completed Application Form (see sample form in Section 21), the necessary payment and if the investor does not have an SCD account, the appropriate SCD 1a or 1b Form, as noted above, must be submitted to the ASAs identified in Section 22 of this Prospectus.

Application Forms can be obtained from any ASA, which includes the Lead Sponsoring Broker and Receiving Bank.

Payment may be made in the form of:

• cash paid to the ASA’s bank account (refer to Section 9.16);

• a valid banker’s draft/cheque, drawn on a bank licensed in Uganda, made payable in favour of CiplaQCIL Share Offer Account in UGX;

• electronic funds transfer to the bank account of the ASA, as designated.

Personal cheques will not be accepted. Late applications will not be considered.

8.9 How to Open an SCD Account

All Applicants are required to have a Securities Account in Uganda. The process and documentation for opening an SCD account are provided in Section 19 of this Prospectus.

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9.1 The Offer

The Offer comprises an offer for sale of up to 591,461,386 Offer Shares to be placed through a Bookbuild for the Institutional Pool and an offer for sale of up to 65,717,933 Offer Shares at fixed price for the Retail Pool. The Offer Price of UGX 256.5 was arrived at the Bookbuild and is the Offer Price at which Offer Shares are offered to investors in both the Institutional Pool and Retail Pool.

The Offer is being made available in Uganda, with intended, subject to regulatory approvals, listing on the USE.

No Securities shall be allotted on the basis of the Prospectus later than six months after its date of issue.

9.2 Legal Basis of the OfferThe Shareholders of the Company passed a resolution approving of listing on the USE, including authorising Directors to seek all necessary authorisations and approvals.

9.3 BenefitsoftheOffer

CiplaQCIL anticipates that the Listing will have the following benefits for the Company and its stakeholders:

• provide investors, both institutional and retail, with an opportunity to participate in the income streams and future capital growth of CiplaQCIL;

• enhance the liquidity and tradability of the ordinary Shares through a spread of investors;

• highlight the potential for globally competitive manufacturing operations in Uganda;

• further the objectives of the GOU by assisting in the development of the capital markets;

• allow broader local Share ownership; and

• provide another potential means to incentivise employees.

CiplaQCIL will not receive any proceeds from the sale of the Offer Shares.

9.4 Number of Shares on Offer

The total number of Offer Shares is 657,179,319. Assuming all of the Offer Shares are sold pursuant to the Offer for Sale, the total number of Offer Shares will constitute 18.00% of the total issued share capital of the Company.

9 Summary of the Offer

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The pre- and post-Offer shareholding structure is shown in the table below:

Pre – Offer Post – Offer

Shareholder # of Shares % of Issued Shares

# of Shares % of Issued Shares

Meditab 1,864,299,646 51.05 1,864,299,646 51.05

Cipla EU 410,675,449 11.25 0 0.00

Mr. Emmanuel Katongole 131,523,510 3.60 101,577,855 2.78

Mr. George Baguma 131,523,510 3.60 101,577,855 2.78

Mr. Frederick Mutebi Kitaka 131,523,510 3.60 101,577,855 2.78

Capitalworks 525,874,925 14.40 405,727,112 11.11

Amistad 456,488,650 12.50 419,969,558 11.50

New Shareholders - - 657,179,319 18.00

TOTAL 3,651,909,200 100 3,651,909,200 100

9.5 Status of the Offer Shares

The Offer Shares rank pari passu in all respects with the issued Shares, including the right to participate in full in all dividends and/or other distributions declared since the Listing Date in respect of such Shares upon the allocation of the Offer Shares.

The Offer Shares will be held in dematerialised form only and, accordingly, no physical documents of title will be issued or delivered to successful Applicants.

The Offer Shares will be freely transferable and will not be subject to any restrictions on marketability or any rights of first refusal on transfer under the Articles.

The Offer Shares will be eligible to participate in the dividends of the Company immediately following the listing of the Shares.

9.6 Structure and Allocation of the Offer

In order to strike a balance between retail and institutional investors, the Offer is structured into an Institutional Pool and a Retail Pool.

591,461,386 Offer Shares or 90% of the Offer Shares have been allocated for sale in the Institutional Pool by way of book building (as outlined in Section 9.14.3) to Institutional Investors and persons who are not Retail Investors that are entitled to apply for Offer Shares as per Section 9.12.2.

65,717,933 Offer Shares or 10% of the Offer Shares have been allocated for sale in the Retail Pool and will be sold at the fixed price set following the institutional book build.

Pool (subject to potential clawback) Number Of Shares Allocation %Institutional Pool (Uganda, other EAC and International) 591,461,386 90%

Retail Pool (Uganda and other EAC) 65,717,933 10%

TOTAL OFFER 657,179,319 100%

If the Retail Pool is oversubscribed, then the Offer Shares available under Retail Pool can be increased up to

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20% of the Offer Shares. In this case, the Offer Shares available under the Institutional Pool will be reduced to the same extent. Further in the Prospectus all statistics and breakdown between pools will assume base case of no clawback of shares to Retail Pool from Institutional Pool, and could vary if the clawback condition as set above is applied.

9.7 Share Retention and Lock-in

The Uganda Founders and Meditab have agreed with the Lead Transaction Advisor to a Lock-in agreement whereby, subject to certain exceptions, they undertake not to sell or otherwise dispose of Shares for a period of 24 months, commencing on the date of Listing.

The Company has agreed with the Lead Transaction Advisor, subject to certain exceptions, not to offer, sell, or dispose of any Shares of the Company’s share capital for a period of 24 months, commencing on the date of Listing.

The Shares owned by TLG Capital will be locked in pursuant to a Lock-in agreement for a period of six months from the date of Listing. Under the Lock-in agreement, TLG may pledge some or all of its Shares in connection with financing transactions (or permit such a pledge to subsist) and transfer such Shares to pledgees upon an enforcement of a pledge agreement, provided that any person acquiring an ownership interest in Shares as a result of such an enforcement first agrees to be locked in for a period of three months, from the date of Listing.

The Shares owned by Capitalworks will be locked in pursuant to a Lock-in agreement for a period of six months from the date of Listing.

9.8 Underwriting

The Offer will not be underwritten.

9.9 Listing of the Offer Shares

The Offer Shares shall be listed on the USE. On allocation, Shares will be uploaded to the Applicant’s Securities Account, as indicated on their Application Form.

9.10 Threshold for Successful Transaction

The Offer is subject to receiving minimum aggregate applications of 50% of the Offer Shares, that is 328,589,660 Offer Shares or UGX 84.3 billion.

Part IV of the Uganda Securities Exchange Listing Rules state that immediately following the Offer, at least 20% of the Shares shall be held by not fewer than 1,000 shareholders. In the event that the minimum subscription is not achieved, a waiver of this requirement will be sought from the USE and the CMA to proceed with the Listing. If the Listing does not become effective, monies paid in respect of any application for Offer Shares accepted will be refunded.

9.11 Offer Conditionality

CiplaQCIL, the Selling Shareholders and the Bookrunner have entered into the Placement Agreement in connection with the Offer, and the Offer is provisional on (amongst others) the Placement Agreement becoming unconditional and the approval of the Listing, failing either of which the Offer and any acceptance thereof shall not be of any force or effect, and no person shall have any claim whatsoever against CiplaQCIL, any Selling Shareholder, the Bookrunner or any other person as a result of the failure of any condition.

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9.12 Eligibility for the Pools

9.12.1 Retail Pool

Only Ugandan and other EAC nationals (as defined in this Prospectus) are eligible to make applications in the Retail Pool.

9.12.2 Institutional Pool

Institutional Investors as well as persons who are not Retail Investors are entitled to apply for Shares reserved under the Institutional Pool.

International Institutional Investors are only eligible to apply for Offer Shares from the Institutional Pool if it is permissible under the laws of their residency or location for them to receive the Prospectus and participate in the Offer and provided that the Offer to such entity complies with the selling restrictions set out in the Section headed “Selling and Transfer Restrictions”.

9.13 Extension of the Offer

Any extension of the Offer Period will be subject to approval of the Board of Directors of the Company, the USE and the CMA and shall be communicated accordingly.

9.14 Allocation Policy

9.14.1 Allocation policy applicable to both the Institutional and Retail Pools

In the event that the total number of Offer Shares applied for by Applicants in a particular pool is below the total number of Offer Shares reserved for that pool, the following will apply:

a) All valid applications received will be allocated in full as per the number of Offer Shares applied for, taking into account the minimum number of Offer Shares that may be applied for in each pool; and

b) The balance of Offer Shares reserved for that pool will be available for allocation in the other pool, and these excess Offer Shares will be allocated in accordance with the allocation policy of that pool.

If the number of Offer Shares validly applied for under Retail Pool is more than the number of Offer Shares initially available under the Retail Pool, then Offer Shares may be reallocated to the Retail Pool from the Institutional Pool. As a result of such reallocation, the total number of Offer Shares available under the Retail Pool may be increased to allocate more shares to valid applications under the Retail Pool but in any case, to not more than 131,435,863 Offer Shares, representing 20% of the Offer Shares.

The Bookrunner reserves the right to accept or refuse any application in its sole discretion in consultation with the Company and Selling Shareholders, either in whole or in part, or to accept some applications in full and others in part, or to abate any or all applications in such manner as they may determine.

Further to the above provisions, the following policies will apply to the pools as specified below:

9.14.2 Allocation Policy for the Retail Pool

If the total number of Offer Shares applied for is more than the total number of Offer Shares reserved for the Retail Pool, Applicants will be allotted Offer Shares in multiples of 100 on a pro rata basis, rounded down to the nearest 100 Offer Shares, until all Offer Shares in the Retail Pool are fully exhausted.

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9.14.3 Allocation Policy for the Institutional Pool

The Bookrunner will seek to build a book of demand consisting of a mix of investors who are likely to be long-term holders of the Shares or providers of liquidity. Some or all the following factors will be considered in determining the allocations to each Applicant:

• investor’s price limit, if any, and the level;

• the size of the investor’s expressed interest (both absolute and relative to the investor’s portfolio or assets under management);

• the investor’s interest in, and past dealings in, other offerings in the health care industry in emerging markets;

• the extent to which the investor’s expressed interest appears consistent with the investor’s investment strategy, objectives and purchasing capacity;

• the timeliness of the investor’s indication of interest;

• the nature and level of interest shown by the investor in the Offer, its involvement in roadshows, meetings and valuation discussions and other contacts with the Company and Bookrunner;

• the category or description into which the investor falls (e.g. retail fund, tracker fund, emerging markets specialist or industry specialist fund);

• the geographic spread of investors in the book of demand;

• the need to comply with applicable selling restrictions or other relevant legal or regulatory restrictions in each relevant jurisdiction;

• based on experience, the investor’s likely long-term interest in the Company;

• any indication or reasonable belief that an investor has exaggerated its indication of interest in anticipation of being scaled back;

• the expected conduct of the investor in the aftermarket; and

• the desirability of avoiding allocations in inconvenient or uneconomic amounts.

The final decision on the allocation of the Institutional Pool will rest with the Bookrunner in consultation with the Company and Selling Shareholders.

If the results of the subscription for the Offer Shares make the above allocation policy impractical, then an amendment to the allocation policy shall be made with the approval of the Company, the Selling Shareholders and the CMA, and such amendment will be announced within 24 hours of the grant of such approval.

The Lead Transaction Advisor will notify the CMA of the allocation results and announce the same by advertisement in the press.

9.15 Status of Applicant

Every Applicant is required to declare on the “Application Form” the pool for which the applicant is eligible to apply for Offer Shares. The Applicant must submit together with the application, documentation supporting such eligibility.

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9.16 Application and Payment Procedures for the Retail Pool

The summarised procedures below should be read in conjunction with the detailed instructions for applying for Offer Shares as contained in the Section 19 of this Prospectus, “Procedures, Terms and Conditions of the Offer” and the instructions on the Application Form.

Copies of this Prospectus, together with the Application Forms and SCD account opening forms for individuals and institutions, may be collected from 9:00 am to 5:00 pm on any day (except Sundays and public holidays) during the Offer Period from any of the ASAs listed in Section 22 of this Prospectus.

Applications may be made only on Application Form, sample copy of which is included herein as Section 21 (whether or not printed as a separate document). Each Retail Pool investor must submit an Application Form supported by payment for an amount equivalent to the value of Offer Shares applied for. Payment may be in the form of cash deposit to the ASA or EFT. In the case of EFTs, payments should be made in favour of the bank account listed below, depending on the currency and the ASA:

The funds, which must be in UGX, should be deposited in the following ASA-assigned bank accounts at the Receiving Bank:

Bank ASA Account Name Account NumberStandard Chartered Bank CIPLAQCIL IPO – Renaissance Capital 01-050-145175-08

Standard Chartered Bank CIPLAQCIL IPO – Crested Capital 01-050-145175-01

Standard Chartered Bank CIPLAQCIL IPO – African Alliance 01-050-145175-02

Standard Chartered Bank CIPLAQCIL IPO – Dyer and Blair 01-050-145175-03

Standard Chartered Bank CIPLAQCIL IPO – Baroda Capital Markets 01-050-145175-04

Standard Chartered Bank CIPLAQCIL IPO – Equity Stock Brokers 01-050-145175-05

Standard Chartered Bank CIPLAQCIL IPO – UAP Financial Services 01-050-145175-06

Standard Chartered Bank CIPLAQCIL IPO – SBG Securities 01-050-145175-07

The SWIFT Code for Standard Chartered Uganda Limited is SCBLUGKA.

The completed Application Form, together with the necessary proof of payment (cash to the ASA or EFT advice applicable to investors comprising the Retail Pool), should be submitted to any of the ASAs no later than 5:00 pm on 24 August 2018.

9.16.1 Communication of Allocation Results

Allocation results will be communicated to all Share Applicants who have been allotted Shares by hard copy to the receiving broker for the allocation, for distribution to the respective applicants, and/or via short message service (SMS) and/or electronic mail in accordance with the dates indicated in the Offer Timetable. An announcement of the same shall be made by advertisement in the press.

9.16.2 Refunds Policy for Retail Applicants

Should the Offer be oversubscribed, Applicants who have not been allotted in full the number of Offer Shares applied for will be refunded an amount equivalent to the value of the Offer Shares not allotted. Applicants will have the funds credited to the bank account specified in the Application Form. Refunds will be made available to Applicants no later than 10 working days after the announcement of allocation results at the cost of the respective Applicant.

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9.16.3 Rejections Policy

Please refer to Section 19 of this Prospectus for the detailed application procedures.

Applications received after 5:00 pm on the close of Retail Offer will not be considered.

Applications will only be considered if received through one of the ASAs. Accordingly, neither the Lead Transaction Advisor, the Lead Sponsoring Broker, the Receiving Bank, the Registrar, the Vendors nor the Company will accept responsibility for any Applications that are, or may be, misdirected.

Applications can be rejected if the full value of the Offer Shares applied for is not received.

Applications may also be rejected for the following reasons:

a) Missing or illegible name of primary or joint Applicant in any Application Form;

b) Missing or incorrect SCD account number;

c) Missing or illegible identification number, including corporation registration number, or in the case of EAC residents, missing or illegible alien registration number;

d) Missing or illegible address (either postal or street address);

e) Missing residence and citizenship indicators (for primary Applicant in the case of an individual) or missing residency for tax purposes for corporate investors;

f) Insufficient documentation, including missing copy of tax exemption certificate copies for companies that claim to be tax exempt;

g) In the case of nominee applications, incomplete information or lack of declaration from the agent submitting the application;

h) Missing or inappropriately signed Application Form, including:

· Primary signature missing from signature box 1;

· Joint signature missing from signature box 2 (if applicable); and

· Two directors or a director and the company secretary having not signed, in the case of a corporate application;

i) Number of Shares applied for not complying with the rules as set out in Prospectus;

j) Incorrect calculation or payment of amount required for the number of Offer Shares applied for;

k) If it is suspected that an Applicant has subscribed to the Offer more than once; or

l) If an application is received with stamps from two or more receiving agents.

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9.17 Application and Payment Procedures for Institutional Pool

The procedures summarised below should be read in conjunction with the detailed instructions for applying for Offer Shares as contained in Section 19 of this Prospectus, “Procedures, Terms and Conditions of the Offer” and the instructions on the Application Form.

The completed Application Form for the Offer Shares applied for by Institutional Investors and other persons eligible for Institutional Pool shall be delivered to the Bookrunner in physical or scanned form. By submitting an Application Form, each Applicant to the Institutional Pool binds itself to the Vendors to pay in full the value of Offer Shares that will be allotted to them with respect to the submitted Application Form.

Payment has to be made upon final allocation and by the final date of payment as set out in the Offer Timetable of this Prospectus in favour of the bank account listed below:

Bank Account Name Account NumberStandard Chartered Bank CIPLAQCIL IPO – MAIN USD 87-050-145175-00

The SWIFT Code for Standard Chartered Uganda Limited is SCBLUGKA.

Institutional Pool investors may pay in UGX or USD to the respective account in Standard Chartered Bank Uganda Limited. Such equivalent USD price will be set based on prevailing market exchange rate and will be provided to investors by the Bookrunner not later than the next day after the close of Bookbuilding.

9.18 Selling and Transfer Restrictions

In certain jurisdictions, the distribution of this Prospectus and the Offer may be restricted by law and, therefore, persons into whose possession this Prospectus comes should inform themselves about and observe any such restrictions, including those that follow. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

No action has been taken or will be taken by the Company, the Shareholders, the Promoters, the Lead Transaction Advisor or the Lead Sponsoring Broker in any jurisdiction that would permit a public offering or sale of the Offer Shares, or possession or distribution of this Prospectus (or any other offering or publicity material relating to the Offer Shares), in any country or jurisdiction (other than Uganda) where action for that purpose is required or doing so may be restricted by law.

None of the Offer Shares may be offered for subscription, sale or purchase or be delivered, and this Prospectus and any other offering material in relation to the Offer Shares may not be circulated in any jurisdiction where to do so would breach any securities laws or regulations of any such jurisdiction or give rise to an obligation to obtain any consent, approval or permission or to make any application, filing or registration.

Persons into whose possession this Prospectus comes should inform themselves about and observe any restrictions on the distribution of this Prospectus and the Offer contained in this Prospectus. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

9.18.1 European Economic Area

In relation to each member state of EEA which has implemented the Prospectus Directive (each, a “Relevant Member State”), no offer to the public of any Offer Shares is being made or will be made in that Relevant Member State, except that the Offer Shares may be offered to the public in that Relevant Member State at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

a) to any legal entity which is a Qualified Investor;

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b) to fewer than 150 natural or legal persons (other than Qualified Investors), subject to obtaining the prior consent of the Lead Transaction Advisor for any such Offer; or

c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of Offer Shares shall result in a requirement for the publication by the Company or Lead Transaction Advisor of a Prospectus pursuant to Article 3 of the Prospectus Directive, and each person who initially acquires Offer Shares, or to whom any offer is made, will be deemed to have represented, warranted and agreed to and with the Lead Transaction Advisor and the Company that it is a “qualified investor” within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive.

For the purposes of this provision, the expression “an offer to the public of any Offer Shares” in relation to any Offer Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the Offer and the Offer Shares to be offered so as to enable an investor to decide to purchase or subscribe for the Offer Shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State. The expression “Prospectus Directive” means Directive 2003/71/EC (and any amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

In the case of any Offer Shares being offered to a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, each financial intermediary will be deemed to have represented, warranted and agreed that the Offer Shares acquired by it in the Offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any Offer Shares to the public in a Relevant Member State other than their offer or resale to Qualified Investors or in circumstances in which the prior consent of the Lead Transaction Advisor has been obtained to each such proposed offer or resale.

The Company, the Lead Transaction Advisor and their affiliates, and others will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements. Notwithstanding the above, a person who is not a Qualified Investor and who has notified the Lead Transaction Advisor of such fact in writing may, with the consent of the Lead Transaction Advisor, be permitted to subscribe for or purchase Offer Shares in the Offer.

9.18.2 United States

Eligible Investors

The Offer Shares have not been and will not be registered under the Securities Act or under any applicable state securities laws of the United States, and, subject to certain exceptions, may not be offered or sold within the United States. The Offer Shares will, subject to certain exceptions, be offered or sold only in an offshore transaction outside the United States within the meaning of and in compliance with Regulation S under the Securities Act.

Each acquirer of Offer Shares will be deemed to have represented and agreed that it has received a copy of this Prospectus and such other information as it deems necessary to make an informed investment decision and that it is aware that the sale of the Offer Shares to it is being made in reliance on an exemption from the registration requirements of the Securities Act, or in a transaction not subject to the registration requirements of the Securities Act, and that such Offer Shares have not been and will not be registered under the Securities Act, or with any securities laws of any state of, or other jurisdiction in, the United States.

In addition, until 40 days after the commencement of the Offer, an offer or sale of Offer Shares within the United States by a dealer (whether or not participating in the Offer) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A or another exemption from registration under the Securities Act.

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Each person who initially acquires Offer Shares or to whom any offer is made will be deemed to have represented, warranted and agreed to and with the Lead Transaction Advisor and the Company that (i) it and any person for whose account it is subscribing for Offer Shares are outside the United States and are acquiring such Offer Shares in an offshore transaction within the meaning of and in compliance with Regulation S under the Securities Act; (ii) it did not become aware of nor is it making any investment decision with respect to the Offer Shares as a result of any “directed selling efforts” within the meaning of Rule 902(c) of Regulation S under the Securities Act; and (iii) it will not reoffer, resell, pledge or otherwise transfer or deliver any Offer Shares, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and all applicable securities laws of the states and other jurisdictions of the United States.

The Company, the Registrar, the Lead Transaction Advisor and their affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements.

9.18.3 South Africa

The Offer does not constitute an ‘‘offer to the public” (as such expression is defined in the South African Companies Act, No. 71 of 2008 (as amended)) (‘‘South African Companies Act’’) in South Africa and this Prospectus does not, nor is it intended to, constitute a ‘‘registered prospectus’’ (as that term is defined in the South African Companies Act) prepared and registered under the South African Companies Act with the Companies and Intellectual Property Commission (“CIPC”). As a result, this Prospectus does not comply with the substance and form requirements for a prospectus set out in the South African Companies Act and the South African Companies Regulations of 2011, and has not been approved by, and/or registered with, the CIPC, or any other South African authority.

To the extent that the Offer Shares are offered for subscription or sale in South Africa, such Offer is made: (i) only to selected persons falling within one of the specified categories listed in Section 96(1)(a) of the South African Companies Act; and/or (ii) selected persons, acting as principal, acquiring Offer Shares for a total acquisition cost of ZAR1,000,000 or more, as contemplated in terms of Section 96(1)(b) of the South African Companies Act, and to whom the Offer will specifically be addressed, and only by whom the Offer will be capable of acceptance (“Appropriate Persons”). To the extent that the Offer Shares are made available to any persons in South Africa, such persons shall be subject to, to the extent applicable, any applicable South African Exchange Control Regulations and requisite approvals from the South African Reserve Bank.

Each person who initially acquires Offer Shares or to whom any offer is made in South Africa will be deemed to have represented, warranted and agreed to and with the Lead Transaction Advisor and the Company that it is an Appropriate Person.

The information contained in the Prospectus constitutes factual information as contemplated in Section 1(3)(a) of the South African Financial Advisory and Intermediary Services Act, 37 of 2002, as amended (the “FAIS Act”) and should not be construed as an express or implied recommendation, guide or proposal that any particular transaction in respect of the shares described therein or in relation to the business or future investments of the Company is appropriate to the particular investment objectives, financial situations or needs of a prospective investor, and nothing in the Prospectus should be construed as constituting the canvassing for, or marketing or advertising of, financial services in South Africa. The Company is not a financial services provider licenced as such under the FAIS Act.

9.18.4 United Kingdom

No Offer Shares have been marketed to, nor are they available for purchase in whole or in part by, the public in the United Kingdom in conjunction with the Offer. This Prospectus does not constitute a public offer or the solicitation of a public offer in the United Kingdom to subscribe for or buy any securities in the Company or any other entity.

This Prospectus does not constitute an admission document drawn up in accordance with the AIM Rules for Companies. This Prospectus is also not an approved prospectus for the purposes of Section 84(2) of the Financial Services and Markets Act 2000 (“FSMA”) and has not been approved by the Financial Conduct

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Authority as a prospectus for the purposes of Sections 85 and 87 of FSMA. This Prospectus has not been approved as a financial promotion in the United Kingdom for the purposes of Section 20 of FSMA.

To the extent that any Offer Shares are made available for purchase to persons in the United Kingdom, they shall only be made available to Qualified Investors who are Relevant Persons (as defined in the “Selling Restrictions Summary” of this Prospectus) (i) investment professionals (within article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the “FPO”)); and (ii) persons of a kind described in article 49(2) of the FPO; (in each case a Relevant Person).

Each person who initially acquires Offer Shares or to whom any offer is made in the United Kingdom will be deemed to have represented and, warranted and agreed to and with to the Lead Transaction Advisor and the Company that it is a Relevant Person.

9.19 Expenses Associated with the Offer

The estimated costs (i)(ii) associated with the Offer are:

UGX (thousands)CMA Fees 337,133USE Fees 258,000Reporting Accountant Fee 158,077

Legal Advisors Fees 326,923

Lead Transaction Advisor (“LTA”) Fee 1,685,665

Lead Sponsoring Broker, Registrar and Receiving Bank Fees 228,600

Selling Commission (iii)(iv) 2,528,497

PR Costs (including advertising and printing) 384,615

Total 5,907,510Notes:

(i) Estimated to the nearest UGX 1,000,000 (ii) These figures are inclusive of VAT (where applicable) and may be subject to change (iii) The regulated selling commission is 1.5% (iv) All the above fees are payable by the Company, except for the selling commission, which are paid by the

Selling Shareholders from the gross proceeds of the Offer

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10.1 Introduction and History

Cipla Quality Chemical Industries Limited is a pharmaceutical company having a WHO-certified cGMP-compliant pharmaceutical plant that manufactures WHO-prequalified first-line treatments for HIV/AIDS and malaria, and also manufactures hepatitis B medications. The Company signed an offtake agreement with the GOU in 2005 with a commitment from the Government to buy ARVs and ACTs (as defined below) from the Company, subject to inter alia appropriate quality standards and prices. The offtake agreement has since been extended twice and is currently valid until 2029. Since 2005, the business has initiated multiple capacity expansion programs and portfolio expansion, including the launch of new therapies, and has evolved into what is today a unique asset, being the only facility manufacturing both WHO-prequalified ARVs and ACTs in SSA.

CiplaQCIL’s plant is currently approved by the drug authorities in 13 SSA countries, and its products are currently sold in nine (compared to only one i.e. Uganda, in 2012). The Company’s products are expected to be registered in 19 SSA countries by the end of 2020. Currently, the Company is the only pharmaceutical producer in SSA supplying ACTs to the Global Fund.

On 17 May 2017, the Company signed a memorandum of understanding with the GOZ for supply of ARVs, ACTs, hepatitis and other medications with a minimum value of USD10 million per year for the next 20 years. To date, orders from GOZ have already exceeded USD10 million. Further, in the said memorandum of understanding, the Company has undertaken to work with GOZ to explore the possibility of establishing a pharmaceutical manufacturing plant in Zambia for manufacture of essential medicines other than ARVs and ACTs.

Summary milestones of Company’s business

2005• Collaboration between Cipla and the Uganda Founders established• Company signed an offtake agreement with the GOU relating to the procurement

from it of all of GOU’s ARV and ACT purchases

2006 • Construction of the manufacturing facility started

2009• Commissioning of the manufacturing facility and launch of first ARV and ACT

products1

• TLG Capital became a shareholder in the Company

2010

• Capitalworks became a shareholder in the Company• Plant received certification of GMP compliance and WHO-prequalification for its ARV

and ACT medications • Company became the first SSA pharmaceutical company to supply to the Global

Fund

2011 • Extension of the ARV portfolio with the launch of two additional drugs2

2012-2013

• Cipla became the majority shareholder in the Company through its WOS, Meditab, acquiring an additional 14.5% of the business

• Offtake agreement with the GOU extended until 2019• Further expansion of the ARV portfolio3

• Company expanded sales to Kenya, taking geographical presence to two countries• WHO prequalification awarded for the two additional ARV drugs launched and

renewed for previously prequalified products• GMP certificate for the manufacturing facility renewed

10 Overview of CiplaQCIL

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2014

• The Company changed its name from Quality Chemical Industries Limited to Cipla Quality Chemical Industries Limited

• CiplaQCIL entered private market in Uganda• Sales expanded to new geographies (Angola, South Sudan and Tanzania), taking

geographical presence to five countries• The WTO extended the transition period (allowing production of generic copies of

still patented products) for LDCs (e.g. Uganda) up to 2033

2015

• Company’s first “one-pill-a-day” ARV4 launched• Company entered a new product category - hepatitis B5

• Sales expanded into Cameroon, taking geographical presence to six countries• Cipla’s effective shareholding in the Company increased to 62.3% by virtue of its

WOS, Cipla EU acquiring 51% stake in QCL

2016

• Offtake agreement with the GOU extended until 2029• WHO prequalification of ARVs and ACTs renewed• GMP certificate for manufacturing facility renewed• Sales footprint further expanded with the addition of Namibia and Zambia, taking

geographical presence to eight countries

2017

• Company signed a 20-year offtake agreement with the GOZ relating to the procurement by the GOZ from the Company of ARVs, ACTs, hepatitis and other medications

• Sales further expanded with the addition of Mozambique, taking geographical presence to nine countries

2018

• Company manufactured its highest ever product volume – over 1 billion tablets (financial year 2017/18)

• Company produced a record 124 million tablets in the month of December 2017 and had record quarterly net profit of USD5.1 million in 4Q 2017/18

• Technology transfer of the latest WHO first line recommended HIV therapy, Dolutegravir+Lamivudine+Tenofovir (DLT) – this will make the Company the first to manufacture and launch in Africa

(1) Duovir-N (ARV) and Lumartem (ACT) (4) Trioday

(2) Efavirenz and Duovir (5) Texavir and Zentair(3) Duomune and Nevimune

10.2 CiplaQCIL Investment Highlights

Large and fast growing market with significant unmet demand

• With over 1 billion people living in SSA, the region is the world’s second largest by population with the highest growth rate (CAGR of 2.8%) in the last decade8

• The region has a high incidence of a range of communicable diseases and accounts for 93%9 of malaria-related and 73%10 of AIDS-related deaths in the world and approximately 12% and 7%11 of hepatitis B and C infections, respectively

• Healthcare spending in SSA has historically demonstrated high growth rates (from USD20 billion in 2000 to USD85 billion in 2015 – a CAGR of 10.0%12) driven by economic development and donor funding. However, a large share of the population still lacks access to lifesaving medicines (e.g. approximately 43%13 of all HIV-infected people still do not receive ARV therapy)

8 Euromonitor.9 World Malaria Report 2017.10 UNAIDS database.11 Global Health Data Exchange 2016.12 WHO.13 UNAIDS database.

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Unique asset for SSA

• The only facility in SSA manufacturing a range of both WHO-prequalified anti-retrovirals and anti-malarials

• Certified and/or audited by global institutions (e.g. WHO) and regional authorities (Governments of Kenya, Tanzania, Zambia and others)

• Currently, the only pharmaceutical manufacturer in SSA supplying ACTs to the Global Fund

Strategic shareholders and strong management team

• Founded by Ugandan businessmen, who are part of the Company’s executive management and Shareholders (Uganda Founders), and Cipla as the technical partner

• Effective majority stake held by Cipla which provides significant support to the business and a strong advantage over any existing competitors in the SSA region (outside South Africa)

• Business is led by an experienced management team with extensive local and regional pharmaceutical expertise

Strong financial and operational performance

• Fast growing business with 5-year CAGR14 of over 24% for revenue and over 36% for EBITDA

• US Dollar-based business, with all revenues and majority of costs denominated in US Dollars

• Highly cash generative and profitable operations with EBITDA and net margins of 23.4% and 20.8%, respectively (2017/18)15, allowing it to self-fund further growth

• Strong balance sheet with no debt16 and access to debt financing at highly attractive terms (USD10 million undrawn facility at USD LIBOR + 3.5-4% and with no commitment fees, which can be increased further)

• A well-invested production base and history of efficient capacity expansion on the same site (from 25 million tablets per month in 2009 to 100 million currently; expected to reach 130 million in the next few months).

Significant social and economic impact on the region

• Company ensures provision of high quality affordable medicines and security of supply and is making great strides in ensuring self-sufficiency for Uganda and adjacent geographies. In addition, it has played an important part in improving access to lifesaving medications across SSA.

• In its last financial year, CiplaQCIL supplied ARVs to approximately 500,000 HIV-infected people and ACTs capable of treating approximately 45 million malaria infections.

• Significant impact on the domestic economy in Uganda in terms of employment, investment, trade balance improvement, foreign exchange savings, etc.

Vast growth potential

• Growth in existing markets and categories: potential launch of additional ARVs, ACTs and hepatitis medications, e.g. DLT and hepatitis C cure, to complement other recent new products, including one-pill-a-day ARV and hepatitis B drugs.

• Well-considered capacity expansion program: Company has a clear short-term capacity expansion plan, allowing it to increase its monthly capacity to approximately 130 million tablets with limited incremental investment.

• The Company has a detailed expansion plan to construct the second plant, which will take effect when business needs dictate it.

• New export geographies: Company’s plant registrations expected to increase from the current 13 countries to 19 by end of 2020.

• Potential entry to new product segments, e.g. tuberculosis, hypertension, diabetes, etc. through in-licensing arrangements with Cipla or third parties.

• Opportunity to capture the benefits provided by TRIPS, including the manufacture of generics of patented products, given the exemptions provided to manufacturing companies located in LDCs.

Source: Company data, CiplaQCIL IFRS financial statements 2016/17 and 2014/15, Euromonitor, World Bank, WHO, UNAIDS, World Malaria Report 2015, Global Fund, Global Burden of Disease Study 2016 (GBD 2016)

14 CAGR calculation assumes a period of 4.25 years between financial years FY2013 and FY2017/18.15 EBITDA and Net Income exclude IPO-related expenses in 2017/18.16 The Company has payables in the ordinary course of business.

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10.3 Focused Product Portfolio

The Company’s focus has been on HIV/AIDS, malaria and, more recently, hepatitis B as these are some of the biggest health challenges of the century in Africa: HIV and malaria are two of the top-five causes of death in the region17. Africa has 70%18 of all HIV/AIDS cases and 90%19 of the global malaria cases but it manufactures only 2% of the required medicines.

This situation was part of the motivation for the Company to build a world-class manufacturing facility in Uganda.

All of the Company’s products are recommended by WHO as first-line treatment methods for the respective diseases. All ARVs and ACT products are prequalified by WHO. The Company has not yet initiated prequalification for hepatitis B products, as they are currently registered and sold in Uganda and not to donors or other agents who require such approval.

Anti-retrovirals Anti-malarials Hepatitis B• Company started ARV production

in 2009 and currently its portfolio comprises six products, all of which are in line with the WHO’s latest treatment guidelines20

• Released in 2015, Trioday became the Company’s first “preferred option” drug as per the WHO guidelines at that time for HIV treatment. It is a convenient “one-pill-a-day” drug and represents a fixed-dose combination therapy (several active ingredients in one pill):

– Simplifies treatment (one daily pill, instead of three) and decreases dosing errors– Decreases likelihood that the virus will become resistant to the treatment due to improved adherence

• The latest WHO recommended first-line therapy, the triple combination of Dolutegravir + Lamivudine + Tenofovir (DLT) will be launched in Uganda in mid 2018. The Company will apply for WHO-prequalification for DLT later in 2018

• Lumartem is the only anti-malarial medication produced by the Company

– The medicine has been manufactured since CiplaQCIL’s launch in 2009– Product continues to be a widely used anti-malarial treatment globally with very few cases of resistance21

– A combination therapy comprising two active ingredients

• Lumartem was included in the WHO list of prequalified medicinal products for malaria treatment in 200922

• Driven by the rising health issues dictated by hepatitis across the African continent, in 2015 the Company launched its first hepatitis B medications - Zentair (entecavir) and Texavir (tenofovir disoproxil fumarate)

– Tenofovir and entecavir are recommended by WHO as the first-line treatment for all adults, adolescents and children aged 12 years or older in whom antiviral therapy is indicated– Entecavir is also recommended for children aged 2–11 years

17 Institute for Health Metrics and Evaluation.18 UNAIDS database.19 World malaria report 2016.20 WHO report “Consolidated guidelines on the use of anti-retroviral drugs for treating and preventing HIV Infection”, second edition, 2016.21 WHO “Q&A on artemisinin resistance”, July 2016.22 WHO list of prequalified medicinal products.

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45%

Anti-retrovirals

55%

Anti-malarials

0.1%

Hepatitis B

10.3.1 HIV/AIDS Treatments (Anti-retrovirals)

WHO provides strict guidelines on HIV treatment, which include first-, second- and third-line treatment regimens. The first-line treatment of a disease is that which is generally accepted as the best initial treatment option, also referred to as the primary therapy or treatment. Second and third-line treatments are further options based on an individual patient’s reaction to the previous treatment.

First-line ARV therapy comprises two nucleoside reverse-transcriptase inhibitors (“NRTIs”) with either a non-nucleoside reverse-transcriptase inhibitor (“NNRTI”) or an integrase inhibitor. Treatment may include consumption of pills containing each ingredient separately, or pills that include three active ingredients (“one-pill-a-day”)– a more convenient option for the patient, resulting in increased adherence (lower chance of missing a dose)23.

While WHO guidelines change from time to time, a patient who is already on a particular therapy that is effective for him/her may continue to take the same drug under certain circumstances. Consequently, the Company may continue producing certain drugs (which could be removed from the WHO preferred list of treatment options) to ensure that such patients have adequate supply of therapies.

For the treatment/management of HIV/AIDS, CiplaQCIL produces the following medications:

23 WHO report “Consolidated guidelines on the use of anti-retroviral drugs for treating and preventing HIV Infection”, second edition, 2016.

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Launch Date (in Uganda)

Dosage Form Pack Size Active Ingredients

Duovir-N Mar 2009 Tablets 60’s container

AZT + 3TC + NVP

Zidovudine (300mg) + Lamivudine (150mg) + Nevirapine (200mg)

Efavirenz Oct 2011 Tablets 30’s containerEFV

Efavirenz (600mg)

Duovir Oct 2011 Tablets 60’s containerAZT + 3TC

Zidovudine (300mg) + Lamivudine (150mg)

Nevimune Apr 2012 Tablets 60’s containerNVP

Nevirapine (200mg)

Duomune24 Apr 2013 Tablets 30’s container

TDF + 3TC

Tenofovir Disoproxil Fumarate (300mg) + Lamivudine (300mg)

Trioday Jan 2015 Tablets 30’s container

TDF + 3TC + EFV

Efavirenz (600mg) + Lamivudine (300mg) + Tenofovir Disoproxil Fumarate (300mg)

DLT Mid-2018 Tablets 30’s container

TDF + 3TC + DTG

Tenofovir Disoproxil Fumarate (300mg) + Lamivudine (300mg) +

Dolutegravir Sodium (50mg)

Based on the WHO’s most recent recommendations25 on the combinations of drugs for the treatment/management of HIV/AIDS, CiplaQCIL is well positioned to provide these medications as shown below:

ARV Regime (WHO Recommendation) CiplaQCIL PortfolioPreferred optionsTDF + 3TC + DTG* üTenofovir Disoproxil Fumarate + Lamivudine

+ Dolutegravir SodiumTDF+3TC+EFV600 üTriodayTDF+FTC+EFV600 üViraday26

Alternative optionsAZT+3TC+EFV600 üDuovir + EfavirenzAZT+3TC+NVP üDuovir-NTDF+3TC(or FTC)+NVP üDuomune + Nevimune27

TDF+3TC(or FTC)+EFV400 üDuomune + Efavirenz28

24 To be discontinued and fully replaced by Duomune (single layer) (Tenofovir Disoproxil Fumarate (300mg) + Lamivudine (300mg) as listed under Pipeline Products in 10.4, once all regulatory approvals are obtained.25 WHO report “Consolidated guidelines on the use of antiretroviral drugs for treating and preventing HIV Infection”, second edition, 2016.26 Subject to completion of technology transfer, and necessary approvals.27 TDF+3TC+NVP combination.28 TDF+3TC+EFV400.

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* Despite being an alternative option according to WHO recommendation, TDF + 3TC + DTG is the preferred treatment combination in Uganda and other SSA countries

The Company has a track record of adapting to changing guidelines or other regulatory requirements by launching new products in a timely manner, e.g. following a change in ARV guidelines by the WHO in 2013, the Company released its new product, Duomune, part of a two-pill-a-day regimen in combination with Efavirenz in just 60 days. Two years later, an improved combination of Duomune and Efavirenz, known as Trioday, taken as a “one-pill-a-day” was introduced.

From July 2018, GOU will begin a staged transition process to gradually switch HIV patients from TDF+3TC+EFV and other combinations to DTG + 3TC + TDF. The Company is currently in the process of getting the manufacturing technology transferred from Cipla and will launch the new DLT combination by mid-2018.

While we are in a position to launch DLT in accordance with our customers’ evolving treatment regimens, WHO, USFDA and EMA have recently issued alerts regarding research that indicates neural tube defects in a higher proportion of babies born to mothers taking DLT during conception than would be anticipated statistically. It has been clarified that in Uganda, DLT will be recommended for treatment of males and post-menopausal females only and TLE will continue to be recommended to females of children bearing age. In other jurisdictions, we will be guided by the WHO and the responsible regulatory authorities and do not anticipate safety concerns as long as treatment guidelines are followed.

10.3.2 Malaria Treatments (Anti-malarials)

For the treatment of uncomplicated cases of malaria, the WHO recommends Artemisinin-based combination therapies (“ACTs”). The combination of Artemether and Lumefantrine was the first fixed-dose ACT recommended by the WHO and continues to be on the list of first-line treatments for uncomplicated malaria29.

CiplaQCIL currently produces one anti-malaria drug under the brand name Lumartem30, which is a combination of Artemether and Lumefantrine.

Launch Date in Uganda

Dosage Form Pack Size Active Ingredients

Lumartem Jul 2009 Tablets

6x1, 12x1, 18x1, 24x1, 6x30, 12x30,

18x30, 24x30 blisters

AM + LUM

Artemether (20mg) + Lumefantrine (120mg)

10.3.3 Hepatitis Treatments

Hepatitis B

In April 2015, the WHO released its first guidance for the treatment of chronic hepatitis B, which includes the use of two safe and highly effective medicines – Tenofovir or Entecavir31. Hepatitis B treatment was, therefore, a natural extension of the Company’s product range, since it already produced medicines containing the same key ingredients in different doses.

Within a few months of the release of guidelines by the WHO, CiplaQCIL successfully launched two hepatitis B medications – Texavir and Zentair.

29 WHO report “Guidelines for the treatment of malaria”, third edition, 2015.30 The Lumartem trademark is owned by Cipla and is currently licensed to CiplaQCIL. For territories beyond Uganda, CiplaQCIL will cease to use this trademark once it has obtained product registrations in its own name in these territories. Thereafter, outside Uganda, the product will be sold under a new trademark that is solely owned by CiplaQCIL. In the territory of Uganda, CiplaQCIL will have the option to continue to use the Lumartem trademark under license from Cipla, if it so prefers.31 WHO report “Guidelines for the prevention, care and treatment of persons with chronic hepatitis B infection”, 2015.

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Launch Date

Dosage Form Pack Size Active Ingredients

Zentair Jul 2015 Tablets 30’s blistersETV

Entecavir (0.5mg or 1mg)

Texavir Sept 2015 Tablets 30’s containerTDF

Tenofovir Disoproxil Fumarate (300mg)

Hepatitis CThe standard of care for hepatitis C has been changing rapidly. Until recently, hepatitis C treatment was based on a 24 to 48 week therapy with a weekly injection of Interferon and daily oral Ribavirin, which required weekly injections for 48 weeks, and cured approximately half of treated patients but caused frequent and sometimes life-threatening adverse reactions32.

Recently, new anti-viral drugs have been developed. These medicines, called direct-acting anti-viral agents (“DAAs”), are more effective, safer and better tolerated than the older therapies. Therapy with DAAs is used to treat hepatitis C with a 12-week treatment regimen (the small percentage who do not respond in 12 weeks are treated for an additional 12 weeks). Although the production cost of DAAs is low, these medicines remain very expensive in many high- and middle-income countries. Prices have dropped dramatically in some countries (primarily low-income countries) due to the introduction of generic versions of these medicines through TRIPS33.

CiplaQCIL intends to launch, in the beginning of 2019, a combination dual therapy of Sofosbuvir and Daclatasvir. The originators of this combination are available in developed countries at substantially higher prices far beyond the reach of many. CiplaQCIL will be able to manufacture this drug and sell it in LDCs at a significantly reduced cost compared to the price in developed countries.

10.4 Extensive New Products Pipeline and Geographical Expansion Plan

As part of its growth strategy, CiplaQCIL has a product pipeline tailored to utilise opportunities for growth that come in various therapeutic areas and new markets and for new customers.

CiplaQCIL Product Pipeline

Product34 Area Launch year (calendar) Description Business impact

Lumartem 80/480(Artemether 80 mg + Lumefantrine 480 mg)

Malaria 2018

• One-pill-a-day solution for adults (higher dosage of Lumartem in a single pill)

• Requires a quarter of the existing Lumartem (20/120) production capacity

• Extraction of significant capacity (4x less compared to 20/120)

• More convenient product for adult patients (fewer tablets)

32 WHO report “Guidelines for the screening, care and treatment of persons with chronic hepatitis C infection”, updated version, 2016.33 WHO report “Guidelines for the screening, care and treatment of persons with chronic hepatitis C infection”, updated version, 2016.34 Wherever reference is made in this prospectus to licensed intellectual property, it should be understood that for the hepatitis C product, Cipla does not own the intellectual property and only has the right to grant a sub-license to CiplaQCIL.

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DLT combination(Dolutegravir Sodium 50 mg + Lamivudine 300 mg + Tenofovir 300 mg)

HIV 2018•Dolutegravir to replace

Efivarenz and Nevirapine as first-line treatment in Uganda

•Commitment to GOU guidelines

TEE combination(Tenofovir 300 mg + Efavirenz 600 mg) + Emtracitabine 200mg

HIV 2018• TEE currently first line

therapy in Southern African market

• Entry to new geographic markets

(e.g. Namibia)

Duomune (single layer)35

(Tenofovir + Lamivudine)

HIV 2018• Improved formulation of

the existing double layer product

•More efficient production process

Lumartem

(20/120, dispersible tablets)

Malaria 2019• Medication specifically

developed for children to provide better patient experience

• Focused customer category

Sofosbuvir + Daclatasvir

Hepatitis C

2019

• Proven high efficacy for treatment of various HCV genotypes36

• Original medicines were launched in 2013 (Sovaldi by Gilead) and 2015 (Daklinza by Bristol-Myers Squibb) and are not accessible to people in SSA due to high price

• In the WHO’s list of essential medicines

• Production is considered to be performed under the licenses provided by the patent owners to Cipla

• Single pack to contain tablets for both products (30+30)

• Significantly less competitive segment

• High margin product

• Entry to new therapeutic area with huge unmet medical need37

35 This is an improved version of the Product and fully replaces the existing Product, Tenofovir Disoproxil Fumarate (300mg) + Lamivudine (300mg) listed in 10.3.1, once all regulatory approvals are obtained.36 WHO report “Guidelines for the screening, care and treatment of persons with chronic hepatitis C infection”, updated version, 2016.37 Report “Hepatitis C virus (HCV) infection in Africa: a review”.

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CiplaQCIL’s plant is currently approved in 13 countries (up from eight in March 2016) across Eastern and Southern Africa. Plant approval is the first step in order to enter any particular market. Select medications are currently approved in 10 countries; product registration allows the Company to initiate sales of such medication in that particular market. Select registration of the Company’s products in these markets, as well as in at least nine other countries is planned by end of 2020.

Despite each country having its own regulatory requirements, the approval process is often facilitated by the fact that products have already been registered by Cipla, which in turn allowed CiplaQCIL to achieve approval in three months (as an additional manufacturing site for Cipla). In addition, WHO-prequalified products do not require separate factory approval by regulators in some countries.

Registration status and 2018 pipeline (as of 31 May 2018)The brand names in the table below may vary from jurisdiction to jurisdiction, depending upon the availability of the brand name in the respective countries.

Lumartem / Lumet Duovir-N Duovir Duomune Efavirenz1 Nevimune Trioday Texavir Zentair Approved

plant

Uganda ü ü ü ü ü ü ü ü ü ü

Kenya ü ü ü ü ü ü ü 6 - ü

Tanzania ü ü ü ü ü ü 6 - - ü

Namibia 6 ü ü 6 ü ü - 6 - *

Zambia üü ü ü ü

- ü ü - ü

Angola2 ü ü ü ü ü ü ü ü ü ü

Malawi3 ü ü ü ü ü ü - - - ü

Mozambique ü - - - - - - - - *

Ivory Coast tbs - tbs - - - tbs - - ü

Ethiopia 6 - - - - - - - - ü

Ghana ü - - - - - ü - - ü

Nigeria tbs - tbs - - - tbs tbs tbs tbs

Zimbabwe ü - - - - - ü - - ü

Botswana - - - - 6 - 6 - - *

Sudan tbs - - - - - - tbs - tbs

South Africa - - tbs - - - tbs - -tbs

Niger tbs - - - - - tbs - -tbs

Cameroon tbs - - - - - tbs - -tbs

Senegal tbs - - - - - tbs - -tbs

6 - Application submitted.tbs - Application to be submitted.

1) Efavirenz is the API name and not a registered trademark.2) Plant registration is not mandatory.3) The Company hasn’t started selling in Malawi.* Plant approvals not mandatory.

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Expansion plan to supply medicines in 19 SSA countries by December 2020Aggregate demand for lifesaving medications in Company’s 19 target markets:

•Aggregate population growth reaches 2.5% per year (CAGR 2017-2027) with GDP growing at 10.2% in the same period38

• 23 million HIV-infected people39

• 163 million suspected malaria cases per year40

• 73 million people infected with hepatitis B41

• 21 million people infected with hepatitis C42

In the 2017/18 financial year, the Company served approximately 500,000 HIV patients and sold approximately 45 million malaria treatments

Source: UNAIDS (2016), World Malaria Report 2017 (data

for 2016), Global Health Data Exchange 2015

Following the implementation period of the East African Community Regional Pharmaceutical Plan of Action, which ended in 2016, the EAC states adopted the Second EAC Regional Pharmaceutical Manufacturing Plan of Action (2017-2027), which took effect in January 2018. The plan sets the following targets for the development of the EAC pharmaceutical sector:

• Reverse the dependency on pharmaceutical imports from outside the EAC from more than 70% to less than 50% (i.e., over 50% of pharmaceutical products purchased in EAC should be manufactured regionally);

• Support the expansion of product portfolio of EAC firms to cater for more than 90% of diseases.

The Company believes that implementation of this plan may benefit CiplaQCIL in the medium term.

10.5 Sales Channels and Customer Mix

The Company’s sales can be categorised into four channels:

a) Government of Uganda;

b) Government of Zambia;

c) The Global Fund; and

d) Other

SouthAfrica

IvoryCoast Ghana

NigerSudan

EthiopiaNigeria

Cameroon

Senegal

Namibia

AngolaZambia

Botswana

Malawi

Tanzania

UgandaKenya

Zimbabwe

Mozambique

Approved Markets

Markets planned for approvalby December 2020

38 Euromonitor.39 WHO report “Guidelines for the screening, care and treatment of persons with chronic hepatitis C infection”, updated version, 2016.40 World Malaria Report 2017.41 Global Burden of Disease Study 2016 (GBD 2016).42 Global Burden of Disease Study 2016 (GBD 2016).

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a) Government of Uganda

Sales to the GOU are executed in accordance with the offtake agreement, which was signed in 2005 and extended in 2012 and then in 2016 to remain effective until 2029. This agreement is a contract for the GOU to purchase ACTs, ARVs and hepatitis B drugs from the Company up to the amount as allocated in the annual budget (budget year ends in June, while Company’s year ends in March). Allocations for purchase of ARVs and ACTs increased by UGX10 billion to approximately UGX110 billion (including logistics fees), following the GOU annual budget review for the financial year ended June 2017.

The GOU purchases from CiplaQCIL through the NMS, which is responsible for procurement, storage and distribution of pharma products to all public healthcare facilities in Uganda. NMS charges a logistics fee deductible from the total state budget allocation. Prices are determined based on a global reference price for similar products plus a local content advantage that allows for a preference margin of up to 15%, provided under Section 59A(3)(a) of the Public Procurement and Disposal of Public Assets Act No 1 of 2003, which is consistent with EAC directives. All of the Company’s products are manufactured at its facility and it is not engaged in trading of imported goods.

b) Government of Zambia

On 17 May 2017, the Company signed a memorandum of understanding with the GOZ for purchase of ARVs, ACTs, hepatitis drugs and other medications with a minimum guaranteed annual contract value of USD10 million for 20 years.

Further, in the said memorandum of understanding, the Company has undertaken to work with GOZ to explore the possibility of establishing a pharmaceutical manufacturing plant in Zambia for manufacture of essential medicines other than ARVs and ACTs.

Over the last 12 months, GOZ has placed orders in excess of USD10 million. In Q1 2018/19 GOZ has already placed orders for a significant portion of its annual minimum guaranteed volume.

Prices are determined based on a global reference price for similar products. Should the facility be constructed, the Company will also enjoy local content advantage (as it does in Uganda).

c) The Global Fund

The Global Fund is a financing institution that provides support to countries in order to address HIV, tuberculosis and malaria. The Global Fund was founded in 2002 as a partnership between governments, civil society, the private sector and people affected by these diseases. The objective of the Global Fund is to raise and invest nearly USD4 billion each year to support programmes run by governments and civil society organisations in countries and communities in need.

The Global Fund has historically been one of the most active donors supporting healthcare systems and access to medicines across Africa. Its annual disbursements across 19 SSA countries (markets where the Company plans to register its products by the end of 2020) for HIV and malaria have exceeded USD1 billion in recent years, with 2006-2017 CAGR of 10% (in Dollar terms).

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The Global Fund’s total disbursements on all activities (excluding tuberculosis) to 19 SSA countries (USD million)

504

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

662779

1,044 1,025871

1,261

1,599

1,2591,413 1,462 1,484

253

173210

622 317312

447

526

413460 575 656

251489 569 422

707558

8141,073 846 953 887 828

HIV/AIDS Malaria

Source: The Global Fund Note: Company’s short-term target markets; plant already registered or qualified in 13 of the 19 countries (products registered in 10 markets)

Disbursements across selected countries - 2017

Other, 10%

Cameroon, 3%Niger, 4%

Ivory Coast, 5%

Zambia, 6%

Ghana, 6%

Uganda, 8%

Kenya, 9% Mozambique, 9%

Tanzania, 11%

Ethiopia, 11%

Nigeria, 18%

Other, 4%

Cameroon, 6%

Namibia, 4%

Ethiopia, 8%

Ivory Coast, 4%

Zimbabwe, 12%

Ghana, 5%

Uganda, 5%

Kenya, 10%

Mozambique, 9%

Tanzania, 19%

Nigeria, 13%

Malaria HIV

Source: The Global Fund Note: Company’s short-term target markets; plant already registered or qualified in 13 of the 19 countries (products registered in 10 markets)

Recently, the Global Fund has redefined its strategy to seek an end to the AIDS, tuberculosis and malaria epidemics globally by 2030. In addition, it targets a 90% reduction in new HIV infections and deaths (compared to 2010) and malaria mortality and case incidence (compared to 2015).

The Global Fund tender evaluation process uses a points-based system which considers not only suppliers’ pricing, but also product and facility quality, historical delivery times (OTIF), Africa manufacturing presence and commitment to research and development.

Company’s business with the Global FundThe Global Fund is a major customer for CiplaQCIL and the Company has been a significant beneficiary of the Global Fund’s business.

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In 2014, the Company was awarded its first two-year contract to supply the Global Fund with ACTs as part of a new competitive bidding process across countries. This contract was subsequently extended for two years and the Company supplied two times the awarded volumes in the second year and over three times the awarded volumes in the third and fourth years.

In May 2017, Global Fund changed the rules pertaining to the next tender, such that Cipla and CiplaQCIL were required to submit a single bid, rather than bidding separately as they had done in the previous tender. Accordingly, the second Global Fund contract was awarded in October 2017 to a consortium of the Company and Cipla (“Consortium”) for a two-year period extendable by one year. The volume awarded to the Consortium was similar to those initially awarded to CiplaQCIL alone in the 2014 tender. The size of the tender was smaller than expected. The reduced size of the tender creates a funding gap that regional governments will need to fill.

Currently, CiplaQCIL is the only pharmaceutical manufacturer in SSA supplying ACTs to the Global Fund. The Company is well placed to be the beneficiary of the business that is likely to flow from regional governments, as its track record in Zambia and the EAC demonstrates. A further advantage of being a supplier to the Global Fund is the opportunity to establish relationships within the countries it supplies on behalf of the Global Fund, thereby increasing its prospects for direct business with each of them.

d) Other

Other sales categories comprise occasional direct sales to export markets, inter-company sales to Cipla and sales to the private sector in Uganda and the wider region. Direct sales to other governments have typically been contracted on a shipment-by-shipment basis. Sales to Cipla represent contracted manufacturing operations (lower margin and higher volume) for its customers internationally and are only accepted by the Company in times of available spare production capacity. Reduction of Other sales in 2017/18 was driven by absence of sales to Cipla in this financial year.

Sales breakdown by customer Sales breakdown by therapeutic areaUGX billion

24%

5%

22%

54%

47%

0.1%

48%

44%

10%

46%

NMS The Global Fund MHZ Other

164.1

211.7227.3

2015/16 2016/17 2017/18

48%

52%

64%

35%

55%

45%

ARV ACT Hepatitis B

2015/16 2016/17 2017/18

164.1

211.7227.3

0.1%

0.1%1.4%

UGX billion

The Company seeks to supply its customers on time and in full (OTIF), and where required, provides emergency supplies. In so doing, the Company increases its likelihood of maintaining and securing new business in the future.

All sales contracts are priced in USD (including for the GOU, where budget allocations are set in UGX, but selling prices are quoted in USD), and most of the Company’s supply contracts are also USD denominated, which provides a natural hedge to the Company’s procurement operations.

Sales and distribution are mainly performed by the distributors and NMS (e.g. via dedicated state agencies, like NMS in Uganda), hence, there is no need for the Company to hold inventory or staff in various locations/

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regions, and orders are manufactured and shipped from the Company’s facility in Uganda.

The share of the GOU in the Company’s total revenue has declined over the last three years, following CiplaQCIL’s expansion to new markets, customer growth and increased diversity in customer mix, which has driven substantial revenue growth. The share of the GOU in total revenue in 2017/18 amounted to 46% compared to 84% in CY 2013.

Expansion to new markets has partially been achieved via sales to the Global Fund, hence its share in Company’s revenue has increased from 22% in 2015/16 to 44% in 2017/18.

10.6 State-of-the-Art Production Facility

The Company’s state-of-the-art plant is compliant with GMP standards published by the WHO and has been designed to meet international regulatory standards. It sits on approximately 27 acres of land located 12 kilometres east of Kampala, Uganda and has a built up area of 13,000 square metres. The facility produces complex molecules of various fixed dose medicines for the management of malaria, HIV/AIDS and hepatitis. The goal for CiplaQCIL is to produce pharmaceutical products of the highest quality that adhere to current GMP and international regulatory standards, such as those set by the WHO.

In the financial year 2017/18, the Company manufactured over 1 billion tablets – the highest volume in its history, such has been the growth in business. Monthly production in December 2017 reached a record of 124 million tablets.

As a result of the Company’s efficiency optimization program, which has identified significant capacity enhancements in the short term, the Company has increased its capacity over the years from 25 million tablets per month in 2010 to 75 million tablets in 2015 and to approximately 100 million tablets per month currently.

The Company uses shifts in product mix to review its capacity and efficiency, which has historically led to further capacity improvements with minimal capital investments. Recent examples of such initiatives include batch size optimisations, improvements in machine speed and packing line, increase in production yields, etc.

The Company is in the midst of an additional capacity expansion program and expects to reach 130 million tablets per month in the next few months.

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Evolution of plant capacity

2009

25 25

50 50

7580

75

100 100

130

2010

100:0

2011 2012 2013 2014/15 2015/16 2016/17 2017/18 2018/19

85:15 75:25

Short term capacity investment plan (in progress)will add 30 million tablets by mid 2018

Product mix >>>(ACTs:ARVs)

Since 2010

+105

2010 2011 2012 2013 2014/15 2015/16 2016/17 2017/18 2018/19

Expansion Capex, USD million 0.2 2.0 0.5 2.1 1.6 1.4 0.9 1.3 1.6

# of lines total 8 11 11 14 15 16 17 17 17

Granulation 1 2 2 3 4 4 4 4 4

Compression 4 5 5 5 5 6 6 6 6

Coating 1 1 1 2 2 2 2 2 2

Packaging 2 3 3 4 4 4 5 5 5

The total expansion capex over the last three financial years (increasing production capacity by over 70%) amounted to USD3.6 million, with an additional approximately USD1.6 million to be spent in 2018/19.

In 2017/18, approximately USD1.8 million was invested in construction of the Company’s warehouse, which is expected to replace all currently leased facilities starting from Q3 2018/19. In 2017/18, the Company spent approximately USD0.3 million on rental expenses.

The new warehouse will have an area of 1,983 square metres with a capacity of almost 4,000 pallets, which is almost three times the capacity of the current stores at the facility. The warehouse will allow the Company to save rental costs and enable better quality control on the storage conditions.

Due to the nature of its operations, it is imperative that CiplaQCIL remains compliant with all regulatory and certification requirements, and the Company makes all reasonable efforts to comply with relevant laws, regulations and market standards. In addition, Cipla carries out an annual audit of the Company to ascertain the level of quality assurance of the Company in line with GMP requirements.

11.6

+9

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CiplaQCIL’s manufacturing facility is currently in compliance with cGMP of the following international and regional institutions:

WHO Malawi PMPB

National Drug Authority of Uganda (NDA)

Ethiopia FMHACA

Kenya Pharmacy and Poisons Board

Namibia Ministry of Health*

Tanzania Food and Drugs Administration

Ivory Coast Ministry of Health

Medicines Control Authority of Zimbabwe

Ghana Ministry of Health

Mozambique Ministry of Health*

Zambia Medicines Regulatory Authority

Ministry of Health & Wellness, Botswana*

* Plant approvals not mandatory

The Company is currently exploring business potential with donor agencies in addition to the Global Fund, such as President’s Malaria Initiative (“PMI”), whose total annual spend on malaria is over USD 350 million in SSA. PMI accepts WHO product and plant accreditation and therefore offers significant potential for the Company.

Construction of a new production facility

The Company has a detailed expansion plan to construct the second plant with production capacity of at least 130 million tablets per month (“Phase 2”), which will take effect when business needs dictate it.

Existing facility and the location of the new plant

Phase 2 site

Given the strategic importance of the business on a national and continental level, its ethical nature, financial performance and strong customer and shareholder base, the Company has been able to raise debt financing on attractive terms.

In 2008, CiplaQCIL obtained long-term debt financing from Barclays Bank of Uganda in the amount of USD17.6 million to finance construction of the facility (an additional loan of USD2.5 million was raised in 2012). The interest rate for both loans was set at a three-month LIBOR + 4% (USD terms). The Company fully repaid these loans in 2015 (according to the original schedule). For this loan, Barclays Bank of Uganda was awarded Deal of the Year 2014 (by Global Trade Review) for supporting domestic businesses.

The Company expects that, should it choose to utilise debt to finance Phase 2, it could do so on attractive terms.

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10.7 CiplaQCIL’s relationship with Cipla

Cipla, a leading global pharmaceutical producer of branded generics and listed on the Bombay Stock Exchange and the National Stock Exchange (market capitalisation of USD6.3 billion as of May 31, 2018), effectively holds 62.3% of CiplaQCIL. Cipla also shares the Ugandan and regional vision for self-sufficiency in the provision of critical medicines. CiplaQCIL receives significant support from Cipla on the technical front and has access to world-leading IP and believes, as a result, it has a significant advantage over any existing competitors in the SSA region.

As the effective majority shareholder in the Company, Cipla is committed to the success of the business and supports it in five major areas:

i) Technical knowledge and transfer of skills: Cipla makes available its expertise to the Company, including in relation to technology and manufacturing know-how of new products, improved manufacturing processes for existing products, adoption of new technologies, efficiency improvement, quality and expansion programs.

Over the years, Cipla has seconded some of its employees to the Company to assist in the training and supervision of new employees, in addition to training the CiplaQCIL team in the sales and operational planning process.

ii) New products and time-to-market: Cipla has an extensive product portfolio, which may potentially be licensed to CiplaQCIL. Many of Cipla’s products are already registered globally and since CiplaQCIL is registered as an additional manufacturing site for Cipla, this has reduced the time required for the Company to register products in new markets.

iii) Procurement: Due to its size and reach, Cipla enjoys significant economies of scale when it comes to procuring raw materials, resulting in attractive pricing and favorable payment terms. Not only does this give the Company a cost advantage, but it also gives the Company access to a supply of high quality raw materials.

iv) Quality control: In addition to financial audits, Cipla carries out annual audits of the Company to ascertain the level of quality assurance of the Company in line with GMP requirements. Procedures have been established in the facility to meet requisite regulatory and customer standards. The Company has successfully been inspected by the WHO to assess compliance with GMP standards.

v) Access to important relationships that support the growth of the business: Cipla, being a global entity, is in a position to give the Company access to other global pharmaceutical producers, donors and non-governmental organisations. This relationship also gives the Company the potential opportunity to take advantage of Cipla’s license agreements with other pharma producers, subject to the terms of such agreements. The Company also benefits from the extensive local market expertise, insights and relationships provided by the Uganda Founders, who collectively own 10.8% of the Company.

10.8 Licensing arrangements with Cipla

Based on the IP Agreements, CiplaQCIL has rights to use Cipla’s manufacturing technology and know-how and product dossiers, where applicable and required, pertaining to the existing and pipeline products and geographies listed therein, for which Cipla is entitled to receive an arm’s length determined royalty fee, which ranges from 5% to 8%, depending on the product.

10.9 Company’s Strategy

Growth in existing and new markets

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The Company is already a market leader in Uganda, the only pharmaceutical manufacturer within SSA producing WHO-recommended and WHO-prequalified treatments for HIV/AIDS and malaria, as well as hepatitis B drugs, and a major supplier of ARVs and ACTs to Zambia. The Company intends to widen its access further, supported by ongoing engagements with countries, such as Namibia, by leveraging its successful track record. With nine existing products, the near-term expected manufacture of five pipeline products and plant registrations in 13 countries (expected to grow to 19 by December 2020), the Company has a clear opportunity to increase its reach and impact.

In keeping with the EAC directives (Article 35 of the Protocol on the establishment of EAC Common Market), the Company receives a 15% local content advantage when supplying the GOU, which may also be applied by other governments in the EAC. The Company is a unique and strategic asset for the region, and given its local presence, is capable of providing high quality products with lower logistics costs for the customers and offering quick response in case of medicine shortages.

The Company has long-term contracted business with the GOU and the GOZ and a shorter-term contracted business with the Global Fund through the Consortium, which provide some visibility on its financial prospects and inform its expansion plans. It is part of the Company’s strategy to seek further contracted and/or multi-year tender business.

Expansion of product portfolio

With Cipla’s support, especially on technical knowledge, quality assurance and manufacturing efficiency, the Company is positioned to have line of sight on and adapt effectively to changes in treatment regimens by expanding its product range and tailoring it to various core markets and strategic therapeutic areas. In 2015/16, the Company launched three new products in Uganda, these being a “one-pill-a-day” ARV and the adult and paediatric hepatitis B treatments. The Company is also registering these products selectively in other countries and is preparing to launch a hepatitis C cure. Recently GOU has announced that starting from mid-2018 it will adopt DTG +3TC+ TDF as a primary treatment for HIV patients. Accordingly, the Company plans to launch its DLT combination in mid-2018. To build its pipeline for the longer term, the Company is considering various other therapeutic areas, based on its ability to potentially access Cipla’s expansive product portfolio.

Maintain and improve quality

The Company will continue to apply the highest quality standards and processes to ensure continued successful outcomes for customers and regulatory audits. This will be supported by its relationship with Cipla with respect to the latter’s technical expertise, product innovation, quality assurance and procurement capabilities.

The Company’s state-of-the-art manufacturing facility ensures that its products are manufactured not only to local regulators’ specifications, but also in accordance with international best practice. CiplaQCIL’s strategy of producing a small number of medications that are in high demand locally enables it to operate a tightly controlled manufacturing facility, and ensures, that its products are manufactured in keeping with global standards.

Efficiency and capacity enhancements

The Company’s production is highly efficient by any measure, e.g. high yields and low downtime. Nevertheless, the management regularly reviews the potential for improvement and has recently identified the following opportunities to improve its efficiency and capacity:

i) Ongoing improvement of business processes across all areas of operations and maintaining a low-cost base;

ii) Enhance its forecasting and planning processes to maintain timely order execution and availability of raw materials; and

iii) Evaluate and ensuring efficient expansion possibilities that support long-term business growth.

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10.10 Financial Performance Summary

Revenue has grown rapidly since 2013 driven by the addition of new export markets, such as Zambia, Namibia, and Southern Africa (either directly or via the Global Fund), increasing by a CAGR43 of 24.4% over the period.

Revenue

UGX billion

89.8

117.0

CAGR: 24.4%*

164.1

211.7227.3

2013 2014/15 2015/16 2016/17 2017/18

*CAGR calculation assumes a period of 4.25 years between financial years FY2013 and FY2017/18

Gross profit has also grown over the period by a CAGR of 25.8%.44 The reduction in gross margin in 2017/18 compared to 2016/17 was due to changes in pricing and product and customer mix.

Gross profit and gross profit margin

UGX billion

36.461.1

CAGR: 25.8%*

78.5

95.296.4

2013 2014/15 2015/16 2016/17 2017/18

40.5% 52.2% 47.9% 45.0% 42.4%

*CAGR calculation assumes a period of 4.25 years between financial years FY2013 and FY2017/18*CAGR calculation assumes a period of 4.25 years between financial years FY2013 and FY2017/18

Raw materials comprise the largest part of the Company’s production expenses (approximately 82% of entire cost of goods sold for 2017/1845).

43 CAGR calculation assumes a period of 4.25 years between financial years FY2013 and FY2017/18.44 CAGR calculation assumes a period of 4.25 years between financial years FY2013 and FY2017/1845 Calculated as (Opening inventory – Closing inventory + material purchases) / total cost of sales..

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EBITDA

CiplaQCIL’s efficient production platform, growth in volumes, gross margin improvement and operating improvements have resulted in an EBITDA growth of 36.5% over the last five years.

Operating expenses breakdown46

(UGX billion) EBITDA and EBITDA margin47

(UGX billion)

22.4

2013

25.0%

30.6

2015/16

18.6%

47.6

2016/17

19.4%

47.2

2017/18

19.6%

23.8

2014/15

20.3%

14.2

39.7

CAGR: 36.5%*

48.8

57.953.2

2013 2014/15 2015/16 2016/17 2017/18

15.8% 33.9% 29.8% 27.3% 23.4%

10.3

2.43.24.61.9

16.6

3.12.65.00.3

12.7

4.12.57.20.3

21.5

5.33.9

9.8

6.60.5

22.7

6.44.8

9.9

2.60.7

Other operating expensesIPO-related expensesOther administration expenses

Other staff related expensesSalaries

Office expenses

*CAGR calculation assumes a period of 4.25 years between financial years FY2013 and FY2017/18

Staff costs are the Company’s largest operating expense, comprising about 12.8% of the total revenue in 2017/18. Staff costs include salaries, bonuses, welfare, pension contributions and other expenses such as training. Driven by economies of scale, as well as continuous production processes optimisations, the Company has managed to reduce the overall operating expenses48 from 25.0% of revenue in 2013 to 19.6% of revenue in 2017/18.

EBITDA

EBITDA

2015/16 2016/17 2017/18

(10.1%)(1.2%)

(1.3%)(1.5%)

(4.4%)0.4%

29.8%

(10.2%)

(1.1%)

(1.4%)(1.8%)

(4.6%)

1.5%

27.3%

(3.1%)

(10.0%)

(1.1%)

(1.7%)

(2.1%)(4.4%)

0.3%

23.4%

(1.2%)

Gross profit

(as % of revenue)

Salaries & bonusesWelfare & NSSF contribution

Other staff expensesOffice expenses

Other admin. expensesOther oper. income (exp)

IPO related expensesIPO

relat

edex

p.Ad

min

expe

nses

Staf

fex

pens

es

Note: Periods of 2013, 2014/15 and 2015/16 refer to 12 months ended 31-Dec-2013, 31-Mar-2015 and 31-Mar-2016, respectively

Source: CiplaQCIL IFRS financial statements 2015/16 and 2013

46 In 2016/17 and 2017/18 operating expenses as a percentage of total revenue amounted to 19.4% and 19.6%, respectively, if IPO-related costs are excluded.47 2016/17 and 2017/18 EBITDA excludes IPO-related expenses.48 Excluding amortisation, depreciation and IPO-related expenses.

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Capital expenditure

As a result of the capital investments made by CiplaQCIL since 2013, the Company is well positioned to increase its capacity in the near term. This will allow the Company to increase business further and begin construction of the Phase 2 facility should business needs dictate it.

Table 3: Capacity expansion history

Calendar year Installment of additional equipment Total capacity(million tablets per month)

2018Compression line replacementCoating line replacement2 granulation lines replacement

130

2017 Operational improvements 100

2016 (+) Bottle packing line 100

2015

(+) Compression line(+) Blister cartonator(-) reduction in actual capacity given the change in product mix (share of ARVs increased from 15% to 25%)

75

2014(+) MacroPacter(+) Boiler(+) Granulation line

80

2013(+) Granulation line(+) Coating line(+) Blister packing line

75

2011(+) Granulation line(+) Compression M/c(+) Blister packing line

50

20091

1 granulation line4 compression M/cs1 coating line1 blister packing line1 bottle packing line

25

1) configuration when commissioned

Capital investment history

UGX billion

2013 2014/15 2015/16 2016/17 2017/18

Plant & Machinery Buildings Other

6.61.0

7.90.4

3.50.6

2.46.9

0.8

2.627.3

6.1

18.6

3.72.46.85.6

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The increase in capital expenditures to UGX 27.3 billion in 2017/18 was driven by investments in capacity expansion and construction of the Company’s own warehouse and laboratory.

10.11 Currency Exposure

The majority of the Company’s key cash flow items are denominated in or are directly linked to US Dollars:

• All of the Company’s sales are in US Dollars.

• Raw materials (which accounted for 82% of all cost of goods sold in 2017/1849) are also mainly purchased in US Dollars, which provides a natural hedge against any significant exchange rate fluctuations. In 2017/18 over 98% of all raw materials purchases were in US Dollars.

• In addition, given its strategic position and risk profile, CiplaQCIL has had and continues to have access to debt financing (denominated in US Dollars) at attractive rates.

10.12 Significant Social Impact in Uganda and in the Wider Region

CiplaQCIL is the only manufacturer of both WHO-prequalified ARVs and ACTs in SSA. As such, given the prevalence of HIV/AIDs and malaria and their effect in SSA, CiplaQCIL plays a crucial social role in supporting the community through:

i) Local production which guarantees consistent supply of high quality lifesaving medications;

ii) Ensuring that Uganda has the potential to be self-sufficient in ARV, ACT and, hepatitis drugs;

iii) Being a major contributor to Uganda’s economy by virtue of improved national trade balance (reduced imports, increased exports), employment of over 300 people and regular training sessions for staff and industrial training for students from within and outside Uganda.

In the last year 2017/18, CiplaQCIL supplied 500,000 people with ARVs and 45 million malaria treatments.

The Company’s efforts have contributed to the gradual improvement of HIV and malaria related healthcare treatment in Uganda.

Gradual improvement of HIV and Malaria related healthcare treatment in Uganda

22%

67%

2010 2016

39%

88%

2009 2016

63

(56%)(66%)

28

2010 2016

35

12

2005 2015

ARV Coverage AIDS-relateddeaths, ‘000

Use of ACTs in malariatreatment amongchildren under 5

Malaria - relatedestimated deaths, ‘000

Source: The Uganda HIV and AIDS country progress report (July 2015 – June 2016), UNAIDS database, Uganda Malaria Indicator Survey held in Dec-14-Jan-15, WHO

49 Calculated as (Opening inventory – Closing inventory + material purchases) / total cost of sales.

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The Company has hosted many distinguished visitors to its facility, including:

• His Excellency Yoweri Kaguta Museveni, the President of Uganda

• His Excellency Paul Kagame, the President of Rwanda

• His Excellency Uhuru Kenyatta, the President of Kenya

• His Excellency Edgar Lungu, the President of Zambia

• Honorable Alexander Segbefia, Minister of Heath for the Republic of Ghana

• Dr. Roberto Azvedo, the Director General of the World Trade Organisation

• Dr. Yusuf Hamied, the Chairman of Cipla, and Mr. Mustafa Hamied, the Vice Chairman of Cipla

10.13 Corporate Social Responsibility

CiplaQCIL has adopted best practices in Corporate Social Responsibility (“CSR”) guided by the principle of shared values and partnerships. The Company’s CSR initiatives focus on the natural environment, the workplace environment, health and education, all with attention to the communities in which the Company operates.

CiplaQCIL’s CSR activities are split into four categories:

i) Medicine Donations

CiplaQCIL often makes medicine donations, typically Lumartem and Texavir, to various medical campaigns. CiplaQCIL has donated to the following medical campaigns:

• Ministry of Health World Malaria Day

• Uganda Manufacturing Association (UMA)

• St. Joseph’s Child Development Initiative

• Patient Solidarity Day Celebrations

ii) Employee Engagement

CiplaQCIL has facilitated various initiatives that improve employee welfare and has also supported other initiatives that do the same. Some of these include:

• QCS SACCO – a savings scheme started in 2012 to help employees save, invest and grow financially. The SACCO has enabled members to buy land, boda bodas (public transport motorbikes) and many other assets.

• Corporate League – an annual sports competition that sees over 50 companies battle for a championship trophy. CiplaQCIL has been a three-time champion of the league and a champion of the soccer tournament in the league.

• Marathons – CiplaQCIL employees participate in annual marathons that raise funds for various causes. These marathons include the MTN Marathon, the Airtel Kabaka Run, the Indian Women Association (IWA) Race for Life and the Rotary Cancer Run.

• Blood Donations – CiplaQCIL has organised blood donation drives where members of the community are encouraged to donate blood.

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iii) Trainings/Internships

Every year, CiplaQCIL takes in pharmaceutical students from various African countries to intern at the Company and gain relevant experience. Some of the schools whose students have been trained at CiplaQCIL are:

• Bishop Cipriano Kahangire Secondary School (Community School)

• Makerere University School of Pharmacy

• Mbarara University School of Pharmacy

• Mount Kenya University Rwanda School of Pharmacy

• University of Namibia School of Pharmacy

iv) Blood Bank Donations

In 2017/18, the Company made a donation for the completion of the blood bank at Mengo Hospital, which is Uganda’s first privately owned blood bank.

10.14 Human Resources

The Company employs 307 people (excluding those engaged on a short-term basis) as at 31 December 2017, a 57% increase from 2012. Approximately 97% of all employees are Ugandan nationals.

Head count dynamics by type of employment

Permanent Contract

Dec 2017Dec 2016Dec 2015Dec 2014Dec 2013Dec 2012

196 207233 244

279307

74 7584 83

8887

122 132 149 161 191220

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10.15 CiplaQCIL’s Organisation Structure (as of 31 May 2018)

BOARD OF DIRECTORS

GLOBAL QUALITY HEAD

FINANCEMANAGER

ITMANAGER PURCHASE

OFFICER

SECURITYHEAD

SECURITYGUARDS

FRONT DESKOFFICER

HR OFFICER/ADMINISTRATIVE

OFFICERPERSONALASSISTANTS

DEPARTMENT ASSISTANTSDEPARTMENTASSISTANTS

EXECUTIVE CHAIRMAN

STORESMANAGER

EXECUTIVE DIRECTORSCHIEF EXECUTIVE OFFICER

QA MANAGER

QC MANAGER

QAPHARMACIST

REGULATORYAFFAIRS

EXECUTIVE

SUPERVISINGPHARMACIST

QAOFFICERS

DOCUMENTATIONSECTION

SAFETYOFFICER

PACKINGHEAD

PACKINGOFFICERS

DEPT.ASSISTANTS

ELEC.ENG.

MECH.ENG.

MICROSECTION

ROUTINESECTION

NONROUTINESECTION

QCOFFICERS

DISPERSINGOFFICERS

GRANULATIONOFFICERS

COMPRESSIONOFFICERS

COATINGOFFICERS

OPERATORS OPERATORS OPERATORS

MECH.OPERATORS

ELEC.OPERATORS

PRODUCTIONMANAGER

ENG.MANAGER

COO B.D.M HEAD OFFINANCE

HRMANAGER

SUPPLYCHAIN

MANAGERC.S P.R.E.

CIPLA HEAD OF QUALITYINTERNATIONAL

RMOFFICERS

PMOFFICERS

FGOFFICERS

DISPERSINGOFFICERS

HOUSEKEEPING

DEPT.ASSISTANTS

LINENASSISTANTDRIVERS

OPERATORS

ACCOUNTS ITOFFICER

10.16 WHO-Prequalification50

WHO prequalification of medicines is a service provided by the WHO to assess the quality, safety and efficacy of medicinal products. Originally, in 2001, the focus was on medicines for treating HIV/AIDS, tuberculosis and malaria. Over time, it has been extended to cover other diseases. At the end of 2012, the WHO List of Prequalified Medicinal Products contained 316 medicines for priority diseases.

Every year, medicines worth billions of US Dollars are purchased by international procurement agencies for distribution in resource-limited countries. Prequalification is intended to give these agencies the choice of a wide range of quality medicines for bulk purchase.

The prequalification process consists of five components:

10.16.1 Invitation

The WHO Prequalification of Medicines Programme (“PQP”), other UN agencies (UNAIDS and UNICEF) and UNITAID, issue an invitation to manufacturers to submit an expression of interest (“EOI”) for product evaluation. Only products included in an EOI are eligible for prequalification.

BOARD OF DIRECTORS

EXECUTIVE CHAIRMANEXECUTIVE DIRECTORSGLOBAL QUALITY HEADCIPLA HEAD OF QUALITY INTERNATIONAL CHIEF EXECUTIVE OFFICERQA MANAGER QC MANAGERQA PHARMACIST

QA OFFICERS

COOC.SP.R.EB.D.MHEAD OF FINANCEHR MANAGER

PURCHASE OFFICERIT

MANAGER

FINANCE MANAGERACCOUNTANTS IT OFFICER

PERSONAL ASSISTANTSSECURITY HEAD

HR OFFICER/ ADMINISTRATIVE OFFICER

FRONT DESK OFFICERSECURITY GUARDS

PRODUCTION MANAGERENGINEERING MANAGER STORES MANAGERSUPERVISING PHARMACIST

MECH. ENG

ELEC. ENGSAFETY OFFICER

REGULATORY AFFAIRS EXECUTIVE

QC OFFICERS

MECH.OPERATORSELEC. OPERATORSDEPT. ASSISTANTS PACKING HEADPACKING OFFICERS OPERATORS RM OFFICERS

PM OFFICERS

FG OFFICERS

DISPERSING OFFICERS OPERATORSOPERATORSOPERATORS

DEPARTMENT ASSISTANTSDEPARTMENT ASSISTANTS DRIVERSHOUSE KEEPING

LINEN ASSISTANTDEPT. ASSISTANTS

DOCUMENTATION SECTION MICRO SECTIONROUTINE SECTION

NON ROUTINE SECTION

SUPPLY CHAIN MANAGER

DISPERSING OFFICERSGRANULATION OFFICERS COMPRES-SION OFFICERS w

These employees are spread across the various departments:

Head count dynamics by departments

Production

PackingStores

Quality Assurance Engineering

Quality Control

Facilities

Admin

Dec 2017

307

Dec 2013

2072326

30121424

32

46

Dec 2014

23329

30

34121526

40

47

Dec 2015

244

3021

37121431

47

52

Dec 2016

279

2920

401318

30

60

69

35

20

45

2020

30

62

75

Dec 2012

196232527

1326

32

42

8

The bulk of the compensation for full-time staff is fixed as monthly salaries, with a bonus that is paid once or twice annually, depending on both the Company’s and the individual employee’s performance.

CiplaQCIL recognises that it is in a very specialised industry and is reliant on key officers and qualified scientific and technical employees. In view of this, the Company maintains a strong depth of talent within the Company, with various opportunities for professional development and continued training. The Company also prides itself in remunerating employees competitively and offering benefits that help with employee retention.

Additionally, the Company engages the services of contract workers through a third-party contractor, as required from time to time.

CiplaQCIL is also key to the healthcare objectives of Uganda and has a positive impact on other countries in SSA by improving access to quality, affordable medications. Consequently, it is a sought-after employer, and one that is able and willing to retain key personnel. The Company ensures that its employees are regularly trained to the highest industry standards with the objective of ensuring its work force is properly skilled and safe. Through the relationship that the Company has with Cipla, it is able to adapt and train in accordance with changes in the industry.

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10.15 CiplaQCIL’s Organisation Structure (as of 31 May 2018)

BOARD OF DIRECTORS

GLOBAL QUALITY HEAD

FINANCEMANAGER

ITMANAGER PURCHASE

OFFICER

SECURITYHEAD

SECURITYGUARDS

FRONT DESKOFFICER

HR OFFICER/ADMINISTRATIVE

OFFICERPERSONALASSISTANTS

DEPARTMENT ASSISTANTSDEPARTMENTASSISTANTS

EXECUTIVE CHAIRMAN

STORESMANAGER

EXECUTIVE DIRECTORSCHIEF EXECUTIVE OFFICER

QA MANAGER

QC MANAGER

QAPHARMACIST

REGULATORYAFFAIRS

EXECUTIVE

SUPERVISINGPHARMACIST

QAOFFICERS

DOCUMENTATIONSECTION

SAFETYOFFICER

PACKINGHEAD

PACKINGOFFICERS

DEPT.ASSISTANTS

ELEC.ENG.

MECH.ENG.

MICROSECTION

ROUTINESECTION

NONROUTINESECTION

QCOFFICERS

DISPERSINGOFFICERS

GRANULATIONOFFICERS

COMPRESSIONOFFICERS

COATINGOFFICERS

OPERATORS OPERATORS OPERATORS

MECH.OPERATORS

ELEC.OPERATORS

PRODUCTIONMANAGER

ENG.MANAGER

COO B.D.M HEAD OFFINANCE

HRMANAGER

SUPPLYCHAIN

MANAGERC.S P.R.E.

CIPLA HEAD OF QUALITYINTERNATIONAL

RMOFFICERS

PMOFFICERS

FGOFFICERS

DISPERSINGOFFICERS

HOUSEKEEPING

DEPT.ASSISTANTS

LINENASSISTANTDRIVERS

OPERATORS

ACCOUNTS ITOFFICER

10.16 WHO-Prequalification50

WHO prequalification of medicines is a service provided by the WHO to assess the quality, safety and efficacy of medicinal products. Originally, in 2001, the focus was on medicines for treating HIV/AIDS, tuberculosis and malaria. Over time, it has been extended to cover other diseases. At the end of 2012, the WHO List of Prequalified Medicinal Products contained 316 medicines for priority diseases.

Every year, medicines worth billions of US Dollars are purchased by international procurement agencies for distribution in resource-limited countries. Prequalification is intended to give these agencies the choice of a wide range of quality medicines for bulk purchase.

The prequalification process consists of five components:

10.16.1 Invitation

The WHO Prequalification of Medicines Programme (“PQP”), other UN agencies (UNAIDS and UNICEF) and UNITAID, issue an invitation to manufacturers to submit an expression of interest (“EOI”) for product evaluation. Only products included in an EOI are eligible for prequalification.

BOARD OF DIRECTORS

EXECUTIVE CHAIRMANEXECUTIVE DIRECTORSGLOBAL QUALITY HEADCIPLA HEAD OF QUALITY INTERNATIONAL CHIEF EXECUTIVE OFFICERQA MANAGER QC MANAGERQA PHARMACIST

QA OFFICERS

COOC.SP.R.EB.D.MHEAD OF FINANCEHR MANAGER

PURCHASE OFFICERIT

MANAGER

FINANCE MANAGERACCOUNTANTS IT OFFICER

PERSONAL ASSISTANTSSECURITY HEAD

HR OFFICER/ ADMINISTRATIVE OFFICER

FRONT DESK OFFICERSECURITY GUARDS

PRODUCTION MANAGERENGINEERING MANAGER STORES MANAGERSUPERVISING PHARMACIST

MECH. ENG

ELEC. ENGSAFETY OFFICER

REGULATORY AFFAIRS EXECUTIVE

QC OFFICERS

MECH.OPERATORSELEC. OPERATORSDEPT. ASSISTANTS PACKING HEADPACKING OFFICERS OPERATORS RM OFFICERS

PM OFFICERS

FG OFFICERS

DISPERSING OFFICERS OPERATORSOPERATORSOPERATORS

DEPARTMENT ASSISTANTSDEPARTMENT ASSISTANTS DRIVERSHOUSE KEEPING

LINEN ASSISTANTDEPT. ASSISTANTS

DOCUMENTATION SECTION MICRO SECTIONROUTINE SECTION

NON ROUTINE SECTION

SUPPLY CHAIN MANAGER

DISPERSING OFFICERSGRANULATION OFFICERS COMPRES-SION OFFICERS w

50 WHO: Prequalification of medicines by WHO (Fact sheet N°278)

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The inclusion of a medicine in an EOI is based on one or more of three criteria:

• it is listed on the WHO Model List of Essential Medicines;

• an application for its addition to the Model List has been submitted to the relevant WHO Expert Committee for assessment, and is likely to meet the criteria for inclusion (based on public health need, comparative effectiveness, safety and cost-effectiveness); and/or

• it is recommended for use by a current WHO treatment guideline.

10.16.2 Dossier submission

The manufacturer provides a comprehensive set of data about the quality, safety and efficacy of the product submitted for evaluation. This includes:

• data on the purity of all ingredients used in manufacture;

• data on the finished pharmaceutical product (such as information about stability); and

• results of bioequivalence tests (clinical trials conducted with healthy volunteers), unless waived.

10.16.3 Assessment

A team of assessors evaluates all the data presented. Assessment teams include WHO staff and experts from national regulatory authorities worldwide.

10.16.4 Inspection

A team of inspectors verifies that the manufacturing sites for the finished pharmaceutical product and its active pharmaceutical ingredient(s) comply with WHO good manufacturing practice. They also verify that any contract research organisation that conducted any clinical studies relating to the submitted product complies with WHO good clinical practice and WHO good laboratory practice.

10.16.5 Decision

If the product is found to meet the specified requirements, and the associated manufacturing site(s) and contract research organisation(s) are compliant with WHO standards, the product is added to the WHO list of prequalified medicinal products.

The WHO prequalification of medicines process can take as little as three months, provided the data presented are complete and demonstrate that the product meets all required standards. If data is insufficient, however, the process can take considerably longer since the manufacturer must submit the necessary data for reassessment.

To ensure that prequalified products continue to meet WHO specifications, the PQP regularly re-inspects manufacturing sites of prequalified products. It also evaluates any changes (known as “variations”) made to specifications, manufacturing processes and quality control of prequalified products, and conducts random quality control tests on prequalified products.

Increasing the availability of quality-assured medicines

PQP bases its activities on international pharmaceutical standards for medicines quality, safety and efficacy. As well as prequalifying medicines, it also prequalifies pharmaceutical quality control laboratories and active pharmaceutical ingredients, and conducts considerable advocacy for medicines of guaranteed quality. Its

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long-term goal is to increase the availability of quality-assured medicines by assisting manufacturers to comply with WHO standards and supporting regulatory authorities to implement them. It does not seek to replace national regulatory authorities or national authorization systems for the importation of medicines.

Capacity building and technical assistance

In addition to evaluation and inspection activities, PQP builds national capacity for sustainable manufacturing and monitoring of quality medicines, by organising training and hands-on experience at the country-level.

It also offers a three-month rotational post at WHO headquarters to national regulatory staff from developing countries. By working closely with senior programme assessors, incumbents increase their technical expertise and enhance information exchange between their regulatory authority and PQP on their return to their home country. Each of these activities promotes communication between stakeholders on pharmaceutical issues relating to quality.

In addition, PQP provides targeted technical assistance for manufacturers and quality control laboratories. Assistance is delivered by specialists who are not involved in WHO prequalification assessment or inspection activities, but who can conduct audits and training at country-level. This assistance is aimed at resolving specific technical problems.

Why does WHO run the Prequalification of Medicines Programme?

PQP is a United Nations programme managed by the WHO. It is the only global quality assurance programme for medication. No other global body in this field receives the active support of regulatory experts from both developed and developing countries.

10.17 Dividend Policy The Board may from time to time declare dividends at its discretion. In considering any dividends, the Board will review, inter alia, the Company’s budgeted and prospective working capital requirements and capital expenditure plans, as well as any third-party debt covenants.

The Company has paid dividends in the current and each of the last two financial years.

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11.1 Board

CiplaQCIL’s Board of Directors is responsible for setting the strategic vision and direction of the Company and monitoring the implementation of internal policies and procedures. The Board has delegated the responsibility for the implementation of the agreed strategy and the management of the day-to-day operations of the Company to the Chief Executive Officer. The Board has also delegated some of its authority to the Committees. However, the Board retains its overall responsibility to establish and maintain an efficient system of internal controls and governance, and overall Board authority.

None of the Directors has been, nor is currently, the subject of a filing of a petition for bankruptcy, either in his/her own capacity or as an executive officer of any company. None of the Directors has been convicted of a criminal offence, nor is any Director the subject of current or previous criminal proceedings. None of the Directors has been ruled temporarily or permanently unfit to engage in any business practices.

Immediately prior to the listing, the Board consists of 13 Directors51, whose profiles are outlined below in Section 11.4.

11.2 Board Committees

The Board has created the following Committees that assist in carrying out its mandate. Certain responsibilities are delegated to the Committees, which will meet as regularly as the business may require. The Committees that report to the Board are as follows:

11.2.1 Audit and Risk Committee

The Company has opted to implement the requirements in Article 132 of the Articles by combining both the Audit and Risk Committees. The purpose of the Audit and Risk Committee is to assist the Board in fulfilling its responsibilities in respect of:

• overseeing the Company’s financial reporting process, including the internal control structure and procedures for financial reporting and monitoring the integrity and appropriateness of the Company’s financial statements;

• the selection, compensation, independence and performance of the Company’s external auditors;

• the independence and performance of the Company’s internal auditors; and

• overseeing risks relating to the Company’s strategic goals, objective and plans including risks associated with the industry.

All the members of this committee are Non-executive Directors, all of whom are required to be financially literate and at least one of whom is required to have recent relevant experience.

Current members of the Audit and Risk Committee are: Mark Daly (Chair), Nishant Saxena, Beth Mandel, Zain Latif, Chandru Chawla and Paul Miller.

11.2.2 Remuneration Committee

The purpose of the Remuneration Committee is to assist the Board in fulfilling its responsibilities in respect of:

• determining and agreeing to the framework or broad policy for the remuneration of the Company’s Chairman, Executive Directors, Chief Executive/General Manager, Company Secretary and such other members of the Executive Management as it is designated to consider;

51 Including two alternate Directors.

11 CiplaQCIL’s Corporate Governance

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• reviewing the ongoing appropriateness and relevance of the remuneration policy;

• within the terms of the agreed policy and in consultation with the Chairman and/or Chief Executive Officer, as appropriate, determining the total individual remuneration package of the Chairman, each Executive Director, the Company Secretary and other designated senior executives, including bonuses and incentive payments;

• obtaining reliable, up-to-date information about remuneration in other companies if reasonably available. To help it fulfil its obligations, the Committee shall have full authority to appoint remuneration consultants and to commission or purchase any reports, surveys or information which it deems reasonably necessary;

• approving the design of, and targets for, any performance-related pay schemes operated by the Company and approving the total annual payments made under such schemes;

• approving any major changes in benefits structures throughout the Company; and

• approving significant (in terms of cost) human resources and other policies and benefits.

Current members of the Remuneration Committee are: Beth Mandel (Chair), Zain Latif, Chandru Chawla, Paul Miller, Mark Daly and Nishant Saxena.

11.2.3 Nominating Committee

The purpose of the Nominating Committee, which is currently combined with the Remuneration Committee, is to assist the Board in fulfilling its responsibilities in respect of:

• identifying and nominating for the approval of the Board, candidates to fill board vacancies as and when they arise;

• evaluating the balance of skills, knowledge, experience and diversity on the board, and, in the light of this evaluation preparing a description of the role and capabilities required for a particular appointment;

• regularly reviewing the structure, size and composition (including the skills, knowledge, experience and diversity) of the board and making recommendations to the board with regard to any changes;

• giving full consideration to succession planning for directors and other senior executives taking into account the challenges and opportunities facing the company, and the skills and expertise needed on the board in the future;

• regularly reviewing the leadership needs of the organisation, both executive and non-executive, with a view to ensuring the continued ability of the organisation to compete effectively in the marketplace; and

• keeping up to date and fully informed about strategic issues and commercial changes affecting the Company and the market in which it operates.

The Company has proposed Prof. Peter Mugyenyi and Mr. Joseph Baliddawa as Independent Non-executive Directors. Upon their confirmation, the proposed Independent Non-executive Directors and such other Non-executive Directors will constitute the nominating committee.

11.3 Director’s Interests

Save as disclosed below, at the date of this Prospectus, none of the Directors has any direct or indirect beneficial interest in CiplaQCIL. Mr. Emmanuel Katongole, Mr. George Baguma and Mr. Frederick Mutebi Kitaka each

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currently hold a direct interest of 3.60% in the issued share capital of the Company. On conclusion of the Offer, each of the Directors above will have a direct interest of 2.78% of the Shares in the Company.

Director’s Name Position on the Board of CiplaQCIL Interest in CiplaQCILMr. Emmanuel Katongole Executive Chairman 3.60%

Mr. George Baguma Executive Director 3.60%

Mr. Frederick Mutebi KitakaExecutive Director(alternate* to Mr. George Baguma)

3.60%

*As defined in 16.14.1.

No payment has been made or is due to any Director in the three years preceding the date of this Prospectus for serving on the Board of CiplaQCIL. Only the Independent Non-Executive Directors are expected to be paid fees for serving on the Board once the Company is listed. The Board has historically met three to four times per year and, post-Listing expects to meet four times per year, unless there is cause to meet more frequently.

None of the Directors had or has any direct beneficial interest in the promotion of CiplaQCIL, nor in any property or assets acquired by CiplaQCIL during the three years preceding the date of this Prospectus.

None of the Directors had or has beneficial interests, direct or indirect, in transactions which are or were unusual or material to CiplaQCIL during the current or previous year and which remain in any respect outstanding or unperfected.

Except for employment contracts with the Executive Directors, there are no existing or proposed contracts between any of the Directors and CiplaQCIL as on the date of this Prospectus; Executive Directors are paid by virtue of the fact that they have employment contracts with the Company.

No options to purchase any securities of CiplaQCIL have been granted to or exercised by a Director of CiplaQCIL within the three years preceding the date of this Prospectus.

There are no outstanding loans granted by CiplaQCIL to any of the Directors, nor has CiplaQCIL issued guarantees in favour of the Directors.

There have been no material acquisitions or disposals of share capital of CiplaQCIL by any Director within a one-year period prior to the Offer, other than the unbundling of QCL shares

Post the Listing and if deemed appropriate from a governance perspective, the Board structure may change both in terms of composition and size and as voted on by the Shareholders.

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11.4 Board of Directors

Name Profile

Mr. Emmanuel KatongoleExecutive Chairman

Mr. Katongole is the founding Chief Executive Officer at CiplaQCIL (2005 -2013), and currently serves as the Executive Chairman.

Prior to founding CiplaQCIL, Mr. Katongole co-founded QCL in 1997, where he served as Managing Director.

Mr. Katongole also serves as Chairman of the Uganda National Oil Company and is a Member of the Initiative for Global Development (Frontier 100) - a prestigious group that connects the most successful business leaders operating in frontier markets.

Mr. Katongole has won several business awards; he was East African Winner and representative at the 2013 Ernst & Young World Entrepreneur of the Year Awards in Monte Carlo, won the 2012 Africa Business Leadership and the Africa Entrepreneurship Awards, and was a finalist for the East Africa Ernst and Young Entrepreneur of the Year 2011 Awards.

He is a Rotarian, who has steadily and diligently served Rotary in different capacities, including serving as 2010/11 District Conference and Assembly (89th DCA Chair), District Governor for Rotary District 9211, comprising Tanzania and Uganda and currently he serves as Assistant Regional Rotary Foundation Coordinator for zone 20A for Africa English speaking countries.

Mr. Katongole holds a Master of Arts degree in Economic Policy and Planning and a Bachelor of Statistics degree, both from Makerere University (Uganda).

Mr. Nevin BradfordCEO

Mr. Nevin Bradford has been the Chief Executive Officer at CiplaQCIL since 2013.

Prior to joining CiplaQCIL, Mr. Bradford spent over 30 years in the pharmaceutical industry cutting across consumer health, personal care, branded and generic products. His previous positions include Executive Director and Head of Rest of Africa Business at Cipla, Head of Ranbaxy UK and Managing Director of Ranbaxy’s JV in China (Ranbaxy Guangzhou China Ltd).

Mr. Bradford also spent 17 years with GlaxoSmithKline in a range of senior commercial roles such as Regional Manager in Africa, General Manager in Saudi Arabia, Sales and Marketing Director in Indonesia and Marketing Director in Russia.

Mr. Bradford holds a Master of Arts degree in History from Cambridge University (Emmanuel College).

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Mr. George BagumaExecutive Director

Mr. George Baguma is the founding Chief Commercial Officer at CiplaQCIL (2005 – 2014), and currently serves as Executive Director - Commercial Affairs.

Prior to founding CiplaQCIL, Mr. Baguma co-founded QCL in 1997, with Messrs Katongole and Mutebi Kitaka, and served as Chief Commercial Officer.

Prior to that, Mr. Baguma was Deputy Commissioner at the Directorate of Animal Resources in the Ministry of Agriculture, Animal Industries and Fisheries in Uganda.

Mr. Baguma holds a Bachelor of Science (Hons) from Makerere University, a Master of Science degree and a Diploma of the Imperial College in applied Entomology.

Mr. Frederick Mutebi Kitaka(Alternate52 toMr. George Baguma)

Mr. Frederick Mutebi Kitaka is the founding Chief Finance Officer at CiplaQCIL (2005 – 2014), and currently serves as Executive Director - Financial and Economic Affairs.

Prior to founding CiplaQCIL, Mr. Kitaka Mutebi co-founded QCL in 1997, where he served as Head of Finance.

Mr. Mutebi holds a degree in Accounting and Financial Management from the University of Buckingham, United Kingdom. He is a fellow of the African Leadership Initiative.

Ms. Beth Mandel Non-Executive Director

Ms. Mandel is a co-founder and has been a Principal at Capitalworks Investment Management since 2007.

Prior to founding Capitalworks, Ms. Mandel spent 18 years at Morgan Stanley, where she was the Managing Director and Country Head of Morgan Stanley in South Africa, with responsibility for the bank’s operations in the Sub-Saharan region.

Ms. Mandel holds a Bachelor of Science degree from the University of California, Berkeley and a Master of Science degree from the University of Oxford (New College), which she attended as a Marshall Scholar.

52 As defined in 16.14.1

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Mr. Zain Latif Non-Executive Director

Mr. Latif is the Founder and Principal of TLG Capital (shareholder in CiplaQCIL).

Prior to founding TLG Capital in 2009, Mr. Latif was an Executive Director at Goldman Sachs in the New Markets division focusing on Sub-Saharan Africa. Before that he has also worked at Merrill Lynch and HSBC investment banking divisions executing transactions in the African region.

Mr. Latif holds a Master’s degree in Banking and International Finance from Cass Business School, London.

Mr. Chandru ChawlaNon-Executive Director

Mr. Chawla is Executive Vice President and Head of Specialty business and New Ventures at Cipla.

He has over 28 years of experience in leading and managing bio pharmaceutical businesses across diverse geographies and segments with a proven track record having managed P&Ls, strategy and business development globally. He initially joined the company in 2011 as member of the Senior Management Group overseeing international business, corporate strategy and corporate development initiatives.

Prior to joining Cipla, Mr. Chawla served as Senior Vice President at Lupin, where he headed business operations spread across emerging markets in Asia, Latin America and Africa with directorial responsibility in several subsidiaries. Prior to this, Mr. Chawla has worked with Wockhardt as General Manager for emerging markets.

Mr. Chawla has a B.Tech degree in Mechanical Engineering from the Indian Institute of Technology, Bombay and Post Graduate from the Indian Institute of Foreign Trade, New Delhi.

Mr. Paul MillerNon-Executive Director

Mr. Miller is the Chief Executive Officer at Cipla Medpro (Pty) Ltd. since 2013. In 2016, he has also assumed responsibility for Cipla’s operations in the Sub-Saharan region.

Prior to joining Cipla, he has worked as Vice President & Managing Director at Mylan South Africa (2008-2013).

Mr. Miller also worked as Marketing Director at AstraZeneca, China where he has successfully built and launched brands that were market leaders in China in the areas of cardiovascular, gastrointestinal, respiratory and anaesthesia. Before that he has spent over four years at AstraZeneca, UK as a Strategy & Portfolio Manager and then as Global Brand Manager in the oncology division.

Mr. Miller has a Bachelor’s degree from University of KwaZulu-Natal, South Africa and an MBA University of Wales, Cardiff

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Dr. Ranjana PathakNon-Executive Director

Dr. Pathak has been the President – Global Quality, Medical Affairs & Pharmacovigilance at Cipla since 2013.

Dr. Pathak spent over 30 years in the pharmaceutical industry having previously worked as a Senior Vice President of Global Quality at Watson/Actavis Pharmaceuticals, as Vice President of Quality and Compliance at Endo/Dupont Pharmaceuticals and also worked at Zenith Goldline and Thames Pharmacol. Dr. Pathak has an extensive background in dealing with regulatory bodies such as the US Food and Drug Administration, Medicines and Healthcare Products Regulatory Agency (UK), National Sanitary Surveillance Agency (Brazil), etc.

Dr. Pathak holds a Doctorate in Health Administration from the University of Phoenix, an MBA from Dowling College and a Bachelor of Science (Honors) degree in Chemistry from Mithibai College of Arts and Chauhan Institute of Science, Mumbai. She also holds a Post Graduate Diploma in Pharmaceutical & Chemical Analysis from Sophia College and has completed a Leadership course in Pharmaceutical and Biologics from Harvard University.

Mr. Nishant SaxenaNon-Executive Director

Mr. Saxena is the Global Chief Strategy Officer at Cipla, having initially joined Cipla in 2013 as Chief Financial Officer for India.

Prior to joining Cipla, Mr. Saxena founded and ran Elements Akademia, an award winning social enterprise for seven years and was recognised by World Bank-IFC as a High Impact Entrepreneur. Previously, Mr. Saxena worked as Deputy Chief Financial Officer and Head of M&A at Procter & Gamble India.

Mr. Saxena holds a Bachelor’s degree in Production Engineering from National Institute of Technology, Trichy (India), an MBA from Indian Institute of Management, Lucknow (India) and also done an advanced course on entrepreneurship from University of Chicago-Booth School of Business.

Mr. Mark DalyNon-Executive Director

Mr. Mark Daly has been with the Cipla Group for more than 10 years. Currently, Mark is serving as the Regional CFO (including SA, SSA, CiplaQCIL).

Prior to the CFO role, Mark was the Company Secretary for the group and Financial Director of the manufacturing division (based in Durban) from 2008. He also held the position of Corporate Finance Executive and was responsible for the capital raising exercise for the factory upgrade and the sale of the non-core businesses in 2007.

Prior to joining Cipla Medpro, Mark was a manager in the Corporate Finance and Auditing departments at KPMG.

Mr. Daly holds a B.Com Honours degree in accounting from the University of Natal, Pietermaritzburg.

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Mr. Samuel Acuti OpioRegulatory Pharmacist

Mr. Opio has been the Supervising Pharmacist at CiplaQCIL since 2009, having joined the Company in 2007 as Quality Assurance Pharmacist.

Prior to this, Mr. Opio was a Supervising Pharmacist at Kwality Afro-Asia and an Intern Pharmacist at Mulago Hospital.

Mr. Opio holds Bachelor and Master of Science degrees in Pharmacology from Makerere University (Uganda).

Dr. Abofele Bogosi Khoele (alternate to Dr. Ranjana Pathak)

Dr. Abofele Bogosi Khoele is the Executive Director – Sub-Saharan Africa at Cipla South Africa, having joined Cipla in 2014 as the Executive Director - Regulatory Affairs, Medical Affairs & Quality Assurance for Cipla South Africa.

Prior to joining Cipla, Dr. Khoele worked as the Group Executive- Drug Management & Development at Adcock Ingram Healthcare, Director – Medical and Chief Scientific Officer, Head of Clinical Research Operations, Medical Advisor/Research Physician and Medical Science Liaison/Scientific Operations for Novartis Pharma SA.

Dr. Khoele also sits on the Board of Directors of Cipla Medpro (Pty) Ltd.

Dr. Khoele holds Bachelor of Medicine and Bachelor of Surgery degrees from the University of Cape Town, and an MBA from the University of Cape Town Graduate School of Business.

Prof. Peter Mugyenyi*Independent Non-Executive Director

Prof. Peter Mugyenyi, Bachelor of Medicine and Surgery (MB ChB), Fellow of the Royal College of Physicians of Ireland (FRCPI), Fellow of the Royal College of Physicians (Edinburgh) (FRCP Edin), Doctor of Science (ScD(h)), is a Ugandan Paediatrician, researcher and specialist on HIV/AIDS and related conditions. He is the Executive Director of Joint Clinical Research Centre, Kampala – a centre of excellence in medical research, training and healthcare. He was among the pioneers who introduced use of ARV in Africa, as well as development of an effective model for scaling up ARVs in resource limited countries.

Prof. Mugyenyi has been a Principal Investigator on dozens of landmark research projects some of them funded by National Institutes of Health (NIH), European Union, WHO and Medical Research Council (MRC). His research and publications cover a wide spectrum of HIV/AIDS, related diseases and other medical conditions. Specific areas of his research include: paediatric and adult HIV treatment, drug trials, HIV resistance, HIV prevention, immunological studies including HIV vaccine trials, pharmacokinetic, molecular and epidemiological studies as well as social and economic impact of HIV.

Internationally, he has served as a board member on a number of institutions and organisations in Africa, the United Kingdom, India and the United States. Other roles include membership of various advisory boards including HIV Vaccine Trials Network, USA, Massachusetts General Hospital and Institute of Medicine of the National Academies, USA and the Joint United Nations Programme on HIV/AIDS (UNAIDS) 90-90-90 initiative to end the HIV epidemic, among others.

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Mr. Joseph Baliddawa*Independent Non-Executive Director

Joseph Baliddawa is a former partner of PricewaterhouseCoopers Africa (“PwC”), having spent 34 years with PwC in a variety of roles in the United Kingdom, Zambia and Uganda. He is a Fellow of the Association on Chartered Certified Accountants (FCCA), a Member of the Institute of Certified Public Accountants of Uganda (CPA)and a Founder Council Member of both the Institute of Certified Public Accountants of Uganda and the Zambia Institute of Chartered Accountants (ZICA). He is a Member of the Association of Chartered Certified Accountants.

Joseph has extensive experience in management and leadership roles in PWC, specifically in country management, formulating and monitoring the implementation of PWC’s strategic growth plan for Africa, risk, quality and compliance standards management and firm wide financial management and reporting.

Mr. Baliddawa is a Ugandan national and is currently President of the Institute of Corporate Governance of Uganda, and Chair of the Audit Committees of the Commercial Bank of Africa, Alliance Africa General Insurance Limited and New Vision Group and a Board member of all three organisations. He is Chair of the Uganda-Norway Friendship Association and a Member of the Council of Uganda Martyrs University and Chair of its Audit Committee. He has received many national and international awards from the World Bank, national and international accountancy organisations and Lions Club International. He undertook his professional education at the London School of Accountancy obtaining Membership of the Association of Chartered Certified Accountants (ACCA)

*Appointment of Independent Non-executive Directors is conditional to the Listing and becomes effective on the Listing Date.

11.5 Senior Management

The full profiles of the senior management team who are also Directors are given below.

Name Profile

Mr. Emmanuel KatongoleExecutive Chairman

As above

Mr. Nevin BradfordCEO

As above

Mr. George BagumaExecutive Director

As above

Mr. Frederick Mutebi Kitaka (alternate to Mr. George Baguma)

As above

Mr. Samuel Acuti OpioRegulatory Pharmacist

As above

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Mr. Manoranjan PrasadHead of Finance

Mr. Prasad currently serves as Head of Finance at Cipla South Africa (since March 2018).

He has previously been Head of Finance at CiplaQCIL since 2014 and currently continues to oversee the financial side of the Company until CiplaQCIL finds a replacement.

Prior to joining Cipla, he was a Deputy General Manager responsible for financial planning and analysis at Vodafone India and also served as a Financial Planning and Analysis Manager at Cadbury India.

Mr. Prasad has a bachelor’s degree from the National Institute of Technology, Warangal (India) and an MBA from Manchester Business School.

Ms. Terry Nantongo KajobaCompany Secretary

Ms. Kajoba has been the Company Secretary at CiplaQCIL since May 2012 and is also in charge of all the legal matters in the Company.

Prior to joining CiplaQCIL, she was a Partner and a Legal Consultant at M/S Victoria Advocates & Legal Consultants, where she specialized in land and commercial transactions. She is a trained Court-connected Mediator and has served as such at the High Court - Commercial Division.

Ms. Kajoba has also served as a Senior Private Secretary/Legal Affairs in the office of the Vice President, Republic of Uganda.

Ms. Kajoba is an Advocate and holds a Bachelor of Laws (Hons) degree from Makerere University (Uganda), a Diploma in Legal Practice, a master’s degree in International Trade Law from the University of Amsterdam and various certificates in the legal field.

Mr. Ravi ReddyChief Technical Officer

Mr. Reddy has been the Chief Technical Officer at CiplaQCIL since 2007.

Mr. Reddy has overall responsibility for manufacturing and all production related areas. He has over 23 years’ experience in quality pharmaceutical manufacturing.

Prior to CiplaQCIL, Mr. Reddy worked as Unit Head at Golden Cross Pharma, as Production Executive with Wockhardt Ltd and also with Khandelwal Laboratories and Dupen Laboratories.

Mr. Reddy holds an MBA from Jaipur National University, India, a Bachelor of Pharmacy degree from Bangalore University, India and a Diploma in Production Management from the All India Institute of Management Studies (AIIMS).

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12.1 Gross Domestic Product and Economic GrowthUganda’s economy has remained resilient amidst a volatile global environment. Uganda’s real GDP was estimated to have grown at a rate of 3.9% in the financial year 2016/2017 ended June 201753, driven by growth in services and construction. Although this growth rate is lower than the 4.8% registered in the previous financial year54, it still exceeds the expected growth rate of 1.4% for SSA over the equivalent period55. Partially driven by the rebound in commodity prices, in 2018 GDP growth is expected to increase to 5.2%.

The significant decline in global commodity prices has had an adverse effect on export earnings for most SSA countries, including Uganda. The impact of diminished export earnings to GDP has impacted GDP growth rates across the region, although Uganda has been able to partially mitigate this negative shock to GDP, due to continued investment in infrastructure, particularly in power generation, and construction56.

While Uganda’s strong economic growth over the past few years has facilitated a reduction in the country’s extreme poverty levels, high population growth rates of 3% per year have sustained a low per capita income growing at only 2% annually57.

Table 4: Uganda macroeconomic summary statistics

Real GDP Growth (2017) 4.5%Nominal GDP (2017, USD) USD 26.3 billionNominal GDP per capita (2017, USD) USD 699Inflation rate (2017, average) 5.6%Government Gross Debt as % of GDP (2017) 38.9%Country Rating B+

Source: IMF World Economic Outlook Database, Fitch Ratings

Figure 1: Uganda real GDP growth (%) and nominal per capita GDP (USD)

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E

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E

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E

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E

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E

1000

900800

700

600500

12

10

8

6

4

2

0

400

300

2001000

Uganda Nominal per Capita GDP (US$)

Uga

nda

Nom

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per

Cap

ita G

DP

(US$

)

Uganda Real GDP Growth Rate (%)

Uga

nda

Real

GD

P G

row

th R

ate

(%)

Source: IMF World Economic Outlook Database

53 Ugandan Ministry of Finance, Planning and Economic Development, Budget Speech Financial Year 2017/2018.54 Bank of Uganda, State of the Economy, December 2016.55 Ugandan Ministry of Finance, Planning and Economic Development, Budget Speech Financial Year 2017/2018.56 Fitch Ratings, Ugandan Credit Rating Press Release, 1 August 2017.57 Ugandan Ministry of Finance, Planning and Economic Development, Budget Speech Financial Year 2017/2018.

Uganda’s Macroeconomic Environment

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12.2 Fiscal Policy Framework

Uganda’s budget is prepared under a Macroeconomic Policy Framework and is typically delivered in June each year. The guiding principles of the framework include delivery of a sustained economic growth rate of at least 5.5% per annum, single-digit annual inflation and public debt sustainability58.

12.3 Development Framework

Uganda’s strategic development plan, Vision 2040, seeks to bring prosperity to Uganda within the next 22 years. As per the overall Vision 2040 development plan, Uganda publishes five-year National Development Plans (“NDPs”). The second plan (“NDPII”) was launched in June 2015 and covers the fiscal years 2015-2016 to 2019-2020. The goal of NDPII is to “propel the country towards middle income status by 2020 through strengthening its competitiveness for sustainable wealth creation, employment and inclusive growth”. This NDPII is expected to deliver a per capita income of USD1,039 by 202059. Uganda’s significant oil reserves are expected to improve the country’s economic prospects going forward, although commercialisation of the sector is only expected in the long term.

12.4 Infrastructure Development

Largescale infrastructure investment, notably on the Karuma and Isimba hydropower dams, currently drives economic growth, although it is likely that this investment also increases both the budget and current account deficits. Funding strategic investments into various sectors such as transport, energy and Information Communications Technology (“ICT”) is a national focus. The government’s prioritisation of these sectors is evident given a 33% allocation of government expenditure to these sectors each year60.

12.5 Uganda State Healthcare61

Uganda’s government is aware that increasing access to inclusive quality healthcare is key to ensuring the well-being of Ugandans, and it has therefore sought to continue the construction and equipping of hospitals and health centres during the financial year 2017/2018. The focus on increasing access to quality healthcare services has had an impact on reducing the country’s disease burden.

The 2017/2018 Budget Speech notes encouraging statistics over the last five years since 2011, such as “the decline in the maternal mortality from 438 to 336 deaths per 100,000 births”; “the proportion of deliveries in a health facility increased from 57% to 73% of all births”; “infant mortality declined from 54 deaths per 1,000 live births to 43 deaths per 1,000 live births”; “mother to child HIV transmission has decreased from 22,000 in 2012 to 3,400 in 2016”; and “immunization against the five immunolabel diseases among children is at 97% coverage”.

The GOU’s intention is to increase domestic access to specialised medical care and thereby reduce the cost and incidence of patients travelling abroad for healthcare. This has resulted in the prioritisation of centres of excellence within Uganda. The 2017/2018 Budget Speech also states that “in the next financial year ending June 2018 priority will be placed on increasing facility inspection to eradicate negligence of duty, corruption, and poor service delivery at health facilities, emergency rehabilitation of Health Units and general hospitals, universalisation of access to maternal health and increased sensitization and awareness of the population to healthy living”.

12.6 Government of Uganda Debt and Public Finances

Uganda’s government debt (in nominal terms) has been steadily increasing over recent years. Government

58 Ugandan Ministry of Finance, Planning and Economic Development, Budget Speech Financial Year 2017/2018.59 Ugandan National Planning Authority, Second National Development Plan.60 Ugandan Ministry of Finance, Planning and Economic Development, Budget Speech Financial Year 2016/2017.61 Ugandan Ministry of Finance, Planning and Economic Development, Budget Speech Financial Year 2017/2018.

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gross debt as percent of GDP grew from 30.8% as at 2014 to 38.9% as at 201762. Rising debt levels are largely due to higher domestic and external borrowing to finance key infrastructure projects over the medium term, including the Karuma and Isimba Hydro power projects, rehabilitation and expansion of Entebbe Airport and phase three of the National Transmission Back Bone Project. The 2017/2018 Budget Speech notes that the GOU’s “public debt is sustainable over the medium to long term”.

Uganda’s Medium-Term Debt Management Strategy of 2016 notes that the country’s “current external debt remains largely concessional and mainly from the World Bank (IDA), the African Development Bank (ADB) and the International Fund for Agricultural Development (IFAD), which collectively account for 82.4% of the total external debt stock63”. Furthermore, the 2017/2018 Budget Speech considers the current debt to GDP ratio at 33.8% to be far below the Public Debt Management Framework threshold for sustainability and the East African Community Monetary Union convergence criteria requirement of 50%64.

Figure 2: Ugandan government gross debt since 2000

2014

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2000

2010

2011

2012

2013

2015

2016

2017

2018

E

2019

E

2020

E

2021

E

2022

E

2023

E

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

-

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80

-

Government Gross Debt (UGX billion)

Gov

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% o

f GD

P

Government Gross Debt as % of GDP

Gov

ernm

ent G

ross

Deb

t (U

GX

billi

on)

Source: IMF World Economic Outlook Database

12.7 Current Account

Uganda’s current account deficit was expected to reduce to 4.5% of GDP in 2017 and increase to 6.9% in 2018, up from 6.7% in 201565. The widening current account deficit is largely the result of high non-oil private sector imports and public infrastructure related imports, as well as weaker exports due to subdued global commodity prices and weaker aggregate demand in Uganda’s key export markets.

Figure 3: Ugandan’s current account deficit as a % of GDP

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E

-15

-10

-5

0

5

Source: IMF World Economic Outlook Database

62 IMF World Economic Outlook Database, April 2018.63 Ugandan Medium-Term Debt Management Strategy 2016.64 Ugandan Ministry of Finance, Planning and Economic Development, Budget Speech Financial Year 2017/2018.65 IMF World Economic Outlook Database, April 2018.

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12.8 Inflation

The BOU’s primary policy objective is to hold annual core inflation to its medium-term target of 5%66, with a secondary objective of ensuring that real output is “as close as possible” to the economy’s potential level. The BOU currently adopts an “inflation targeting lite” (“ITL”) policy. Under the ITL framework that was adopted in 2011 following a Monetary Targeting policy, the BOU’s Monetary Policy Committee (“MPC”) sets the central bank rate (“CBR”) at a level consistent with achieving its policy objectives. While the MPC is expected to meet in order to discuss inflation outlook and associated policy measures every two months, the Committee may also adjust the CBR outside this schedule, if they deem this to be required.67

The BOU increased the CBR by a cumulative 6% in 2015, following rising inflationary pressures and what the MPC deemed as increased risks to the inflation outlook. Given the MPC’s significant contractionary stance during 2015, easing inflation expectations and reduced pressure on the Ugandan Shilling, the BOU decreased the CBR rate to 9.0% at its final meeting in February in 201868. Notably, Uganda’s core inflation declined to 1.7% year-on-year in February 2018 (versus 5.7% in February 2017 year-on-year), with food items remaining the key driving factor in the consumer price index basket with an overall weight of 28%69. The headline inflation rate was 2.1% as of February 2018 and considered to remain stable70.

Figure 4: Uganda’s inflation rate (average consumer prices, %)

0

-2

2

4

6

8

10

14

16

12

2000

2001

2002

2003

2004

2006

2005

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

E

2019

E

2020

E

2021

E

2022

E

2023

E

Source: IMF World Economic Outlook Database

12.9 Interest Rates

Uganda’s monetary and fiscal policies combined with the country’s imperfectly competitive financial system are the main drivers behind money market pricing. Commercial banks’ lending rates have been fairly stable over the past few years, as evident from the chart below, although they remain high due in part to the large fiscal deficit which gives the banks the option of investing in “risk-free” Treasury securities71. Furthermore, the Budget Speech of 2016/2017 notes that a limited availability of long-term capital has resulted in a mismatch between the commercial banks’ financing products and the nature of the investments being undertaken.

Lending rates in commercial banks have decreased from about 23% in February 2017 to 21% in February 2018. The 91-day Treasury bill rates decreased from 13.5% to 8.7% over the same period72.

66 Bank of Uganda, State of the Economy, December 2016.67 Barclays Research Sub-Sahara Markets Guide 2016.68 Bank of Uganda.69 Ugandan Bureau of Statistics.70 Ugandan Consumer Price Index, February 2018.71 Deloitte, Ugandan Economic Outlook 2016.72 Bank of Uganda Statistics.

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Figure 5: Ugandan interest rates since January 2000 (%)

5

0

10

15

20

25

30

Jan

00

Sep

00

May

01

Jan

02

Sep

02

May

03

Jan

04

Sep

04

May

05

Jan

06

Sep

06

May

07

Jan

08

Sep

08

May

09

Jan

10

Sep

10

May

11

Jan

12

Sep

12

Sep

16

May

13

Jan

14

Jan

16

Jan

18

Sep

14

May

15

May

17

Commercial Bank’s Weighted Average Lending Rates (%)

Commercial Bank’s Weighted Average Savings Deposits Rates (%)

91 Day T-Bill Rate

Source: Bank of Uganda Statistics

12.10 Exchange Rate73

Uganda has a managed floating exchange rate regime, which implies that the BOU intervenes intermittently in the foreign exchange market, as deemed necessary to smooth any excessive exchange rate volatility. The calendar year 2015 was a notable year for the Ugandan Shilling following a significant weakening of 18% against the US Dollar. Despite minor fluctuations the Ugandan Shilling has remained relatively stable against the US Dollar since the beginning of 2016. Factors that could support an appreciation of the Ugandan Shilling going forward include a more contractionary monetary policy stance and intermittent intervention by the BOU in the foreign exchange market.

Figure 6: Foreign exchange rate (UGX/USD, monthly average)

Jan

00

Jan

01

Jan

02

Jan

03

Jan

04

Jan

05

Jan

06

Jan

07

Jan

08

Jan

09

Jan

10

Jan

11

Jan

12

Jan

13

Jan

14

Jan

15

Jan

16

Jan

17

Jan

18

1,500

1,000

2,000

2,500

3,000

3,500

4,000

Source: Bank of Uganda Statistics

73 Bank of Uganda Statistics.

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Table 5: Mean exchange rates over the three-month period ended 31 March 2018

UGX per USD 3,646

KES per UGX 35.82

TSH per UGX 1.62

RWF per UGX 4.27

12.11 Demographic and Population Trends

Uganda’s population has continued to grow rapidly over time. The Ugandan National Census of 2014 main report shows that the population increased by 10.4 million to 34.6 million people between the 2002 census and the 2014 census, representing an average annual growth rate of 3.0%.

Uganda’s total fertility rate, or the average number of children per woman over the course of her lifetime, has declined from 6.2 children per woman in 2011 to 5.4 children per woman in 201674. With Uganda’s political commitment to family planning, increased investment in health and education and economic initiatives to facilitate job creation, the country is on the path to a population age structure that may enable it to experience rapid economic growth known as a “demographic dividend”.

Figure 7: Uganda’s historical and forecast population (millions of people)

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

1991

1990

1992

1993

1994

1995

1996

1997

1998

1999

2000

2010

2011

2012

2013

2014

2015

2016

2017

2018

E20

19E

2020

E20

21E

2022

E20

23E

10

5

0

15

20

25

30

35

45

50

40

Popu

latio

n (m

illio

ns)

Source: IMF World Economic Outlook Database

Uganda’s population pyramid is broad-based, with a young age structure. In 2014, more than half (55%) of the population was younger than 18 years old. The proportion of older persons (aged 60 years and above) was 3.7%, having fallen from 5% in 199175.

74 Ugandan Ministry of Finance, Planning and Economic Development, Budget Speech Financial Year 2017/2018.75 Ugandan National Population and Housing Census 2014.

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Figure 8: Uganda’s population distribution by age, according to the 2014 National Census

20 10 5 015 5 15 2010

0-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

Male Female

Source: Ugandan National Population and Housing Census 2014

The Ugandan National Census of 2014 notes that the definition of urban areas in Uganda has changed over time, and that the most recent 2002 and 2014 censuses defined urban areas to constitute only the gazetted urban areas, compared to earlier censuses that defined gazetted urban areas and un-gazetted trading centres with more than 1,000 people as part of the urban population76.

The figure below shows an almost four-fold increase in Uganda’s urban population from less than 1 million people in 1980 to approximately 3 million in 2002. The increase in the urban population of 4.5 million between 2002 and 2014 is attributable to mainly four factors, as noted below:

• the gazetting of new urban areas;

• natural growth, that is, an excess of fertility over mortality;

• redefinition of the boundary of selected urban areas; and

• rural to urban migration.

The urban population was expected to reach 7.2 million in 201777.

76 Ugandan National Population and Housing Census 2014.77 Euromonitor.

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Figure 9: Uganda’s urban population evolution over time (millions of people)

0.9

1.7

2.9

7.4

1980 1991 2002 2014

Source: Ugandan Bureau of Statistics, Statistics Abstract 2015

12.12 Private Sector Credit

High lending rates by commercial banks and other lending institutions have continued to constrain credit growth, which has in turn constrained domestic economic activity. By the end of January 2018, average lending rates had reached 20.3% with the total stock of outstanding credit to the private sector having grown by 5.7% year-on-year, from UGX11,449 billion in February 2017 to UGX12,044 billion in February 2018 78. While this growth remains strong, it is however notable that the 2016/2017 Budget Speech references a stronger 17% growth in private sector lending over the prior corresponding period ended March 201579. A key driver behind this slower private sector lending growth in the 12 months ended March 2016 is the constraint on private sector cash flows owing to high debt service payments arising from the consequences of increased inflation80. For the full year 2017 value of loan applications has averaged around UShs. 3,789.9 billion. Sector-wise, main growth factors were agriculture, trade and personal loans, together they have contributed 51% of total private sector loans. 81

Figure 10: Total commercial banks credit to the private sector

Total Commercial Bank’s Credit to the Private Sector

Tota

l Com

mer

cial

Ban

k’s

Cred

it to

the

Priv

ate

Sect

or

% Change (y-o-y)

% C

hang

e (y

-o-y

)

Jan

10

Jun

10

Nov

10

Apr

11

Sep

11

Feb

12

Jul 1

2

Dec

12

May

13

Oct

13

Mar

14

Aug

14

Jan

15

Jun

15

Nov

15

Apr

16

Sep

16

Feb

17

Jul 1

7

Dec

17

4,000,000

2,000,000

0

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

0%

(10%)

10%

20%

30%

40%

50%

Source: Bank of Uganda Statistics

78 Bank of Uganda Statistics.79 Ugandan Ministry of Finance, Planning and Economic Development, Budget Speech Financial Year 2016/2017.80 Ugandan Ministry of Finance, Planning and Economic Development, Budget Speech Financial Year 2016/2017.81 Bank of Uganda, State of the Economy, June 2017.

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12.13 Political Overview

During February 2016, when Uganda held both presidential and parliamentary elections, the incumbent President Yoweri Museveni was re-elected to his fifth term in office, with his National Resistance Movement (“NRM”) party retaining a majority in Uganda’s parliament. Museveni’s re-election is considered likely to ensure policy continuity and investor-friendly regulatory support in the short term. Uganda‘s government is also a strong advocate of further integration of the EAC and relations with member states remain positive.82

12.14 Macroeconomic Outlook

The all-encompassing economic policy of the Ugandan government is to continue to implement a well calibrated and appropriate mix of fiscal and monetary policies to ensure macroeconomic stability.

The Ugandan Ministry of Finance has a projected GDP growth of 5.4% over the 2017/2018 financial year (ending June 2018), with GDP growth over the medium term projected to average 6.4% per annum83. This growth outlook is based on the GOU’s commitment to fast track the implementation of key public investments in infrastructure to facilitate private investment, as noted in the 2016/2017 Budget Speech.

The 2017/2018 Budget Speech notes that in addition to aiming to deliver sustained average GDP growth of 7% per annum, the Ugandan Macroeconomic Policy Framework also seeks to “maintain single-digit inflation, a stable and competitive exchange rate, adequate foreign exchange reserves, and prudent debt levels”. Importantly, these objectives are consistent with the requirements of the East African Monetary Union Protocol.

82 Deloitte Ugandan Economic Outlook 2016.83 IMF World Economic Outlook Database, April 2018.

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13.1 Sub-Saharan Africa Region in a Global Context

Population growth and GDP

Sub-Saharan Africa is one of the largest regions globally (with a population that numbers more than a billion), that continues to grow at faster rates compared to other regions (CAGR measured 2.8% in the last decade which is double the rate as compared to majority of other geographies).

Over the last 10 years, SSA countries significantly outperformed other regions in terms of real GDP growth. However, the region continues to be the poorest in the world in terms of GDP per capita, which amounted to just approximately USD 1,500 in 2017.

Driven by a number of fundamental factors, SSA is expected to be a significant driver of future economic growth globally:

• Population is expected to continue growing at historical rates and reach 1.2 billion people by 2025 (2.6% CAGR)

• Fuelled by urbanization and increasing incomes, the emerging middle class will drive consumer expenditure which is expected to grow from current approximately USD 1,060 per capita to approximately USD 1,430 by 2025, implying a 4% CAGR84

World Trade Organisation TRIPS Agreement

The WTO TRIPS agreement came into force in 1995, as part of a package of seventeen agreements, introducing unprecedented global minimum standards for the protection and enforcement of intellectual property rights.

The implementation of the TRIPS paved the way for the production of cheaper generic medicines within LDCs. The agreement provided for transition periods allowing LDCs with facing great difficulties in accessing lifesaving medications, to continue producing medicines that are under patent (even if discovered post 2005), as long as they are produced domestically. These LDCs are also permitted to export these products to fellow LDCs. TRIPS was initially set to end in 2016, but has been extended to 2033.

LDCs comprise 47 countries85, including Uganda, and are primarily located in SSA and Asia. Whilst there is no ‘threshold’ definition for a LDC, the WTO recognises LDCs as countries that have been designated as such by the UN, and comprise over 950 million people (about 13% of the world’s population), but account for less than 2% of world GDP and about 1% of global trade in goods86.

With specific reference to the healthcare sector, LDCs face a multiple of challenges, as compared to developed countries regarding the prevention and management of fatal diseases and healthcare crises. LDCs are especially susceptible to health risks associated with poverty, such as malnutrition, unsafe water and poor sanitation. Additionally, lower income levels and skills shortages mean that LDCs struggle to provide prevention, treatment and holistic care for diseases, particularly where such measures require expensive medicines, diagnostic skill and equipment, and other economically unattainable health products. Patent protection by pharmaceutical companies in general is a key contributing factor to the high cost of treatment.

84 Euromonitor.85 United Nations Committee for Development Policy.86 World Bank.

13 SSA and Ugandan Healthcare Industry Overview

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LDCs vs developing countries: cost of HIV-1 regimen treatment (USD per person per year, 2016)

100

613

1,033

Lowest Generic Price (LDCs) Original price (category 1) Original price (category 2)

Source: Medecins sans Frontieres (Untangling the web of ARV price reductions, 18th edition – July 2016)

LDCs: anti-retroviral therapy coverage (% of people living with HIV)

2001 2002 2003 2004 20062005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0.1% 0.2% 0.5% 1.5%5.6%3.2%

9.5%13.4% 17.1%

21.1%24.8%

30.2%36.6%

43.6%49.8%

56.0%

Source: The World Bank

Spending on healthcare in the region

SSA has the lowest healthcare spending in the world, partly due to a lack of economic resources to address key issues. Healthcare expenditure per capita for many SSA countries lags behind the WHO target of reaching the Millennium Development Goals level of USD 54 for SSA87. However, expenditure on healthcare is rising, and is largely fuelled by unmet demand for basic health services and lifesaving medication.

Current healthcare expenditure across SSA (USD billion)

20.339.8

71.384.5

2000 2005 2010 2015

Source: WHONote: current healthcare spending denotes public and private expenditures on healthcare goods and services and does not include healthcare infrastructure expenditures.

87 WHO, World Bank.

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Current healthcare expenditures per capita (2015, USD)U

SA

Ger

man

y

UK

Fran

ce

Braz

il

Russ

ia

Chin

a

Indi

a

Sout

h A

fric

a

Nig

eria

Uga

nda

Tanz

ania

Ethi

opia

Developed Countries BRIC Countries SSA Countries

9,536

4,592 4,356 4,026

780524 426

63

47198

46 32 24

Source: World Health OrganizationNote: current healthcare spending denotes public and private expenditures on healthcare goods and services and does not include healthcare infrastructure expenditures.

13.1.1 Ugandan Healthcare Overview

The Ugandan healthcare sector is diverse, with various levels of services offered across urban and rural areas. While there are no user fees charged for public healthcare, spending by households accounts for approximately 41% of current healthcare expenditure, while the GOU contributes only 25% of health financing and donors contribute 31%88. The GOU encourages shared financing initiatives such as private hospital wings and public-private partnerships. Private-not-for-profit organisations remain key in providing healthcare services, especially in rural areas.

Public primary healthcare is decentralised to district level, which results in decisions regarding general hospitals and health centres being taken locally. However, while the public health sector is decentralised, medicines and medical products are procured centrally by the governmental agency National Medical Stores. Purchasing of equipment is coordinated by the Ministry of Health but procured by the individual districts or hospitals.

In the private healthcare sector, medicines, supplies, and equipment are either purchased through Joint Medical Stores, which are owned by faith-based, private-not-for-profit organisations, or through donor programmes.

Approximately 60% of Uganda’s imported medicines and supplies are procured through the private sector, donors’ procurement agencies or directly by the Ministry of Health, and the remaining 40% is procured by the governmental National Medical Stores89.

13.2 Health Financing

According to the World Health Organization, the healthcare expenditure, as a percentage of GDP, increased in Uganda from 8.0 % in 2000 to 12.0 % in 2006, and decreased to 7.3% in 2015. This is high in comparison to other Sub-Saharan countries (excluding South Africa), but the public share of the total health expenditure is low with the GOU only contributing 28% to healthcare expenditure.

Donors are major funders of medicines in the public sector in Uganda. Global initiatives provide the bulk of resources needed for malaria, HIV/AIDS, tuberculosis, vaccines and reproductive health commodities. Programmes that are hosted, co-funded and funded by larger organisations with off-budget support usually procure medicines and medical supplies on their own.

88 WHO Global Health Expenditure Database, 2015.89 Swecare Ugandan Health Sector and partnership Opportunities Report, August 2013.

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Table 6: Health Financing Indicators in 2015Current health

expenditure (CHE) as % GDP

Public expenditure on health as% of CHE

Out-of-pocket expenditure as

% of CHE

SSA countriesUganda 7.3% 28% 41% South Africa 8.2% 43% 8% Nigeria 3.6% 18% 72% Tanzania 6.1% 40% 26% Ethiopia 4.0% 33% 38%

Developed countriesUSA 16.8% 27% 11% Germany 11.2% 7% 13% France 11.1% 4% 7% UK 9.9% 80% 15%

BRIC countriesBrazil 8.9% 43% 28% Russia 5.6% 27% 36% India 3.9% 22% 65% China 5.3% 20% 32%

Source: World Health Organization

The share of private insurances remains small, at around 2% of the total private expenditure on health90.

Households are by far the major source of health financing in Uganda, contributing approximately 41% of total expenditure. Household spending includes purchasing drugs and supplies, informal payments at public facilities, payments for imaging, laboratory costs, etc., and user fees paid at Private Health Providers.

Out-of-pocket (OOP) expenditure is high in Uganda, although not much higher than in many other SSA countries, however, when viewed in light of consultations and medicine being provided free of cost to individuals in Uganda, OOP can be considered remarkably high.

13.3 Communicable and Non-Communicable Diseases

Over the past decade, the GOU and donors have primarily been active in the area of communicable diseases. As a result of the focus on communicable diseases, the Ugandan health system is increasingly more developed and equipped to prevent, detect and treat these related health problems. This focus on communicable diseases, the continuing challenges in communicable disease control and prevention, and Uganda’s strong focus on its health-related Millennium Development Goals have helped to create a market of demand and thus opportunities for investment in this area. Nevertheless, HIV/AIDS and malaria continue to cause the highest numbers of life years lost in Uganda.

90 WHO Global Health Expenditure Database, 2015.

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Top-5 causes of death in Uganda (DALYs, 2016)

Number of people living with AIDS (all ages)

Share of households with at least one insecticide-treated net (ITN)

1.0

1.5

2000 2016

CAGR: 2.8%*

16%

2006

47%

2009

60%

2011

90%

2014/15

Source: Institute for Health Metrics and Evaluation, UNAIDS database, Uganda Country Aids Progress Report 2015-2016, Uganda Malaria Indicator Survey 2014-15

13.3.1 Communicable Diseases

Communicable diseases in Uganda, including malaria, tuberculosis (TB) and HIV/AIDS, account for 54 % of the total burden of disease91. Barring HIV/AIDS, indicators of the prevalence of infectious diseases are improving as a result of donor funded programmes focused on health education, as well as policy improvements. Nonetheless, HIV/AIDs and malaria remain two of the top three leading causes of death in Uganda, and when viewed relative to the rest of the world, SSA continues to deal with a disproportionate HIV/AIDS and malaria burden.

Figure 11: Burden across Range of Most Severe Communicable Diseases

27%

73%

12%

88% 93%

7%

93%

7%

SSA Rest of the world

AIDS-related deaths(2016)

HBV-infected people(2016)

HCV-infected people(2016)

Malaria-related deaths(2015)

HIV/AIDS Hepatitis B (HBV) Hepatitis C (HCV) Malaria

Source: UNAIDS database, Global Health Data Exchange 2016, World Malaria Report 2016

91 Ugandan Health Sector strategic & Investment Plan 2010/11 – 2014/15.

DiseaseShare in total # of deaths

HIV 10.1%

Malaria 9.4%

Lower respiratory infections

6.8%

Neonatal encephalopathy due to birth asphyxia and trauma

5.3%

Diarrheal diseases 5.2%

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(i) HIV/AIDs

SSA has the largest gap between people receiving anti-retroviral therapy and the number of those in need of it, with around 12 million people still without access to this critical medication. Despite significant international support and donor funding, SSA still lacks sufficient funds to adequately provide the necessary treatment to all those in need.

Figure 12: Gap between total number of HIV-infected people and people receiving ARV (2016)

Asia & Pacific

5.1

Latin America &Caribbean

2.1

Eastern Europe &Central Asia

1.6

SSA

25.5

Receive ART Do not receive ART

11.7

13.8

2.72.4 0.4

1.01.2 1.2

Source: UNAIDS database

Figure 13: HIV treatment cascade for SSA (2016)

People livingwith HIV

People livingwith HIV who

know their status

People livingwith HIV

receiving ART

People livingwith HIV with

supressed viral load

100%

68%54%

44%

Source: UNAIDS database

With regards to Uganda in particular, the country has had a low prevalence of HIV/AIDS over the last decade, in comparison with many other Southern African countries, however, the prevalence rate has increased noticeably over the past few years. For people aged 15 to 49 years the prevalence rate estimated at 6.5% in 2009 increased to 7.3% in 2011. As a result of this increased prevalence, Uganda is currently among the list of countries most severely affected by HIV/AIDS. In 2015, Uganda accounted for 7% of the aggregate number of new HIV infections that occurred in SSA92.

92 The Ugandan HIV and AIDS country progress report (July 2015 – June 2016), UNAIDS database, World Bank.

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Figure 14: HIV Prevalence: Evolution of HIV-infected people in SSA (all ages)

1990 2003 2007 2011 2016

6.7

22.4 23.0 24.0 25.5

Source: UNAIDS database

Encouragingly however, HIV-related mortality rates in Uganda have been steadily declining, largely due to increased ART coverage among HIV-positive patients, as evidenced by the estimated ART coverage reaching 57% in 2015 compared to just 22% in 2010.

Figure 15: Improvement of HIV Related Healthcare Treatment in Uganda

Source: The Uganda HIV and AIDS country progress report (July 2015 – June 2016), UNAIDS database

Despite a high level of political commitment and significant support from international partners, the tide of the HIV/AIDS epidemic continues to match national efforts to control it, and without any interventions, it is estimated that the annual number of new HIV infections may increase to approximately 340,000 in 202593.

In 2014, the GOU has amended a National Strategic Plan (NSP) to fight HIV/AIDS with the following goals to be achieved by 2020:

• Prevention: reduce the number of youth and adult infections by 70% and the number of new pediatric HIV infections by 95%;

• Care and treatment: decrease HIV associated morbidity and mortality by 70% through achieving 90% viral suppression;

• Social support: reduce vulnerability to HIV/AIDS and mitigate its impact on HIV-infected people by scaling up efforts to eliminate discrimination; and

• Systems strengthening: improve HIV/AIDS service delivery system to ensure universal access and coverage of quality, efficient and safe services to the targeted population.

93 National HIV and AIDS strategic plan 2015/16 – 2019/20.

22%

67%63

28

2010 2016 2010 2016

AIDS - related deaths, ‘000ARV Coverage (all ages)

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The cost of implementation of the NSP amounts to USD 1.8 billion over the next two years, which is USD 0.5 billion more than projected resource inflow from the state budget and donors94.

• It is expected that the shortage will be financed by international partners;

• The NSP assumes that the government will increase its funding to a level where it funds at least 40% of the NSP requirements from the current 11%.

The total ARV-only funding in the 19 SSA countries (target markets for CiplaQCIL where registrations are planned by end of 2020) is estimated to be over USD 6.7 billion per year with governments accounting for about 35% of total spending, with the remaining 65% funded by The Global Fund, PEPFAR and other donors95.

(ii) MalariaIn most parts of Uganda, temperature and rainfall are optimal for year-round malaria transmission at high levels with relatively low seasonal variability. Transmission of malaria occurs in 95% of the country’s territory96.

Malaria is a leading cause of mortality in Uganda, accounting for approximately 20% of all hospital deaths and approximately 15 to 20% of all hospital admissions97.

While almost all of Uganda’s healthcare facilities offer clinical diagnosis or treatment of malaria, only 60% offer confirmed diagnosis98, i.e. blood testing. Since Uganda is among the countries with the highest percentage of population at risk, the number of deaths caused by malaria remains among the highest in Eastern and Southern Africa.

The National Malaria Control Program focuses on prompt case management using Artemisinin combination therapy for uncomplicated malaria, injectable Artesunate/Quinine for severe malaria, Long Lasting Insecticide Treated Mosquito Nets (LLINs), Indoor Residual Spraying (IRS) and Intermittent Protective Treatment of Malaria in Pregnancy (IPTP). Concerns still exist however, around the promptness of malaria treatment as well as increasing resistance to commonly used treatments.

Uganda has made significant progress in reducing the malaria burden over the past several years. Malaria prevalence amongst children aged under five decreased from 42% in 2009 to 19% in 2014 and there has been an increase in household ownership of at least one bed net from 47% in 2009 to 90% in 2014. This positive trend is partially attributable to continuing support from international institutions99.

Figure 16: Reported malaria cases in Uganda (million)

15.3

2010

12.5

2011

16.8

2012

26.1

2013

19.2

2014

22.1

2015

28.7

2016

Source: World Malaria Report 2017

94 National HIV and AIDS strategic plan 2015/16 – 2019/20.95 PEPFAR country profiles.96 Malaria Operational Plan FY 2017.97 The Ugandan Malaria Reduction Strategic Plan 2014-2010.98 Swecare Ugandan Health Sector and partnership Opportunities Report, August 2013.99 Ugandan Malaria Indicator Survey 2014-15.

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The prominent decrease in malaria cases was largely driven by significant increases in global malaria financing. In 2016, total financing for malaria reached USD 2.7 billion with international funds accounting for 70% of all spending (74% of all international funding was directed to the WHO African region)100. Spending on malaria control commodities (mosquito nets, ACTs, insecticides and other) has increased 40-fold from USD 40 million in 2004, to USD 1.6 billion in 2014101.

Figure 17: Evolution of global funding for malaria control

State Funding Donor Funding

2005 2008 2011 2014 2015 2016

0.9

1.6

2.12.5

2.92.7

0.9 0.8

2.0 1.9

Source: World Malaria report 2017, Global financing for malaria report 2014

The total public malaria funding in the 19 SSA countries (target markets for CiplaQCIL where registrations are planned by end of 2020) is estimated at about USD 1.7 billion per year with governments accounting for about 13% of total spending and remaining 87% funded by The Global Fund, PMI and other donors102. According to WHO, approximately 20.5% of all malaria funding globally is spent on procurement of ACT drugs, with remaining funds directed towards infrastructure payments, healthcare institutions financing, acquisition of mosquito nets, and the like103.

(iii) Hepatitis B and CAccording to the Uganda Ministry of Health, hepatitis in Uganda is highly endemic with a hepatitis B national prevalence rate of 10%, with rates varying across the country from 3% in the Southwest and 22% in the Northeast104 .

The scale of the burden of Uganda’s hepatitis B disease came into light following the 2005 HIV survey carried out by the Ministry of Health in collaboration with US Center for Disease Control. In 2014, the World Health Assembly passed a resolution urging member states to develop and implement strategies to prevent, diagnose and treat viral hepatitis. As a result of this, Uganda’s Ministry of Health set up a hepatitis B sectoral committee in 2014.

There are two types of hepatitis B: acute and chronic. In Uganda, 10% (more than 3.5 million people) of the population lives with a chronic hepatitis B infection.

• Acute: HBV-infected adults are able to fight off the virus and fully recover within a couple of months if treatment is received.

• Chronic: cannot be cured; the desired clinical outcome is for patients to enter and remain in the inactive virus phase (it is estimated that only 20 to 30% of people with HBV will benefit from treatment105), hence a continuous supply of medications is required.

100 World Malaria Report 2017.101 World Malaria Report 2015.102 WHO Malaria Report 2017.103 WHO Malaria Report 2015.104 Ugandan Ministry of Health.105 WHO.

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Hepatitis B has its highest prevalence is SSA and East Asia, where 5-10% of the adult population is chronically infected. Vaccination is considered the most effective preventive measure and reduces the rate of chronic infection to less than 1% among immunised children. Since over 90% of HBV is transmitted in the first five years of life, improving vaccination coverage in new-borns is essential. Notably however, in 2013, vaccination coverage in SSA had reached 76%, although only 11% of neonates received HBV vaccination at birth106.

Over 140 million people107 worldwide are infected with HCV and HCV-related complications leading to approximately 400,000 deaths each year108. Approximately 2.3 million people worldwide109 are estimated to be HCV and HIV/AIDS co-infected, with HCV being independently associated with a 50% increase in mortality among patients with a diagnosis of AIDS. The HCV prevalence rate across the WHO African region is estimated at 5.3%, which is the highest rate across WHO regions. Hepatitis C can develop into a chronic infection after many years causing cirrhosis and / or liver cancer. There is no treatment for the acute form of the disease. Persons with chronic hepatitis C are usually monitored to determine the best course of treatment110.

Figure 18: HCV prevalence (2013)

Africa EasternMediterranean

WesternPacific

South EastAsia

Americas Europe

5.3%4.6%

3.9%

2.2%1.7% 1.0%

Source: Report “Prices, Costs, and Affordability of New Medicines for Hepatitis C in 30 Countries: An Economic Analysis”

Hepatitis is a leading co-infection affecting people living with HIV/AIDS and arises as a result of a weakened immune system and common mode of transmission. In HBV infections, 10% show co-infections with HCV and HIV, and these co-infections potentiate each other. Additionally, HIV increases the risk of re-activation of previously existing asymptomatic and chronic HBV and HCV infections. Notably, the success of antiretroviral therapy (ART) has led to a longer life expectancy of HIV positive individuals, and as a result, complications of co-infections occur increasingly more often.

The prevalence of HBV is considered high among HIV positive individuals with more women commonly infected. There is 100% transmission rate to new-borns from highly infectious mothers and a 90%-95% rate for children aged under 15 years old develop chronic HBV. In addition, 30 % of children aged below 20 years old develop a chronic HCV infection.

Despite the lack of public information with regards to existing spending on hepatitis drugs, the total potential addressable market for hepatitis B and hepatitis C products (potential market value achievable in the long term if all infected people will start receiving treatment) for CiplaQCIL’s target 19 countries may amount to approximately USD 1.2 bn and USD 8.9 bn, respectively (estimates based on the existing number of infected people in these countries, which require medical treatment multiplied by the expected potential prices for Company’s products or prices of analogues)111.

106 WHO.107 Global Health Data Exchange 2015.108 WHO.109 Global hepatitis report 2017.110 Report "Prices, Costs, and Affordability of New Medicines for Hepatitis C in 30 Countries: An Economic Analysis”.111 Report “Hepatitis C virus (HCV) infection in Africa: a review”, Renaissance Capital analysis.

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Any investment in the Offering is speculative and subject to a high degree of risk. Prior to investing in the Company, prospective investors should consider carefully the factors and risks associated with any investment in the Offer Shares, CiplaQCIL’s business and the industry in which it operates, together with all other information contained in this Prospectus, including, in particular, the risk factors described below. Following the occurrence of any material risk factor, the value of the Offer Shares could decline, and investors could lose all or part of their investment.

The following is not an exhaustive list or explanation of all risks that investors may face when investing in the Offering and should be used as guidance only. The factors listed under a single heading may not provide a comprehensive view of all risks relevant to the subject to which the heading relates. Additional risks and uncertainties relating to the Company that are not currently known to the Company, or that it currently deems immaterial, may also have an adverse effect on the Company’s business, prospects, financial condition and operational results. In particular, the Company’s performance might be affected by changes in market and/or economic conditions and in legal, regulatory and tax requirements. If such changes were to occur, the value of the Offer Shares may decline, and investors could lose all or part of their investment. Investors should consider carefully whether an investment in the Offering is suitable for them in the light of the information in this Prospectus and their personal circumstances and, if they are in any doubt, should consult with an independent financial advisor authorised in their jurisdiction who specialises in advising on the acquisition of shares.

The information contained in this Prospectus is based on current legislation and tax practice, and any changes in legislation or in the levels and bases of, and reliefs from, taxation may affect the value of an investment in the Company.

14.1 Risks Relating to CiplaQCIL’s Business and Industry

The business can experience occasional delays in timing of payments or product offtakes, which can impact financial results and cash flows.

The offtake agreement between the GOU and the Company commits the GOU to buying ARVs, ACTs, hepatitis B and related drugs (once included in the agreement) from CiplaQCIL during the term of the offtake agreement with the total value of such purchases set in the GOU’s annual budget and with the orders being handled by the NMS. While the offtake agreement does provide for deferred payments, according to the Ugandan laws, NMS is not able to procure the drugs or make orders before it actually receives the relevant funds from the GOU. Occasionally, there are delays in provision of such funds to the NMS by the GOU, which results in delayed orders for the Company’s products (and in case orders come later than anticipated, the Company might not be able to accommodate them promptly due to other production plans). Such delays can lead to recognition of revenues in subsequent periods (financial year or quarter) instead of the initially anticipated period, which has an impact on financial results and cash flows of the business. The Company expects the GOZ business to evolve similarly and, therefore, it has similar risks, e.g. in terms of timing of the orders and the payments, as the GOU business.

The proportion of financial contribution of the GOU to the Company’s total revenue has been steadily declining over the recent years, following CiplaQCIL’s expansion to new markets, customer growth leading to increased diversity in customer mix, which has driven substantial overall revenue growth. The contribution of the GOU to total revenue in 2017/18 amounted to 46% compared to 84% in 2013.

The loss of any significant business could adversely impact the Company’s financial condition and results of operations.

CiplaQCIL’s three largest customers are the GOU, GOZ and the Global Fund.

Business with the GOU.

The offtake agreement with the GOU that is valid until 2029 is premised on various factors, including the continuance of the collaboration between Cipla and QCL, for the term of such agreements. While QCL has ceased to be a shareholder in the Company pursuant to unbundling, the GOU has provided its confirmation that unbundling will not be construed as a breach of the offtake agreement. Subsequent to Listing, CiplaQCIL

14 Risk Factors

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will be a public company with free transferability of shares, and therefore Cipla’s WOS, Meditab and the Uganda Founders will have the right to sell their Shares upon expiry of the Lock-in. In the event of any such exit, the GOU could exercise its right to terminate the offtake agreement before 2029.

In terms of the agreement with the GOU, CiplaQCIL undertook to make an additional investment, estimated at USD50 million, towards enhancing manufacturing capacity or construction of an additional plant (Phase 2) by April 2015. The Company and GOU had agreed to this on the understanding that there would be much higher demand from GOU (to include donor funded procurements), under the offtake arrangement. Since demand has been lower than anticipated, the Company was not in a position to fully implement Phase 2 but continues to implement capacity enhancement projects in a phased manner as the need develops. Since the demand was lower than anticipated, due to the lack of donor funded procurements, CiplaQCIL was not in a position to implement Phase 2 within the agreed timelines, and there is a risk that this could be interpreted as a failure to meet the obligations of the 2012 extension of the offtake agreement. Once business visibility improves, justifying a larger manufacturing base, CiplaQCIL will implement Phase 2, and this has regularly been notified to the GOU and it is aware that Phase 2 implementation has been delayed for these justifiable reasons.

The GOU purchases from CiplaQCIL through the NMS, which is responsible for procurement, storage and distribution of pharma products to all public healthcare facilities in Uganda. The supply contract with NMS is valid for a period of three years from 11 February 2016. While this contract may be terminated by the NMS with 60 days’ written notice to the Company at the sole discretion of NMS, the agency performs purely a distribution function on behalf of GOU and is therefore not likely to make such decisions separately from GOU (the contract has been consistently extended in the past in line with the offtake agreement). Termination of the offtake agreement could have a significant negative impact on CiplaQCIL’s financial condition and results of operations, given that the GOU is currently one of the three largest customers.

While actual GOU allocation amounts are determined as part of its annual budget process and can potentially vary on an annual basis (impacting the Company’s revenues), there has never been a case when these allocations declined year-on-year (in UGX). In fact, GOU’s objective is to supply ARVs and ACTs to all Ugandans who require them. Given the significant percentage of the population that is untreated, this objective suggests that decline of respective allocations is among the least likely in the state budget spending.

Business with the GOZ.

In May 2017, the Company signed a memorandum of understanding with the GOZ for purchase of ARVs, ACTs, hepatitis drugs and other medications with a minimum guaranteed annual contract value of USD10 million for 20 years. Under the said memorandum of understanding, the parties undertook to explore the possibility of establishing a pharmaceutical manufacturing plant in Zambia for production of essential medicines other than ARVs and ACTs.

In 2017/18, being the year during which the memorandum of understanding was implemented, sales to GOZ accounted for approximately 10% of the Company’s revenue.

Although the term of the agreement is 20 years, the agreement can be reviewed every five years and can be terminated by either party with a 12-month notice period. Termination of the agreement with GOZ could have a negative impact on financial results and cash flows of the business.

Business with the Global Fund.

For the current ACT tender which was awarded in 2017, the Global Fund changed its tendering policy to disallow related parties from submitting separate bids. Accordingly, and despite their different circumstances, Cipla and the Company were required to submit a joint or consortium bid, following which the Global Fund awarded a two-year contract for supply of ACT medicines starting from 2018 (the agreement was signed between Cipla and the Global Fund).

Global Fund has the right to terminate the agreement with immediate effect if there is any change in control of the Company or Cipla. Given that Cipla’s WOS, Meditab, will be locked in for 24 months after the Listing, the current agreement is unlikely to be at risk. Any dilution or sale by Meditab of its stake in the Company,

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after the expiry of the Lock-in, could result in termination of all Global Fund business. Any such termination of award allocation will have a significant negative impact on the Company’s financial condition and results of operations. However, should Cipla cease to be a related party, the Company could, under the Global Fund’s current tender rules, bid separately from Cipla in the future.

Any failure by Cipla and the Company to bid successfully, or maintain past success levels for Global Fund tenders, or the loss or inability to extend related contracts at commercially reasonable terms, particularly with respect to price, or at all, could have a material adverse effect on the Company’s business, financial condition and results of operations.

The previous Global Fund tender used a points-based system which considered not only suppliers’ proposed price, but also product and facility quality, historical delivery times, local presence and commitment to research and development. Currently, CiplaQCIL is the only SSA pharmaceutical manufacturer supplying ACTs to the Global Fund.

With respect to any clients in its portfolio, the Company ensures that it services and supplies its orders in a timely manner in order to maintain good relationships with its customers. In so doing, the Company increases its likelihood to maintain and secure new contracts in the future.

The Global Fund’s 2018 tender marked a significant reduction of aggregate procurement volumes for ACTs. Based on the indicative forecast published by the Global Fund, 2018, procurement volumes in this tender will amount to 87-120 million treatments112 (Artemether + Lumefantrine tablets only), compared to about 200 million treatments per year in the previous tender. The Global Fund is believed to be increasing its spend money on prevention rather than treatment.

Decreased procurement volumes of Global Fund will naturally lead to shortages of medicines and therefore will need to be offset by other sources, such as increased government spending on malaria treatment. Should that be the case, CiplaQCIL is uniquely positioned to benefit from these new opportunities given its African presence, world-class facility, track record and long-standing relationships with SSA countries.

Other future tenders.

For other future non-Global Fund tenders, CiplaQCIL intends to bid separately from Cipla, irrespective of Cipla’s participation. Since CiplaQCIL is part of the group of Cipla companies, the possibility of: (i) allegations or investigations from antitrust standpoint by the tendering authority or any third party; or (ii) restrictions on competitive bidding by Cipla and the Company for the same tender, cannot be ruled out. While the Company has implemented, and will be implementing further commercial separateness measures, such steps do not entirely preclude the possibility of allegations or investigations or restrictions on competitive bidding. Any unfavourable outcome, pursuant to such investigations or allegations or otherwise, may result in CiplaQCIL and/or Cipla being restricted from submitting competing bids on tenders, termination of subsisting supply arrangements with tendering agencies, and/or levy of fines or other penalties. Any of such actions against the Company, may lead to business disruption and/or a material adverse effect on the business, its financial condition and results of operations.

The Company’s measures for commercial separateness include institutionalising separate regulatory processes for product registrations and product trademarks after a limited transition period, and arm’s-length transactions for licence of intellectual property (including trademarks, technology, dossiers), technical assistance, and quality assessment services from Cipla. In addition, CiplaQCIL will continue to expand its pursuit of new business, as distinct from Cipla, and believes in certain situations, such as regional government offtakes, it has an advantage over other suppliers by virtue of, inter alia, its African manufacturing base.

If CiplaQCIL is unable to obtain active pharmaceutical ingredients (“API”) or other raw materials, or if the costs of API or other raw materials increase substantially, its operations could be seriously impaired.

API and other raw materials form a major part of the Company’s total production expenses. In 2017/18, raw materials comprised 82% of the total cost of goods sold. CiplaQCIL obtains these raw materials from Cipla or

112 Indicative forecast for both Pooled Procurement Mechanism and Co-Payment Mechanism volumes for 2018.

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from Cipla’s pre-approved suppliers. In certain, limited cases, CiplaQCIL uses sole sources of supply for the raw materials used in manufacturing its products and for packaging components.

This, coupled with the fact that CiplaQCIL does not have fixed-term or price agreements with such suppliers, subjects the Company to the risk of supply disruptions or changes to the terms from order to order. Any such disruption could result in production or other delays, and, in the case of products for which only one raw material supplier exists, could result in a material loss of sales for the relevant product, with consequent adverse effects on CiplaQCIL’s business. Furthermore, the prices of key raw materials can fluctuate sharply over a short period. A substantial increase in raw material costs would adversely affect CiplaQCIL’s business, financial condition and results of operations.

CiplaQCIL imports the majority of its raw materials, including from China and India. Imports of these materials are subject to customs and other government clearances, duties and regulations by the countries of origin.

CiplaQCIL mitigates its supply risks by having more than one supplier for each raw material, where possible, as well as relying mostly on globally recognised and WHO prequalified companies, which are and will continue to be annually audited by Cipla. In addition, the Company purchases materials directly from and through Cipla on mutually agreed terms and benefits from the attractive prices obtained from and quality assurance performed by Cipla on a global level, given its large scale

Decline in prices for CiplaQCIL’s products may adversely affect CiplaQCIL’s profitability.

Although the Company is the only manufacturer of both WHO-prequalified ARVs and ACTs in SSA, CiplaQCIL faces competition from foreign companies, which may decrease prices for their products in order to secure certain tenders or increase their capacity utilization. In addition, some of the competitors may be global, vertically integrated pharmaceutical manufacturers with lower production costs. The prices in the offtake agreement with the GOU and GOZ are referenced to global prices and must therefore follow the price dynamics for similar products globally. In case the prices decrease in the future and the Company is not able to secure the same savings on raw materials costs, this may have a negative impact on the profitability of the business.

In keeping with the EAC directives, the Company receives a 15% local content advantage when supplying the GOU, which may also be applied by other governments in the EAC and elsewhere in SSA.

The manufacture of CiplaQCIL’s products is exacting and complex and subject to strict regulation. If any delay in production at or shutdown of its manufacturing facility occurs, or if CiplaQCIL or its suppliers encounter problems manufacturing products, lose their regulatory certifications or cease to manufacture products, CiplaQCIL’s business could be adversely impacted.

Problems may arise during pharmaceutical manufacturing process for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials and environmental factors. If problems arise during the production of a batch, that batch may have to be discarded. This could, amongst other things, lead to increased costs, lost sales, damage to customer relations, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products.

If problems are not discovered before the product is released to the market, recall and product liability costs may also be incurred. In addition, if the problems are severe or if the regulatory authorities determine that CiplaQCIL’s manufacturing facilities or controls do not meet the relevant regulatory requirements, CiplaQCIL may lose or have its regulatory approvals and certifications suspended, and it may be prohibited from manufacturing and distributing some or all products or may lose some of its customers and contracts. The suspension or loss of regulatory approvals and certifications, or a partial or complete shutdown, or loss of customers and contracts, could severely harm CiplaQCIL’s reputation and have a material adverse effect on CiplaQCIL’s business, financial condition and results of operations.

The Company receives support from Cipla, inter alia, in the form of an annual audit of the Company to ascertain the level of quality assurance of the Company in line with GMP requirements. Procedures have been

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established across all operational areas in the facility to ensure the Company meets global regulatory and customer standards. The Company has successfully undergone inspections by the WHO for cGMP compliance, as well as for prequalification of its ARV and ACT products, at regular time periods. The Company has also taken out product liability insurance.

Any recall of the Company’s products could adversely affect business, prospects, results of operations, financial condition and reputation.

The Company may be required to undertake voluntary or involuntary product recalls. Despite the fact that the Company’s portfolio comprises nine products currently supplied to nine countries, from time to time, regulatory authorities in various jurisdictions may require pharmaceutical companies to recall certain products from the market. Any such recalls, whether due to factors within or outside the Company’s control, could have an adverse effect on business, prospects, results of operations, financial condition and reputation. There have been no such events in the history of the Company to date.

The Company has a standard operating procedure for product recalls. Although the Company has not had recalls in its history, CiplaQCIL performs a mock recall every two years to validate the procedure.

CiplaQCIL may not succeed in its strategy of expanding the number and range of its pharmaceutical products.

As part of its business strategy and growth plan, CiplaQCIL is considering expanding the number and range of pharmaceutical products that it manufactures, including potential entry to new therapeutic categories, based on the possibility of accessing Cipla’s expansive product portfolio, should commercial opportunities arise. Having said that, the Company’s plans to expand its product portfolio and geographic presence, will be subject to several factors, including: (i) the Company’s ability to obtain licenses for the use of intellectual property (including dossiers, technology, marketing authorisations, trademarks, etc.) owned by Cipla but not provided for in the IP Agreements and/or third parties, given that the right to offer such licenses would be at the option of the licensor and subject to the conclusion of mutually agreeable terms; (ii) the Company’s ability to undertake necessary investments to obtain regulatory approvals required for such expansion.

Although support on technical knowledge and skills from Cipla can help the Company to launch new products as may be agreed with Cipla, it may still underestimate costs and timelines in expanding its product range and obtaining registrations and regulatory approvals. While CiplaQCIL is currently registered as an additional manufacturing site of Cipla, in an effort to enhance commercial separateness and in line with licensing agreements, CiplaQCIL will increasingly be filing for its own product registrations (based on dossiers licensed from Cipla, third parties or dossiers developed de novo) under its own product trademarks, over the next two years. In certain situations, and for as long as Cipla is a majority shareholder, CiplaQCIL will continue to rely on Cipla’s WHO-prequalification. Any change of control (post Lock-in) will require CiplaQCIL to obtain its own WHO-prequalification which may entail additional costs. While Cipla will support the Company to ensure business continuity during the two-year transition period following a change of control (in accordance with the terms of the IP Agreements), such transition will likely entail additional investments by the Company, including costs incurred towards regulatory filings and inspections, technical expertise, dossier development and / or licensing fees.

Furthermore, it may not be able to operate its plants at the required levels to support increased product demand, hire sufficient personnel to achieve its growth strategy or manufacture new product lines.

If CiplaQCIL’s expansion is unsuccessful, it may incur losses, and the costs of implementing its product expansion strategy could lower its overall profits. Furthermore, after making investments to expand its business, CiplaQCIL may find that the demand for these new pharmaceutical products is lower than it had expected, which may negatively impact its business, financial condition and results of operations. In addition, if the product portfolio is not expanded, the Company will continue to rely heavily on certain products (e.g. Lumartem accounted for approximately 55% of the Company’s total revenue in 2017/18).

However, the Company’s existing portfolio of ARV, ACT and hepatitis B products continues to be part of the

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WHO-recommended regimens, as per the latest WHO guidelines published in 2016. In addition, a patient who is already on a particular therapy that is effective for him/her typically continues to take the same drug until (and if) it fails. In this regard, the Company may continue producing certain drugs (which could be removed from the WHO preferred list of treatment options) to ensure that such patients have adequate supply of therapies.

The Company also has long-term contracted business with the GOU and the GOZ and a shorter-term contracted business with the Global Fund through the Consortium, which provide some visibility on its financial prospects and inform its expansion plans. It is part of the Company’s strategy to seek further contracted and/or multi-year tender business.

CiplaQCIL depends on key officers and qualified scientific and technical employees. The loss of key personnel could adversely impact CiplaQCIL’s business.

CiplaQCIL is highly dependent on the Uganda Founders and other qualified scientific and technical employees. CiplaQCIL has employment agreements with its senior management that include non-compete and non-solicitation provisions and specify notice periods for termination. However, the majority of CiplaQCIL’s other staff, including scientific and technical personnel, are employed at “will”, which means their employment can be terminated by either party with limited notice. In addition, due to the specialised scientific nature of CiplaQCIL’s business, CiplaQCIL is highly dependent upon its ability to continue to attract and retain qualified scientific and technical personnel. Loss of the services of, or failure to recruit, key personnel could be materially detrimental to CiplaQCIL’s business and financial condition. CiplaQCIL faces competition for scientific and technical personnel from other companies, academic institutions, government entities and other organisations.

The Uganda Founders continue to be shareholders in the business and will continue as shareholders at least until the expiry of the Lock-in and their interests are in line with the continued growth of the Company. These individuals, on account of their extensive experience and distinguished standing in Uganda and SSA, were instrumental in the foundation of CiplaQCIL, including in securing investment incentives and favourable bank terms, and continue to contribute significantly towards the development of its business. Any exit by the Uganda Founders after the Lock-in, may impact the ability of the Company to develop and/or strengthen its relationships with key customers.

Some of the key personnel have been recommended to the Company by Cipla or were previously associated with Cipla. As a prominent global pharmaceutical player with effective majority shareholding in the Company, Cipla will continue to support CiplaQCIL in identifying relevant candidates for key positions as required, at least for as long as it remains a majority shareholder. Any exit by Cipla from its shareholding in the Company, may result in the withdrawal of such support and/or resignation of such employees.

CiplaQCIL’s business could be affected by cancellation of the intellectual property agreement with CiplaBased on the IP Agreements, CiplaQCIL has rights to use Cipla’s manufacturing technology and know-how and product dossiers, where applicable and required, pertaining to the existing and pipeline products and geographies listed therein. As regards technical know-how and dossiers related to the current and pipeline products (listed in Section 10) already licensed to the Company for manufacturing of Products in Uganda for commercialization in 19 SSA countries, CiplaQCIL will have the right to use these in perpetuity, provided the Company complies with the terms of the IP Agreements. Under the terms of the IP agreements, CiplaQCIL will be filing for its own product registrations (based on dossiers licensed from Cipla, third parties or dossiers developed de novo) under its own product trademarks, over the next two years. The IP agreements shall terminate with immediate effect upon Cipla or any of Cipla’s subsidiaries ceasing to have any shares in CiplaQCIL or if any competitor of Cipla acquires management control of CiplaQCIL, or upon breach of the IP Agreements. Upon Cipla or any of its subsidiaries ceasing to have any shares in CiplaQCIL, the continued use of IP shall be non-exclusive, at an arm’s-length basis and subject to the terms of

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a new separate license agreement. In the event a competitor of Cipla acquires the management or control of CiplaQCIL, CiplaQCIL shall transition to such competitor’s technology within two years and thereafter cease to use the IP unless the competitor enters into a separate license agreement with Cipla for the continued use of the IP; and if the IP Agreements are terminated for breach, CiplaQCIL shall subject to transition period of thirty days or such longer period as may be provided by law cease using the IP and obtain its own regulatory approvals for the Products under its own trademarks. Termination of IP agreements could therefore temporarily impact CiplaQCIL’s ability to supply products pursuant to contractual obligations, its ability to successfully bid for future tenders or extend the offtake agreement with the GOU, consequently impacting CiplaQCIL’s revenue and market share.

CiplaQCIL’s effective majority shareholder’s future interests may influence the Company’s prospects.

Cipla may be able to influence decisions on certain matters for as long as it holds effective majority shareholding in the Company. Cipla’s WOS, Meditab, which holds shares in the Company will be locked in for 24 months after the Listing. Any exit or dilution may significantly impact the Company’s business, financial condition, and growth prospects. This may extend to the potential loss of some customers where change of control provisions exists in the agreements, as outlined above. On the other hand, if Cipla exits the Company, it will allow CiplaQCIL to bid independently for tenders (e.g. for the Global Fund).

The Company does not have any in-house research and development and solely depends on Cipla for matters such as intellectual property including dossiers, technical know-how, technology transfer and certain marketing authorisations, required for manufacturing and sale of current and pipeline products (listed in Section 10). The agreements licensing the Cipla trade name and product trademarks between Cipla and CiplaQCIL allow Cipla to withdraw the Cipla trade name and product trademarks in the event that Cipla ceases to have management control of CiplaQCIL, as well as in the case of breach and certain other circumstances set out in the relevant agreements. In the event of such withdrawal, CiplaQCIL will no longer use Cipla as part of its corporate name, which may potentially impact CiplaQCIL’s revenue and market share. CiplaQCIL shall use its own trademarks or generic names for all new products. For all existing products, CiplaQCIL has a two-year period to transition to its own trademarks or use generic names.

As regards technical know-how and dossiers related to the current and pipeline products (listed in Section 10) already licensed to the Company for manufacturing of Products in Uganda for commercialization in 19 SSA countries, CiplaQCIL will have the right to use these in perpetuity, provided the Company complies with the terms of the IP Agreements.

Cipla may withdraw intellectual property under the circumstances set out in the IP Agreements. Any withdrawal of intellectual property could impact CiplaQCIL’s ability to supply products pursuant to contractual obligations, its ability to successfully bid for future tenders or extend the offtake agreement with the GOU, consequently impacting CiplaQCIL’s revenue and market share.

Separately, Cipla and its affiliates have historically competed and may continue competing with CiplaQCIL in various geographical markets and therapeutic segments. In such instances, each of CiplaQCIL and Cipla (and their respective affiliates) will operate independently of the other and will be guided by their respective individual commercial interests. Such conflicts between CiplaQCIL and Cipla in the retail or tender markets may impact the opportunities for CiplaQCIL, given the possible cost-based or any other advantages of Cipla. However, compared to any foreign manufacturer outside of SSA, the Company currently enjoys a number of advantages which may allow it to operate successfully in its markets, such as eligibility for EAC local content advantage, LDC origin, shorter delivery times and long-term offtake agreements in Uganda and Zambia.

Cipla has, in the course of its business, signed non-compete agreements covering different territories and different products. There may be some instances of overlap between such non-competes and CiplaQCIL’s expansion plans, in which event CiplaQCIL’s expansion plans will be subject to those non-competes, or alternatively waivers may have to be procured from relevant parties. To date, CiplaQCIL has not encountered any challenges to its expansion plans because of non-compete agreements entered into by Cipla with its third-party customers. Furthermore, it does not seem likely, that such agreements will affect the Company’s largest customers in the future – e.g. the GOU or the Global Fund.

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Operations could be impaired by a failure of our information systems.

Information systems are essential to a number of critical areas of our business operations. Any system failure that causes an interruption in production could adversely affect operations or delay the collection of revenue. Although the Company has implemented network security and daily backup measures, servers are potentially vulnerable to computer viruses, break-ins and similar disruptions from unauthorised tampering. The occurrence of any of these events could result in interruptions, delays, the loss or corruption of data, or cessations in the availability of systems. In addition, we may be subject to liability as a result of any theft or misuse of personal information stored in our systems.

Changes in technology may render current technologies used by CiplaQCIL obsolete or requires it to make substantial capital investments.

The pharmaceutical industry is continually changing due to technological advances and scientific discoveries. These changes result in the frequent introduction of new products and significant price competition. If CiplaQCIL’s pharmaceutical technologies become obsolete, its business and results of operations could be adversely affected. Although the Company strives to maintain and upgrade its technologies, facilities and machinery consistent with current national and international standards, the technologies, facilities and machinery it currently uses may become obsolete. The cost of implementing new technologies and upgrading CiplaQCIL’s manufacturing facilities could be significant, which could adversely affect its business, results of operations and financial condition.

Having said that, CiplaQCIL operates in the area of generic medications, which by the nature of its business do not require the same level of investments in continuous modernisation of production equipment as innovative pharmaceutical products, and the evolution of latest pharmaceutical technologies is far less relevant. Cipla may, at the Company’s request, support the Company in respect of adoption of new technologies and processes.

CiplaQCIL’s historical operating results and growth should not be relied on as an indication of future performance.

CiplaQCIL’s operating results may fluctuate due to a number of factors, many of which may be out of its control. Accordingly, CiplaQCIL’s past performance (revenue, profit margins, costs) should not be relied on as an indication of future performance or growth, especially as competition intensifies.

Unionising of CiplaQCIL’s employees in the future can lead to additional costs for the Company.

The Company was presented with a proposed Recognition Agreement by a labour union, UCPAWU, in June 2013. UCPAWU proposed that CiplaQCIL recognize it and, the employees of the Company to join the union. Company management has engaged with its employees and the union and has arranged for independent education on the topic of unionization for its employees.

This matter poses a potential litigation, cost and reputational risk in the event it escalates due to failed discussions between the Company, the labour union and the employees. However, the Company is aware of its legal obligations to recognise any labour union that its employees choose to join, and the Company will not prohibit any employee from joining such labour union as they choose to. Additionally, CiplaQCIL considers itself an attractive and prestigious workplace, currently employing over 300 people (over 97% are Ugandans) with very low attrition levels, and the employees are provided with regular training, competitive wages and a range of other benefits.

Reforms in the healthcare industry and the uncertainty associated with pharmaceutical pricing, reimbursement and related matters could adversely affect the marketing, pricing and demand for the Company’s products.

The Company’s success will depend in part on the extent to which governments, donors and other third-party payers will continue to fund the purchase of its products since most of the people requiring the Company’s treatments may not be able to afford them. Increasing expenditures for healthcare have been the subject of considerable public attention in almost every jurisdiction where we conduct business. In many countries

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in which we currently operate, including Uganda, there is scrutiny on prices of pharmaceutical products and pressure to reduce them further. The Company’s current pricing model is based on international benchmarks, and it supports the cause of improving access to affordable medications to patients.

The availability of counterfeit drugs could adversely affect CiplaQCIL’s goodwill and results of operations.

Any potential proliferation of counterfeit and pirated products, such as drugs passed off by others as the Company’s products, and the time and attention lost to defending claims and complaints about counterfeit products could have an adverse effect on CiplaQCIL’s goodwill and its business, prospects, results of operations and financial condition. The Company sells its products in bulk and to a limited number of customers (which carry their own responsibility for logistics and distribution), all of which are reputable. This reduces the likelihood of counterfeit products appearing on the market and consequential adverse effects for the Company’s business.

To further mitigate the risk of spurious, falsely labelled, falsified counterfeits (“SFFC”) as defined by the WHO, the Company has a written procedure for handling product complaints, including complaints related to counterfeits. The complaint surveillance forms are dispatched to customers from time to time to record and forward such complaints to the Company for investigation. The procedure has a feedback mechanism to provide a timely response to complainants, such as regulators, distributors, users, prescribers and dispensers.

The Company’s packaging materials also have special embedded codes, with a bar code on the packaging line to detect falsified packaging materials. The Company retains a reserve sample for each batch of finished product before dispatch to the market, for future reference in the event of potential counterfeit claims.

14.2 Regulatory Specific Risks

Risks relating to an evolving regulatory environment.There have been a number of reforms and profound transformations in the Ugandan and SSA healthcare markets aimed at achieving higher standards of care, modernisation of equipment and facilities, wider access to healthcare and lower healthcare costs. The Company cannot predict what additional regulatory changes will be introduced in the future or their effect. However, it is expected that the regulatory environment will continue to evolve in the advancement of these goals.

Compliance with, and changes in, safety, health and environmental laws and various labour, workplace and related laws and regulations applicable in jurisdictions in which the Company operates may increase compliance and other costs and, as such, adversely affect business, prospects, results of operations and financial condition.

The Company operates in a highly regulated environment. Although the Company will make every effort to ensure that it complies with all applicable regulations and reporting requirements, the nature and complexity of compliance and the dynamic regulatory environment within which the Company operates may affect the Company’s ability to comply with applicable regulations in a timely manner. This may affect the Company’s ability to successfully commercialise its products and/or lead to legal action being taken against the Company, which could have a material adverse effect on the Company.

The Company is subject to a broad range of safety, health and environmental laws and various labour, workplace and related laws and regulations in the jurisdictions in which it operates, which impose controls on the disposal and storage of raw materials, noise emissions, air and water discharges, on the storage, handling, discharge and disposal of chemicals, employee exposure to hazardous substances and other aspects of Company’s operations. The discharge of raw materials that are chemical in nature or of other hazardous substances or other pollutants into the air, soil or water may cause the Company to be liable to government and regulatory bodies or to third parties. In addition, CiplaQCIL may be required to incur costs to remedy the damage caused by such discharges, pay fines or other penalties for non-compliance. Compliance with, and changes in, safety, health and environmental laws and various labour, workplace and related laws and regulations may increase compliance costs.

As part of its ongoing support to the business, Cipla carries out an annual audit of the Company to ascertain the

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level of quality assurance of the Company in line with GMP requirements. Procedures have been established in the facility to meet requisite regulatory and customer standards. The Company has been successfully inspected several times by the WHO to assess compliance with GMP standards.

14.3 Country Specific Risks

Risks relating to investments in developing markets

Investors in the securities of companies in developing markets such as Uganda should be aware that these investments are generally subject to greater risk than investments in the securities of companies from more developed countries and carry risks that are not typically associated with investing in more mature markets. These risks include, but are not limited to, higher volatility and more limited liquidity, greater political risk, a narrow export base, budget deficits, lack of adequate infrastructure necessary to sustain economic growth and changes in the political and economic environment.

In addition, international investors’ reactions to events occurring in one developing market or region sometimes appear to demonstrate a ‘contagion’ effect, in which an entire region or class of investment is disfavoured by such investors. If such a contagion effect occurs, Uganda could be adversely affected by negative economic or financial developments in other developing markets.

Prospective investors should also note that developing economies such as Uganda’s are subject to rapid change and that the information set out in this Prospectus may become outdated relatively quickly. Accordingly, prospective investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment is appropriate. Generally, investment in developing markets is suitable only for sophisticated investors who fully appreciate the significance of the risks involved. Prospective investors are urged to consult their own legal and financial advisors before making an investment decision.

Fluctuations in exchange rates may adversely affect CiplaQCIL’s business and results of operations.

CiplaQCIL sells its products in several countries with selling prices in USD, which provides a natural hedge to the Company’s profitability (as raw materials are also purchased primarily in USD). However, since government budgets and medications allocations are set in local currencies, significant fluctuations of the exchange rates may lead to change in volumes procured by these governments from the Company. This might have an impact on CiplaQCIL’s business, financial condition and results of operations.

Given GOU and GOZ’s objective to supply lifesaving medicines to its citizens who require them, the Company believes that even if such controls were imposed, it would be least likely that CiplaQCIL would be significantly affected, given the importance of its business for the country.

Political, social and economic instability in Uganda and SSA may adversely affect CiplaQCIL’s business, financial condition and results of operations.

Political, economic and military conditions in Uganda and surrounding countries could affect CiplaQCIL’s operations. CiplaQCIL could also be adversely affected by the interruption or curtailment of trade between countries in the SSA, although the current trend of regional initiatives is to facilitate increased intra-regional trade.

Ugandan tax system

There remains a commercial risk that current tax rates, tax categories and tax incentives may change in a manner that may affect the Company and its income or obligations, thereby affecting investments in the Company (the Company has a tax holiday that is expiring in June 2019). Differing opinions regarding the legal interpretation of tax laws often exist, both among and within governmental ministries and authorities, including the tax administration, creating uncertainty and potential areas of conflict for taxpayers and investors. Investors are advised to take tax advice in this regard.

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14.4 Risks Relating to the Shares

Uganda has a less developed securities market than developed countries and there may be limited or no liquidity with respect to the Company’s shares.

The trading market for shares in Uganda is currently relatively small in terms of the number of issuers listed, the market capitalisation of these issuers and the number of participants in the market, which could lead to low liquidity or illiquidity of securities listed on the USE (including the Shares). Furthermore, if there is a trading interruption on the USE, this could have a negative effect on the price of the Shares.

There has been no prior public market for the Shares of the Company.

As of the date of this Prospectus, there has been no public market for the Shares. Investors should not view the initial Offer Price as any indication of the price that will prevail in the trading market. Due to the absence of a prior market, the Offer Price may not accurately reflect the price of the Shares following the Offering. There can be no assurance that a liquid market in the Shares will develop or be maintained. If a market for the Shares does not develop, the price of the Shares and the ability to sell the Shares could be adversely affected.

The price of the Shares may be volatile, which could have an adverse impact on holders of the Shares.

The price of the Shares may be volatile and may be affected by factors, such as: fluctuations in the operating results of the Company; announcements by the Company, its competitors or its Shareholders regarding the launch of new products, offers or technologies; announcements regarding changes in the Company’s management team or key personnel or in its shareholding structure, including potentially different market reactions based on which shareholders sell or buy Shares; changes in financial estimates by securities analysts; changes in the regulatory environment; and announcements regarding acquisitions or divestitures. Furthermore, the financial markets have experienced significant price fluctuations in recent years, often unrelated to the underlying performance of listed companies. Such market fluctuations, as well as general economic conditions, may affect the price of the Shares.

The price of the Shares may be adversely affected by negative publicity regarding CiplaQCIL or its Shareholders.

There can be no assurance that negative publicity relating to CiplaQCIL or its Shareholders will not adversely affect the price of the Shares, regardless of the inaccuracy of, or lack of grounds for, any such negative publicity and the absence of any relationship between such negative publicity and the Company itself.

As the Company’s shares will be quoted in Uganda on the USE, investors may be subject to potential losses arising out of exchange rate risk on the Ugandan Shilling and risks associated with the conversion of Ugandan Shilling proceeds into foreign currency.

International investors are subject to currency fluctuation risk and convertibility risk since the Company’s shares are quoted on the USE. In addition, dividends on the Company’s shares will be paid in Ugandan Shillings. Any depreciation in the Ugandan Shilling resulting in a decreased value of the Shares or a decreased value of dividend payments could have an adverse effect on investors wishing to convert proceeds from dividends or Share sales into an alternative currency.

Settlement of the Offer Shares may take longer than expected.

Applications for Offer Shares will be processed on a manual and semi-automated basis, and this process may take longer than expected due to high subscription rates, limited order processing capacity, mechanical breakdown, delays in opening brokerage accounts, delays in opening SCD accounts and/or clerical error. Accordingly, while the commencement of trading is expected to be on [24 September 2018], there is a risk of unforeseen delays during the Offer period and up to the commencement of trading.

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Further issuances or sale of Shares by the Company could adversely affect the trading price of the Shares.

Any future issuances by the Company could lead to the dilution of investors’ holdings, which could adversely affect the trading price of the Shares. In addition, any perception by investors that such issuances or sales might occur could also affect the trading price of the Shares. On the other hand, the Company, Meditab and the Uganda Founders have signed a Lock-in agreement, in which they undertake not to sell or otherwise dispose of Shares (other than the Offer Shares) for a period of 24 months, commencing on the date of Listing. In addition, Capitalworks and Amistad have signed a Lock-in agreement for six months. In any event, the Company believes its expansion plans can be funded from its own resources and, therefore, it is not likely to require additional equity financing.

No guarantee on payment of dividends in the future. The Company’s dividend policy is as set out in Section 10. The amount of future dividend payments, if any, will depend on the Company’s future earnings, financial condition, cash flows, working capital requirements, capital expenditures, loan agreements, if any, and other factors. The Board may decide to retain all earnings to finance the development and expansion of its business and therefore, may not declare dividends on the Shares.

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The comments below are of a general nature based on taxation law and practice in Uganda as at the date of this Prospectus and are subject to any changes thereafter. They relate only to the position of persons who are the absolute beneficial owners of the Offer Shares. This Section does not purport to be a complete analysis of all tax considerations relating to the Offer Shares and so should be treated with appropriate caution. Prospective investors should consult their own professional advisors concerning the possible tax consequences of purchasing, holding and/or selling Shares and receiving payments of dividends and/or other amounts in respect of the Offer Shares under the applicable laws of their country of citizenship, residence or domicile.

15.1 Tax on Dividend Income

Dividends paid to Ugandan resident Shareholders who are individuals attract a withholding tax at a rate of 10%. Dividends paid to Ugandan resident Shareholders who are companies and non-resident Shareholders attract withholding tax at a rate of 15% in accordance with current legislation. The Company is required to deduct that tax before making dividend payments.

15.2 Capital Gains Tax

Capital gains tax is historically not payable in Uganda for shares listed on the USE. Investors are advised to seek an opinion if this tax would otherwise be applicable to them.

15.3 Tax Treaties

Uganda has entered into double taxation treaties with Zambia; Norway; Netherlands; Denmark; the United Kingdom; India; Mauritius; South African and Italy. Treaties with Egypt and the East African Community are pending ratification.

15 Taxation on Income on Offer Shares

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16.1 Incorporation

CiplaQCIL was incorporated in Uganda on 10 June 2005 as Quality Chemical Industries Limited, a private limited liability company under Company Number 72613. It changed its name to Cipla Quality Chemical Industries Limited on 27 March 2014, after Cipla became an effective majority shareholder.

The Company converted to a public company on 7 October 2016 and was issued with a new Company Number P.558.

16.2 Authorised and Issued Share Capital

The changes in controlling shareholding of the Company, as required by the USE Listing Rules, 2003, Appendix 1, para. 3(16), and changes in share capital of the Company over the last two years are as follows:113

· By a share purchase agreement dated 21 May 2015, duly amended and restated on 22 July 2015, Cipla EU, a direct subsidiary of Cipla, acquired 51% stake in QCL with effect from 6 August 2015, thus increasing the beneficial shareholding of Cipla in a Company to 62.3%.

· By a Written Special Resolution of the Company dated 26 September 2016, the par value of each share in the Company was adjusted by way of a share split from the par value of UGX 5,000/- to UGX 12.5/- per share. The number of shares was increased accordingly from 9,129,773 ordinary shares of UGX 5,000 each to 3,651,909,200 ordinary shares of UGX 12.5/- per share.

Therefore, currently:

i. CiplaQCIL’s authorised share capital is UGX 45,648,865,000 divided into 3,651,909,200 ordinary shares with a par value of UGX 12.50 each;

ii. CiplaQCIL’s issued and fully paid-up share capital is UGX 45,648,865,000 divided into 3,651,909,200 ordinary shares with a par value of UGX 12.50 each; and

iii. CiplaQCIL’s share capital is not divided into different classes of shares and all of the shares carry the same voting rights.

At every general meeting of the CiplaQCIL, every shareholder present has one vote on a show of hands, and on a poll, every shareholder present in person or by proxy has one vote for each share of which he is the holder.

The rights attached to any class of shares, unless otherwise provided for by the terms of issues of such shares, may be varied with the consent in writing of the holders of three-fourths of the issued shares of that class or by special resolution at a separate general meeting of the holders of the shares of the class.

Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, any share in CiplaQCIL may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise as CiplaQCIL may from time to time by ordinary resolution determine.

In accordance with CiplaQCIL’s Articles, the CiplaQCIL Shares are freely transferable without pre-emptive rights in favour of any person subject to the Lock-in.

16.3 Licenses and Regulatory Compliance

All material licenses and consents required by the Company to perform its business have been duly obtained and are valid.

113 A record of the changes in the Company’s shareholding from the date of incorporation to date is available with the Company Secretary, and may be inspected at the Company’s premises during office hours for the duration of the Offer.

16 Statutory and Other Information

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16.4 Environmental Compliance

The activities carried out at the Company factory are in compliance with the environmental regulatory requirements and in tandem with best environmental practices.

16.5 Health and Safety

The Company is compliant with regulations under the Occupational Safety and Health Act, 2006. The manufacturing facility of the Company is duly registered and regular inspections are conducted by the Ministry of Gender, Labour and Social Development.

16.6 Indebtedness

CiplaQCIL has no indebtedness except for trade payables in the ordinary course of business.

16.7 Claims and Litigation

Material Litigation and Other Legal Action

The Company is or has been involved or interested in the following litigious matters in the last nine months:

1. Application No. 1 of 2016 Cipla Quality Chemical Industries Limited versus Uganda Revenue Authority (“URA”) before the Tax Appeals Tribunal

i. On 13 March 2013, the URA issued the Company with a withholding tax assessment of UGX 901,600,000 on the grounds that the royalties on licensed intellectual property that Cipla granted to the Company are taxable.

ii. The Company objected to the withholding tax assessment on the grounds that the licensed intellectual property was an equity contribution in kind, and therefore no withholding tax applied. The URA did not accept the Company’s grounds of objection and confirmed the tax assessment through its objection decision dated 18 December 2015.

iii. The Company paid 30% of the tax assessed in accordance with Section 103 of the Income Tax Act, Cap. 340 and lodged an appeal to the Tax Appeals Tribunal against the tax assessment.

iv. The Company and URA on 14 June 2018 registered a consent settlement order in court by which the Company agreed to pay to URA UGX 805,000,000 in the interest of closing the matter. Having earlier paid UGX 270,480,000 as 30% of the tax assessed, the Company has paid the balance of UGX 534,520,000 in full settlement of the consent settlement order.

2. Civil Suit No. 470 of 2016, Enock Musasizi versus CiplaQCIL114

i. The Plaintiff, a former employee of the Company, filed a suit against CiplaQCIL on 2 September 2016 seeking to recover compensation for occupational injury, general, punitive and special damages for injuries he claims were negligently occasioned to him, during the course of his employment with the Company. The Plaintiff alleged that over the course of his employment with the Company, he was exposed to several toxicants and developed several complications and illnesses. Consequently, the Plaintiff sought compensation for injury amounting to UGX 36,732,000; general damages of UGX 200,000,000; special damages of UGX 91,200,000; punitive damages of UGX 20,000,000; interest at 21%; and costs of the suit.

ii. The Company, in a written statement of defence prayed for costs and dismissal and denied that: (i) the Plaintiff had any cause of action against it and has raised a preliminary objection that the

114 The Defendant is stated as Cipla/Quality Chemicals in the Complaint.

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suit is beyond the pecuniary jurisdiction of the Chief Magistrate; and (ii) that the Plaintiff was not exposed to any hazardous materials as he was employed as a cleaner.

iii. The suit is pending hearing.

3. Industrial Court Labour Dispute No.271 of 2016 Enock Musasizi v CiplaQCIL

i. The Plaintiff a former employee of the Company seeks UGX 85,558,266 as alleged unlawful termination.

ii. The Company has filed a response in which it has disputed the claims. The Claimant was employed on short-term contracts, the longest being for one year and the rest for six months at a time. In or around 2013, the Claimant complained of impaired vision and went on sick leave and upon expiry he refused to return to work not withstanding request to explain his continued abscondment. The Company decided not to renew his contract. The Company asserts that his contract was brought to a lawful end.

iii. There has not been any progress in terms of court hearing since the matter was filed.

4. Labour Dispute No.50 of 2017 KCCA/NDC.CB/210/16 Lucy Namakoye (deceased) suing through legal representative v CiplaQCIL

i. The Claimant, who is a legal representative of Lucy Namakoye, a former employee of the CiplaQCIL between 2007-2013, claims UGX 40,092,920 being outstanding gratuity, general damages and interest thereon at the rate of 21% from the date of the claim till payment in full and costs of the suit. The Claimant alleges that at the death of Lucy Namakoye, the Company processed payment in respect to the deceased’s benefits amounting to UGX 37,916,107 and left an amount of UGX 20,092,920 unpaid for which she seeks payment together with general damages of UGX 20,000,000 and interest of 21% per annum and costs.

ii. In response the CiplaQCIL denies the claim and contends that the deceased’s benefits were properly calculated, processed and paid.

iii. The suit is yet to be set down for hearing.

5. Civil Suit No. 636 of 2016, Godfrey Magezi (Plaintiff) v National Medical Stores, CiplaQCIL and Attorney filed in the Civil Division of the High Court of Uganda

i. The Plaintiff claimed that NMS and CiplaQCIL entered into certain agreements pursuant to which CiplaQCIL supplied products to NMS in breach of the terms of the memorandum of understanding and the Public Procurement and Disposal of Public Assets Act 2003 and regulations thereto, which occasioned a financial loss to the GOU amounting to USD18,082,739.30.

ii. The Plaintiff prayed for inter alia: (i) a declaration and recovery of financial loss from CiplaQCIL of USD18,082,739.30 caused in execution and implementation of contracts between National Medical Stores and CiplaQCIL; and (ii) a declaration that fraudulent activities were done under the contracts.

iii. The High Court dismissed the suit on 9 November 2017. On 27 March 2018 an appeal was filed in the Court of Appeal as Civil Appeal No.79 of 2018. The appeal seeks to set aside the dismissal of the suit in the high court. The matter has not yet been set down for hearing.

Save as discussed above, there is no other material litigation, prosecution or other civil or criminal legal action in which the Company is involved or has been involved in the last nine months from the date of this Prospectus.

16.8 Related Party Transactions

There are contracts between the Company and its effective majority Shareholder, Cipla. These contracts

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include a quality technical agreement, a pharmacovigilance agreement and IP Agreements covering licensing arrangements between Cipla and the Company and are summarized in Material Contracts below.

Other related party transactions are disclosed in Note 28 of the Reporting Accountant’s Report in Section 18.

16.9 Access to Information

CiplaQCIL will prepare and publish interim and annual financial statements.

16.10 Material Contracts

The following are the only contracts (excluding contracts entered into in the ordinary course of business) which: (i) have been entered into by the Company within two years immediately preceding the date of this Prospectus or which are expected to be effective on the date of this Prospectus; (ii) which are, or may be, material or which have been entered into by the Company; and (iii) contain any provision under which the Company has any obligation or entitlement which is, or may be, material to the Company as at the date of this Prospectus:

16.10.1 Cipla and QCL entered into a memorandum of understanding dated 3 May 2005, as amended on 11 August 2005 pursuant to which:

i. Cipla and the Uganda Founders agreed to enter into a technical collaboration to undertake local manufacture of pharmaceuticals in Uganda, with particular emphasis on ARV and ACT products. For this purpose, Cipla agreed to license to the Company its trade names, although the ownership of the trademarks and intellectual property rights would belong to Cipla, and

ii. the GOU guaranteed inter alia to purchase on a regular basis, ARVs and ACTs, manufactured by the Company.

16.10.2 Cipla and QCL entered into a joint venture agreement dated 30 September 2005 through which they agreed that:

i. the parties would set up a pharmaceutical manufacturing plant in Uganda to manufacture and distribute a range of pharmaceutical drugs such as ARVs and ACTs;

ii. the Company would determine the products to be manufactured and distributed;

iii. Cipla would provide the technology and scientific documentation required for the registration of determined products; and

iv. the said agreement was valid for at least an initial period of ten years and could be terminated only in accordance with the terms of the agreement.

This agreement has since been replaced by the IP Agreements which have memorised, streamlined and clarified the terms and conditions regarding the permitted use of the licenced technology, dossiers, regulatory approval, regulatory documentation, licenced marks and licenced CIPLA Mark by the CiplaQCIL.

16.10.3 The Company entered into a quality technical agreement with Cipla with effect from 7 November 2016 for the manufacture of 14 products. This document includes a detailed checklist of the various activities associated with pharmaceutical manufacture, testing and release of the product to the market, in which the responsibility for each relevant activity is assigned to either the Contract Giver (Cipla) or the Contract Acceptor (the Company). The agreement is to be reviewed every two years from the effective date.

16.10.4 The Shareholders of the Company entered into a Shareholders’ Agreement dated 15 January 2010 which will terminate automatically upon Listing. Certain provisions of the said agreement will survive

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upon its termination, particularly those relating to dispute resolution for matters arising from the said agreement.

16.10.5 The Company entered into an agreement with Cipla relating to payment of service fees in relation to services to be provided by Cipla, relating to facilitation of procurement by the Company of APIs, excipients and packaging material directly from vendors authorised by Cipla, which will enable the Company to manufacture and supply products at competitive market prices. The agreement commenced on 7 September 2012 and was terminated/replaced on 11 April 2018, pursuant to the execution of the Technology Licence Agreement.

16.10.6 Pursuant to the memorandum of understanding dated 3 May 2005 as amended on 11 August 2005 and the joint venture agreement dated 30 September 2005, Cipla Limited and CiplaQCIL have executed a technology license agreement dated 11 April 2018 to clarify and supersede the arrangements in relation to the licenced technology and licenced marks pursuant to which:

i. Cipla has granted to CiplaQCIL an exclusive115, non-transferable, non-sub-licensable, royalty-bearing license to use the licensed technology, subject to the specific terms of the Agreement in perpetuity as solely necessary to manufacture the products in the facility. Cipla Limited also granted a non-exclusive, non-transferable, non-licensable, royalty-bearing licence to use the licenced technology, dossier, regulatory documentation and Cipla Limited’s WHO/FDA-prequalification registration of the facility during the term to obtain regulatory approval and commercialization of the products (nine existing products and five pipeline products) in the territory (19 countries), subject to the terms of the agreement.

ii. Cipla has further agreed to grant to CiplaQCIL licences to all upgrades to the licensed technology or to any changes in licenced technology resulting from improvements in the method of manufacture of the product and/or technology and/or technology replacement for an existing product.

iii. Upon Cipla and Cipla (EU) or any of Cipla’s subsidiaries ceasing to have any shares in CiplaQCIL, the said agreement shall terminate with immediate effect. However, CiplaQCIL shall, subject to the terms of a separate licence agreement have the right to continue using the technology on a non-exclusive basis to manufacture and commercialize only the existing products in the territory. In the event that there is a breach of the terms of such separate licence agreement, and the breach is not remedied by CiplaQCIL, the non-exclusive right shall cease.

iv. In the event any competitor of Cipla acquires management control in CiplaQCIL (by controlling 50% or more of the Board of directors of CiplaQCIL), CiplaQCIL shall transition to such competitor’s technology within two years and shall thereafter cease to use the technology, unless there is a separate agreement executed for use of the technology.

v. Upon any such termination, if CiplaQCIL requests, Cipla shall provide such technical support for such period as may be mutually agreed upon, subject to payment of a technical support fee.

vi. CiplaQCIL shall not directly or indirectly compete with Cipla or engage in any arrangement with a third party to manufacture the products or competing products in the territory.

vii. The Agreement and the performance of its obligations are not assignable or transferrable without the prior written consent of Cipla.

viii. Either party may terminate the agreement with immediate effect upon written notice to the other party if the other party is insolvent, unable to pay its debts, a receiver is appointed over its assets, or if a petition for winding up is filed against it and is not dismissed within 60 days, or if it discontinues business.

115 The right to use the licensed technology in exclusivity currently applies only for manufacturing of products in the specified facility in Uganda.

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16.10.7 Cipla and CiplaQCIL have executed a product trademarks license agreement pursuant to which Cipla will grant to CiplaQCIL an exclusive, non-transferable, non-sub-licensable, royalty-bearing license to use licensed trademarks (for seven existing products and five pipeline products in 19 countries), subject to the condition that CiplaQCIL shall obtain regulatory approval for the products in the territory in its own name and under its own trademarks no later than two years from the effective date of the agreement. The agreement shall terminate with immediate effect upon Cipla or any of Cipla’s subsidiaries ceasing to have any Shares in CiplaQCIL or if any competitor of Cipla acquires management control of CiplaQCIL, and any continued use of the licensed trademarks by CiplaQCIL as permitted by Cipla Limited after termination of the agreement shall be on arms’ length basis only and subject to the terms of a separate license agreement.

16.10.8 Cipla and CiplaQCIL have executed a Cipla name license agreement pursuant to which Cipla Limited will grant to CiplaQCIL an exclusive, non-transferable, non-sub-licensable, royalty-bearing license to use the Cipla mark (for seven existing products and five pipeline products in 19 countries), which agreement shall terminate with immediate effect upon Cipla or any of Cipla Limited’s subsidiaries ceasing to have any Shares in CiplaQCIL or if any competitor of Cipla acquires management control of CiplaQCIL. At termination, the Company shall also cease to use “Cipla” as part of its name.

16.10.9 The Company has entered into a safety data exchange agreement (pharmacovigilance agreement) with Cipla dated 7 March 2016. This agreement defines and outlines the responsibilities and processes for exchange of safety data towards the conduct of all pharmacovigilance activities related to the products for which Cipla is a Market Authorisation Holder (MAH). The agreement would terminate if the Company ceases to be a MAH in Uganda and Rwanda.

16.10.10 In 2017, the Company along with Cipla, as a Consortium, participated in the Global Fund tender for ACTs and was awarded the tender. The Company executed a certificate of conformance and acknowledgment of the framework agreement accepting the terms and conditions of the framework agreement (“Certificate”). As part of the Global Fund’s tender process, Cipla executed the framework agreement on behalf of the Consortium to which CiplaQCIL is bound by virtue of the Certificate.

The Consortium is to supply these drugs in accordance with agreed volumes for agreed prices.

16.10.11 The Company has also entered into a Memorandum of Understanding (“MOU”) and Guarantee Agreement (“Guarantee”) with the GOU, each dated 14 December 2005. The MOU and Guarantee were further amended on 16 April 2012, 26 August 2014, 28 August 2015 and 16 September 2016 pursuant to which:

i. The GOU guaranteed: (a) offtake purchase by the GOU of the ARVs and ACTs and hepatitis B treatments (Entecavir and Tenofovir) and several of its other medications, manufactured by CiplaQCIL, as identified by the Ministry of Health and in quantities required for use in all public and or government health centres; (b) the priority and/or precedence to supply to GOU-related agencies; and (c) a guarantee that during the term, the GOU or any of its regulatory or licensing agencies will not grant any competing franchises, guarantees or concessions nor facilitate to any competitor of the Company in the field of manufacture of or supply to the GOU and its related agencies of ARVs and ACTs and hepatitis B.

ii. This offtake arrangement is valid until February 2029, subject to the Company complying with the terms of these agreements. The MOU states that project financing for Phase 1 and Phase 2 is secured by the offtake guarantee. Accordingly, it provides that the GOU as the offtake purchaser shall only have the right to terminate the offtake purchase arrangement (and the offtake guarantee) in “very specific and extreme circumstances”, such as those that could deprive GOU of substantially the whole benefit intended from this arrangement. The Company undertook under this MOU with the GOU not to dissolve the joint venture for the duration of the project.

CiplaQCIL undertook to make an additional investment, estimated at USD50 million, towards enhancing manufacturing capacity and/or construction of an additional plant (Phase 2) by April 2015. The Company and GOU had agreed to this on the understanding that there would be much higher demand from GOU (to include donor-funded procurements), under the offtake arrangement. Since demand has been lower than anticipated, the Company was not in a position to fully implement Phase 2 but continues to implement capacity enhancement projects in a phased manner as the need develops. Once business visibility improves, justifying a larger

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manufacturing base, CiplaQCIL will implement Phase 2, and this has regularly been notified to the GOU and it is aware that Phase 2 implementation has been delayed for these justifiable reasons.

16.10.12 The Company has entered into Supply Contract with NMS (No. NMS/SUPLS/15-16/0070) dated 11 February 2016 for a period of three years. NMS is the procuring and disposal entity through which the GOU implements its obligations in relation to the offtake arrangement. According to the general conditions of contract applicable to this supply contract, for bidders in the nature of a joint venture, consortium, or association, the composition or the constitution of the joint venture, consortium, or association, shall not be altered without the prior consent of the NMS.

16.10.13 Disclosures on the contracts between the Chairman, Executive Directors and the Company:

Messrs Emmanuel Katongole, George Willy Baguma and Frederick Mutebi Kitaka have each signed contracts with effect from 27 September 2013, appointing them as Executive Chairman, and Executive Director in charge of Commercial Affairs and Executive Director Finance and Economic Affairs of the Company, respectively, as well as deeds of confirmation and restatement with effect from 3 February 2017 (repeats conditions of the Shareholders’ Agreement dated 15 January 2010). All three Executive Directors are entitled to:

i. a gross basic salary which includes an annual cash payment of USD338,568;

ii. a number of Company-funded benefits, subject to certain monetary limits, and including a vehicle with fuel allowance, security package, utility payments and family medical benefits;

iii. bonuses, conditional on achieving targets as recommended by the Remuneration Committee of the Board and approved by the Board and Shareholders, as appropriate;

iv. retirement and life assurance arrangements appropriate for their efforts in the foundation of the Company, including monthly retirement benefit payments of 75% of gross monthly salary. This benefit will be passed over to nominated beneficiaries upon death; and

v. death in service benefit of USD1,000,000 (if prior to retirement from the Company). The Company maintains insurance in relation to this death in service benefit.

The Founding Chairman, Mr. Francis X. Kitaka, who retired from the Board in 2013, also receives a monthly retirement benefit of USD8,000.

16.10.14 The Company has entered into a placement agreement dated July 26, 2018. This agreement records the arrangements between the Company, Selling Shareholders and the Bookrunner for the standard representations, allocation, purchase and sale of the Shares in terms of this Offer.

16.10.15 The Company has entered into three separate IP Agreements with Cipla, granting rights to CiplaQCIL for the continued use of the CIPLA corporate brand name, product trademarks and technical know-how. All intellectual property in respect of products, dossiers, product registrations, trademarks, technical know-how and processes is owned by Cipla116.

16.10.16 The Company, Cipla and the Uganda Founders have entered into a support letter dated 31 March 2017 pursuant to which the Uganda Founders have inter alia agreed to use their best endeavours to ensure that the GOU continues the offtake arrangement to realize the strategic objectives of the Company. This obligation will continue whilst the Uganda Founders are Shareholders of the Company.

16.10.17 The Company, Cipla and the Uganda Founders have signed a lock-in letter dated July 26, 2018 pursuant to which they have agreed not to issue new Shares or dispose of their shareholding in the Company, respectively, for a period of 24 months (save for the Offer Shares).

16.10.18 The Company has entered into an MOU with the GOZ and GOU dated 17 May 2017 pursuant to which:

i. The GOZ guaranteed: (a) offtake purchase of ARVs, ACTs, hepatitis and other medications,

116 The Company had applied for registration of Trioday, Duovir-N, Duovir, Nevimune, Duomune and Lumartem trademarks in Uganda on behalf of Cipla, which have since been assigned to Cipla via a Deed of Assignment. Efavirenz will be sold under the generic name of the API.

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manufactured by CiplaQCIL, as identified by the GOZ; (b) the minimum annual procurement under the agreement of USD10 million; (c) the prices for medicines would be within the range of global reference prices with the existing domestic preferences/advantages given to local Zambian pharmaceutical producers.

ii. Under the MOU, the parties undertook to explore the possibility of establishing a pharmaceutical manufacturing plant in Zambia for production of essential medicines other than ARVs and ACTs. The GOZ will determine whether the facility will be established: (a) in partnership with CiplaQCIL with the Company providing the necessary technology and GOZ meeting all other investment costs or (b) by the Company, which will own 100% of it and in which case the GOZ will guarantee investment incentives and appropriate procurement volumes to allow CiplaQCIL to recover capital investments in an acceptable business timeframe.

iii. This offtake arrangement is valid until May 2037 and may be reviewed every five years. The MOU may also be terminated by either party with a 12-month notice period. The validity and duration of ongoing actions may not be affected in case of termination.

16.10.19 The Company has entered into a framework supply contract with the Ministry of Health of Zambia, MoH/SP/013/17 dated 31 October 2017, for a period of two years. The framework agreement may be renewed for another one year based on review of performance by the Zambia Ministry of Health. Under the contract, the Ministry of Health of Zambia will place orders as and when the need arises.

16.11 Property

16.11.1 Immoveable Property

A search at the Lands Registry has confirmed that the Company is the registered proprietor of the following properties as of the date of this Prospectus:

Property description Date and instrument No. Validity of tenure

LRV 3484, Folio 4, Plot 1 – 7 1st Ring Road, 4 – 8 2nd Ring Road, 10 3rd Ring Road, 2 – 6 2nd Link Road, 9 – 11 1st Ring Road, 1 1st Link Road and 10 2nd Ring Road, land at Luzira, Kampala measuring 11.705 acres

21 Dec 2005, inst. 362036 (new company name entered on 4 Oct 2016, inst. no.KCCA-00032378)

99 years from 21 Dec 2005

LRV 4420 Folio 3, Plots 13-15 and 17-23 1st Ring Road and 1, 3 and 5 2nd Ring Road, Kampala measuring 15.179 acres

15 Nov 2012, inst. 477412 (new company name entered on 4 Aug 2016, inst. no. KCCA-00030596)

49 years from 25 May 2012

The above-mentioned properties have no subsisting encumbrances.

The Company owns two parcels of land held under leasehold tenure pursuant to lease agreements entered into between the Company (lessee) and Uganda Investment Authority (lessor)117.

16.11.2 Lease Agreements

The Company has entered into a lease agreement dated 21st December 2005 with the Uganda Investment Authority (“UIA”) in respect of property at LRV 3484, Folio 4, Plot 1 – 7 1st Ring Road, 4 – 8 2nd Ring Road, 10 3rd Ring Road, 2 – 6 2nd Link Road, 9 – 11 1st Ring Road, 1 1st Link Road and 10 2nd Ring Road, land at Luzira.

The lease was granted for an initial term of five years from 21 December 2005. The term of the lease was subsequently increased to 99 years with effect from 21 December 2005.

117 Article 237(3) (d) of the Constitution of the Republic of Uganda provides that land in Uganda shall be owned in accordance with the leasehold tenure system, among others.

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The premium, ground rent and park service charge payable by the Company under this lease agreement were waived by the UIA.

The use of the demised premises is restricted to a pharmaceuticals manufacturing plant.

The Company has the first option of purchase in case of an intended sale of the reversion by the lessor. The lease is renewable for a further 99 years upon the lessee giving notice in writing to the lessor at least two months prior to expiry of the term, on such terms and conditions to be mutually agreed.

The Company has entered into a second lease agreement dated 25 May 2012 with the UIA in regard to the property at LRV 4420 Folio 3, Plots 13-15 and 17-23 1st Ring Road and 1, 3 and 5 2nd Ring Road, Kampala. The lessor agreed to waive the premium, ground rent and park service charge.

The lease was initially for a term of five years from 25 May 2012. The lease term has been increased to 49 years from 25 May 2012. Warehouse construction on this land is in advanced stage with expected completion in Q3 2018/19.

The use of the land is restricted to pharmaceuticals manufacturing and for any purpose which may be conveniently carried out for that purpose.

The Company has a first option of purchase of the reversion in case of a sale by the lessor.

16.11.3 Manufacturing Facility

The manufacturing facility of CiplaQCIL is housed on property at LRV 3484, Folio 4, Plot 1 – 7 1st Ring Road, 4 – 8 2nd Ring Road, 10 3rd Ring Road, 2 – 6 2nd Link Road, 9 – 11 1st Ring Road, 1 1st Link Road and 10 2nd Ring Road, land at Luzira.

The buildings erected on the land are owned by the Company.

16.11.4 Plant and Machinery

The Company owns plant and machinery used for the manufacturing of pharmaceutical products. The Company maintains an asset register for its plant and machinery. The assets register is available for inspection at the Company’s registered office during normal working hours on any working day during the Offer period.

The primary vendors of the assets acquired by the Company are:

No. Supplier Asset (machine/land)

Address

1 Uganda Investment Authority Land TWED Plaza, Plot 22B, Lumumba Ave, P.O. Box 7418, Kampala, Uganda

2 Forbes Marshall Private Limited Steam boiler A34/35 H Block MIDC, Pimpri, Pune, 411018, India

3 Saan Engineer Private Limited Octagonal blender Plot R-481, TTC Industrial Area, MIDC, Rabale, Navi Mumbai, 400701, India

4 ERWEKA GmbH Hardness tester Ottostrasse 20-22, 63150, Heusenstamm, Germany

5 Manisha Trading Company Carton sealing machine

B-16, Ground Floor, Satyam Shopping Centre, Mahatma Gandhi Road, Ghatkopar East, Mumbai

6 Plus Print Solutions Trident head controller

P.O. Box 26997, Dubai, UAE

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7 Achelis Uganda Limited Hyster pedestrian stacker

Plot 35, William Street, P.O. Box 7198, Kampala, Uganda

8 Airtech System Private Limited Air handling system A-503, Vishal Apartment, Sir M.V Road, Andheri East, Mumbai, 400069, India

9 ACG Pharma Technologies Private Limited

Coating machine Plot No. 1100,1109 & 1116, Taluka - Khandala, Dist. Satara, Shirwal, 412801, India

10 ACG Pampac Machines Private Limited

Basic BQS machine Gate No. 446/2, Village Bebadohol, Dist. Pune, 410506, India

11 Technofour Electronics Private Limited

Check weigher systems

Khed Shivapur, Saswad Road, Kasurdi, Dist. Pune, 412205, India

13 Propix Technologies Private Limited

Packi systems (camera)

14, House No. 1720&1721, First Floor, Dhareshwar Industries, Dhadge Industrial Estate, Nanded Phata, Pune, 411041, India

14 Utopia Optovision Private Limited

Blister pack inspection system

P-4/6, Informatiion Technology Park, Old MIDC, Satara, 415004, India

15 Electrolab India Private Limited 14 station tablet disolution tester

23/24, Ground/First Floor, TTC Electronic Zone, MIDC Mahape, Navi Mumbai, 400710, India

16 Tapasya Engineering Works Private Limited

Saizoner mixer granulator

A/212 Road No.30, Wagle Industrial Estate, Thane West, 400604, India

17 Gansons Engineering Private Limited

Sifter (single deck) Plot No. 157/158a, Akbar Camp Road, Sandoz Baug, Kolshet, Thane, 400607, India

18 CMC Machinery Cadmach square model compression machine

Plot No. 3604/3605, Phase IV, G.I.D.C., Vatva, Ahmedabad, 382445, India

19 ACG Pharma Technologies Private Limited

Fluid bed processor/dryer

Plot No. 1100,1109 & 1116, Taluka - Khandala, Dist. Satara, Shirwal, 412801, India

20 Gulf Bio Analytical Agilent HPLC machines

P.O. Box 28832, Dubai, U.A.E.

21 Fette Compacting GmbH Compression machine

Grabuaerstrasse 24, 21493, Schwarzenbek, Germany

22 Gerteis Maschinen+Processengineering AG

Macro-Pactor (roll compactor)

Stampfstrasse 74, Postfach, 8645, Jona, Switzerland

23 Bowman & Archer Pharma Machines (India) Private Limited

Contablender with colour screen MMI

Survey No. 66, JAJ International, Arjunali Village, Padgha, Taluka - Bhiwandi, Dist. Thane, 421302, India

24 Atlas Copco Airpower N.V. Air compressor Boomsesteenweg 957, B2610, Wilrijk, Belgium

25 Pilani Envirotech Private Limited Dust collector B11 Rose Blossom, Sitladevi Temple Road, Mahim West, Mumbai, 400016, India

26 Countec Company Limited Count verification machine

78 Saneop-Ro, Ojeong-Gu, Bucheon City, Gyeonggi-Do, 421170, South Korea

27 Countec Company Limited Online torque tester 78 Saneop-Ro, Ojeong-Gu, Bucheon City, Gyeonggi-Do, 421170, South Korea

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27 Countec Company Limited Tablet/capsule counter

78 Saneop-Ro, Ojeong-Gu, Bucheon City, Gyeonggi-Do, 421170, South Korea

28 Countec Company Limited Rotary screw capper 78 Saneop-Ro, Ojeong-Gu, Bucheon City, Gyeonggi-Do, 421170, South Korea

29 Electronics Devices Worldwide Private Limited

Air cooled-induction sealing machine

31, Mistry Industrial Complex, Cross Road "A", MIDC Andheri, Mumbai, 400093, India

30 IFB Industries Limited IFB washing machine L-1, Verna, Industrial Estate, Goa

31 Kompress India Private Limited Mobile rack Godrej Coliseum, B Wing, Off Eastern Express Highway, Sion East, Mumbai, 400022, India

32 Newtronic Lifecare International FZC

Stability chambers 125 M2 Warehouse, A-2 100, P.O. Box 121856, Sharjah, UAE

33 Victoria engineering Diesel generators Plot 7/8/11 Mulwana road,Industrial area,Kampala , Uganda

35 Romaco Cartonator Romaco s.r.l via Nazionale 55/11,40067 Rastgnano (Bolonga),Italy

36 CAM PAK India PVT Ltd Cartonator B-704 RNA Royale Park,M.G. Road,Kandivli West,Mumbai-400 067,India

37 ACG Pam Platt pvt Ltd GCS-500 Gat No. 1100,1109 & 1116/1,Shirwal,Tal,Khandala,Dist.Satara,Maharashta-412801,India

38 Neomachines Autocoater 39/2A,Purna Das Road ,Kolkata-700 029 India

16.11.5 Other AssetsThe Company also owns various moveable assets such as computers, furniture, motor vehicles, tools and equipment. The plant and machinery and other tangible assets owned by the Company are not subject to any pledge, third-party interests or retention of title agreements from suppliers/vendors. There are no payments outstanding over the assets acquired by the Company, and all taxes due have been duly paid by the Company. The Company has not entered into any non-compete agreements with the vendors of assets purchased by the Company. The Company maintains details of these assets in its asset register which is available for inspection.

The Company has procured licenses from Cipla relating to the latter’s intellectual property in order to use the technical know-how, product trademarks and CIPLA trade name for the nine products already commercialised and for five pipeline products, as specified in the licence agreements under Material Contracts. The title to all such intellectual property exclusively belongs to Cipla. The licensed intellectual property of the Company is not subject to any pledge or third-party interests from suppliers/vendors. There are no payments outstanding over the licensed intellectual property of the Company, and except as stated under Material Litigation, all taxes due have been duly paid by the Company. The Company has not entered into any non-compete agreements with any third parties with respect to the licensed intellectual property of the Company. The Company maintains a register containing details of such licensed intellectual property, licensed to it by Cipla, which is available for inspection.

The Company has full and good title to both the immoveable and moveable assets owned by the Company, save for the licensed intellectual property which is owned by Cipla.

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16.12 Insurance

A schedule for the insurance policies taken out by the Company is shown below:

No. Insurance Cover Provider Policy No. CommencementDate

Expiry Date

1. Executive Directors’ Medical Insurance

AETNA (fronted by ICEA General Insurance Company Ltd as local insurer)

EHP3036023 27/03/2018 26/03/2019

2.Group Personal Accident with Workers’ Compensation Policy (UGX)

Britam Insurance Company (Uganda) Limited

900/092/1/000359/2017/12 01/04/2018 31/03/2019

3.Group Personal Accident with Workers’ Compensation Policy (USD)

Britam Insurance Company (Uganda) Limited

900/092/1/000360/2017/12 01/04/2018 31/03/2019

4.Public Liability Policy

(Covered by Cipla Limited Group Policy)

Bajaj Allianz General Insurance Co. Limited

OG-17-1919-3303-00000004

5. Travel SANLAMP/100/5009/2018/00628

59160C-59161C01/04/2018 31/03/2019

6. Fidelity Guarantee UAP Old Mutual Insurance Uganda Limited

010/101/1/000212/2009 31/03/2019

7. Money/Cash in-transit UAP Old Mutual Insurance Limited

010/100/1/000598/2011 01/04/2018 31/03/2019

8. Motor Insurance UAP Insurance Various 01/04/2018 31/03/2019

9.Directors and Officers Liability Insurance

UAP Old Mutual Insurance Uganda Limited

095/054/1/000028/2018 01/04/2018 31/03/2019

10. Industrial All Risks Insurance

UAP Insurance and Britam Insurance Company (Uganda) Limited (covering 30%)

010/042/1/000041/2008 01/04/2018 31/03/2019

11. Group Life Assurance cover Liberty Life Assurance 10/13/79 01/01/2018

31/12/2018 to be extended for 3 months

at expiry

12. Medical Insurance UAP Insurance UCIP000001 01/01/2018 31/03/2019

13.Full Political Violence Insurance

UAP Old Mutual Insurance Uganda Limited

095/044/1/00074/2011 01/04/2018 01/04/2019

The Company has taken out insurance against product liability as an extension to its public liability insurance.

16.13 Objects of the Company

As stated in the Memorandum of Association, the objects of the Company are:

(a) To manufacture, supply and sell anti-retroviral (ARV), anti-malarial, hepatitis treatment and medicines from other therapeutic categories.

(b) To carry on any other such business of manufacturing, buying, selling, exporting and distributing pharmaceutical, medicinal, and medicated preparations, medicines, drugs, herbs, and of and in pharmaceutical, medicinal, proprietary and industrial preparations, compounds and articles of all kinds.

(c) To manufacture, make up, prepare, buy, sell, and deal in all articles, substances, and things commonly or conveniently used in or for making up, preparing, or packing any of the products in which the Company is authorised to deal, or which may be required by customers of or persons having dealings with the Company.

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(d) To invest in pharmaceutical and related assets, including, amongst other items, investments in pharmaceutical companies, products, businesses, divisions, technologies, devices, sales force and other marketing capabilities, development projects and related activities, licenses, intellectual and similar property rights, premises and equipment, royalty rights and all other assets needed to operate a pharmaceuticals business.

(e) To establish, maintain and operate laboratories for the purpose of carrying on chemical, physical and other research in medicine, chemistry, industry or other unrelated or related fields.

(f) To borrow or raise money in such manner as the Company shall think fit, and in particular by the issue of debentures, stock (perpetual) or otherwise, and to ensure the repayment of any money borrowed, raised or owed by mortgage, lieu or charge upon the whole or any of the Company’s assets.

(g) To carry on any trade or business whatsoever and the Company has power to do all such things as are incidental to or conducive to the carrying on of any trade or business whatsoever.

16.14 Extracts of the Company’s Articles of Association

16.14.1 Directors

i) Number of Directors

The minimum number of the Board shall be four and the maximum shall be 12. At least 51% of the Board shall be non-executive. (Article 98)

Shareholders shall be entitled to propose suitable candidates for consideration for appointment as Directors to the Nominating Committee.

The Nominating Committee shall recommend to the Board candidates for directorship to be filled by the Members. The responsibility to nominate candidates for directorship rests on the full Board after considering recommendations of the Nominating Committee. (Article 100)

ii) Appointment of Directors

The Directors shall be appointed by the Company at a properly constituted general meeting. (Article 99)

iii) Alternate Directors

Subject to the approval of the Board, each Director shall have the power to appoint any person, apart from a fellow Director, to act as alternate director in his or her place during his or her absence and at his or her discretion to remove such alternate director and on such appointment being made, the alternate shall, except as regards remuneration and the power to appoint an alternate, be subject in all respects to the terms and conditions existing with reference to the other Directors of the Company and each alternate director, while so acting, shall exercise and discharge all the functions, powers and duties of the Director whom he represents. An alternate director shall ipso facto cease to be an alternate director if his appointer ceases for any reason to be a Director. All appointments and removals of alternate directors shall be affected by instrument in writing delivered at the registered office of the Company signed by the appointer. (Article 109)

iv) Remuneration of Directors

The Directors shall be paid all their travelling and other expenses properly and necessarily incurred by them in and about the business of the Company, and in attending meetings of the Directors or of

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committees thereof, and if any Director shall be required to perform extra services or to go to reside abroad or otherwise shall be specifically occupied about the Company’s business, he shall be entitled to receive a remuneration to be fixed by a disinterested quorum of Directors, which may be in addition to or in substitution of any other remuneration. (Article 102)

v) Power of Directors to Vote on Contracts

A Director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the Company or in any matter which is about to be discussed or determined by the Board or a committee of the Board shall declare the nature of his interest at a meeting of the Board in accordance with Section 198 (C) (iii) of the Act and to the extent that the discussion or decision concerns that interest, he shall exclude himself from further attendance at that meeting.

The above prohibitions shall not apply to:

i. any arrangement for giving of any Director any security or indemnity in respect of money lent by him to or obligations undertaken by him for the benefit or the Company;

ii. any arrangement for the giving by the Company of any security to a third party in respect of a debt or obligation of the Company for which the Director himself has assumed responsibility in whole or in part under a guarantee or indemnity or by the deposit of a security;

iii. any contract by a Director to subscribe or underwrite shares or debentures of the Company; or

iv. any contract or arrangement with any other company in which he is interested only as an officer or as holder of less than 49% of the total shareholding of the other company or other securities, and these prohibitions may at any time be suspended or relaxed to any extent, and either generally or in respect of any particular contract, arrangement or transaction, by the Company in a General Meeting. (Article 112)

vi) Disqualification of Directors

The office of Director shall ipso facto be vacated if the Director:

i. ceases to be a Director by virtue of Section 195 or 199 of the Act;

ii. becomes prohibited from being a Director by reason of any order made under Section 199 of the Act;

iii. becomes of unsound mind;

iv. becomes bankrupt or makes any arrangement or composition with his or her creditors;

v. resigns his or her office by notice in writing to the Company;

vi. is for more than six months absent without permission of Directors from meetings of the Directors held during that period. (Article 106)

vii) Proceedings of Directors

The Board may meet for the dispatch of business, adjourn, and otherwise regulate their meetings, as they think fit. Questions arising at any meeting shall be decided by a majority of votes unless otherwise provided herein. In case of an equality of votes, the Chairman shall have a second or casting vote. (Article 124)

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The meetings of the Board shall be held on a three-monthly basis or as shall be determined by the Board for the efficient conduct of the business and affairs of the Company. (Article 125)

viii) Board Committees/Sub-Committees

The Board shall appoint such committees/sub-committees as necessary to carry on the duties of the Board, of which at least two members must be Board members. (Article 131)

The Board, shall as soon as is commercially practical, establish Board committees as follows:

i. an audit committee, which shall be responsible for reviewing financial management in the Company;

ii. a remuneration committee, which shall be responsible for reviewing financial management in the Company;

iii. a risk committee, which shall be responsible for ensuring that a risk profile is compiled by management and assurance efforts and reporting to the Board;

iv. a nominating committee, which shall be responsible for proposing new nominees for the Board and for assessing the performance and effectiveness of Directors to perform their role in the Company. (Article 132)

The composition of the committees shall be determined by the Board, taking into account operation and commercial need. Except in respect of the Audit Committee, persons who are not Directors shall not be appointed to Board Committees. (Article 133)

The Board shall be authorised to establish such additional committees as the Directors may deem appropriate from time to time. (Article 134)

ix) Rotation of Directors

At each General Meeting of the Company, one-third of the Board or, if their number is not a multiple of three, then the number nearest to but no less than one-third, shall retire from office, provided that, if a person is appointed Chief Executive Officer or Executive Chairman or other Director while employed by the Company, the contract under which such person is employed may provide that he or she shall not, while he continues to hold that position or office, be subject to rotation and that he or she shall not be taken into account in determining the rotation or retirement of Board members provided further that no more than half of the Board may be appointed in positions which shall not subject them to retirement by rotation. (Article 115)

x) Quorum

The quorum necessary for the transaction of business of the Board shall be not fewer than seven of the Directors. If no quorum is present at any meeting of the Board within 30 minutes after the specified time, the meeting shall be adjourned to a date two days later, at the same time and venue, or if that date is not a Business Day, to the next succeeding Business Day and if at such adjourned meeting a quorum is not present within 30 minutes from the time of that meeting, the Directors present shall constitute a quorum. Written notice of such adjournment, specifying the business to be dealt with at the adjourned meeting, shall be given forthwith to all Directors; if written notice is not so given to the Directors, in the manner set out herein. The adjourned meeting may only deal with the matters specified on the agenda for, but not dealt with at the meeting which was adjourned for lack of quorum. (Article 101)

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xi) Delegation/Chairman of the Board

The Board may from time to time appoint one or more of their body to the office of Chairman for such period and on such terms as they think fit, and, subject to the terms of any agreement entered into in any particular case, may revoke such appointment. A Director so appointed shall not, while holding that office, be subject to retirement by rotation or be taken into account in determining the rotation of Board, but his or her appointment shall be automatically terminated if he or she ceases for any cause to be a Director. (Article 138)

The Board may entrust to and confer upon the Chairman any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit, and either collaterally with or to the exclusion of their own powers and may from time to time revoke, withdraw, alter or vary all or any of such powers. (Article 139)

xii) Borrowing Powers

The Directors may exercise all the powers of the Company to borrow money, and to mortgage or charge its undertaking, property and uncalled capital, or any part of it, and to issue debentures, debenture stock, and other securities whether outright or as security for any debt, liability or obligation of the Company or of any third party; except that the amount for the time being remaining undischarged of moneys borrowed or secured by the directors apart from temporary loans obtained from the Company’s bankers in the ordinary course of business shall not any time, without the previous approval of the company in general meeting, exceed the nominal amount of the share capital of the Company for the time being issued, but a lender or other person dealing with the Company shall not be concerned to see or inquire whether the limit is observed. (Article 104)

A debt incurred, or security given in excess of the limit referred to in Article 104 is not invalid or ineffectual except in the case of express notice to the lender or the recipient of the security at the time when the debt was incurred, or security given that the limit imposed by Article 104 had been or was as a result exceeded. (Article 105)

16.14.2 Transfer and Transmission of Shares

There shall be no restriction on the transfer of shares. (Article 29)

Any member may transfer all or any of his or her shares in the form and manner prescribed under the Securities Rules. (Article 30)

In case of the death of a member, the survivor or survivors where the deceased was a joint holder and the personal representatives of a deceased sole holder of a share shall be the only person recognized by the Company as having any title to the share; but nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him or her with other persons. (Article 38)

16.14.3 Meetings

The Company shall in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year and shall specify the meeting as such in the notices calling it, and not more than 15 months shall elapse between the date of one annual general meeting of the Company and that of the next. The annual general meeting shall be held at such place and time as may be determined by the Board. (Article 69)

All general meetings other than annual general meetings shall be called extraordinary general meetings. (Article 70)

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16.14.4 Proceedings at General Meetings

All business shall be deemed special that is transacted at an Extraordinary General Meeting, and also all that is transacted at a General Meeting, with the exception of declaring a dividend, the consideration of accounts and the Board report and auditors, the election of Board in the place of those retiring and the appointment of, and the fixing of the remuneration of the auditors. (Article 76)

No business shall be transacted at any General Meeting unless a quorum of three members who together hold not less than 51% of the total voting rights of the Company is present either in person or by proxy when the meeting proceeds to business. Any member who participates at the commencement and for the duration of a meeting by way of a telephone conference call or by way of a video conference or audio-visual means shall be deemed to be present at the meeting and counted towards the quorum. (Article 77)

If no quorum is present at any General Meeting within 30 minutes of the specified time, the meeting shall be adjourned to the same day seven days later at the same time and venue or if that day is not a business day, to the next succeeding business day, and if at the adjourned meeting a quorum is not present within 30 minutes of the time of that meeting, the members present shall constitute a quorum. Written notice of such adjournment specifying the business to be dealt with at the adjourned General Meeting shall be given forthwith to each of the members. If written notice is not so given, the adjourned meeting may not be held until notice is given to the members in the manner set out herein, subject to the provisions of the Companies Act. (Article 78)

The chairman, if any, of the Board shall preside as chairman at every General Meeting of the Company and or if there is no such chairman, or if at any meeting he is not present within fifteen minutes after the time appointed for holding the meeting or is unwilling to act as chairman, the members present shall choose someone from their number to be chairman. (Article 79)

16.14.5 Voting of Members

Subject to any rights or restrictions for the time being attached to any class or classes of shares, on a show of hands every member present in person or by proxy or being a corporation represented by a representative appointed in accordance with Article 94 shall have one vote and one poll every member shall vote according to the number he or she has. On a poll every member present in person or by proxy or being a corporation represented by a representative appointed in accordance with Article 97 shall have one vote for each share of which he is the holder. (Article 87)

In case of joint holders, the vote of the senior holder who tenders a vote whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the register of members. (Article 88)

A member of unsound mind in respect of whose estate a manager has been appointed under the Administration of Estates of Persons of Unsound Mind Act (Cap.155) may vote whether on a show of hands or on a poll by his manager or other person authorised by any court of competent jurisdiction to act on his behalf and such person may on a poll vote by proxy. (Article 89)

No member shall be entitled to vote at any General Meeting unless all calls or other sums presently payable by him or her in respect of shares in the Company have been paid. (Article 90)

On a poll, votes may be given either personally or by proxy. (Article 91)

The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorized in writing, or, if the appointer is a corporation, either under Seal, or under the hands of an officer or attorney duly authorized. A proxy need not be a member of the Company but shall be entitled to the same rights to address a meeting as the member appointing him. (Article 92)

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Corporation Acting by Representatives at Meetings

Any corporation which is a member of the Company may by resolution of its Board or other governing body authorize such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members of the Company, and the person so authorized shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual member of the Company. (Article 97)

16.14.6 Dividends and Reserve

The Company in a general meeting may declare dividends, but no dividend shall exceed the amount recommended by the Board. (Article 144)

The Board may from time to time pay to the members such interim dividends as appear to the Board to be justified by the profits of the Company. (Article 145)

No dividend shall be paid otherwise than out of profits. (Article 146)

The Board may, before recommending any dividend, set aside out of the profits of the Company such sums as they think proper as a reserve or reserves which shall, at the discretion of the Board, be applicable for any purpose to which the profits of the Company may be properly applied, and pending such application may, at their discretion either be employed in the business of the Company or be invested in such investments (other than shares of the Company) as the Board may from time to time think fit. The Board may also without placing the same to reserve carry forward any profits which they may think prudent not to divide. (Article 148)

16.14.7 Alterations of Share Capital

The Company may from time to time by Ordinary Resolution increase the share capital by such sum, to be divided into shares of such amount, as the resolution shall prescribe. (Article 62)

The Company may by ordinary resolution, before the issue of any new shares determine that the any of them shall be offered in the first instance either at par or at premium, to all the existing holders of any class of shares in proportion as nearly as may be to the amount of the capital held by them respectively, or make any other provisions as to the issue of the new shares; but in default of any such determination, the new shares may be dealt with as if they formed part of the shares in the original capital. (Article 63)

Except so far as otherwise provided by the conditions of issue or by these articles, any capital raised by the creation of new shares shall be considered part of the original capital and shall be subject to the provisions herein contained with reference to the payment of calls and instalments, transfer and transmission, forfeiture, lieu, surrender and otherwise, unless otherwise provided in accordance with those articles, the new share shall be ordinary shares. (Article 64)

The Company may by Ordinary Resolution

i. consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;

ii. subdivide its existing shares, or any of them, into shares of smaller amount than is fixed by the memorandum of association subject, nevertheless, to the provisions of Section 71 (1) (d);

iii. cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person; (Article 65)

The Company may by Special Resolution reduce its share capital, any capital redemption reserve fund or any share premium account in any manner and with, and subject to, any incident authorised, and consent required, by law. (Article 66)

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The members may in a General Meeting by Ordinary Resolution authorise the Board to allot unissued shares to existing shareholders pro rata to their shareholding unless issued for the acquisition of assets. The General Meeting may further authorise the Board to allot unissued shares and/or give options to subscribe for the unissued shares, as the Board in its discretion may think fit including under an employee share ownership plan, provided this has been approved by the Securities Exchange. (Article 67)

Where in any allotment of shares it would become inevitable to allot fractions of shares to members, the fractions shall be withheld by the Board to be sold by them as they shall deem fit for the benefit of the members. (Article 68)

16.15 Other Statutory Disclosures

16.15.1 ‘The Company declared and paid a final dividend for the financial year ended on 31 March 2016 in the amount of UGX 12,853 million (UGX 3.5 per share118) and an interim dividend in relation to the six months ended on 30 September 2016 of UGX 12,261 (UGX 3.4 per share119)’.

16.15.2 The Company is aware of arrangements to market the Institutional Pool to Institutional Investors and not Retail Investors. Certain Institutional Investors and not Retail Investors have expressed interest in subscribing for more than 5% of the offer shares

16.15.3 The Offer size will not be increased, i.e. the Offer does not contain a “Greenshoe” option.

16.15.4 The Company shall ensure continued retention of suitably qualified management during Listing and no change of management for a period of 12 months following the Listing other than for reason of a serious offence that may be considered to affect the integrity or be inappropriate for management of a listed company in line with the eligibility criteria of listing on the MIMS.

16.15.5 There are no arrangements known to the Company that may at a subsequent date result in a change in control of the Company.

16.16 Auditors for the Last Five Financial Years

Ernst & Young Certified Public Accountants of Uganda have been the auditors of the Company for the last five financial years.

16.17 Documents Available for Inspection

The following documents, or copies thereof, may be inspected at the CiplaQCIL’s registered office during normal working hours on any working day during the Offer period:

i. CiplaQCIL’s Certificate of Incorporation

ii. Memorandum and Articles of Association of CiplaQCIL

iii. A copy of the Board Resolution approving the IPO

iv. A copy of the Shareholder’s Resolution approving the IPO

v. A copy of this Prospectus and forms to be used during the Offer

vi. The published audited financial statements for the last five years, i.e., 1 April 2013 to 31 March 2018

118 Calculated using Total Issued Shares of 3,651,909,200.119 Calculated using Total Issued Shares of 3,651,909,200.

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vii. Consent letters from the Transaction Advisor, Legal Advisors, Reporting Accountants and the Lead Sponsoring Broker

viii. A signed copy of the Legal Opinion issued by Bowmans (AF Mpanga Advocates)

ix. A signed copy of the Reporting Accountant’s Report issued by Ernst & Young Certified Public Accountants of Uganda

x. Written statement by the auditor setting out the adjustment made by them in arriving at the figures shown in the Accountant Report

xi. A copy of the letter of no objection from the National Drug Authority

xii. The letters of approval for the IPO by the CMA

xiii. The letters of approval for the listing of the shares from the USE

xiv. Copies of Material Contracts set out in Section 16

xv. Copies of Directors’ Service Contracts

xvi. Assets Register

xvii. Deed of confirmation and restatement dated 3 February 2017

xviii. Valuation report relative to moveable and immoveable property.

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Our Reference: WK/1363/AFM/193/2016 Your Reference:Direct Line: +256 31 226 3747 Date: 9 August 2018Email Address: [email protected]

Cipla Quality Chemical Industries LimitedPlot 1- 7, 1st Ring Road, Luzira Industrial Park,KAMPALA.

Dear Sirs

RE: LEGAL OPINION ON THE INITIAL PUBLIC OFFER OF CIPLA QUALITY CHEMICAL INDUSTRIES LIMITED ON THE UGANDA SECURITIES EXCHANGE (“USE”).

17.1 Background

We have acted as legal advisors to Cipla Quality Chemical Industries Limited (CiplaQCIL) in relation to the proposed offer for sale by the Selling Shareholders of the Offer Shares and the listing of the Company on the USE (collectively, the “Transaction”) upon the terms and conditions set out in the Prospectus.

Unless otherwise specifically defined, the terms defined in the Prospectus have the same meaning in this opinion.

17.2 Documents

This opinion is based on our examination of copies of the following documents:

i) the Certificate of Incorporation of CiplaQCIL dated 10 June 2005, the Certificate of Re-registration as a public company CiplaQCIL dated 7 October 2016, the amended Memorandum of Association and Articles of Association filed on 5 October 2016;

ii) a special resolution of the CiplaQCIL dated 26 September 2016 approving the re-registration of the CiplaQCIL as a public limited liability CiplaQCIL, adopting the Amended Memorandum and Articles of Association;

iii) a resolution of the Board of Directors of the CiplaQCIL dated 27 September 2016 effecting the resolution of the CiplaQCIL to carry out the Transaction;

iv) a special resolution of the CiplaQCIL dated 21st May 2018, approving the Transaction;

v) a resolution of the Board of Directors of the CiplaQCIL dated 21 May 2018 effecting the resolution of the CiplaQCIL to carry out the Transaction;

vi) resolution dated 8 August 2018 appointing the independent non-executive directors.

vii) the Prospectus;

17 Uganda Legal Opinion on CiplaQCIL

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viii) The Placement Agreement entered into between the CiplaQCIL, the Selling Shareholders and Lead Transaction Advisor dated 26 July, 2018 (the “Placement Agreement”) and the Placement Memorandum (the “Placement Memorandum”) (collectively referred to as ‘Transaction Agreements’);

ix) Share Certificates No. 1 in respect of Meditab Holdings Limited, No.2 in respect of Capitalworks SSA1, No.5 in respect Cipla (EU) Limited, No.7 in respect of Fredrick Mutebi Kitaka and No.8 in respect of George William Baguma, No. 6 in respect of Emmanuel Katongole all dated 14

February 2017 and No.3 in respect of AMISTAD LTD issued on 19th March 2018 respectively. CiplaQCIL such other records and documents relating to the business of CiplaQCIL as we may have considered necessary and appropriate for the purposes of this opinion.

The documents listed above for the purpose of this opinion will be referred to together as the “Documents”.

17.3 The Assumptions

For purposes of this opinion we have assumed:

i) that all the information contained in the Documents supplied to us by CiplaQCIL, and the Lead Transaction Adviser and by their respective officers and advisers is true, accurate and up to date;

ii) the genuineness and completeness of the Documents, and the conformity to original documents of all copies of the Documents, submitted to us;

iii) that the Documents, all agreements and all other relevant documents have been duly authorised and duly executed and delivered by the parties to those Documents (other than CiplaQCIL);

iv) that all copies of and signatures on the Documents supplied to us are authentic;

v) with respect to matters of fact, we have relied on the representations of CiplaQCIL and its officers and advisors contained in the Documents;

vi) that the governmental or regulatory bodies which granted approval to the Offer were properly constituted in accordance with the applicable laws, regulations and rules, were duly authorised to grant the approvals and acted within the bounds of that authority;

vii) that the approvals have not been amended or withdrawn, and are in full force and effect;

viii) that the Memorandum and Articles of Association of CiplaQCIL supplied to us have not been amended or varied;

ix) the obligations of all parties (other than the obligations of CiplaQCIL) to the Documents, are binding on such parties;

x) that the resolutions referred in clause 2(a) and (b) above have been validly passed and have not been amended or rescinded; that they are complete and accurate and remain in full force and effect and that all signatures on the originals of such resolutions are genuine and were not fraudulently obtained; and

xi) that no law or regulation of a jurisdiction other than Uganda affects the opinions given below.

17.4 The Opinion

This opinion is confined to matters of Ugandan law as at the date of this opinion and is governed by and should be construed in accordance with the laws of Uganda. In addition, the opinions expressed herein are

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based upon:

i) the information supplied to us in the Documents by the CiplaQCIL, its officers and advisors;

ii) a due diligence conducted by ourselves dated June 13, 2018;

Subject to the assumptions set out above and the qualifications set out below, we are of the following opinion.

17.5 Status of the CiplaQCIL

i) CiplaQCIL is a duly registered public limited liability company incorporated in Uganda, with power to execute, deliver and exercise its rights and perform its obligations pursuant to the Transaction.

ii) The execution, delivery and performance of the Transaction has been duly authorised by the requisite corporate action and as such, the execution, delivery and performance shall not result in any violation by CiplaQCIL of any term of its Memorandum or Articles of Association or of any law or regulation having the force of law in Uganda and applicable to the Transaction.

iii) The results of a search of the Registry of Companies at the Uganda Registrations Services Bureau conducted on 30th May 2018 showed that there was no order or resolution for the winding-up of CiplaQCIL and no notice or appointment of a liquidator or receiver of CiplaQCIL had been filed.

iv) The sale of the Offer Shares has been duly authorised by CiplaQCIL and when the purchase price for the Offer Shares is paid and the transfers of the respective Offer Shares have been duly effected and delivered to the respective purchasers in accordance with the conditions of sale as set out in the Prospectus, the transfer of shares will constitute , legally binding and unconditional obligations of CiplaQCIL in accordance with their terms except as the same may be limited by bankruptcy, insolvency or other similar laws affecting creditors’ rights generally and by general principles of equity.

v) No consents, licences, approvals or authorizations of any governmental or other authority or agency in Uganda are required by law in connection with the execution, delivery and performance of the Transaction by CiplaQCIL, except as indicated in paragraph 10 below, which consents have been obtained and remain in effect.

17.6 Licenses

All material licenses and consents required by CiplaQCIL to perform its business have been duly obtained and are current.

17.7 Ownership of Assets

i) CiplaQCIL is the registered proprietor of property comprised in leasehold certificate of title, LRV 3484, Folio 4, Plot 1 – 7 1st Ring Road, 4 – 8 2nd Ring Road, 10 3rd Ring Road, 2 – 6 2nd Link Road, 9 – 11 1st Ring Road, 1 1st Link Road and 10 2nd Ring Road, land at Luzira, Kampala. Uganda Investment Authority (“UIA”) granted CiplaQCIL a leasehold interest in the land for a term of 99 years from 21 December 2005. This property houses the manufacturing facility of CiplaQCIL.

ii) CiplaQCIL is also the registered proprietor of property comprised in leasehold certificate of title LRV 4420 Folio 3, Plots 13-15 and 17-23 1st Ring Road and 1, 3 and 5, 2nd Ring Road, Kampala. Under the Lease Agreement, UIA granted CiplaQCIL a leasehold interest in the land for an initial term of 5 years from 25 May 2012. The term was extended to 49 years starting from 25 May 2012.

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iii) We have conducted independent searches at the Ministry of Lands and Urban Development Registry and obtained search reports dated 25th May 2018 and we confirm that the title of CiplaQCIL to the aforementioned properties was valid and unencumbered as at the date of the searches.

iv) CiplaQCIL owns moveable assets such as plant and machinery, furniture and equipment as detailed in the assets register kept at the Companies premises, which assets register is available for inspection.120

17.8 Material Litigation and Other Legal Action

The Company is or has been involved or interested in the following litigious matters in the last nine months:

a) Application No. 1 of 2016 Cipla Quality Chemical Industries Limited versus Uganda Revenue Authority (“URA”) before the Tax Appeals Tribunal.

i) On 13 March 2013, the URA issued the Company with a withholding tax assessment of UGX 901,600,000 on the grounds that the royalties on licensed intellectual property that Cipla granted to the Company are taxable.

ii) The Company objected to the withholding tax assessment on the grounds that the licensed intellectual property was an equity contribution in kind, and therefore no withholding tax applied. The URA did not accept the Company’s grounds of objection and confirmed the tax assessment through its objection decision dated 18 December 2015.

iii) The Company paid 30% of the tax assessed in accordance with Section 103 of the Income Tax Act, Cap. 340 and lodged an appeal to the Tax Appeals Tribunal against the tax assessment.

iv) The Company and URA on 14 June 2018 registered a consent settlement order in court by which the Company agreed to pay to URA UGX 805,000,000 in the interest of closing the matter. Having earlier paid UGX 270,480,000 as 30% of the tax assessed, the Company has paid the balance of UGX 534,520,000 in full settlement of the consent settlement order.

b) Civil Suit No. 470 of 2016, Enock Musasizi versus CiplaQCIL121

i) The Plaintiff, a former employee of the Company, filed a suit against CiplaQCIL on 2 September 2016 seeking to recover compensation for occupational injury, general, punitive and special damages for injuries he claims were negligently occasioned to him, during the course of his employment with the Company. The Plaintiff alleged that over the course of his employment with the Company, he was exposed to several toxicants and developed several complications and illnesses. Consequently, the Plaintiff sought compensation for injury amounting to UGX 36,732,000; general damages of UGX 200,000,000; special damages of UGX 91,200,000; punitive damages of UGX 20,000,000; interest at 21%; and costs of the suit.

ii) The Company, in a written statement of defence prayed for costs and dismissal and denied that: (i) the Plaintiff had any cause of action against it and has raised a preliminary objection that the suit is beyond the pecuniary jurisdiction of the Chief Magistrate; and (ii) that the Plaintiff was not exposed to any hazardous materials as he was employed as a cleaner.

iii) The matter is pending hearing.

c) Industrial Court Labour Dispute No.271 of 2016 Enock Musasizi v CiplaQCIL

120 There is no public registry in Uganda for moveable assets such as plant and machinery and as such there are no documents of title issued in respect to the ownership of these assets.

121The Defendant is stated as Cipla/Quality Chemicals in the Complaint.

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i) The Plaintiff a former employee of the Company seeks UGX. 85,558,266 as alleged unlawful termination.

ii) The Company has filed a response in which it has disputed the claims. The Claimant was employed on short- term contracts, the longest being for one year and the rest for six months at a time. In or around 2013, the Claimant complained of impaired vision and went on sick leave and upon expiry he refused to return to work not withstanding request to explain his continued abscondment. The Company decided not to renew his contract. The Company asserts that his contract was brought to a lawful end.

iii) There has not been any progress in terms of court hearing since the matter was filed.

d) Labour Dispute No.50 of 2017 KCCA/NDC.CB/210/16 Lucy Namakoye (deceased) suing through legal representative v CiplaQCIL

i) The Claimant, who is a legal representative of Lucy Namakoye, a former employee of the CiplaQCIL between 2007-2013, claims UGX 40,092,920 being outstanding gratuity, general damages and interest thereon at the rate of 21% from the date of the claim till payment in full and costs of the suit. The Claimant alleges that at the death of Lucy Namakoye, the Company processed payment in respect to the deceased’s benefits amounting to UGX 37,916,107 and left an amount of UGX 20,092,920 unpaid for which she seeks payment together with general damages of UGX 20,000,000 and interest of 21% per annum and costs.

ii) In response the CiplaQCIL denies the claim and contends that the deceased’s benefits were properly calculated, processed and paid.

iii) The suit is pending hearing.

e) Civil Suit No. 636 of 2016, Godfrey Magezi (Plaintiff) v National Medical Stores, CiplaQCIL and Attorney filed in the Civil Division of the High Court of Uganda.

i) The Plaintiff claimed that NMS and CiplaQCIL entered into certain agreements pursuant to which CiplaQCIL supplied products to NMS in breach of the terms of the memorandum of understanding and the Public Procurement and Disposal of Public Assets Act 2003 and regulations thereto which occasioned a financial loss to the GOU amounting to USD18,082,739.30.

ii) The Plaintiff prayed for inter alia: (i) a declaration and recovery of financial loss from CiplaQCIL of USD18,082,739.30 caused in execution and implementation of contracts between National Medical Stores and CiplaQCIL; and (ii) a declaration that fraudulent activities were done under the contracts.

iii) The High Court dismissed the suit on 9 November 2017. On 27 March 2018, an appeal was filed in the Court of Appeal as Civil Appeal No.79 of 2018. The appeal seeks to set aside the dismissal of the suit in the high court. The matter has not yet been set down for hearing.

Save as discussed above, there is no other material litigation, prosecution or other civil or criminal legal action in which the CiplaQCIL or its Directors are involved.

17.9 Share Capital

The existing capital of CiplaQCIL is in conformity with the requirements for its admission to listing on the USE and CiplaQCIL has received all necessary CiplaQCIL authorisations for the listing of CiplaQCIL’s Shares on the USE.

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17.10 Compliance

i) The Prospectus complies with the requirements of the Capital Markets Authority Act (Cap. 84) (as amended), the Capital Markets Authority (Prospectus) Regulations (S.I. 84-2) (as amended), the Companies Act, 2012 and the Uganda Securities Exchange Listing Rules, 2003.

ii) A copy of the Prospectus is to be delivered to the Registrar of Companies at Kampala for registration as provided under Section 90G(1)(c) of the Capital Markets Authority Act (Cap. 84) (as amended), duly signed by every person named in the Prospectus as a Director of CiplaQCIL, or by his agent, duly authorised in writing.

iii) The Prospectus includes statements made by Ernst & Young as the Reporting Accountants, and by AF Mpanga, Advocates as the Legal Advisors, both of whom are experts for purposes of Section 90M (1) (h)(i) and (ii) of the Capital Markets Authority Act (Cap. 84) (as amended). Accordingly, Ernst & Young and AF Mpanga, Advocates have given and have not, prior to the date of the Prospectus, withdrawn their consent to the issue of the Prospectus containing the statements by themselves in the form and context in which they are included.

17.11 Memorandum and Articles of Associations

The Memorandum and Articles of Association of CiplaQCIL are in conformity with the Laws of Uganda and the Transaction does not contravene any of its provisions.

17.12 The Shareholders Agreement (SHA)

The shareholders have a SHA dated 15th January 2010 which will automatically terminate upon the listing of CiplaQCIL. Certain provisions of the SHA, as specifically set out therein, will survive upon its termination. The Transaction does not contravene the provisions of the SHA.

17.13 Foreign Investors

There are no restrictions on the number or percentage of shares that may be held by foreign investors in CiplaQCIL following its listing on the USE.

17.14 Transaction Agreements

i) The Transaction Agreements have been duly authorised, executed and delivered by CiplaQCIL and constitute valid and legally binding agreements in respect of CiplaQCIL insofar as the laws of Uganda are concerned.

ii) The obligations assumed by CiplaQCIL under the Transaction Agreements constitute legal, valid, binding and enforceable obligations in terms of Ugandan law.

iii) The entry into, and performance by CiplaQCIL of its obligations under the Transaction Agreements will not conflict with or result in a breach or violation of any Ugandan law applicable to CiplaQCIL.

iv) The courts of Uganda will, subject to public policy considerations, recognise and give effect to the choice of the laws of England and Wales as the governing law of the Placement Agreement.122

v) The indemnification provisions set forth in the Placement Agreement do not contravene the laws of Uganda and are enforceable in the courts of Uganda.

122

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vi) An award against CiplaQCIL by an arbitral tribunal appointed in accordance with the provisions of the Placement Agreement, will be recognised and enforced against CiplaQCIL by a Ugandan court of competent jurisdiction when asked to enforce such award, without substantive re-examination or re-litigation on the merits of the subject matter thereof.

17.15 Qualifications

The opinions expressed herein are subject to the following qualifications:

i) We shall not be liable for any inaccuracies in this opinion resulting from the actions and/or omissions and/or wilful misstatements or misrepresentations on the part of CiplaQCIL and/or any of its officers, representatives or agents in the Documents which may take place, or which may be made in connection with the preparation and/or rendering of this opinion.

ii) Any views which are expressed in respect of, or on the basis of, any law, statute, regulation or similar rules, are expressed in respect of the relevant law, statute, regulation or similar rules as it was in force, and on the basis of the provisions thereof, at the date of this opinion.

iii) This opinion is based only on Uganda law as currently applied and interpreted by the Ugandan courts and is limited to questions arising under the laws of Uganda.

iv) Save where expressly stated, we have not opined on matters of fact which we have assumed to be correct as provided.

17.16 Reliance

We express no opinion on any laws other than the Laws of Uganda as at date hereof and we assume no responsibility for updating this opinion as of any date subsequent to the date of this opinion or of advising you of any changes with respect to any matters described in this opinion that may occur subsequent to the date of this opinion.

This opinion is addressed to CiplaQCIL in connection with the Transaction referred to above. It may not, without our express written consent, be transmitted to any other person other than the Transaction Advisor, the Capital Markets Authority and the intended purchasers. It may not be relied upon by any person other than the addressee or for any other purpose without our written consent first had and obtained.

17.17 Consent

In accordance with Regulation2(c)(vi) of the Capital Markets Authority (Prospectus Requirements) Regulations, SI 84-2, we have given, and have not prior to the date of this Prospectus withdrawn our consent to the issue of the Prospectus containing the statements by us in the form and context in which they are included.

Yours faithfully

AF MPANGAPer: William Kasozi, Partner

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The DirectorsCIPLA Quality Chemical Industries Limited Luzira Industrial ParkP.O. Box 34871Kampala, Uganda

18 July 2018

Reporting Accountant’s report on compilation and review of the financial information of Cipla Quality Chemical Industries Limited for the periods ended 31 December 2013 and 31 March 2015, 2016, 2017 and 2018

IntroductionWe hereby submit our Reporting Accountant’s Report in accordance with the requirements of Section 6 and Part 3 of the Third Schedule to the Capital Markets (Prospectus Requirements) Regulations of Uganda and the Fourth Schedule of the Capital Markets (Securities) (Public Offers, Listings and Disclosures) Regulations, 2002 of Kenya, hereafter referred to as “the Regulations”).

We have examined the audited financial statements of Cipla Quality Chemical Industries Limited (the “Company”) for the following periods:

i) 12 months ended 31 March 2018ii) 12 months ended 31 March 2017iii) 12 months ended 31 March 2016iv) 15 months ended 31 March 2015v) 12 months ended 31 March 2015vi) 12 months ended 31 December 2013

Ernst & Young acted as auditors of the Company for the above periods and issued unqualified audit reports.

Responsibility of the directorsThe directors of the Company are responsible for the preparation of the Information Memorandum and all the information contained therein and for the financial statements and financial information to which this Accountants’ Report relates and from which it has been prepared.

Our responsibilityYou required us to prepare an Accountants’ Report to be included in the Information Memorandum for the purposes of preparing an IPO prospectus. Our responsibility is detailed in our letter of engagement. The objective of the engagement was to enable us to state whether, on the basis of our review procedures which do not provide all the evidence that would be required in an audit, anything has come to our attention that causes us to believe that the financial statements were not prepared, in all material respects, in accordance with International Financial Reporting Standards and the requirements of the Companies Act, 2012 of Uganda.

Basis of conclusionThe financial information set out in this report was prepared in accordance with International Standard on Related Services 4410 – Engagement to compile Financial Statements (‘ISRS 4410) and is based on the audited financial statements of the Company, after making the adjustments considered appropriate to make all the financial statements compliant with International Financial Reporting Standards.

Further, to enable us to prepare an Accountants’ Report, we carried out procedures to satisfy ourselves that the information presented in the financial statements was in accordance with the Regulations.

18 Reporting Accountant’s Report

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In compiling the financial information, we have effected an adjustment to the information presented in the audited financial statements as set out below.

Table 1: Summary of adjustments

March 2018 March 2017 March 2016 March 2015* Dec 2013Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000

Prior year adjustments relating to increase in issued capital - - - - 29,504,865

Impact on equity - - - - 29,504,865

*Covers a 15-months period as the company changed its year-end from 31 December to 31 March to align it to the financial year-end of

the parent company, Cipla.

The above prior year adjustment relating to increase in share capital was made to the restated audited financial statements for the year ended 31 December 2013, in order to correct prior period errors and to comply with IAS 8 Accounting policies, changes in accounting estimates and errors. In accordance with IAS 8, an entity shall correct material prior period errors retrospectively in the first set of financial statements authorized for issue after their discovery by: (a) restating the comparative amounts for the prior period(s) presented in which the error occurred; or (b) if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented. In its financial statements for the 15 months period ended 31 March 2015, the Company restated the reported amounts for the year ended 31 December 2013 to recognize an increase in issued capital, as per the shareholders’ resolution of July 2008, and to reverse amounts erroneously recognized as share premium.

In compiling the financial information, we have incorporated the adjustments summarised in Table 1 above and broken down in Table 2 below in order for the financial information to be presented on a consistent basis for each of the years presented.

Table 2: Prior year adjustments to the year ended 31 December 2013 in respect of shareholders' resolution of July 2008

Statement of financial position Statement of changes in equity Dr Cr Dr Cr

Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000Amount due from shareholder 1

29,504,865 - - -

Share premium 2 - - 16,044,000 -

Issued capital 3 - - - 45,548,865

Total 29,504,865 - 16,044,000 45,548,865

Net impact 29,504,865 - - 29,504,865

1 Relates to recognition of a receivable from shareholders, arising from the increase in issued capital to Ushs 45,648,865,000, as per the shareholders’ resolution of July 2008.

2 Relates to the reversal of the amount erroneously recognized as share premium.

3 Relates to the restatement of issued capital to Ushs 45,648,865,000 as a result of the above adjustments and in line with the shareholders’ resolution of July 2008.

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Change of the company’s financial year-end

As a result of the restructuring on 20 November 2013 detailed in Note 1 to the financial statements, the company’s financial year was changed from 31 December to 31 March to align it to the financial year-end of the parent company. As a result, the company prepared two sets of financial statements for 12 and 15 months periods ended 31 March 2015. As such, the statement of comprehensive income in this report reflects 6 accounting periods while the statement of financial position reflects 5 accounting periods.

We consent to the inclusion of this report in the CiplaQCIL IPO Prospectus to be issued on or about 10 August 2018 in the form and context in which it appears.

Certified Public AccountantsKAMPALA

18 July 2018

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Cipl

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L IP

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148

Note

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*15

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Year

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31 M

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31 M

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Note

31 M

ar 2

018

31 M

ar 2

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31 M

ar 2

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31 M

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31

Dec 2

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0

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147,

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45,6

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232,

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126,

165,

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92,4

30,9

7175

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32,5

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1,47

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2532

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25,1

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32,7

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23,8

51,6

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209,

296,

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168,

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Cipla_prospect_18.indd 149 8/11/18 5:19 PM

Page 152: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

150

Issu

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lCa

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1345

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Cipla_prospect_18.indd 150 8/11/18 5:19 PM

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151

Note

Year

end

edYe

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end

edYe

ar e

nded

*15

mon

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o**

Year

end

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Mar

20

1831

Mar

201

731

Mar

201

631

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201

531

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201

531

Dec

201

3Us

hs ‘0

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(1,2

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(188

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)In

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(38,

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(3,3

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(10,

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(25,

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(1,0

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00)

(9,1

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(dec

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h eq

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of y

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Cipla_prospect_18.indd 151 8/11/18 5:19 PM

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CiplaQCIL IPO Prospectus

152

1. Company information

The Company was incorporated on 10 June 2005 as a joint venture between Quality Chemicals Limited (of Uganda) (‘QCL’) and Cipla Limited (‘Cipla’) for the manufacture and sale of pharmaceutical drugs with emphasis on ARVs and ACTs. Cipla later transferred its shares to Meditab Holdings Limited (‘Meditab’), a company domiciled in Mauritius. The company owns a pharmaceutical plant at Luzira Industrial Park.

On 11 November 2013, Cipla increased its effective stake (through Meditab) in the Company from 36.55% to 51.05% by acquiring an additional 14.5% of the Company from QCL. This restructuring made the Company a subsidiary of Meditab which in turn is an indirectly held, wholly owned subsidiary of Cipla Limited. The Company’s name was subsequently changed from Quality Chemical Industries Limited ‘QCIL’) to Cipla Quality Chemical Industries Limited (‘CIPLAQCIL’) effective 24 March 2014. On 6 August 2015, Cipla acquired an additional 11.25% stake in the Company through its wholly owned subsidiary, Cipla (EU), raising Cipla’s effective interest in the Company to 62.3%.

2. Summary of significant accounting policies

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

(a) Basis of accounting

The financial statements are prepared under the historical cost convention, except where otherwise stated.

(b) Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’). IFRS include International Accounting Standards (‘IAS’), IFRS pronouncements and interpretations issued by the International Accounting Standards Board (‘IASB’). For purposes of reporting under the Companies Act, 2012 of Uganda, the balance sheet in these financial statements is represented by the statement of financial position and the profit and loss account is represented by the statement of comprehensive income. The Company’s financial statements are presented in Uganda Shillings rounded to the nearest thousand (Ushs’000) which is the Company’s functional and presentation currency.

(c) Significant accounting judgments and estimates

The preparation of the financial statements requires management to make judgments, estimations and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities. The key assumptions made concerning the future and other key sources of estimation uncertainty at the reporting date that could have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are below:

Deferred income tax assetsDeferred income tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred income tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with tax planning strategies.

The company considers (i) timing differences that are expected to reverse during the tax holiday period, and are not recognised because they are offset against the government grant (Note (12 b)); and (ii) timing differences which reverse after the tax holiday period, and should be recognized in the financial statements.

Notes to Financial Statements

Cipla_prospect_18.indd 152 8/11/18 5:19 PM

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CiplaQCIL IPO Prospectus

153

2. Summary of significant accounting policies (continued)

(c) Significant accounting judgments and estimates (continued)

Current income taxesUncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. The Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the Company and the tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing. As the Company assesses the probability for litigation and subsequent cash outflow with respect to taxes as remote, no contingent liability has been recognised.

(d) Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and any impairment losses.

Depreciation is calculated on a straight-line basis (prorated over the useful lives) at annual rates estimated to write off the carrying values of assets over their expected useful lives.

The annual depreciation rates in use are:

Buildings Lower of 4% and the lease period for buildings on leased land Motor vehicles 25.0%

Tools and equipment 25.0% Computers 33.3%

Furniture and fittings 25.0%Plant and machinery 10.0%

Assets in the course of construction (capital work-in-progress) are not depreciated. Upon completion, the accumulated cost is transferred to an appropriate asset category, where it is depreciated according to the policy set out above.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition is determined by reference to the asset carrying amount and disposal proceeds and is included in profit or loss in the year the item is derecognised.

(e) Impairment of assets

The Company assesses at each reporting date whether there is an objective indication that long-term assets other than deferred income tax assets are impaired. Where an indicator of impairment exists, the Company makes a formal estimate of the asset’s recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of an asset is the higher of an asset’s fair value less costs to sell and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its life.

Impairment losses recognised in prior years are reversed if and only if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. However, an impairment loss is reversed only to the extent that it does not increase the carrying amount of an asset above the carrying amount that would have been determined for the asset (net of amortisation or depreciation) had no impairment loss been recognised in prior years.

Notes to Financial Statements (continued)

Cipla_prospect_18.indd 153 8/11/18 5:19 PM

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CiplaQCIL IPO Prospectus

154

2. Summary of significant accounting policies (continued)

(f) Inventories

Inventories comprise mainly raw materials, work-in-progress, finished goods, spares and supplies. They are stated at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition are accounted for as follows:

• Raw materials: purchase cost on a weighted average basis including transport costs, handling costs, duties and other costs incurred in bringing the inventories to their present location and condition.

• Finished goods and work in progress: cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Any write down to net realisable value is recognised in profit or loss in the period it is determined.

(g) Financial instruments - initial recognition and subsequent measurement

(i) Financial assets

Date of recognition: Purchases or sales of financial assets that require delivery of assets within a timeframe generally established by regulation or convention in the marketplace are recognised on the trade date, i.e. the date that the company commits to purchase or sell the asset.

Initial recognition of financial instruments: The classification of financial instruments at initial recognition depends on the purpose for which the financial instruments were acquired and their characteristics. All financial instruments are measured initially at their fair value plus, in the case of financial assets and financial liabilities not at fair value through profit or loss, any directly attributable incremental costs of acquisition or issue.

Bank balances, due from shareholders and trade receivables: Bank balances, amounts due from shareholders and trade receivables are financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not classified as ‘Financial assets held for trading’, designated as ‘Financial investments - available-for-sale’ or ‘Financial assets designated at fair value through profit or loss’. After initial measurement, bank balances and trade receivables are subsequently measured at amortised cost using the effective interest rate method, less allowances for impairment. Amortisation is calculated by taking into account any discount or premium on acquisition fees and costs that are an integral part of the effective interest rate. The amortisation is included in profit or loss.

De-recognition of financial assets

A financial asset is derecognised where:• The rights to receive cash flows from the asset have expired; or• The company has transferred its rights to receive cash flows from the asset or has assumed an obligation

to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and

• Either (a) the company has transferred substantially all the risks and rewards of the asset, or (b) the company has neither transferred nor retained substantially all the risks and rewards of the assets but has transferred control of the asset.

Notes to Financial Statements (continued)Notes to Financial Statements

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CiplaQCIL IPO Prospectus

155

2. Summary of significant accounting policies (continued)

(g) Financial instruments - initial recognition and subsequent measurement (continued) (ii) Impairment of financial assets

The Company assesses at each reporting date whether there is any objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably be estimated.

Evidence of impairment may include indications that the debtor or group of debtors is experiencing significant financial difficulty, default or delinquency in payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For bank balances, due from shareholders and trade receivables carried at amortised cost, the company first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant.

If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss. Trade receivables, together with the associated allowance, are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to profit or loss.

Notes to Financial Statements (continued)Notes to Financial Statements (continued)

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CiplaQCIL IPO Prospectus

156

2. Summary of significant accounting polices (continued)

(g) Financial instruments - initial recognition and subsequent measurement (continued)

(iii) Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs.

The company’s financial liabilities include trade and other payables, loans and borrowings.

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

Loans and borrowingsAfter initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the Effective interest rate (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in profit or loss.

Trade and other payablesOther accounts payable are carried at amortised cost, which is the consideration to be paid in the future for goods and services received.

De-recognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

(iv) Offsetting of financial instruments

Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

(h) Cash and cash equivalents

For the purposes of the statement of cash flows, cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short-term deposits net of outstanding bank overdrafts, highly liquid investments.

(i) National Social Security Fund (“NSSF”) contribution

The company contributes to the statutory National Social Security Fund (NSSF). This is a defined contribution scheme registered under the National Social Security Act. The company’s obligations under the scheme are limited to specific contributions legislated from time to time and are currently 10% of the employees’ gross salaries. The company’s contributions are charged to profit or loss in the year to which they relate.

Notes to Financial Statements (continued)Notes to Financial Statements

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157

2. Summary of significant accounting policies (continued)

(j) Intangible assets

Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses. Intangible assets comprise: -

• Computer software, which is stated at cost less accumulated amortisation and accumulated impairment losses. Computer software is amortised over its economic useful life of three years; and

• Licences and patents, which are stated at cost and amortised for over a period of 10 years.

(k) Tax

Current income taxTaxation is provided in the statement of comprehensive income on the basis of the results included therein adjusted in accordance with the provisions of the Ugandan Income Tax Act (Cap. 340).

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, by the reporting date. Current income tax relating to items recognised outside profit or loss is recognised in other comprehensive income.

Deferred taxDeferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred income tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized except:

• Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred income tax relating to items recognised outside profit or loss is recognised in other comprehensive income. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Notes to Financial Statements (continued)Notes to Financial Statements (continued)

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158

2. Summary of significant accounting policies (continued)

(k) Tax (continued)

Value Added Tax (VAT)Revenues, expenses and assets are recognised net of the amount of VAT except:

• Where the VAT incurred on a purchase of goods and services is not recoverable from Uganda Revenue Authority, in which case the VAT is recognised as part of the cost of acquisition of the asset or as part of the expense for the item as applicable; and

• Receivables and payables are stated with the amount of VAT included.

The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

(l) Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

(m) Presentation currency and foreign currency transactions

The financial statements are presented in Ugandan Shillings (Ushs), which is also the company’s functional currency. Transactions during the year are converted into Uganda Shillings at rates ruling at the transactions dates. Monetary assets and liabilities at the reporting date, which are expressed in foreign currencies, are translated into Uganda Shillings at rates ruling at that date. The resulting differences from conversion and translation are dealt with in profit or loss in the year in which they arise.

(n) Government grants and leased land

Government grantsGovernment grants are recognised where there is reasonable assurance that the grant will be received, and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the company receives non-monetary grants, the asset and that grant are recognised at fair value and released to profit or loss over the expected useful life of the relevant asset by equal annual instalments.

Capital contributionsCapital contributions are accounted for under a separate account in equity.

Leased land Leased land is initially and subsequently measured at cost. The land is not amortised because the underlying value of the asset appreciates over time rather than depreciates.

(o) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and other sales taxes or duty.

Sale of goodsRevenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods.

Notes to Financial Statements (continued)Notes to Financial Statements

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159

2. Summary of significant accounting policies (continued)

(o) Revenue recognition (continued)

Other incomeInterest income on bank deposits is recognised as interest accrues using the effective interest rate method. Other revenues earned by the company are recognised as they are earned.

(p) Cash dividends

The company recognises a liability to make cash distributions to shareholders when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the corporate laws in Uganda, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. The approved dividends are recognised as liabilities until when paid. Interim dividends are charged to equity when paid.

(q) Adoption of new and amended standards and interpretations

The accounting policies adopted are consistent with those of the previous financial years. Amendments resulting from changes in standards and interpretations and improvements to IFRSs to the following standards did not have any impact on the accounting policies, financial position or performance of the company:

Numerous new standards, amendments and interpretations to existing standards have been issued but are not yet effective. Below is a list of new standards that are likely to be relevant to the Company.

This description is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt those standards when they become effective. The Company expects that adoption of these standards, amendments and interpretations will in most cases not have significant impact on the Company’s financial position or performance in the period of initial application. In cases where it will have an impact, the Company is still assessing the possible impact as indicated below.

IFRS 15: Revenue from Contracts with CustomersIFRS 15 was issued in May 2015 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2018 with early adoption permitted.

The Company is currently considering engaging a consultant to assist management in assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date.

Notes to Financial Statements (continued)Notes to Financial Statements (continued)

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160

2. Summary of significant accounting polices (continued)

(q) Adoption of new and amended standards and interpretations (continued)

IFRS 9: Financial instruments

IFRS 9, as issued in July 2015, reflects the completion of all the phases of the IASB’s work on the replacement of IAS 39 and applies to the classification and measurement of financial assets and financial liabilities, impairment as well as hedge accounting.

Classification and measurement of financial instruments

Financial Assets:

Financial assets are measured at amortised cost, fair value through profit or loss, or fair value through other comprehensive income, based on both the entity’s business model for managing the financial assets and the financial asset’s contractual cash flow characteristics.

Equity securities are measured at fair value through profit or loss unless the entity chooses, on initial recognition, to present fair value changes in other comprehensive income (OCI).

This option is irrevocable and applies only to equity instruments, which are not held for trading. Unlike debt instruments, gains and losses in OCI are not recycled on sale and there is no impairment accounting.

Derivatives are also measured at fair value through profit or loss. In comparison to IAS 39, there is no divergence of embedded derivatives for financial assets recorded at amortised cost or FVOCI.

The de-recognition principles in terms of IAS 39 remain the same in IFRS 9.

Financial Liabilities:For liabilities designated at fair value through profit and loss, the change in the fair value of the liability attributable to changes in credit risk is presented in OCI. All other classification and measurement requirements in IAS 39 have been carried forward into IFRS 9.

Impairment of financial assets:The expected credit loss model applies to debt instruments recorded at amortised cost or at fair value through other comprehensive income (such as loans, debt securities and trade receivables), lease receivables and most loan commitments and financial guarantee contracts.

Entities are required to recognise either 12-month or lifetime expected credit losses, depending on whether there has been a significant increase in credit risk since initial recognition.

The measurement of expected credit losses would reflect a probability-weighted outcome, the time value of money and reasonable and supportable information.

Effective date and transition:

The standard applies to annual periods beginning on or after 1 January 2018, although early application is permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

The Company is currently considering engaging a consultant to assist management in assessing the impact of IFRS 9 and plans to adopt the new standard on the required effective date.

Notes to Financial Statements (continued)Notes to Financial Statements

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161

2. Summary of significant accounting polices (continued)

(q) Adoption of new and amended standards and interpretations (continued)

IFRS 16 Leases

The scope of the new standard includes leases of all assets, with certain exceptions. A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. The key features of the new standard are:

- The new standard requires lessees to account for all leases under a single on-balance sheet model (subject to certain exemptions) in a similar way to finance leases under IAS 17.

- Lessees recognise a liability to pay rentals with a corresponding asset, and recognise interest expense and depreciation separately.

- The new standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computer) and short-term leases (i.e., leases with a lease term of 12 months or less).

- Reassessment of certain key considerations (e.g., lease term, variable rents based on an index or rate, discount rate) by the lessee is required upon certain events.

- Lessor accounting is substantially the same as today’s lessor accounting, using IAS 17’s dual classification approach.

The new standard is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies IFRS 15.

The new standard permits a lessee to choose either a full retrospective or a modified retrospective transition approach. The new standard’s transition provisions permit certain reliefs. The new standard requires lessees and lessors to make more extensive disclosures than under IAS 17. The amendments however do not have any impact on the financial statements of the Company.

Other amendments issued but not yet effective which the Company does not expect to have an impact on its financial statements are listed below:

- IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (effective date postponed indefinitely).

- IFRS 2 Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2 (Effective 1 January 2018).

- Transfers of Investment Property (Amendments to IAS 40) – Effective 1 January 2018.

Notes to Financial Statements (continued)Notes to Financial Statements (continued)

Cipla_prospect_18.indd 161 8/11/18 5:19 PM

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162

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163

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164

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ion

of i

ntan

gib

le a

sset

s54

0,16

449

5,19

3

542,

374

6

03,5

98

7

57,4

79

61

2,65

3

6,62

9,85

56,

042,

785

5,79

0,28

65,

698,

166

6

,980

,429

5,

192,

921

10.

Finan

ce ex

pens

e

Inte

rest

exp

ense

--

216,

325

289,

806

437,

463

7

23,9

22

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 164 8/11/18 5:19 PM

Page 167: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

165

11.

Profi

t bef

ore t

axYe

ar e

nded

Year

end

edYe

ar e

nded

Year

end

ed15

mon

ths t

oYe

ar e

nded

31 M

ar 2

018

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015

31 M

ar 2

015

31 D

ec 2

013

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Pro

fit b

efo

re ta

x is

sta

ted

aft

er c

harg

ing

/(c

red

iting

):D

epre

ciat

ion

6,08

9,69

15,

547,

592

5,24

7,91

25,

094,

568

6,22

2,95

0

4,5

80,2

68

Am

ort

isat

ion

of i

ntan

gib

le a

sset

s54

0,16

449

5,19

3

542,

374

6

03,5

98

757,

479

61

2,65

3 A

udito

rs’ r

emun

erat

ion

60,0

0057

,016

62,1

6770

,674

88,

830

81,8

02(G

ain)

/lo

ss o

n d

isp

osa

l of p

rop

erty

, pla

nt &

eq

uip

men

t86

,507

(16,

556)

(198

,481

)17

,298

17,2

98-

Net

fore

ign

exch

ang

e g

ains

(1

,176

,440

)(3

,054

,469

)(6

26,3

75)

(2,2

94,3

98)

(

2,91

9,60

2)(1

36,2

34)

12.

Tax

a)

Inco

me t

ax (c

redi

t)/ch

arge

Tax

is p

rovi

ded

for i

n th

e fin

anci

al s

tate

men

ts o

n th

e b

asis

of t

he re

sults

incl

uded

ther

ein,

ad

just

ed in

acc

ord

ance

with

the

pro

visi

ons

of th

e In

com

e Ta

x A

ct

of U

gan

da,

(Cap

340

) les

s an

y ta

x cr

edits

and

with

hold

ing

tax

reco

vera

ble

.

Year

end

edYe

ar e

nded

Year

end

edYe

ar e

nded

*15

mon

ths t

o**

Year

end

ed31

Mar

201

831

Mar

201

731

Mar

201

631

Mar

201

531

Mar

201

531

Dec

201

3Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00

Cur

rent

inco

me

tax

17,9

91,2

3116

,987

,800

13,7

48,8

6210

,279

,315

12,8

49,1

441,

437,

872

Def

erre

d in

com

e ta

x (c

red

it)/c

harg

e (N

ote

12(

b))

(633

,752

)3,

068,

185

--

--

17,3

57,4

7920

,055

,985

13,7

48,8

6210

,279

,315

12,8

49,1

441,

437,

872

Less

:G

rant

rece

ived

(No

te 1

2(c)

)(1

7,99

1,23

1)(1

6,98

7,80

0)(1

3,74

8,86

2)(1

0,27

9,31

5)(1

2,84

9,14

4)(1

,437

,872

)

Inco

me

tax c

harg

e in

the

SOCI

(633

,752

)3,

068,

185

--

--

*Den

otes

a y

ear f

rom

1 A

pril

201

4 to

31

Mar

ch 2

015

whi

le *

* d

enot

es a

15-

mon

ths

per

iod

from

1 J

anua

ry 2

014

to 3

1 M

arch

201

5.

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 165 8/11/18 5:19 PM

Page 168: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

166

12.

Tax (

cont

inued

)

Reco

ncilia

tion

of ta

x exp

ense

/(cre

dit)

to ta

x as p

er ac

coun

ting

loss

The

tax

on

the

Co

mp

any’

s lo

ss b

efo

re in

com

e ta

x d

iffer

s fr

om

the

the

ore

tical

am

oun

t tha

t wo

uld

aris

e us

ing

the

sta

tuto

ry in

com

e ta

x ra

te a

s fo

llow

s:

Year

end

edYe

ar e

nded

Year

end

edYe

ar e

nded

*15

mon

ths t

o**

Year

end

ed31

Mar

201

831

Mar

201

731

Mar

201

631

Mar

201

531

Mar

201

531

Dec

201

3Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00

Pro

fit b

efo

re in

com

e ta

x43

,993

,488

45,2

42,2

1242

,842

,845

33,6

64,6

3540

,559

,099

8

,280

,270

Tax

calc

ulat

ed a

t the

sta

tuto

ry in

com

e ta

x ra

te

of 3

0%13

,198

,046

13,5

72,6

6412

,852

,854

10,0

99,3

9112

,167

,730

2,4

84,0

81

Tax

effe

ct o

f:Ex

pen

ses

and

inco

me

not d

educ

tible

for

tax

pur

po

ses,

net

48

4,90

21,

474,

954

298,

248

110,

924

138,

656

2,71

9,21

5

Dep

reci

atio

n o

f no

n-q

ualif

ying

ass

ets

--

-8,

365

10,4

57-

Prio

r yea

r def

erre

d in

com

e ta

x (o

ver)

/und

er

pro

visi

on

--

(26,

737)

105,

932

588,

922

-

Def

erre

d in

com

e ta

x cr

edit/

(cha

rge)

no

t re

cog

nise

d d

urin

g t

he y

ear/

per

iod

3,67

4,53

15,

008,

367

624,

497

(45,

297)

(56,

621)

(3,7

65,4

24)

Tax

gra

nt re

ceiv

ed (N

ote

12(

c))

(

17,9

91,2

31)

(

16,9

87,8

00)

(

13,7

48,8

62)

(

10,2

79,3

15)

(

12,8

49,1

44)

(1,4

37,8

72)

Inco

me

tax (

cred

it)/e

xpen

se

(6

33,7

52)

3,0

68,1

85

-

-

-

-

*Den

otes

a y

ear f

rom

1 A

pril

201

4 to

31

Mar

ch 2

015

whi

le *

* d

enot

es a

15-

mon

ths

per

iod

from

1 J

anua

ry 2

014

to 3

1 M

arch

201

5.

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 166 8/11/18 5:19 PM

Page 169: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

167

12.

Tax (

cont

inued

)

b) D

efer

red

incom

e tax

Def

erre

d in

com

e ta

x is

cal

cula

ted

on

all t

emp

ora

ry d

iffer

ence

s us

ing

the

liab

ility

met

hod

at

the

app

licab

le r

ate

of

30%

. The

mo

vem

ent

on

the

def

erre

d

tax

acco

unt i

s as

follo

ws:

31 M

ar 2

018

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015

31

Dec 2

013

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

At t

he s

tart

of t

he y

ear/

per

iod

2,41

3,71

34,

353,

895

4,97

8,39

24,

921,

771

1,15

6,34

7

Mo

vem

ent

for

the

year

/per

iod

(4,3

08,2

83)

1,94

0,18

2(6

24,4

97)

56,6

213,

765,

424

At th

e en

d of

the

year

/per

iod

(1,8

94,5

70)

2,41

3,71

34,

353,

895

4,97

8,39

24,

921,

771

Adj

uste

d fo

r:D

efer

red

inco

me

tax

cred

it/(c

harg

e) t

hat i

s ex

pec

ted

to

reve

rse

by

June

201

9 4,

329,

003

654,

472

(4,3

53,8

95)

(4,9

78,3

92)

(4,9

21,7

71)

Defe

rred

incom

e ta

x liab

ility r

ecog

nised

in th

e st

atem

ent o

f fina

ncial

po

sitio

n 2,

434,

433

3,06

8,18

5-

--

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 167 8/11/18 5:19 PM

Page 170: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

168

12.

Tax (

cont

inued

)

b) D

efer

red

incom

e tax

(con

tinue

d)

The

def

erre

d in

com

e ta

x lia

bili

ties/

(ass

ets)

as

at t

he re

po

rtin

g p

erio

d a

re a

ttrib

utab

le to

the

follo

win

g it

ems:

Year

end

ed 3

1 M

arch

201

8

At st

art o

f yea

rM

ovem

ent f

or th

e pe

riod

At e

nd o

f yea

r

Less

: Def

erre

d inc

ome

tax

liabi

lity/

(asse

t) th

at is

ex

pect

ed t

o re

vers

e by

June

201

9

Defe

rred

incom

e ta

x lia

bilit

y/(as

set)

that

is n

ot

expe

cted

to re

vers

e by

June

201

9Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00A

ccel

erat

ed ta

x d

epre

ciat

ion

4,11

7,77

0(2

78,9

16)

3,83

8,85

450

9,83

73,

329,

017

Sho

rt-t

erm

tim

ing

diff

eren

ces

(1,7

04,0

57)

(4,0

29,3

67)

(5,7

33,4

24)

(4,8

38,8

40)

(894

,584

)

Net d

efer

red

incom

e ta

x liab

ility/

(asse

t)2,

413,

713

(4,3

08,2

83)

(1,8

94,5

70)

(4,3

29,0

03)

2,43

4,43

3

Year

ende

d 31

Mar

ch 20

17

At st

art o

f yea

rM

ovem

ent f

or th

e pe

riod

At e

nd o

f yea

r

Less

: Def

erre

d inc

ome

tax

liabi

lity/

(asse

t) th

at is

ex

pect

ed to

reve

rse

by Ju

ne 2

019

Defe

rred

incom

e ta

x lia

bilit

y/(as

set)

that

is n

ot

expe

cted

to re

vers

e by

June

201

9Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00

Acc

eler

ated

tax

dep

reci

atio

n4,

458,

275

(340

,505

)4,

117,

770

669,

039

3,44

8,73

1

Unr

ealis

ed fo

reig

n ex

chan

ge

loss

es(1

04,3

80)

(1,5

99,6

77)

(1,7

04,0

57)

(1,3

23,5

11)

(380

,546

)

Net d

efer

red

incom

e ta

x liab

ility/

(asse

t)4,

353,

895

(1,9

40,1

82)

2,41

3,71

3(6

54,4

72)

3,06

8,18

5

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 168 8/11/18 5:19 PM

Page 171: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

169

12.

Tax (

cont

inued

)

b) D

efer

red

incom

e tax

(con

tinue

d)

Year

ende

d 31

Mar

ch 20

16

At st

art o

f yea

rM

ovem

ent f

or

the

perio

dAt

end

of y

ear

Less

: Def

erre

d inc

ome

tax

liabi

lity/

(asse

t) th

at is

ex

pect

ed to

reve

rse

by

June

201

9

Defe

rred

incom

e ta

x lia

bilit

y/(as

set)

that

is n

ot

expe

cted

to re

vers

e by

June

20

19Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00

Acc

eler

ated

tax

dep

reci

atio

n4,

674,

330

(216

,055

)4,

458,

275

(4,4

58,2

75)

-

Unr

ealis

ed fo

reig

n ex

chan

ge

loss

es30

4,06

2(4

08,4

42)

(104

,380

)10

4,38

0-

Net d

efer

red

incom

e ta

x liab

ility/

(asse

t) 4,

978,

392

(624

,497

)4,

353,

895

(4,3

53,8

95)

-

Year

ende

d 31

Mar

ch 20

15

At st

art o

f yea

rM

ovem

ent f

or th

e pe

riod

At e

nd o

f yea

r

Less

: Def

erre

d inc

ome

tax

liabi

lity/

(asse

t) th

at is

exp

ecte

d to

reve

rse

by Ju

ne

2019

Defe

rred

incom

e ta

x lia

bilit

y/(as

set)

that

is n

ot

expe

cted

to

reve

rse

by Ju

ne

2019

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Acc

eler

ated

tax

dep

reci

atio

n5,

230,

154

(555

,824

)4,

674,

330

(4,6

74,3

30)

-

Unr

ealis

ed fo

reig

n ex

chan

ge

(gai

ns)/

loss

es(3

08,3

83)

612

,445

304,

062

(304

,062

)-

Net d

efer

red

incom

e ta

x liab

ility/

(asse

t)4,

921,

771

56,6

214,

978,

392

(4,9

78,3

92)

-

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 169 8/11/18 5:19 PM

Page 172: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

170

12.

Tax (

cont

inued

)

b) D

efer

red

incom

e tax

(con

tinue

d)

Year

ende

d 31

Dec

embe

r 201

3

At st

art o

f yea

rM

ovem

ent f

or

the

perio

dAt

end

of y

ear

Less

: Def

erre

d inc

ome

tax

liabi

lity/

(asse

t) th

at is

exp

ecte

d to

re

vers

e by

June

201

9

Defe

rred

incom

e ta

x lia

bilit

y/(as

set)

that

is n

ot

expe

cted

to re

vers

e by

Ju

ne 2

019

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Acc

eler

ated

tax

dep

reci

atio

n4,

913,

255

316,

899

5,23

0,15

4 (5

,230

,154

) -

Unr

ealis

ed fo

reig

n ex

chan

ge

(gai

ns)/

loss

es(3

,756

,908

)3,

448,

525

(308

,383

)30

8,38

3-

Net d

efer

red

incom

e ta

x liab

ility/

(asse

t)1,

156,

347

3,76

5,42

44,

921,

771

(4,9

21,7

71)

-

Def

erre

d i

nco

me

tax

is r

eco

gni

zed

onl

y to

the

ext

ent

that

it

is p

rob

able

tha

t th

e C

om

pan

y w

ill p

ay c

urre

nt i

nco

me

tax

whe

n th

e ta

xab

le t

emp

ora

ry

diff

eren

ces

reve

rse

or

whe

n it

is p

rob

able

tha

t th

ere

will

be

taxa

ble

pro

fits

agai

nst

whi

ch d

educ

tible

tem

po

rary

diff

eren

ces

can

be

utili

sed

. As

such

, onl

y d

efer

red

tax

(ass

ets)

/lia

bili

ties

that

are

no

t exp

ecte

d to

reve

rse

dur

ing

the

tax

exem

ptio

n p

erio

d a

re re

cog

nise

d a

s in

dic

ated

ab

ove

.

The

follo

win

g h

ave

bee

n co

nsid

ered

in e

stim

atin

g t

he d

efer

red

tax

(ass

ets)

/lia

bili

ties

that

are

no

t exp

ecte

d to

reve

rse

dur

ing

the

tax

exem

ptio

n p

erio

d:

•A

ll sh

ort-

term

tim

ing

diff

eren

ces

are

exp

ecte

d t

o re

vers

e w

ithin

the

exe

mp

tion

per

iod

sin

ce t

hey

rela

te t

o: (

a) u

nrea

lised

exc

hang

e d

iffer

ence

s on

b

orro

win

gs

and

trad

e p

ayab

les

whi

ch w

ill b

e se

ttle

d b

efor

e 30

Jun

e 20

19, (

b) t

ax lo

sses

whi

ch w

ere

fully

util

ised

by

31 M

arch

201

7, a

nd (c

) pro

visi

ons

for

obso

lete

inve

ntor

ies

and

bad

deb

ts m

ade

dur

ing

the

per

iod

1 J

anua

ry 2

012

to 3

1 M

arch

201

7.

•A

ll as

sets

who

se e

cono

mic

use

ful l

ife is

exp

ecte

d t

o co

me

to a

n en

d o

n or

bef

ore

30 J

une

2019

wer

e co

nsid

ered

to

giv

e ris

e to

def

erre

d in

com

e ta

x (a

sset

s)/li

abili

ties

whi

ch a

re e

xpec

ted

to re

vers

e w

ithin

the

exem

ptio

n p

erio

d. C

onve

rsel

y, fo

r tho

se a

sset

s w

hose

eco

nom

ic u

sefu

l life

sp

ans

bey

ond

30

June

201

9, th

e un

der

lyin

g d

efer

red

tax

(ass

ets)

/liab

ilitie

s ar

e no

t exp

ecte

d to

reve

rse

with

in th

e ex

emp

tion

per

iod

.

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 170 8/11/18 5:19 PM

Page 173: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

171

12.

Tax (

cont

inued

)

c) G

over

nmen

t gra

nt o

n cur

rent

inco

me t

ax

Effe

ctiv

e 1

July

200

9, t

he G

ove

rnm

ent

of U

gan

da

agre

ed t

o p

ay t

he C

om

pan

y’s

curr

ent

inco

me

tax

ob

ligat

ions

on

beh

alf o

f the

co

mp

any

for

a p

erio

d o

f 10

yea

rs. T

he G

ove

rnm

ent

will

pay

the

tax

es a

s as

sess

ed b

y th

e C

om

pan

y in

the

tax

retu

rns

filed

in a

cco

rdan

ce w

ith t

he In

com

e Ta

x A

ct o

f Ug

and

a (C

ap

340)

, but

will

no

t be

liab

le to

any

liab

ilitie

s an

d p

enal

ties

aris

ing

fro

m e

rro

rs o

r om

issi

ons

in th

e ta

x re

turn

s. T

his

giv

es th

e C

om

pan

y th

e le

gal

rig

ht to

offs

et

any

tax

ob

ligat

ions

fro

m t

he g

rant

and

the

Co

mp

any

has

the

inte

ntio

n to

offs

et t

he tw

o.

The

Com

pan

y’s p

olic

y is

to s

et o

ff g

over

nmen

t gra

nts

agai

nst t

he e

xpen

ses

or a

sset

s to

whi

ch th

ey re

late

. The

inco

me

tax

char

ges

/(cr

edits

) for

the

per

iod

s fro

m

1 Ja

nuar

y 20

12 to

31

Mar

ch 2

017

have

ther

efor

e no

t bee

n re

cog

nize

d in

pro

fit o

r los

s si

nce

it is

fully

offs

et b

y th

e g

over

nmen

t gra

nt a

s an

alyz

ed in

Not

e 12

(a)

abov

e.

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 171 8/11/18 5:19 PM

Page 174: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

172

13.

Prop

erty,

Plan

t and

equip

men

t

Buil

ding

s P

lant &

m

achin

ery

Fur

nitur

e &

fittin

gs

Mot

or ve

hicles

C

ompu

ters

To

ols &

eq

uipm

ent

Tota

l

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Cost

At 1

Janu

ary 2

013

15,8

34,8

8727

,844

,874

594,

131

1,43

2,33

666

4,19

71,

022,

985

47,3

93,4

10A

dd

itio

ns-

95,9

3142

,059

-47

,043

3,53

818

8,57

1Tr

ansf

er fr

om

CW

IP-

5,20

6,59

5-

--

50,8

305,

257,

425

At 3

1 De

cem

ber 2

013

15,8

34,8

8733

,147

,400

636,

190

1,43

2,33

671

1,24

01,

077,

353

52,8

39,4

06

Ad

diti

ons

-58

3,16

611

9,52

846

9,05

649

,167

-1,

220,

917

Tran

sfer

fro

m C

WIP

-3,

822,

600

--

--

3,82

2,60

0D

isp

osa

ls-

(177

,729

)-

(184

,800

)-

-(3

62,5

29)

At 3

1 M

arch

201

515

,834

,887

37,3

75,4

3775

5,71

81,

716,

592

760,

407

1,07

7,35

357

,520

,394

Ad

diti

ons

-41

,894

42,3

6637

8,02

010

1,74

8-

564,

028

Tran

sfer

fro

m C

WIP

-4,

649,

954

1,80

9-

-35

,475

4,68

7,23

8D

isp

osa

ls-

--

(297

,107

)-

-(2

97,1

07)

At 3

1 M

arch

201

615

,834

,887

42,0

67,2

8579

9,89

31,

797,

505

862,

155

1,11

2,82

862

,474

,553

Ad

diti

ons

-11

,283

43,8

571,

155,

671

538,

778

-1,

749,

589

Tran

sfer

fro

m C

WIP

1,61

1,98

23,

251,

856

27,9

55-

-26

4,17

25,

155,

965

Dis

po

sals

--

(1,2

04)

(517

,069

)(1

2,79

9)-

(531

,072

)At

31

Mar

ch 2

017

17,4

46,8

6945

,330

,424

870,

501

2,43

6,10

71,

388,

134

1,37

7,00

068

,849

,035

Ad

diti

ons

-56

,491

171,

562

650,

017

527,

736

24,5

521,

430,

358

Tran

sfer

fro

m C

WIP

-4,

625,

486

54,8

51-

94,9

9335

2,93

15,

128,

261

Dis

po

sals

-(1

82,5

77)

-(6

15,9

08)

--

(798

,485

)At

31

Mar

ch 2

018

17,4

46,8

6949

,829

,824

1,09

6,91

42,

470,

216

2,01

0,86

31,

754,

483

74,6

09,1

69

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 172 8/11/18 5:19 PM

Page 175: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

173

13.

Prop

erty,

Plan

t and

equip

men

t (co

ntinu

ed)

Buil

ding

s P

lant &

m

achin

ery

Fur

nitur

e &

fittin

gs

Mot

or ve

hicles

C

ompu

ters

To

ols &

eq

uipm

ent

Tota

l

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Depr

eciat

ion

At

1 Ja

nuar

y 20

133,

149,

267

11,8

66,1

3439

3,41

486

5,95

641

8,40

666

4,58

817

,357

,765

Cha

rge

for

the

year

633,

395

3,30

6,11

650

,442

345,

584

103,

726

141,

005

4,58

0,26

8At

31

Dece

mbe

r 201

33,

782,

662

15,

172,

250

443

,856

1,2

11,5

4052

2,13

2 8

05,5

9321

,938

,033

Cha

rge

for

the

year

791,

744

4,6

89,7

02 9

8,46

5 3

67,3

76

109

,365

1

66,2

98

6,2

22,9

50

Dis

po

sals

-(1

24,4

10)

-(8

1,12

5)-

-(2

05,5

35)

At 3

1 M

arch

201

54,

574,

406

19,

737,

542

542,

321

1,4

97,7

9163

1,49

797

1,89

127

,955

,448

Cha

rge

for

the

year

633,

395

4,2

06,7

2883

,553

174

,070

46,

159

104

,007

5,24

7,91

2D

isp

osa

ls-

--

(297

,108

)-

-(2

97,1

08)

At 3

1 M

arch

201

6 5

,207

,801

23,9

44,2

70 6

25,8

74 1

,374

,753

677

,656

1,

075,

898

32,9

06,2

52

Cha

rge

for

the

year

697,

875

4,29

7,46

562

,092

270,

374

188,

268

31,5

185,

547,

592

Dis

po

sals

--

(1,2

04)

(517

,069

)(1

2,79

9)-

(531

,072

)At

31

Mar

ch 2

017

5,90

5,67

628

,241

,735

686,

762

1,12

8,05

885

3,12

51,

107,

416

37,9

22,7

72

Cha

rge

for

the

year

697,

875

4,29

0,93

589

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551,

432

315,

960

143,

766

6,08

9,69

1D

isp

osa

ls-

(171

,927

)-

(529

,902

)-

-(7

01,8

29)

At 3

1 M

arch

201

86,

603,

551

32,3

60,7

4377

6,48

51,

149,

588

1,16

9,08

51,

251,

182

43,3

10,6

34

Net C

arry

ing A

mou

ntAt

31

Mar

ch 2

018

10,8

43,3

1817

,469

,081

320,

429

1,32

0,62

884

1,77

850

3,30

131

,298

,535

At 3

1 M

arch

201

711

,541

,193

17,0

88,6

8918

3,73

91,

308,

049

535,

009

269,

584

30,9

26,2

63At

31

Mar

ch 2

016

10,6

27,0

8618

,123

,015

174,

019

422,

752

184,

499

36,9

3029

,568

,301

At 3

1 M

arch

201

511

,260

,481

17,6

37,8

9521

3,39

721

8,80

112

8,91

010

5,46

229

,564

,946

At 3

1 De

cem

ber 2

013

12,0

52,2

2517

,975

,150

192,

334

220,

796

189,

108

271,

760

30,9

01,3

73

All

com

pan

y as

sets

for t

he y

ear e

nded

201

3 w

ere

sub

ject

to a

firs

t cha

rge

to s

ecur

e a

long

-ter

m lo

an fr

om

Bar

clay

s B

ank

of U

gan

da

Lim

ited

of U

S$ 1

7.6

mill

ion

acq

uire

d in

200

8.

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 173 8/11/18 5:19 PM

Page 176: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

CiplaQCIL IPO Prospectus

174

14. Capital work-in-progress (CWIP)

Buildings Plant & machinery

Consultancy Computer software

Total

Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000

At 1 January 2013 - 184,666 592,080 - 776,746 Additions - 5,456,445 619,920 304,080 6,380,445Clearing charges on PPE - 45,601 - - 45,601Transfer to Property, Plant & Equipment - (5,257,425) - (304,080) (5,561,505)At 31 December 2013 - 429,287 1,212,000 - 1,641,287Additions 635,729 6,968,987 76,080 65,219 7,746,015Transfer to Property, Plant & Equipment - (3,822,600) - - (3,822,600)At 31 March 2015 635,729 3,575,674 1,288,080 65,219 5,564,702Additions 570,237 2,326,205 - 74,520 2,970,962Transfer to property, plant & equipment - (4,687,239) - - (4,687,239)At 31 March 2016 1,205,966 1,214,640 1,288,080 139,739 3,848,425Additions 838,138 3,646,087 356,193 321,149 5,161,567Transfer to PPE (1,611,981) (3,543,984) - - (5,155,965) Transfer to intangibles - - - (238,873) (238,873) At 31 March 2017 432,123 1,316,743 1,644,273 222,015 3,615,154 Additions 6,051,889 18,585,596 - 1,249,863 25,887,348Transfer to PPE - (5,128,261) - - (5,128,261)Write-off - - - (221,213) (221,213)At 31 March 2018 6,484,012 14,774,078 1,644,273 1,250,665 24,153,028

The CWIP represents the cost of the machinery under installation, consultancy services relating to design fees for phase 2 factory and construction costs-to-date of the boundary wall for the Company’s additional premises for Active Pharmaceutical Ingredients (API) plant.

15. Leasehold land

31 Mar 2018 31 Mar 2017 31 Mar 2016 31 Mar 2015 31 Dec 2013Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000

At year end 2,776,233 2,776,233 2,776,233 2,776,233 2,776,233 On 21 December 2005, the Company leased land at Luzira Industrial Park from Uganda Investment Authority for an initial period of five years.

The lease was subsequently extended to 99 years after notification by the Company to the lessor of its intention to renew the lease. The leasehold land was obtained at an initial sum of Ushs 2.275 billion (as determined by the valuation done by the Company) including premium and ground rent, but excluding additional costs of survey and landscaping of Ushs 0.501 billion. The cost of the lease of was waived by Government of Uganda and the valuation of the land was therefore recognised as a capital contribution in line with the Company’s accounting policy disclosed in Note 2(n) above.

Notes to Financial Statements (continued)Notes to Financial Statements

Cipla_prospect_18.indd 174 8/11/18 5:19 PM

Page 177: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

CiplaQCIL IPO Prospectus

175

15. Leasehold land (continued)

The directors re-assessed the classification of the lease and classified it as a finance lease. The land has not been amortised because the underlying value of the asset appreciates over time rather than depreciate. The accounting policy for leased land is disclosed in Note 2(n) above.

16. Intangible assets

Licenses & patents Computer software

Total

Ushs ‘000 Ushs ‘000 Ushs ‘000CostAt 1 January 2013 4,025,000 243,739 4,268,739 Additions - 165,974 165,974 Transfer from CWIP - 304,080 304,080At 31 December 2013 4,025,000 713,793 4,738,793

Additions - 12,915 12,915At 31 March 2015 and 2016 4,025,000 726,708 4,751,708

Additions - 419,707 419,707Transfer from CWIP - 238,873 238,873At 31 March 2017 4,025,000 1,385,288 5,410,288

Additions - 38,360 38,360At 31 March 2018 4,025,000 1,423,648 5,448,648

AmortisationAt 1 January 2013 (2,012,500) (119,069) (2,131,569)Charge for the year (402,500) (210,153) (612,653)

At 31 December 2013 (2,415,000) (329,222) (2,744,222)

Charge for the period (503,125) (254,354) (757,479)

At 31 March 2015 (2,918,125) (583,576) (3,501,701)

Charge for the year (402,500) (139,874) (542,374)At 31 March 2016 (3,320,625) (723,450) (4,044,075)

Charge for the year (402,500) (92,693) (495,193)At 31 March 2017 (3,723,125) (816,143) (4,539,268)

Charge for the year (301,875) (238,289) (540,164)At 31 March 2018 (4,025,000) (1,054,432) (5,079,432)

Net Carrying Amount

At 31 March 2018 - 369,216 369,216At 31 March 2017 301,875 569,145 871,020At 31 March 2016 704,375 3,258 707,633At 31 March 2015 1,106,875 143,132 1,250,007At 31 December 2013 1,610,000 384,571 1,994,571

Intangible assets are made up of licences for manufacturing anti-retroviral (ARV) and anti-malarial (ACT) drugs. The licenses were granted in 2008 for a period of 10 years with a right to formulae modifications.

Notes to Financial Statements (continued)Notes to Financial Statements (continued)

Cipla_prospect_18.indd 175 8/11/18 5:19 PM

Page 178: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

176

17.

Inven

torie

s31

Mar

201

831

Mar

201

731

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201

631

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201

531

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201

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od

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18.

Trad

e and

oth

er re

ceiva

bles

31 M

ar 2

018

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ar 2

017

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ar 2

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ec 2

013

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‘000

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,344

,353

798

,330

Pr

e-p

aid

rent

174,

071

234,

947

260,

697

206

,980

117

,955

St

aff a

dva

nces

206,

518

323,

456

232,

259

301

,286

9

1,74

3 O

ther

pre

pay

men

ts

18,5

19,0

1613

,038

,895

8,0

75,1

36 5

,227

,881

1,

645,

260

Am

oun

ts h

eld

by

the

ban

k un

der

APG

--

--

3,7

52,4

83

92,0

49,1

0688

,361

,254

83,5

42,5

2232

,150

,229

12,9

44,0

91

Pro

visi

on

for i

mp

airm

ent

(204

,259

)-

--

-91

,844

,847

88,3

61,2

5483

,542

,522

32,1

50,2

2912

,944

,091

Impa

irmen

t allo

wanc

e

At 1

sta

rt o

f yea

r-

--

--

Imp

airm

ent c

harg

e fo

r the

per

iod

204,

259

--

--

At e

nd o

f yea

r20

4,25

9-

--

-

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 176 8/11/18 5:19 PM

Page 179: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

177

18.

Trad

e and

oth

er re

ceiva

bles

(con

tinue

d)

Trad

e re

ceiv

able

s ar

e no

n-in

tere

st b

earin

g a

nd a

re g

ener

ally

on

45-9

0 d

ays’

term

s. T

he d

etai

led

dis

clos

ures

rela

ting

to c

red

it ris

k ha

ve b

een

incl

uded

in N

ote

32—

finan

cial

risk

man

agem

ent (

cred

it ris

k).

Adva

nce P

aym

ent G

uara

ntee

sTh

e C

omp

any

had

Ad

vanc

e Pa

ymen

t G

uara

ntee

(A

PG)

faci

lity

with

Bar

clay

s B

ank

Mau

ritiu

s w

ith a

lim

it o

f U

shs

100

bill

ion.

Thi

s w

as t

o g

uara

ntee

the

ad

vanc

e p

aym

ents

rece

ived

fro

m N

atio

nal M

edic

al S

tore

s un

der

the

off-

take

pur

chas

e ag

reem

ent.

The

APG

faci

litie

s w

ere

gua

rant

eed

by

the

Co

mp

any

Dire

cto

rs a

nd Q

ualit

y C

hem

ical

s Li

mite

d in

ad

diti

on

to c

ash

mar

gin

of 1

00%

of t

he a

gg

reg

ate

amo

unt

of a

ll o

blig

atio

ns is

sued

by

the

ban

k.

As

at 3

1 M

arch

201

8, 2

017,

201

6 an

d 2

015,

the

ban

k he

ld n

il ca

sh m

arg

in in

res

pec

t o

f the

se fa

cilit

ies

as N

atio

nal M

edic

al S

tore

s ch

ang

ed t

he p

aym

ent

sche

dul

e to

pay

men

t up

on

del

iver

y as

op

po

sed

to a

dva

nce

pay

men

ts.

19.

Fixe

d de

posit

31 M

ar 2

018

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015

31 D

ec 2

013

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Purc

hase

s10

,905

,000

--

--

Acc

rued

inte

rest

29,3

82-

--

-

Fore

ign

exch

ang

e g

ain

144,

000

--

--

11,0

78,3

82-

--

-

The

wei

ght

ed a

vera

ge

effe

ctiv

e ra

te o

n th

e fix

ed d

epos

its a

s at

31

Mar

ch 2

018

was

1.6

5% (2

017:

nil)

. The

mat

urity

ana

lysi

s of

the

fixed

dep

osit

is a

s fo

llow

s:

31 M

ar 2

018

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015

31 D

ec 2

013

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

With

in 3

to 6

mo

nths

11,0

78,3

82-

- -

-

11,0

78,3

82-

- -

-

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 177 8/11/18 5:19 PM

Page 180: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

178

20.

Cash

and

bank

bala

nces

31 M

ar 2

018

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015

31 D

ec 2

013

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Cas

h o

n ha

nd26

,496

6,98

96,

438

479

4,53

1C

ash

at b

ank

10,5

31,3

3913

,816

,458

6,78

0,32

74,

803,

868

9,48

0,55

010

,557

,835

13,8

23,4

476,

786,

765

4,80

4,34

79,

485,

081

For t

he p

urp

ose

of th

e st

atem

ent o

f cas

h flo

ws,

cas

h an

d c

ash

equi

vale

nts

com

pris

e th

e ab

ove

bal

ance

s.

21.

Auth

orise

d an

d iss

ued

shar

e cap

ital

a) O

rdina

ry sh

ares

— au

thor

ised,

issu

ed an

d fu

lly p

aid:

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015

31 D

ec 2

013

& 20

18(R

esta

ted)

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Num

ber

of s

hare

s (‘0

00)

3,65

1,90

99,

130

9,13

09,

130

No

min

al v

alue

per

sha

re (U

shs)

12.5

0 5,

000

5,00

0 5,

000

Aut

horis

ed a

nd is

sued

cap

ital (

Ush

s ‘0

00)

45,6

48,8

6545

,648

,865

45,6

48,8

6545

,648

,865

On

5 O

ctob

er 2

016,

the

shar

ehol

der

s p

ursu

ant t

o Se

ctio

n 71

of t

he C

omp

anie

s A

ct, 2

012,

Art

icle

45(

b) o

f Tab

le A

of t

he C

omp

anie

s A

ct, 2

012

and

Art

icle

20(

b)

of th

e C

omp

any’s

Art

icle

s of

Ass

ocia

tion,

reso

lved

that

the

par

val

ue o

f eac

h sh

are

in th

e C

omp

any

be

adju

sted

by

way

of a

sha

re s

plit

from

the

curr

ent p

ar v

alue

of

Ush

s 5,

000

to U

shs

12.5

per

sha

re a

nd th

e nu

mb

er o

f sha

res

be

incr

ease

d a

ccor

din

gly

from

9,1

29,7

73 to

3,6

51,9

09,2

00 o

rdin

ary

shar

es.

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 178 8/11/18 5:19 PM

Page 181: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

179

21.

Auth

orise

d an

d iss

ued

shar

e cap

ital (c

ontin

ued)

b) S

hare

hold

ing:

31 M

arch

201

831

Mar

ch 2

017

31 M

arch

201

6 an

d 20

1531

Dec

embe

r 201

3 (R

esta

ted)

Nam

eNo

. of s

hare

s Pe

rcen

tage

No. o

f sha

res

Perc

enta

geNo

. of

shar

es

Perc

enta

geNo

. of

shar

es

Perc

enta

ge

Qua

lity

Che

mic

als

Ltd

--

-2,

013,

115

22.0

5%2,

013,

115

22.0

5%M

edita

b H

old

ing

s Lt

d1,

864,

299,

646

51.0

5%1,

864,

299,

646

51.0

5%4,

660,

749

51.0

5%4,

660,

749

51.0

5%C

apita

lwo

rks

SSA

152

5,87

4,92

514

.40%

525,

874,

925

14.4

0%1,

314,

687

14.4

0%1,

314,

687

14.4

0%A

MIS

TAD

456,

488,

650

12.5

0%38

3,45

0,46

610

.50%

958,

626

10.5

0%95

8,62

610

.50%

Path

find

er P

rivat

e Pe

nsio

n-

-73

,038

,184

2.00

%18

2,59

62.

00%

182,

596

2.00

%C

ipla

Lim

ited

EU

41

0,67

5,44

911

.25%

410,

675,

449

11.2

5%-

--

-M

r. Em

man

uel K

ato

ngo

le13

1,52

3,51

03.

60%

131,

523,

510

3.60

%-

--

-M

r. G

eorg

e W

illia

m

Bag

uma

131,

523,

510

3.60

%13

1,52

3,51

03.

60%

--

--

Mr.

Fred

eric

k M

uteb

i Kita

ka13

1,52

3,51

03.

60%

131,

523,

510

3.60

%-

--

-3,

651,

909,

200

100.

00%

3,65

1,90

9,20

010

0.00

%9,

129,

773

100.

00%

9,12

9,77

310

0.00

%

In 2

008,

the

Co

mp

any

sig

ned

an

agre

emen

t with

the

Go

vern

men

t of U

gan

da

(‘GO

U’)

und

er w

hich

GO

U m

ade

an in

vest

men

t in

the

Co

mp

any

of U

shs

10 b

illio

n fo

r a

cons

ider

atio

n o

f 2 m

illio

n o

rdin

ary

shar

es (p

ar v

alue

of U

shs

5,00

0) in

the

eq

uity

of t

he c

om

pan

y. T

his

follo

wed

the

val

uatio

n o

f the

Co

mp

any

by

the

Chi

ef

Go

vern

men

t Va

luer

, w

ho e

stim

ated

the

val

ue o

f th

e C

om

pan

y’s

cap

ital

and

ass

ets

to b

e U

shs

45,6

48,8

65,0

00.

Bas

ed o

n th

is v

alue

and

the

par

val

ue o

f th

e C

om

pan

y’s

shar

es o

f U

shs

5,00

0, t

he n

umb

er o

f o

rdin

ary

shar

es in

the

co

mp

any

was

co

mp

uted

to

be

9,12

9,77

3. T

he d

irect

ors

the

n re

solv

ed t

o in

crea

se t

he

com

pan

y’s

auth

oris

ed s

hare

cap

ital f

rom

Ush

s 95

mill

ion

to U

shs

45.6

bill

ion

and

then

allo

t 21.

9% (2

,000

,000

sha

res)

of t

hese

sha

res

to G

OU

. The

rem

aini

ng s

hare

s w

ere

to b

e al

lott

ed to

the

exi

stin

g s

hare

hold

ers

by

way

of a

scr

ipt s

hare

issu

e.

Ho

wev

er, t

he C

om

pan

y d

id n

ot h

ave

dis

trib

utab

le re

serv

es (a

ccum

ulat

ed lo

sses

of U

shs

8.3

bill

ion)

fro

m w

hich

a s

crip

t sha

re is

sue

coul

d b

e ef

fect

ed. T

here

fore

, th

e sh

ares

allo

tted

to

the

orig

inal

sha

reho

lder

s co

uld

no

t b

e p

aid

out

of d

istr

ibut

able

res

erve

s as

wo

uld

be

exp

ecte

d fo

r a

scrip

t sh

are

issu

e. T

he s

crip

t sh

are

issu

e ar

rang

emen

t w

as t

here

fore

no

t p

revi

ous

ly r

eflec

ted

in t

he fi

nanc

ial s

tate

men

ts. H

ow

ever

, sha

re c

ertifi

cate

s ha

d a

lread

y b

een

issu

ed b

ased

on

the

abo

ve

arra

ngem

ent.

Und

er t h

e ag

reem

ent w

ith G

OU

, the

sel

ling

sha

reho

lder

s ha

d a

n o

ptio

n to

rep

urch

ase

the

GO

U s

hare

s at

thei

r orig

inal

co

st. T

he o

rigin

al s

hare

hold

ers

exer

cise

d

this

op

tion

in 2

010.

As

at 3

1 M

arch

201

5, th

e C

om

pan

y ad

just

ed th

e fin

anci

al s

tate

men

ts to

har

mo

nize

the

com

pan

y’s

reg

istr

y re

cord

s an

d th

e co

mp

any’

s b

oo

ks

of a

cco

unt b

efo

re in

Tab

le 1

- Sta

tem

ent o

f ad

just

men

ts, o

f the

Rep

ort

ing

Acc

oun

tant

s Re

po

rt.

On

13 F

ebru

ary

2017

, the

sha

reho

lder

s o

f Qua

lity

Che

mic

als

Lim

ited

reso

lved

to tr

ansf

er th

e sh

areh

old

ing

of 2

2.05

% in

CIP

LAQ

CIL

to in

div

idua

l sha

reho

lder

s of

Q

ualit

y C

hem

ical

s Li

mite

d.

On

19 M

arch

201

8, P

athfi

nder

Priv

ate

Pens

ion

tran

sfer

red

its

73,0

38,1

84 s

hare

s in

the

Co

mp

any

to A

MIS

TAD

.

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 179 8/11/18 5:19 PM

Page 182: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

180

21.

Auth

orise

d an

d iss

ued

shar

e cap

ital (c

ontin

ued)

c) D

ivide

nd p

aid

In J

uly

and

Oct

ober

201

6, th

e D

irect

ors

of th

e C

omp

any

app

rove

d a

nd p

aid

div

iden

ds

of U

shs

25.1

1 b

illio

n fo

r the

fina

ncia

l yea

rs 2

015/

2016

and

201

6/20

17. I

n M

ay 2

017,

the

Dire

ctor

s of

the

Com

pan

y ap

pro

ved

a fi

nal d

ivid

end

of U

shs

10.8

9 b

illio

n fo

r the

fina

ncia

l yea

r 201

6/20

17. T

he d

ivid

end

was

pai

d in

the

mon

ths

of M

ay a

nd A

ugus

t 201

7.

22.

Ear

nings

per

shar

e

Year

end

edYe

ar e

nded

Year

end

edYe

ar e

nded

15 m

onth

s en

ded

Year

end

ed

3

1 M

ar 2

018

3

1 M

ar 2

017

3

1 M

ar 2

016

31

Mar

201

5 3

1 M

ar 2

015

31

Mar

201

3Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00

Net

pro

fit a

ttrib

utab

le t

o o

rdin

ary

equi

ty h

old

ers

of t

he c

om

pan

y44

,627

,240

42,1

74,0

2742

,842

,845

33,6

64,6

3540

,559

,099

8,28

0,27

0W

eig

hted

ave

rag

e nu

mb

er o

f o

rdin

ary

shar

es in

is

sue

dur

ing

the

yea

r3,

651,

909

3,65

1,90

93,

651,

909

3,65

1,90

93,

651,

909

3,65

1,90

9

Num

ber

of s

hare

s is

sued

3,65

1,90

93,

651,

909

9,13

09,

130

9,13

09,

130

Imp

act o

f sha

re s

plit

3,65

1,90

93,

651,

909

3,65

1,90

93,

651,

909

3,65

1,90

93,

651,

909

Bas

ic a

nd d

ilute

d e

arni

ngs

per

sha

re12

.22

1

1.55

11.7

39.2

2

1

1.11

2.2

7

T

he w

eig

hted

ave

rag

e nu

mb

er o

f ord

inar

y sh

ares

in is

sue

dur

ing

the

year

end

ed 3

1 D

ec 2

014,

31

Mar

ch 2

015

and

31

Mar

ch 2

016

and

the

15 m

onth

s en

ded

31

Mar

ch 2

015

has

bee

n ad

just

ed fo

r the

sha

re s

plit

(not

e 21

(a))

in a

ccor

dan

ce w

ith IA

S 33

.

23.

Cap

ital c

ontri

butio

n31

Mar

201

831

Mar

201

731

Mar

201

631

Mar

201

531

Dec

201

3Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00

At y

ear e

nd

2,2

75,0

00

2,2

75,0

00

2,2

75,0

00

2,2

75,0

00

2,2

75,0

00

As

stat

ed in

No

te 1

5, th

e ca

pita

l co

ntrib

utio

n re

late

s to

the

valu

e o

f the

land

that

was

gra

nted

to th

e C

om

pan

y b

y U

gan

da

Inve

stm

ent A

utho

rity.

The

Dire

cto

rs

elec

ted

to h

ave

it ap

pro

pria

ted

into

a s

epar

ate

rese

rve

und

er e

qui

ty.

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 180 8/11/18 5:19 PM

Page 183: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

181

24.

Bank

loan

31 M

ar 2

018

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015*

31 M

ar 2

015*

*31

Dec

201

3Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00

Bar

clay

s B

ank

loan

--

--

-13

,240

,924

Mov

emen

t on

acco

unt

At

star

t of y

ear/

per

iod

-

-

-

8,28

4,30

613

,240

,924

19,7

04,5

44Re

ceiv

ed d

urin

g t

he y

ear/

per

iod

--

9,11

7,00

0

-

-

3

,345

,408

Fo

reig

n ex

chan

ge

loss

/ (g

ain)

--

1,09

8,00

088

9,85

71,

016,

947

(1

,027

,943

)Re

-pay

men

ts d

urin

g t

he y

ear/

per

iod

--

(10,

215,

000)

(9,1

74,1

63)

(14,

257,

871)

(8,8

77,3

63)

--

--

-13

,144

,646

Acc

rued

inte

rest

-

-

-

-

- 9

6,27

8

At th

e en

d of

year

/per

iod

--

--

-13

,240

,924

The

mat

urity

of t

he b

ank

loan

is fu

rthe

r ana

lyze

d a

s fo

llow

s:

31 M

ar 2

018

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015*

31 M

ar 2

015*

*31

Dec

201

3Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00

Barc

lays B

ank l

oan

(as ab

ove)

--

--

-13

,240

,924

Less

: Am

ount

due

with

in on

e ye

ar:

Acc

rued

inte

rest

-

-

-

-

- (9

6,27

8)Pr

inci

pal

am

oun

t due

in o

ne y

ear

--

--

-(9

,896

,320

)-

--

--

(9,9

92,5

98)

Amou

nts d

ue af

ter o

ne ye

ar-

--

--

3,24

8,32

6

*den

otes

a y

ear f

rom

1 A

pril

201

4 to

31

Mar

ch 2

015

whi

le *

* d

enot

es a

15-

mon

ths

per

iod

from

1 J

anua

ry 2

014

to 3

1 M

arch

201

5.

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 181 8/11/18 5:19 PM

Page 184: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

CiplaQCIL IPO Prospectus

182

24. Bank loan (continued)

In 2008, the Company obtained a long-term loan from Barclays Bank of Uganda Limited of US$ 17.6 million to finance construction of the factory. Repayment of the loan principal was in equal quarterly installments starting 31 January 2008. The loan attracted interest at 3-month LIBOR + 4%, which amounted to 4.31% as at 31 December 2013 and 4.30% as at 31 March 2015.

In 2012, the Company borrowed an additional loan of US$ 2.5 million. The loan attracted interest at 3-month LIBOR + 4%, which amounted to 4.31% as at 31 December 2013 and 4.30% as at 31 March 2015.

Both loans were secured as below in favour of the bank:

• First legal mortgage to cover US$ 17.6 million on the certificate of title for property comprising of industrial land in the names of Cipla Quality Chemical Industries Limited located at Luzira Industrial Park, LRV 3484 Folio 4, Plots –7, 9–11, First Ring Road, Plots 4–8, and 10 Second Ring Road, Plot 10 Third Rink Road, Plot 1 First Link Road and Plot 2–6 Second Link Road.

• Fixed and floating debenture charge of US$ 17.6 million on plant and equipment and all other company assets.

• First legal mortgage up-stamped to cover US$ 17.6 million over property comprising of the Industrial land in the names of the company.

• Unlimited personal guarantees of the company’s Executive Directors. • Cross-Company guarantee by Quality Chemicals Limited.• Corporate guarantee by the Company.

The Company fully settled these loan facilities in January 2015.

In the year ended 31 March 2016, the company made a third draw down on its bridge finance facility from Barclays Bank to meet shortfalls in operational costs including salaries, electricity, utilities, administrative and office running expenses. The draw down was done on 22 April 2015 and the amount drawn down was US$ 3 million at an interest rate of at 8% i.e., 3% below foreign currency base rate, which stood at 11.5% at a time. The Company settled the loan in full on 23 July 2015.

Notes to Financial Statements (continued)Notes to Financial Statements

Cipla_prospect_18.indd 182 8/11/18 5:19 PM

Page 185: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

183

25.

Trad

e and

oth

er p

ayab

les

31 M

ar 2

018

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015

31 D

ec 2

013

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Trad

e p

ayab

les

12,0

13,0

349,

909,

532

7,89

7,93

44,

738,

215

9,66

2,86

3

Dep

osi

ts fr

om

cus

tom

ers

--

-56

7,56

4

4,7

00,9

23

Acc

rual

s6,

022,

000

8,58

4,01

03,

155,

986

3,00

3,68

7

1,6

74,2

70

With

hold

ing

tax

pay

able

- N

et68

7,61

249

1,26

3-

--

Due

to re

late

d p

artie

s (N

ote

26(

a))

14,0

49,9

166,

198,

222

12,7

97,7

19 4

,455

,384

8

,084

,030

32,7

72,5

6225

,183

,027

23,8

51,6

3912

,764

,850

24,1

22,0

86

26.

Relat

ed p

artie

s

i) Th

e fo

l low

ing

are

the

key

rela

ted

par

ties:

Nam

eNa

ture

of r

elatio

nship

Qua

lity

Che

mic

als

Lim

ited

, Ug

and

aSh

areh

old

er/C

om

mo

n d

irect

ors

hip

Med

itab

Ho

ldin

gs

Lim

ited

, Mau

ritiu

sH

old

ing

Co

mp

any

of C

IPLA

QC

ILM

edita

b S

pec

ialit

ies

Priv

ate

Lim

ited

, Ind

iaH

old

ing

Co

mp

any

of M

edita

b H

old

ing

s Li

mite

dSi

tec

Lab

s Pr

ivat

e Li

mite

d, I

ndia

Sub

sid

iary

of M

edita

b S

pec

ialit

ies

Priv

ate

Lim

ited

, Ind

iaC

ipla

Lim

ited

, Ind

iaU

ltim

ate

Ho

ldin

g C

om

pan

yFo

ur M

Pro

pac

k Pr

ivat

e Li

mite

d, I

ndia

Sub

sid

iary

of M

edita

b S

pec

ialit

ies

Priv

ate

Lim

ited

, Ind

ia

ii) T

he fo

llow

ing

wer

e th

e b

alan

ces:

a) Am

ount

s due

to/ (

from

) rela

ted

party

Due

to re

lated

par

ty (N

ote

25)

31 M

ar 2

018

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015

31 D

ec 2

013

Relat

ed p

arty

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Qua

lity

Che

mic

als

Lim

ited

1-

-12

5,89

5 4

,193

1,

265,

760

Cip

la L

imite

d2

13,9

20,7

946,

190,

846

12,5

17,9

26 4

,451

,191

6,81

8,27

0Fo

ur M

Pro

pac

k3-

-

125

,196

-

-Si

tec

Lab

s412

9,12

27,

376

2

8,70

2

--

14,0

49,9

166,

198,

222

12,7

97,7

194,

455,

384

8,08

4,03

0

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 183 8/11/18 5:19 PM

Page 186: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

184

26.

Relat

ed p

artie

s (co

ntinu

ed)

Am

ount

s due

to/(f

rom

) rela

ted

party

(con

tinue

d)

Due

to re

lated

par

ty (c

ontin

ued)

1 Re

late

s to

mis

cella

neou

s p

urch

ases

from

Qua

lity

Che

mic

als

Lim

ited

.

2 Re

late

s to

pur

chas

e of

raw

mat

eria

ls a

nd t

echn

ical

ser

vice

fees

pay

able

to

Cip

la L

imite

d. A

s 31

Mar

ch 2

018

tech

nica

l ser

vice

s fe

es p

ayab

le a

mou

nted

to

Ush

s 9,

578,

331,

340

(31

Mar

ch 2

017:

Ush

s 2,

619,

556,

416,

31

Mar

ch 2

016:

Ush

s 7,

305,

256,

796

and

31

Mar

ch 2

015:

Ush

s 2,

676,

911,

549)

.

3 Re

late

s to

pur

chas

es o

f pac

king

mat

eria

ls.

4 Re

late

s to

pre

-shi

pm

ent l

abor

ator

y te

sts

for r

aw m

ater

ials

.

31 M

ar 2

018

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015

31 D

ec 2

013

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Due

from

relat

ed p

arty

(Not

e 18

)Re

lated

par

tyQ

ualit

y C

hem

ical

s Li

mite

d

(1,5

48,9

51)

(1,1

47,1

45)

(1,6

67,3

20)

(96,

382)

(48,

534)

Cip

la L

imite

d(3

07,1

11)

(3,9

35,0

27)

(15,

656,

161)

(5,9

96,9

91)

-(1

,856

,062

)(5

,082

,172

)(1

7,32

3,48

1)(6

,093

,373

)(4

8,53

4)

Am

ount

s d

ue fr

om re

late

d p

artie

s re

late

to s

ale

of fi

nish

ed g

ood

s.

b)

Key m

anag

emen

t com

pens

ation

31 M

ar 2

018

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015*

31 M

ar 2

015*

*31

Dec

20

13Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00

Sho

rt-t

erm

em

plo

yee

ben

efits

8,91

5,67

97,

652,

003

6,13

0,35

14,

224,

353

5,12

2,70

53,

527,

840

The

abov

e re

pre

sent

s co

mp

ensa

tion

to th

e re

sid

ent d

irect

ors

in th

e fo

rm o

f sal

arie

s.

*den

otes

a y

ear f

rom

1 A

pril

201

4 to

31

Mar

ch 2

015

whi

le *

* d

enot

es a

15-

mon

ths

per

iod

from

1 J

anua

ry 2

014

to 3

1 M

arch

201

5.

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 184 8/11/18 5:19 PM

Page 187: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

185

26.

Relat

ed p

artie

s (co

ntinu

ed)

c) Am

ount

due

from

shar

ehold

ers

31 M

ar 2

018

31 M

ar 2

017

31 M

ar 2

016

31 M

ar 2

015

31

Dec 2

013

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Am

oun

t due

fro

m s

hare

hold

ers

-

-

-

-

29,5

04,8

65

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 185 8/11/18 5:19 PM

Page 188: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

186

27.

Net c

ash fl

ows g

ener

ated

from

ope

ratin

g ac

tivitie

s

Note

Year

end

edYe

ar e

nded

Year

end

edYe

ar e

nded

15 m

onth

s to

Year

end

ed31

Mar

201

831

Mar

201

731

Mar

201

631

Mar

201

531

Mar

201

531

Dec

201

3Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00

Pro

fit b

efo

re ta

x43

,993

,488

45,2

42,2

1242

,842

,845

33,6

64,6

35 4

0,55

9,09

9

8,2

80,2

70A

djus

tmen

t fo

r:Fo

reig

n ex

chan

ge

(gai

n) /

loss

on

bo

rro

win

gs

and

fix

ed d

epo

sits

(144

,000

)-

1,09

8,00

088

9,85

71,

016,

947

(1

,027

,943

)D

epre

ciat

ion

96,

089,

691

5,54

7,59

25,

247,

912

5,09

4,56

8 6

,222

,950

4,5

80,2

68

Am

ort

isat

ion

of i

ntan

gib

le a

sset

s9

540,

164

495,

193

542,

374

603,

599

757

,479

612,

653

Pro

visi

on

for b

ad d

ebts

620

4,25

9-

--

--

Pro

visi

on

for o

bso

lete

inve

nto

ries

663

,798

740,

991

- 2

64,1

29

264

,129

-

Sto

ck w

rite-

off

3(7

40,9

91)

-(2

64,1

29)

--

-A

sset

writ

e-o

ff14

221,

213

--

--

-(G

ain)

/ lo

ss o

n d

isp

osa

l of p

rop

erty

, pla

nt &

eq

uip

men

t86

,507

(16,

556)

(198

,481

)

1

7,29

8 1

7,29

8 -

Inte

rest

inco

me

4(8

7,90

3)(5

11,2

82)

(29,

116)

(15,

719)

(1

5,71

9)

(104

,720

)In

tere

st e

xpen

se10

--

21

6,32

5

289,

806

437

,463

723

,922

Cash

flow

s bef

ore

work

ing ca

pita

l cha

nges

50,2

26,2

2651

,498

,150

49,4

55,7

3040

,808

,173

49,2

59,6

4613

,064

,450

(Incr

ease

)/ d

ecre

ase

in in

vent

orie

s(8

,308

,299

)(9

,057

,745

) (2

,546

,090

)(6

,390

,599

) 1

42,7

60

1,31

7,25

8(In

crea

se)/

dec

reas

e in

trad

e an

d o

ther

re

ceiv

able

s(3

,687

,852

)(4

,818

,732

)(5

1,39

2,29

3)(1

9,21

5,24

5)(1

9,20

6,13

8)8,

473,

342

Incr

ease

/ (d

ecre

ase)

in tr

ade

and

oth

er p

ayab

les

7,58

9,53

51,

331,

388

11,0

86,7

89

1,73

8,19

6 (1

1,35

7,23

6)(3

,479

,168

)

Cash

flow

s gen

erat

ed fr

om o

pera

tions

45,8

19,6

1038

,953

,061

6,60

4,13

616

,940

,525

18,8

39,0

3219

,375

,882

Inte

rest

rece

ived

58,5

2151

1,28

229

,116

15,

719

15,

719

104,

720

Inte

rest

pai

d-

-

(216

,325

)

(289

,806

)(5

33,7

41)

(757

,587

)Ne

t cas

h flo

ws g

ener

ated

from

ope

ratin

g ac

tiviti

es45

,878

,131

39,4

64,3

436,

416,

927

16,6

66,4

3818

,321

,010

18,7

23,0

15

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

Cipla_prospect_18.indd 186 8/11/18 5:19 PM

Page 189: IPO Prospectus QCIL...this Prospectus. Approval of this Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. The Ugandan Registrar

CiplaQCIL IPO Prospectus

187

28. Commitments and contingencies

Legal claims

Possible legal claims against the company

Civil Appeal No. 79 of 2018 Godfrey Magezi Vs National Medical Stores, Cipla Quality Chemical Industries and Attorney General

George Magezi filed a suit against CQCIL, National Medical Stores and the Attorney General of Uganda seeking inter alia a declaration that there was a financial loss of US $ 18,082,739 caused by CQCIL and seeking recovery of the said amount from CQCIL.

K & K Advocates filed a successful defense to the claim stating the suit was res judicata, an abuse of court process, and that there was no fraud or misrepresentation on the part of CQCIL. Drugs were supplied in compliance with the contracts executed between National Medical Stores and CQCIL there was no inflation of prices and no loss was occasioned. The case was dismissed with costs on 09 November 2017. However, on 20 November 2017, the Plaintiff filed a Notice of appeal against the decision dismissing the suit. The appellant contends that the learned trial judge erred in law and in fact by upholding the preliminary points of law raised by the defendants and for which the suit was dismissed.

The Company has been advised by its external legal counsel that CIPLAQCIL has a good case to the appellant with a high likelihood of success but in the event of the plaintiff succeeding, he could be awarded the claimed amount and costs of up to Ushs 500 million. As such, no provision of liability has been made in the financial statements.

The Company has other pending legal claims with estimated total exposures amounting to Ushs 247,932,000 as at 31 March 2018. These are summarised as follows:

NO. CASE NAME SUMMARY OF FACTS FORUM CONTINGENT LIABILITY AMOUNT (USHS)

1 Civil Appeal No. 05/2017 Semuyaba, & Co. Advocates vs. CIPLQCIL

Claim for recovery of taxed advocate bill, applicable VAT, interest and costs of the application.

East Africa Court of Justice

Cost for the appeal estimated at Ushs 20,000,000

2 Enock Musasizi vs. Cipla Quality Chemical Industries Limited

The Plaintiff is seeking compensation for injury allegedly incurred in the course of his employment with CIPLAQCIL due to the negligence of the company.

Nakawa Civil Suit No. 470 of 2016

Compensation amounting to Ushs 36,732,000, Special damages of Ushs 91,200,000, general and punitive damages plus costs.

3 Enock Musasizi vs. Cipla Quality Chemical Industries Limited

The Claimant seeks alleged terminal benefits for an alleged unlawful termination.

Labour dispute No. 271 of 2016

Ushs 80,000,000

4 Namukoye Lucy vs. CIPLAQCIL

Labour claim instituted in the Industrial court, by a representative of an ex-employee of the company.

Labour dispute No.50 of 2017

Ushs 20,000,000

Notes to Financial Statements (continued)Notes to Financial Statements (continued)

Cipla_prospect_18.indd 187 8/11/18 5:19 PM

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28. Commitments and contingencies (continued)

Possible legal claims against the Company (continued)

The Company has been advised by its external legal counsels that CIPLAQCIL has a good defence to the claims with a high likelihood of success. As such, no provision of liability has been made in the financial statements.

29. Events after reporting period date

The Directors are not aware of any events after the reporting date that require adjustment of or disclosure in the financial statements.

30. Financial risk management

The Company’s principal financial instruments comprise cash and bank balances, amounts due from shareholders, trade and other receivables, bank loan and trade and other payables. The main purpose of these financial instruments is to raise finance for the company’s operations.

The main risks arising from the company’s financial instruments are liquidity risk, foreign currency risk and credit risk. The Company has policies for managing financial risks as summarised below:

Foreign currency risk

The Company has transactional currency exposures. Such exposure arises from purchases by the Company in currencies other than its functional currency (Uganda Shillings). When the need arises for foreign currency, the Company purchases its requirements in the open market, and any exchange gains or losses are immediately posted to profit or loss. Some of the company’s sales are in US Dollars. The proceeds from US Dollar sales are used to pay for liabilities denominated in US Dollars as much as is practicable. Otherwise, the Company does not engage in currency derivatives or other measures of managing foreign currency risk. As at 31 March/December, the Company had the following significant foreign currency positions and the equivalent stated in Uganda Shillings:

At 31 March 2018

Financial assets US$ Ushs ‘000Bank balances 2,399,879 8,838,753Fixed deposit 3,007,978 11,078,382Trade and other receivables 23,140,035 85,224,748Due from related parties 503,954 1,856,062

29,051,846 106,997,945Financial liabilitiesTrade and other payables 2,797,906 10,304,688Due to related parties 3,814,802 14,049,916

6,612,708 24,354,604

Net position 22,439,138 82,643,341

Notes to Financial Statements (continued)Notes to Financial Statements

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30. Financial risk management (continued)

Foreign currency risk (continued)

At 31 March 2017Financial assets US$ Ushs ‘000Bank balances 3,274,882 11,789,547Trade and other receivables 21,006,662 75,623,984Due from related parties 1,453,245 5,231,683

25,734,789 92,645,214Financial liabilitiesTrade and other payables 1,298,108 4,673,190Due to related parties 1,767,104 6,361,578

3,065,213 11,034,768

Net position 22,669,576 81,610,446

At 31 March 2016Financial assets US$ Ushs ‘000Bank balances 1,753,035 5,907,728Trade and other receivables 16,191,173 54,564,254Due from related parties 4,901,886 16,519,355

22,846,094 76,991,337

Financial liabilitiesTrade and other payables 1,228,087 4,138,655Due to related parties 3,715,159 12,520,090

4,943,246 16,658,745

Net position 17,902,848 60,332,592

At 31 March 2015Financial assets US$ Ushs ‘000Bank balances 1,235,671 3,669,942Trade and other receivables 5,997,715 17,813,212Due from related parties 2,010,097 5,969,987

9,243,483 27,453,141

Financial liabilitiesTrade and other payables 1,039,229 3,086,509Due to related parties 540,686 1,605,838

1,579,915 4,692,347

Net position 7,663,568 22,760,794

31 December 2013Financial assets US$ Ushs ‘000Bank balances 3,693,624 9,307,932Trade receivables 1,367,997 3,447,352

5,061,621 12,755,284Financial liabilitiesTrade payables 3,403,781 8,577,528Loans and borrowings 5,254,335 13,240,924Due to related parties 2,155,641 5,432,215

10,813,757 27,250,667

Net position (5,752,136) (14,495,383)

Notes to Financial Statements (continued)Notes to Financial Statements (continued)

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30. Financial risk management (continued)

Foreign currency risk (continued)

The table below shows the impact of 5%+/- movement in the foreign exchange on the profitability of the Company:

31 Mar 2018 31 Mar 2017 31 Mar 2016 31 Mar 2015 31 Dec 2013Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000

+5% 58,822 152,723 31,319 114,720 6,812 -5% (58,822) (152,723) (31,319) (114,720) (6,812)

Credit risk

Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract leading to a financial loss. The Company is exposed to credit risk from its operating activities, primarily, trade receivables.

The Company manages its credit risk by only trading with creditworthy third parties. It is the Company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis to minimise the Company’s exposure to bad debts. The maximum exposure to credit risk is equivalent to the bank balances and trade and other receivables balance as at the end of the year.

The following table summarized the company’s exposure to credit risk (the maximum exposure of the financial assets is their carrying amount)::

31-Mar-18 31-Mar-17 31-Mar-16 31-Mar-15 31-Dec-13Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000

Amounts due from shareholders

- - - - 29,504,865

Trade receivables 66,872,389 66,634,945 54,564,254 17,813,212 6,479,147

Fixed deposit 11,078,382 - - - -

Bank balances 10,531,339 13,816,458 6,780,327 4,803,868 9,480,55088,482,110 80,451,403 61,344,581 22,617,080 45,464,562

The company’s major customers are currently Government of Uganda (GOU) and the Global Fund to Fight AIDS, Tuberculosis and Malaria. The concentration of credit risk of the company’s major customers is as follows:

31-Mar-18 31-Mar-17 31-Mar-16 31-Mar-15 31-Dec-13Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000

Government of Uganda (GOU) – NMS 24,488,056 42,424,691 30,869,220 15,964,131 - Global Fund to Fight AIDS, Tuberculosis and Malaria 8,776,001 16,739,399 5,089,450 - 3,029,954 Central Medical Stores– Namibia - - 13,190,180 - - Ministry of Health – Republic of Zambia 23,876,504 - - - -Others 9,731,828 7,470,855 5,415,404 1,849,081 3,449,193

66,872,389 66,634,945 54,564,254 17,813,212 6,479,147

Notes to Financial Statements (continued)Notes to Financial Statements

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30. Financial risk management (continued)

Credit risk (continued)

The aging analysis of trade receivables is as follows:

31 Mar 2018 31 Mar 2017 31 Mar 2016 31 Mar 2015 31 Dec 2013Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000

Past due but not impaired- by up to 30 days 30,018,153 60,692,338 12,284,177 8,259,613 3,570,569- by 31 to 60 days 15,326,881 2,282,925 17,121,699 8,140,823 2,908,578- by 61 to 90 days 4,525,264 640,477 11,560,482 597,129 -- by 90 days and above 17,003,091 2,749,205 13,597,896 815,647 -

66,872,389 66,634,945 54,564,254 17,813,212 6,479,147

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations from its financial liabilities. The risk is monitored by the monthly creditors’ analysis and review of the Company’s cash flows from operations on a regular basis. The directors source money from the Company’s bankers when the Company’s cash flows are not adequate to meet creditor demands.

The table below analyses the Company’s financial assets and liabilities into relevant groupings based on the remaining period at 31 March and 31 December to the contractual maturity dates:

Notes to Financial Statements (continued)Notes to Financial Statements (continued)

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30.

Fina

ncial

risk

man

agem

ent (

cont

inued

)

Li

quid

ity r

isk

(con

tinue

d)

At 31

Mar

ch 20

18Up

to 1

Up to

33

to 1

2Ab

ove

12To

tal

mon

thm

onth

sm

onth

sm

onth

sUs

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Fi

nanc

ial as

sets

Trad

e an

d o

ther

rece

ivab

les

(exc

lud

ing

pre

pay

men

ts)

13,0

58,4

0218

,368

,919

26,2

37,6

7711

,269

,971

68,9

34,9

69Fi

xed

dep

osi

t-

-11

,087

,741

-11

,087

,741

Cas

h an

d b

ank

bal

ance

s10

,557

,834

--

-10

,557

,834

23,6

16,2

3618

,368

,919

37,3

25,4

1811

,269

,971

90,5

80,5

44Fi

nanc

ial lia

bilit

iesTr

ade

and

oth

er p

ayab

les

14,4

78,6

3611

,471

,544

6,38

1,65

544

0,72

732

,772

,562

Net l

iquid

ity g

ap9,

137,

600

6,89

7,37

530

,943

,763

10,8

29,2

4457

,807

,982

At 31

Mar

ch 20

17Up

to 1

Up to

33

to 1

2Ab

ove

12To

tal

mon

thm

onth

sm

onth

sm

onth

sUs

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

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nanc

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sets

Trad

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d o

ther

rece

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(exc

lud

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pre

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men

ts)

14,2

23,8

6420

,008

,344

28,5

79,3

8912

,275

,815

75,0

87,4

12

Cas

h an

d b

ank

bal

ance

s13

,823

,446

--

-13

,823

,446

28,0

47,3

1020

,008

,344

28,5

79,3

8912

,275

,815

88,9

10,8

58

Fina

ncial

liabi

lities

Trad

e an

d o

ther

pay

able

s11

,125

,645

8,81

4,94

14,

903,

779

338,

662

25,1

83,0

27

Net l

iquid

ity g

ap16

,921

,665

11,1

93,4

0323

,675

,610

11,9

37,1

5363

,727

,831

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

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Cipl

aQCI

L IP

O P

rosp

ectu

s

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30.

Fina

ncial

risk

man

agem

ent (

cont

inued

)

Li

quid

ity r

isk

(con

tinue

d)At

31 M

arch

2016

Up

to 1

1 to

33

to 1

2Ab

ove

12To

tal

Mon

thm

onth

sm

onth

sm

onth

sUs

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Us

hs ‘0

00Fi

nanc

ial as

sets

Trad

e an

d o

ther

rece

ivab

les

(exc

lud

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pre

pay

men

ts)

16,8

32,9

67

33,0

34,4

1224

,745

,227

59

4,08

3 75

,206

,689

Cas

h an

d b

ank

bal

ance

s

6,7

86,7

65-

-

-

6,

786,

765

23,6

19,7

3233

,034

,412

24,7

45,2

27

594,

083

81,9

93,4

54Fi

nanc

ial lia

bilit

iesTr

ade

and

oth

er p

ayab

les

8,82

2,41

811

,978

,422

2,

924,

904

125,

895

23,8

51,6

39

Net l

iquid

ity g

ap14

,797

,314

21,0

55,9

9021

,820

,323

468,

188

58,1

41,8

15

At 31

Mar

ch 20

15

Up to

11

to 3

3 to

12

Abov

e 12

Tota

lm

onth

Mon

ths

mon

ths

mon

ths

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Fina

ncial

asse

tsTr

ade

and

oth

er re

ceiv

able

s (e

xclu

din

g p

rep

aym

ents

)11

,068

,396

8

,737

,952

815,

647

-20

,621

,995

Am

oun

ts d

ue fr

om

rela

ted

par

ties

4,07

2,35

91,

924,

632

96,3

81-

6,09

3,37

2C

ash

and

ban

k b

alan

ces

4,80

4,34

6-

-

-

4,

804,

346

19,9

45,1

0110

,662

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912,

028

-31

,519

,713

Fina

ncial

liabi

lities

Trad

e an

d o

ther

pay

able

s 9,

193,

599

567,

564

3,00

3,68

7-

12,7

64,8

50

Net l

iquid

ity g

ap10

,751

,502

10,0

95,0

20(2

,091

,659

)-

18,7

54,8

63

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

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Cipl

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L IP

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rosp

ectu

s

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30.

Fina

ncial

risk

man

agem

ent (

cont

inued

)

Li

quid

ity r

isk

(con

tinue

d)At

31 D

ecem

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013

Up to

11

to 3

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12

Abov

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Tota

lM

onth

Mon

ths

mon

ths

mon

ths

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Ushs

‘000

Fina

ncial

asse

tsTr

ade

and

oth

er re

ceiv

able

s (e

xclu

din

g p

rep

aym

ents

)8,

223,

765

2

,908

,578

48,3

54

-

11,1

80,8

77C

ash

and

ban

k b

alan

ces

9,48

5,08

1-

- -

9,48

5,08

117

,708

,846

2,90

8,57

848

,534

-20

,665

,958

Fina

ncial

liabi

lities

Loan

s an

d b

orr

ow

ing

s96

,278

2,47

4,08

07,

422,

240

3,24

8,32

613

,240

,924

Trad

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d o

ther

pay

able

s24

,122

,087

--

-24

,122

,087

24,2

18,3

652,

474,

080

7,42

2,24

03,

248,

326

37,3

63,0

11

Net l

iquid

ity g

ap(6

,509

,519

)43

4,49

8(7

,373

,706

)(3

,248

,326

)(1

6,69

7,05

3)

Not

es to

Fin

anci

al S

tate

men

ts (c

ontin

ued)

Cipl

aQCI

L IP

O P

rosp

ectu

s

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30. Financial risk management (continued)

Capital management

Capital includes equity attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximize shareholder value. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust its return on capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the period 1 January 2012 to 31 March 2017.

Fair value measurement

The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the company determines fair values using other valuation techniques.

For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instruments.

Valuation models

The company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.

• Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments.• Level 2: inputs other than quoted prices included within Level 1 that are observable either directly

(i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.

• Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

The company’s current valuation techniques include comparison with similar instruments for which market observable prices exist and other valuation models. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

Notes to Financial Statements (continued)Notes to Financial Statements (continued)

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30. Financial risk management (continued)

Valuation models (continued)

Model inputs and values are calibrated against historical data and published forecasts and,e where possible, against current or recent observed transactions in different instruments and against broker quotes.

Accounting classifications and fair values

The table below sets out the carrying amounts of each class of assets and liabilities, and their fair values:

31 March 2018 31 March 2017Carrying amount Fair value Carrying amount Fair value

Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000Assets Financial assetsTrade and other receivables 68,934,969 68,934,969 75,087,412 75,087,412Fixed deposit 11,087,382 11,087,382 - -Cash and bank balances 10,557,835 10,557,835 13,823,446 13,823,446Total financial assets 90,580,186 90,580,186 88,910,858 88,910,858

Financial liabilitiesTrade and other payables 32,772,562 32,772,562 25,183,027 25,183,027

31 March 2016 31 March 2015 31 Dec 2014Carrying amount

Fair value Carrying amount

Fair value Carrying amount

Fair value

Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000Assets Financial assets

Trade and other receivables 75,206,689 75,206,689 24,207,871 24,207,871 6,645,636 6,645,636

Cash and bank balances 6,786,765 6,786,765 4,804,868 4,804,868 9,485,081 9,485,081

Total financial assets 81,993,454 81,993,454 29,012,739 29,012,739 16,130,717 16,130,717

Financial liabilities

Loans and borrowings - - - - 9,992,598 9,992,598

Trade and other payables 23,851,639 23,851,639 12,764,850 12,764,850 24,122,086 24,122,08623,851,639 23,851,639 12,764,850 12,764,850 34,114,684 34,114,684

The carrying amounts of the above financial assets and liabilities approximate their fair values.

Notes to Financial Statements (continued)Notes to Financial Statements

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19.1 Timetable

19.1.1 The Offer will open at 10:00am on 14 August 2018 and will close at 5:00pm on 24 August 2018.

19.1.2 Applications and proof of payment must be received by any one of the ASAs listed in Section 22 not later than 5:00pm on 24 August 2018. CiplaQCIL reserves the right to extend the closing dates of the Offer, subject to the approval of the CMA.

19.1.3 Persons wishing to apply for Shares in CiplaQCIL must complete the appropriate Application Form accompanying this Prospectus together with the applicable Securities Account Opening Form where necessary and return it to one of the ASAs.

19.1.4 Copies of this Prospectus, with the accompanying Application Forms and Securities Account opening forms may be collected during normal working hours (except Sundays and public holidays) from the ASAs listed in Section 22 of this Prospectus.

19.2 Application procedures

19.2.1 An investor shall be required to have a Securities Account. To open a Securities Account please contact an ASA. Securities Accounts do not need to be opened for those investors (both Retail and Institutional) who have already opened an SCD Account, prior to this Offer.

19.2.2 Persons wishing to apply for Offer Shares in CiplaQCIL must complete the appropriate Application Form and SCD Form where necessary. Such forms must be completed in accordance with the provisions contained in this Prospectus and the instructions set out on the Application Form and physically returned to one of the ASAs listed in Section 22 of this Prospectus.

19.2.3 Applications may be made only on the relevant Application Form, a sample copy of which is attached to the Prospectus (whether or not printed as a separate document). Investors applying from outside Uganda are permitted to submit scanned share Application Forms once complete to any of the ASAs listed in Section 22 of the Prospectus, subject to permission of the respective ASA. Each Application Form must be accompanied by proof of payment. Payment in the prescribed form should be made in favour of the bank accounts as set out in Section 9.

19.2.4 The completed Application Form, together with the necessary proof of payment (cash deposit to ASA slip, bankers cheque or EFT advice slips as proof of payment only applicable to the Retail Pool). A copy of an acceptable identification should also be attached to the Application Forms. See Section 9 for the acceptable payment modes for Institutional Investors) should be submitted to any of the ASAs by 5:00pm on 24 August 2018.

19.2.5 The ASAs will present all payments attached to the duly completed application forms to the Registrar, for deposit on behalf of the Selling Shareholders not later than 5:00 p.m. on 28 August 2018.

19.2.6 The minimum number of Shares that may be applied for is 1000. Thereafter application for Shares must be made in whole number multiples of 100 Shares.

19.2.7 Save in the case of negligence or wilful default on the part of the Company, their Advisors or any of the ASAs, neither the Company, nor any of the Advisors nor any of the ASAs shall be under any liability whatsoever should an Application Form not be received by the close of the Retail Offer.

19.2.8 Joint Applications may only be made by individuals (not corporate entities).

19.2.9 Receipt of funds transferred shall not amount to the acceptance of any application.

19 Procedures, Terms and Conditions of the Offer

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19.2.10 All alterations on the Application Form, other than the deletion of alternatives, must be authenticated by the full signature of the Applicant or an ASA.

19.2.11 Neither CiplaQCIL nor the Selling Shareholders will receive any Applications or payments directly. No receipts will be issued by CiplaQCIL or the Selling Shareholders for Applications and/or remittances.

19.2.12 Applications sent by facsimile or by any means other than the methods stipulated in this Prospectus will not be accepted.

19.2.13 Applications once given are irrevocable and may not be withdrawn once submitted.

19.2.14 By signing an Application Form, each Applicant:

i) agrees that having had the opportunity to read this Prospectus, it shall be deemed to have had notice of all information and representations concerning the Company contained herein;

ii) confirms that in making such Application it is not relying on any information or representation in relation to the Company other than those contained in this Prospectus and it accordingly agrees that no person responsible solely or jointly for this Prospectus or any part thereof shall have any liability for such other information or representation; and

iii) in the case of Applications from legal entities, authorises a director of such company to sign on behalf of the Applicant for any shares applied for.

19.2.15 All such Application Forms completed by investors in the Retail Pool must be accompanied by copy of identification of the Applicant and proof of payment (cash to ASA, bankers cheque or EFT payment) for the full amount due for the applicable Offer Shares.

19.2.16 Investors in the Institutional Pool collectively referred to as QIIs will receive provisional Placing Letters two days after close of the Institutional Pool and will be required to execute them within 48 hours upon receipt. The QIIs will be required to make payments by the final date of payment as set out in the Offer Timetable in Section 4 of this Prospectus.

19.2.17 The ASAs and the Receiving Bank are entitled to ask for sufficient identification to verify that the person(s) making the Application has authority or capacity to duly complete and sign the Application Form. A copy of the Know Your Client (“KYC”) document and identification should be stamped as a certified copy by the ASA and should be attached to the Application for submission to the Registrar. The ASAs are therefore expected to undertake all KYC procedures and activities on nominee accounts as required by law. The Lead Transaction Advisors have the right to demand and be provided with the details of the nominee accounts held by the ASAs to ascertain the eligibility of the Applicant. In default, Bookrunner may at its sole discretion treat such an Application as invalid.

19.2.18 Applicants are strongly advised to seek professional advice from either their stock broker or banker before securing any form of loan to participate in this Offer.

19.2.19 All bank charges incurred in submitting an Application Form, together with requisite funds, are for the account of the Applicant.

19.2.20 Companies and/or corporate investors must state the citizenship of the beneficial Shareholders and the total percentage of shareholding attributable to citizens of each country.

19.2.21 Every Applicant is required to tick the appropriate box on the Application Form as regards his/her residency and or citizenship status, where applicable.

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19.2.22 In accordance with the law, all Applicants will receive allocated Offer Shares in immobilised form by way of crediting their Securities Accounts with the allocated number of Offer Shares. All Applicants will have to open up Securities Accounts when applying for the Offer Shares where necessary.

19.2.23 By signing an Application Form, an Applicant agrees to the transfer of such number of Offer Shares (not exceeding the number applied for) as shall be transferred to the Applicant in accordance with the Terms and Conditions of this Prospectus and subject to the Company’s Articles of Association, and agrees that the Company may enter the Applicant’s name in the register of members of the Company as holder of such Offer Shares.

19.2.24 If an Applicant is tax exempt, they will be required to provide a certified copy of the Tax Exemption Certificate.

19.2.25 No interest will be paid on monies received in respect of Applications for Offer Shares, nor will interest be paid on any amounts refunded or indeed deposited at the time of Application.

19.2.26 Commission at the specified rate of 1.5% of the Offer Price will be paid to ASAs that are members of the USE, respectively, on all allocations made to Application Forms received in respect of the Offer which bears the stamp of the ASA or Receiving Bank (as applicable). No commission will be paid on Application Forms which bear more than one stamp.

19.2.27 In the event of a discrepancy between the number of Shares applied for and the value thereof, the Lead Transaction Advisor, in consultation with the Company and Selling Shareholders, may adjust the number of Shares to correspond with the value received for their Application.

19.3 Securities Accounts

All Applicants will receive allocated Offer Shares in electronic (i.e., immobilised) form by way of crediting their Securities Accounts with the allocated number of Offer Shares.

Securities Account Opening Procedures during the Offer Period

19.3.1 The Applicants will submit duly completed and signed Securities Account opening forms together with a copy of his/her/its identification document to the ASA. In addition, the Applicant, if an individual, will be required to submit to the ASA one recent colour passport size photograph of himself/herself. Where the Applicant is a corporate body, association or other entity, passport size photographs will be required of all the signatories or directors or officers authorised to give any instructions on the account. The photograph should not be more than five years old.

19.3.2 For corporate bodies, additional documentation may be required for the Securities Account opening. Where in doubt, please consult one of the ASAs. These additional documents are:

i) Company registration certificate

ii) Memorandum of Association

iii) Board resolution approving the opening of the Securities Account and naming at least two signatories to the Securities Account

iv) Identification documents of the authorised signatories and their passport-size photographs

v) Specimen signatures of the authorised signatories

i) The ASA shall ensure full disclosure of Applicant’s relevant information; verify the accuracy thereof and client’s signature.

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ii) The ASA will enter its SCD identification code (where the ASA is a member of USE) on the form (in the space provided) and will return to the client a copy of Securities Account opening form, duly signed.

iii) The ASA will be responsible for submitting all Securities Account opening documentation relating to new Securities Account Applicants to the Central Securities Depository for creation for Securities Account accounts.

iv) The ASA will ensure duly completed and signed Application Forms accompanied by copies of Securities Account forms (for new Securities Account Applicants) are submitted to the Receiving Bank.

v) The ASA will ensure conformity of the above before submitting any Application to the Registrar for processing.

vi) The Registrar will capture all the Applicant’s data and submit an electronic file to the SCD, as applicable, copies of the Securities Account opening forms for new Securities Account Applicants and any other attachments as necessary.

vii) The SCD shall enter the data obtained from the Securities Account opening form submitted by the ASAs into the applicable Settlement System.

viii) The Settlement System will generate a Securities Account number for all new Securities Account Applicants.

ix) Where the ASA is a participant and a member of the USE, it must ensure it retains copies of identification documents to assist in identifying its clients. ASAs must also ensure the safe custody of specimen signatures and the passport size photographs of their Applicants.

19.3.3 In the case of joint Applications, the joint Applicants should have a Securities Account in the name of the joint Applicants.

19.3.4 On acceptance of any Application, the Directors will, as soon as possible after the fulfilment of the conditions relating to Applications and completion of Application Forms, register the allocated Shares in the name of the Applicant concerned.

19.4 Rejections policy

19.4.1 The ASAs will transfer to the Receiving Bank all payments received on behalf of the Selling Shareholders.

19.4.2 CiplaQCIL or the Selling Shareholders shall not be under any liability whatsoever should any Application Form fail to be received by the Receiving Bank or by any Authorised Selling Agent by 5:00 p.m. on the close of the Retail Offer. In this regard, such Application Forms and accompanying payments shall be returned to the ASA or Receiving Bank where the Application Form was submitted, for collection by the applicable Applicants.

19.4.3 Applications can be rejected if full value has not been received. Applications will also be rejected for the following reasons:

i) Missing or illegible name of primary or joint Applicant in any Application Form;

ii) Missing or illegible identification number, including corporation registration number, or in the case of permanent residents, missing or illegible alien registration number;

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iii) Missing or illegible address (postal, email or street address);

iv) Missing or illegible telephone number;

v) Missing or illegible bank account details;

vi) Missing or illegible Securities Account details;

vii) Missing residence and citizenship indicators (for primary Applicant in the case of an individual) or missing residency for tax purposes for corporate investors;

viii) Insufficient documentation is forwarded including missing tax exemption certificate copies for companies that claim to be tax exempt;

ix) In the case of nominee Applications, incomplete information or lack of declaration from the agent submitting the application;

x) Missing or inappropriately signed Application Form including (for manual Application only):

· Primary signature missing from Signature Box 1;

· Joint signature missing from Signature Box 2 (if applicable);

· Two directors or a director and company secretary have not signed in the case of a corporate Application;

xi) Amount as payment for number of Offer Shares applied for is less than the correct calculated amount;

xii) If an Application has stamps from two or more ASAs as receiving agent; and

xiii) If it is suspected that an Applicant has subscribed to the Offer through more than one Application.

19.5 Allocation policy (see Section 9)

19.5.1 The responsibility for allotting the Offer Shares lies with the Bookrunner.

19.5.2 The allocation policy will be designed according to the pools allocated between the Institutional Pool and the Retail Pool as follows:

i) 90 % – Institutional Pool

ii) 10 % – Retail Pool

19.5.3 In the event that the total number of Offer Shares applied for by Applicants in a particular pool is below the total number of Offer Shares reserved for that pool, the following will apply:

i) All valid Applications received will be allocated in full as per the number of Offer Shares applied for taking into account the minimum number of Offer Shares that may be applied for in each pool; and

ii) The balance of Offer Shares reserved for that pool will be available for allocation in the other pool which is oversubscribed, and these excess Offer Shares will be allocated in accordance with the allocation policy of that pool.

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19.5.4 If the number of Offer Shares validly applied for under the Retail Pool is more of the number of Offer Shares initially available under the Retail Pool, then Offer Shares could be reallocated to the Retail Pool from the Institutional Pool. As a result of such reallocation, the total number of Offer Shares available under the Retail Pool may be increased to allocate more Shares to valid Applications under the Retail Pool but in any case, to not more than 131,435,863 Offer Shares, representing 20% the maximum number of Offer Shares.

19.5.5 The Bookrunner reserves the right to accept or refuse any Application in consultation with the Company and Selling Shareholders, either in whole or in part, or to accept some Applications in full and others in part, or to abate any or all Applications in such manner as they may determine. Any irregular, incomplete or suspected multiple Applications may be rejected.

19.5.6 The Lead Transaction Advisor will notify the CMA of the allocation results as approved by the Company and the Vendors and announce the same by advertisement in the press as indicated in Section 9.

19.5.7 The Lead Transaction Advisor reserves the right to accept or refuse any Application in consultation with the Company and Selling Shareholders, either in whole or in part, or to accept some Applications in full and others in part, or to abate any or all Applications in such manner as they may determine. All irregular or suspected multiple Applications will be rejected.

19.5.8 Further to the above provisions, the following policies will apply to the pools as specified below:

Allocation Policy for the Retail Pool

19.5.9 If the total number of Offer Shares applied for is more than the total number of Offer Shares reserved for the Retail Pool, Applicants will be allotted 1,000 Offer Shares in the first instance and thereafter in multiples of 100 Offer Shares on a pro rata basis, rounded down to the nearest 100 Offer Shares, until all Offer Shares in the Retail Pool are fully exhausted.

Allocation Policy for the Institutional Pool

19.5.10 Applications in the International Pool will be submitted to the Bookrunner by the ASAs and the Bookrunner will subsequently enter each Application into the institutional book of demand.

19.5.11 The Bookrunner will seek to build a book of demand consisting of a mix of investors who are likely to be long-term holders of the securities or providers of liquidity. Some or all the following factors will determine the allocations to each Applicant:

i) investor’s price limit, if any, and the level;

ii) the size of the investor’s expressed interest (both absolute and relative to the investor’s portfolio or assets under management);

iii) the investor’s interest in, and past dealings in, other offerings in the health care industry in emerging markets;

iv) the extent to which the investor’s expressed interest appears consistent with the investor’s investment strategy, objectives and purchasing capacity;

v) the timeliness of the investor’s indication of interest;

vi) the nature and level of interest shown by the investor in the Offer, its involvement in roadshows, meetings and valuation discussions and other contacts with the Company and Bookrunner;

vii) the category or description into which the investor falls (e.g. retail fund, tracker fund, emerging markets specialist or industry specialist fund);

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viii) the geographic spread of investors in the book of demand;

ix) the need to comply with applicable selling restrictions or other relevant legal or regulatory restrictions in each relevant jurisdiction;

x) based on experience, the investor’s likely long-term interest in the Company;

xi) any indication or reasonable belief that an investor has exaggerated its indication of interest in anticipation of being scaled back;

xii) the expected conduct of the investor in the aftermarket; and

xiii) the desirability of avoiding allocations in inconvenient or uneconomic amounts.

19.5.12 The Bookrunner will prepare an allocation for the Institutional Pool, in order to create an optimal institutional shareholder base and promote a favourable aftermarket in the stock. The final decision on allocation of the Institutional Pool will rest with the Bookrunner in consultation with the Company and Selling Shareholders.

19.5.13 In the event of an over-subscription in the Institutional Pool and additional Offer Shares not subscribed for in the Retail Pool are allocated to the Institutional Pool, Applicants in the Institutional Pool will be allotted such increased number of Offer Shares based on their respective initial expressed interest in the Bookbuilding (described above).

19.5.14 If the results of the subscription for the Offer Shares make the above allocation policy impractical, then an amendment to the allocation policy shall be made with the approval of the CMA, the Company and the Vendors, and such amendment will be announced within 24 hours of the grant of such approval.

19.6 Refunds policy

19.6.1 In the event of an oversubscription, all Applicants that have not been allocated in full the number of Offer Shares applied for and the monies for the Offer Shares paid but not allotted will be refunded by use of EFT no later than 10 working days after allocated.

19.6.2 Any refunds paid back to EAC nationals outside Uganda, will be by telegraphic transfer, at the cost of the respective Applicant.

19.7 Foreign investors in Uganda

19.7.1 Ugandan foreign investment policy does not limit or restrict any foreign investor from applying for the Offer Shares. In addition, there are currently no foreign exchange restrictions in Uganda. There are no restrictions on the number or percentage of shares that may be held by foreign investors in a Company listed on the USE. Any foreign investor who wishes to apply for shares should obtain guidance from any of the ASAs listed in Section 22 of this Prospectus, before lodging an Application Form.

19.7.2 Foreign investors wishing to buy the Offer Shares may be exposed to foreign exchange risk that may arise from the conversion of a foreign currency into local currency at the prevailing market rate. This risk shall be borne at the Applicant’s cost.

19.7.3 The distribution of this Prospectus and the making of the Offer in certain jurisdictions is restricted by law. Persons into whose possession this Prospectus may come are required by CiplaQCIL, and the Directors, the Company and the Lead Transaction Advisor to use the information herein purely for the purposes of this Offer. This Prospectus may not be used for or in connection with

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any offer to, or solicitation by, anyone in any jurisdiction or in any circumstances where such offer or solicitation is not authorised or is unlawful.

19.8 Governing law

19.8.1 This Prospectus and any contract resulting from acceptance of an application to purchase shares of CiplaQCIL shall be governed by and constructed in accordance with Ugandan law and it shall be a term of each such contract that the parties submit to the exclusive jurisdiction of the courts of Uganda.

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Investors are strongly advised to obtain professional advice in relation to dealings in the shares on the USE.

20.1 Trading, delivery, settlement and registration

It is recommended that shareholders and potential investors who are interested in buying or selling shares on the USE should consult their licensed broker/dealers, licensed investment advisors, legal advisors, or financial and tax consultants for advice before taking any action.

Investors will be able to buy and sell the Company’s Shares on the USE. Trading on the stock exchange is open to all nationals.

20.1.1 Uganda Securities Exchange

CiplaQCIL will be listed on the Main Investment Market Segment of the USE.

Trading at the USE is through a delivery versus payment system. The exchange is fully automated, with trading taking place on Monday to Friday from 9.30 am to 1.00 pm. Trading is closed on weekends and public holidays. Settlement of trades is effected through the Securities Central Depository platform within a rolling T+3 settlement cycle on a delivery versus payment basis. Final and irrevocable transfer of funds occurs through the settlement bank on settlement date.

Investors are required to open a Securities Account with SCD agents prior to trading on the USE. All licensed brokers/ dealers are SCD Agents (SCDA) through whom a security Securities Account can be opened. Investors can also open SCD accounts with custodian banks.

The principal regulator of listed companies, broker dealers, investment advisors and other players in Uganda’s capital markets is the Capital Markets Authority (Uganda).

Trades in the Company’s shares on the USE will be denominated in Ugandan Shillings. Foreign investors should be aware of the foreign exchange exposure arising from the fact that the Company’s Shares listed on the USE are denominated in Ugandan Shillings.

The USE website contains further information about the USE and trading on http://www.use.or.ug.

Securities Central Depository

· The Ugandan SCD operates a dematerialised share settlement and registration system and thereby facilitates delivery of trades in shares of companies listed at the USE.

· By depositing shares into the SCD, the delivery of the shares in settlement of USE trades can be achieved with entries in the relevant SCD account of the persons engaged in the trade, instead of an exchange of paper share certificates.

· Every shareholder who trades in shares at the USE must now open an SCD account with the SCD. An SCD account operates like a bank account with shares being credited, held and debited whenever the shareholder (account holder) carries out a transaction.

· The shares in the SCD may be withdrawn or pledged.

20.2 Restrictions on foreign ownership of shares of listed companies

There are no restrictions in Uganda on foreign ownership of shares of companies listed on the USE. In the event of any divergence arising between the laws of Uganda with regard to the ability to hold shares, the Company has received advice to the effect that the applicable provisions governing foreign ownership of the Company’s Shares are those of the country of its incorporation, namely Uganda.

20 USE Trading Outline

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20.3 Charges

ConsiderationUshs

Brokerage Commission USE Fee CMA Fee Comp.

FundSCDLevy

Total toCustomer

First 200 Million 1.7% 0.14% 0.14% 0.02% 0.1% 2.1%

Next 800 Million 1.5% 0.14% 0.14% 0.02% 0.1% 1.9%

> 1 Billion 0.8% 0.14% 0.14% 0.02% 0.1% 1.2%

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Serial No. CIPLA QUALITY CHEMICAL INDUSTRIES LIMITED

(“CiplaQCIL”)Company Registration No. P.558

APPLICATION FORMSCD ACCOUNT IS MANDATORY

This Application Form is Not for Sale

Offer Opens: 14 August 2018Offer Closes: 24 August 2018

For use with the Prospectus dated 10 August 2018 in respect to the Offer for Sale of up to 657,179,319 issued and fully paid up ordinary shares of CiplaQCIL of par value UGX 12.5 at an Offer Price of UGX 256.5. Before completing this Application Form, refer to the terms and conditions of the Offer in Section 19 of the Prospectus, and to the instructions on the reverse of this Application Form.

TO BE COMPLETED USING CAPITAL LETTERS

A. SCD ACCOUNT NO. (Mandatory)

B. APPLICANT DETAILS i) Name:

__________________________________________________________________________________________________________________________________Name as per SCD Account

ID/Passport No. /Company Registration or Incorporation No Country of Issue (Attach a copy with application)

______________________________________________________ __________________________________________________________

Physical Address: __________________________________________________________________________________________________________________ Contact P.O. Box: ________________________ Post Code: __________________ Town: ________________________ Country: _______________________ Mobile/Telephone No. ____________________________________________________________ Email ____________________________________________ Country code Area/Town code Number

C. APPLICATION

Application Pool: Retail □ Institutional □No. of Shares Applied Price Amount Payable

UGX 256.5 UGXx =

Minimum (1,000 shares in Multiples of 100)

D. PAYMENT

□ Electronic Transfer (EFT, RTGS, TT) □ Banker’s Cheque (Ref. No: ) □ Via ASA SCD Form 5 – Serial No

□ Financing Bank: ___________________________ Financing Bank Account number: ________________________________ Branch: ________________(Tick and complete mode of payment i.e. Electronic Transfer or Bank)

E. BANK ACCOUNT (Mandatory for All Applicants) to be completed by applicant/lender for refunds (if applicable):

Bank Name: _____________________________________________ Account Name: _____________________________________________

Account Number: ______________________________________________________ Branch: _____________________________________

F. SIGNATURES

Signature 1 Signature 2 Company Seal/Stamp

Date: ______________________________________________________

G. ACKNOWLEDGEMENT SLIP

Applicant Name: ______________________________________________________ Date: _____________________________________________________

SCD A/C No: _________________________________________________________ No. of Offer Shares applied for: ______________________________

SCDA/Broker Code No. (No leading zeroes) (LI/LC/FI/FC/EI, EC)

15 Sample Application Form

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APPLICANT’S STATEMENT

By signing this Application Form, I/We the applicant(s) state that:

A. I/We have read and understood the terms and conditions of the Offer as contained in the Prospectus and agree to be bound by its contents.B. I/We have full legal capacity to contract and hereby irrevocably apply for and request you to accept my/our application for the overleaf Offer

Shares, or any lesser number that may, in your sole and absolute discretion, be allotted to me/us subject to the Memorandum and Articles of Association of CiplaQCIL.

C. I/We authorize the CiplaQCIL to credit my/our SCD Account thus entering my/our name in the register of members of the CiplaQCIL as the holder(s) of shares allotted to me/us and refund any money in respect of shares applied for by me/us but not allocated to me/us in accordance with the terms and conditions contained in the Prospectus.

D. I/We declare that the application made hereby is made solely on behalf of the applicant(s) and that the information contained in this form is true and complete.

GENERAL INSTRUCTIONS

1. A copy of the Prospectus to which this Application Form is attached has been lodged with the Registrar of Companies. A copy of the Prospec-tus may be obtained from the Authorised Agents named below or www.ciplaqcil.co.ug,

2. Persons into whose possession this Application Form may come are required to observe the restrictions contained in the Prospectus.3. Terms defined in the Prospectus shall bear the same meaning herein unless otherwise indicated.4. For advice on the Offer and completion of this form an applicant should consult an accountant, banker, lawyer, stockbroker or other profession-

al advisor.5. The Board of Directors of CiplaQCIL reserves the right to accept or reject any application, in whole or in part, particularly if the instructions set

out in the Prospectus and in this Application Form are not complied with.6. An applicant must be the holder of a SCD Account. To open a SCD Account contact an authorised SCD agent. For Ugandan applicants a bank

account in Uganda is mandatory.7. Joint applications may only be made by individuals and must not be used to defeat the allocation policy. Multiple applications will be rejected

as per the rejection policy in the Prospectus.8. A deceased estate, a trust that has not been incorporated or a partnership cannot apply. Executors, trustees of trusts that have not been incor-

porated and individual partners may apply in their own names.9. No alterations on the Application Form will be allowed.10. Presentation of cheques for payment or receipt of funds transferred shall not amount to the acceptance of any application.11. Investors may approach a Lender for loan facilities to facilitate participation and payment of the full amount due in respect of the Offer.12. An Application Form will be rejected if : (a) it is incomplete, inconsistent or inaccurate with respect to the instructions as provided in the Prospectus and Application Form; (b) it is not signed by the applicant ; (c) the Application Money received by the ASA or Receiving Bank is insufficient; (d) it contains multiple Authorised Agent stamps; (e) Application Money was correctly received but the Application Form is incorrect or missing; (f) there are any alterations; (g) differences in the name and ID/Passport vis-a-vis data in the SCD Account; (h) multiple applications are received; (i) a copy of the ID/Passport/Company Registration or Incorporation Certificate- indicated in section B-(i)-

is not attached.13. A completed Application Form must be physically returned to an ASA. Once made, an application is irrevocable and may not be withdrawn.14. The Application Form and Application Money should be received by the ASA or the Receiving Agent by 5.00 p.m. on 24 August 2018 (Closure

Date) and neither CiplaQCIL, nor any of the advisors nor any of the ASAs shall be under any liability whatsoever should an Application Form not be received by this date.

15. In case of any inconsistency between the contents of this Application Form and the Prospectus, the contents of the Prospectus shall prevail.16. This Application Form and the accompanying Prospectus shall be governed by and construed in accordance with the Laws of Uganda.

SPECIFIC INSTRUCTIONS

17. Section A is mandatory for all applicants. Section E is mandatory for all Ugandan applicants. Both must be completed correctly. Data in Section E will be used for refunds (if applicable). Non-Ugandan applicants will receive their refunds (if applicable) via Banker’s Cheque (subject to a maximum of Ugx 20,000,000) or Electronic Transfer (where bank account data in Uganda has been provided).

18. Section B should be the same as in the SCD Account and if it is not, it’s advisable that the applicant updates the SCD Account data immediately through an authorised SCD agent. The email address is particularly important and should be provided.

19. Section C, applications should be made for a minimum of 1,000 Offer Shares and in multiples of 100 thereafter. Multiply by Ugx 1,000 to obtain the Application Money payable for e.g. 1,000 Offer Shares is Ugx 256,500.

20. Section D allows different ways of making payment: (i) Electronic Transfer is to: Account Name: CiplaQCIL IPO A/C; Bank: Standard Chartered Bank Uganda Limited; Account No: [●] (or as provid-

ed for each ASA as in the Prospectus); SWIFT: SCBLUGKA and then put the Reference No in the space provided; (ii) on the Banker’s Cheque include the Application Form No in the “payee” i.e. (CiplaQCIL IPO A/C Form No XXXXXX); (iii) to Authorised Agent: this allows for different types of direct payments to be made e.g. cash, personal cheque (subject to cleared funds),

credit card, EFT, RTGS, debit to brokerage account; (iv) for applications being financed by a bank or other financial institution, provide a SCD Form 5 Serial No. and attach it.21. Section F is for signatures and date (on or before the Closure Date), and for institutions can be signed as per the mandate.22. Section G is important and should be completed fully. The slip must be kept safe by the applicant.

AUTHORISED AGENTS

Crested Capital, African Alliance Uganda Limited, Baroda Capital Markets (U) Limited, Dyer & Blair Uganda Limited, Equity Stock Brokers Limited, UAP Financials Limited, SBG Securities Limited.

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22 Authorised Selling Agents

Authorised selling Agents in ugAndAMembers of the Uganda Securities Exchange and Licensed Securities Central Depository Agents

Crested Capital Impala House1st FloorPlot 13-15, Kimathi AvenueP.O. Box 31736, Kampala, UgandaTel: +256 312 230 900 /+256 414 230 900Mob: +256 758 230 900Email: [email protected]: Mr. Robert H. Baldwin

African Alliance Uganda Ltd1st Floor, Workers HouseP. O Box 70828, Kampala Tel: +256 417 [email protected]: Joan Asiimwe Irungu

Baroda Capital Markets (U) LimitedP.O. Box 7197 Kampala, UgandaTel: +256 414 232 783Fax: +256 414 230 781Email: [email protected]: www.barodacapital.webscomContact: Charneet Singh

Dyer & Blair Uganda LimitedRwenzori House Ground FloorP.O. Box 36620Tel: +256 414 233 050Fax: +256 414 231 813Email: [email protected]: Kakiiza Esther

Equity Stock Brokers (U) Limited Orient Plaza Plot 6/6A Kampala Road P.O. Box: 7539 Kampala Tel: +256-417 719 102/133/144 Fax: +256-414 348039 Email: [email protected] Contact: Ms. Gloria Kangabe

UAP Financial Services LimitedUAP Nakawa Business Park, 6th FloorP.O. Box 1610 Tel: +256 414 332 700Mob: +256 754 443 788 Email: [email protected] Contact: Mwebaze Simon

SBG Securities4th Floor, Stanbic bankCrested Tower (Short), 17 Hannington RoadP.O. Box 7131 Kampala, UgandaTel: + 256 31 222 4000 /4965Email: [email protected]: Kitungulu Kenneth

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