Proposed Merger of Dannex Limited, Ayrton Drug Manufacturing …dannexgh.com/DAS-Merger.pdf · 2019. 1. 6. · Corporate Governance of the Merged Company ... 153 6. Legal Proceedings

Circular to Shareholders of Ayrton Drug Manufacturing Limited, Starwin Products Limited and Dannex Limited

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Proposed Merger of Dannex Limited, Ayrton Drug Manufacturing Limited and

Starwin Products Limited

Pursuant to a Scheme of Amalgamation (Under Sections 231 to 235 of the Ghana Companies Act, 1963 (Act 179), as amended)

Sponsoring Broker Legal Advisors Reporting Accountant Financial Advisor


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Contents

............................................................................................................................................................................ 1

IMPORTANT INFORMATION AND DISCLAIMERS ......................................................................................... 7

Introduction ....................................................................................................................................................... 7

Legal Basis for the Scheme of Amalgamation of Dannex, Ayrton and Starwin ......................................... 7

Declaration of Interest by Advisors ................................................................................................................ 8

Directors Responsibly Statement ................................................................................................................... 9

CORPORATE INFORMATION ON DANNEX LIMITED .................................................................................. 12

CORPORATE INFORMATION ON AYRTON DRUG MANUFACTURING LIMITED ..................................... 13

CORPORATE INFORMATION ON STARWIN PRODUCTS LIMITED ........................................................... 14

ADVISORS TO THE MERGER ........................................................................................................................ 15

DEFINITIONS ................................................................................................................................................... 16

SUMMARY ....................................................................................................................................................... 20

EXPECTED TIMETABLE OF PRINCIPAL EVENTS ....................................................................................... 24

Part 1: Letter from the Chairman of Ayrton and Starwin ............................................................................ 26

.......................................................................................................................................................................... 29

Part 2: Overview and Key Terms of the Merger ........................................................................................... 30 1. Introduction ................................................................................................................................................. 30 2. Legal structure of the Merger .................................................................................................................... 32 3. Key Terms and Conditions of the Merger ................................................................................................ 32

i. Consideration......................................................................................................................................................................... 32 ii. Valuation ....................................................................................................................................................................................... 33 ii. Issue of Shares ...................................................................................................................................................................... 51 iii. Conditions .............................................................................................................................................................................. 51 iv. Resolutions for Ayrton Shareholders’ Approval.................................................................................................................. 51 v. Resolutions for Starwin Shareholders’ Approval ................................................................................................................ 51 vi. Resolutions for Dannex Shareholders’ Approval ................................................................................................................ 52 vii. Share Capital .......................................................................................................................................................................... 52 viii. Other Authorisations ............................................................................................................................................................. 52 ix. Material Legal Proceedings ................................................................................................................................................... 52 x. Floatation Expenses of the Merger ....................................................................................................................................... 52

4. Boards’ Recommendation ......................................................................................................................... 53

Part 3: Overview of the Proposed Merger .................................................................................................... 53 1. Introduction ................................................................................................................................................. 53 2. Change of Name ......................................................................................................................................... 54 3. Listing on the Ghana Stock Exchange ..................................................................................................... 54 4. Benefits of the Merger ................................................................................................................................ 54

i. Growth potential .................................................................................................................................................................... 54 ii. Leading Market Position........................................................................................................................................................ 54 iii. Synergies, Increased Efficiency and Cost Savings ............................................................................................................. 54 iv. Investment appeal ................................................................................................................................................................. 54

5. Risk Factors ................................................................................................................................................ 55 i. Risks related to a failure to implement or delay in implementing the Scheme .................................................................. 55 ii. Risks related to the shares of the Merged Company........................................................................................................... 55 iii. Risks related to the operations of the Merged Company and the pharmaceutical industry ............................................. 55 iv. Price and foreign exchange risk ........................................................................................................................................... 55 v. Liquidity risk .......................................................................................................................................................................... 55 vi. Credit Risk .............................................................................................................................................................................. 55 vii. Competitor risk ...................................................................................................................................................................... 55 viii. Country Risk .......................................................................................................................................................................... 56 ix. Share Liquidity Risk .............................................................................................................................................................. 56

6. Corporate Governance of the Merged Company .................................................................................... 56 7. Date of Birth of Directors and other directorships held by them in respect of the merged entity .... 56 8. Selected Financial Information relating to Ayrton .................................................................................. 57 9. Selected Financial Information relating to Starwin ................................................................................. 58 10. Selected Financial Information relating to Dannex ........................................................................ 58 11. Shareholders ...................................................................................................................................... 59


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12. Ayrton and Starwin Meetings ........................................................................................................... 59 13. Action to be taken by Ayrton and Starwin Shareholders .............................................................. 60 14. Recommendation ............................................................................................................................... 60 15. Further Information ............................................................................................................................ 60

Part 4: Compliance letter from Kimathi & Partners, Corporate Attorneys ................................................ 60

Part 5: The Pharmaceutical Industry ............................................................................................................ 65 1. Overview ...................................................................................................................................................... 65 2. The Regulatory Environment .................................................................................................................... 65 3. Major Pharmaceutical Companies ............................................................................................................ 66 4. Market Share Analysis ............................................................................................................................... 66 5. Outlook of the Pharmaceutical Industry .................................................................................................. 66

Part 6: General Information on Ayrton Drug Manufacturing Limited ........................................................ 68 1. Background ................................................................................................................................................. 68 2. Share Issue History .................................................................................................................................... 68 3. Shareholders ............................................................................................................................................... 68 4. Products ...................................................................................................................................................... 68 5. Directors ...................................................................................................................................................... 69 6. Senior Management ................................................................................................................................... 70 7. Corporate Governance and Board Practices ........................................................................................... 71

i. Role of the Board ................................................................................................................................................................... 71 ii. Audit Subcommittee .............................................................................................................................................................. 71 iii. Internal Control ...................................................................................................................................................................... 71

8. Employees ................................................................................................................................................... 71 9. Office Locations.......................................................................................................................................... 71 10. Indebtedness and Funds .................................................................................................................. 72 11. Material Contracts .............................................................................................................................. 72 12. Insurance Policies ............................................................................................................................. 72 13. Litigation ............................................................................................................................................. 72 14. Disclosure of Interests by Directors ................................................................................................ 73 15. Disclosure of Interests by Advisors ................................................................................................ 73 16. Other Disclosures .............................................................................................................................. 73

i. Relationships Among Directors ............................................................................................................................................ 73 ii. Bankruptcy Petitions ............................................................................................................................................................. 73 iii. Criminal Proceedings or Convictions for Fraud or Dishonesty .......................................................................................... 73 iv. Prohibition against Financial Advisory or Capacity to Hold Office .................................................................................... 73 v. Materiality of Management Interest in the Company’s Business and Affairs .................................................................... 73 vi. Directors Powers to Borrow and Charge the Company’s Assets ....................................................................................... 73 vii. Affiliations and Affiliated Companies and Businesses ....................................................................................................... 73

17. Risk Factors ....................................................................................................................................... 74 i. Risks related to the pharmaceutical industry ...................................................................................................................... 74

18. Additional Information....................................................................................................................... 74 i. Historical Financial Statements of Ayrton ........................................................................................................................... 75 ii. Accounting Policies of Ayrton .............................................................................................................................................. 76 iii. Historical Income Statement of Ayrton Drugs Manufacturing Ltd ...................................................................................... 83 iv. Historical Balance Sheet of Ayrton Drugs Manufacturing Ltd ............................................................................................ 83 iv. Historical Cash Flow Statement of Ayrton Drug Manufacturing Ltd .................................................................................. 84

Part 7: General Information on Starwin Products Limited ......................................................................... 86 1. Background ................................................................................................................................................. 86 2. Share Issue History .................................................................................................................................... 86 3. Shareholders ............................................................................................................................................... 86 4. Products ...................................................................................................................................................... 86 5. Directors ...................................................................................................................................................... 87 6. Senior Management ................................................................................................................................... 88 7. Corporate Governance and Board Practices ........................................................................................... 89

i. Role of the Board ................................................................................................................................................................... 89 ii. Audit Subcommittee .............................................................................................................................................................. 89 iii. Internal Control ...................................................................................................................................................................... 89

8. Employees ................................................................................................................................................... 89 9. Investments and Subsidiaries ................................................................................................................... 90 10. Office Locations ................................................................................................................................. 90 11. Indebtedness and Funds .................................................................................................................. 90 12. Material Contracts .............................................................................................................................. 91 13. Insurance Policies ............................................................................................................................. 91 14. Litigation ............................................................................................................................................. 91 15. Disclosure of Interests by Directors ................................................................................................ 91 16. Disclosure of Interests by Advisors ................................................................................................ 91 17. Other Disclosures .............................................................................................................................. 92

i. Relationships Among Directors ............................................................................................................................................ 92


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ii. Bankruptcy Petitions ............................................................................................................................................................. 92 iii. Criminal Proceedings or Convictions for Fraud or Dishonesty .......................................................................................... 92 iv. Prohibition against Financial Advisory or Capacity to Hold Office .................................................................................... 92 v. Materiality of Management Interest in the Company’s Business and Affairs .................................................................... 92 vi. Directors Powers to Borrow and Charge the Company’s Assets ....................................................................................... 92 vii. Affiliations and Affiliated Companies and Businesses ....................................................................................................... 92

18. Risk Factors ....................................................................................................................................... 92 i. Risks related to the pharmaceutical industry ...................................................................................................................... 92

19. Additional Information....................................................................................................................... 92 20. Historical Financial Statements ....................................................................................................... 93

i. Independent Reporting Accountants’ Review Report on Starwin .............................................................................................. 93 ii. Accounting Policies of Starwin ................................................................................................................................................... 95 iii. Historical Income Statement of Starwin Products Ltd ............................................................................................................ 100 iv. Historical Balance Sheet of Starwin Products Ltd .................................................................................................................. 100 v. Historical Cash Flow Statement of Starwin Products Ltd ........................................................................................................ 101

Part 8: General Information on Dannex Limited ........................................................................................ 103 1. Background ............................................................................................................................................... 103 2. Share Issue History .................................................................................................................................. 103 3. Shareholders ............................................................................................................................................. 103 4. Products .................................................................................................................................................... 104 5. Directors .................................................................................................................................................... 104 6. Senior Management ................................................................................................................................. 105 7. Corporate Governance and Board Practices ......................................................................................... 106

i. Role of the Board ................................................................................................................................................................. 106 ii. Internal Control .................................................................................................................................................................... 106

8. Employees ................................................................................................................................................. 106 9. Investments and Subsidiaries ................................................................................................................. 106

i. Ayrton Drug Manufacturing Limited ................................................................................................................................... 107 ii. Starwin Products Limited .................................................................................................................................................... 107

10. Group Shareholding Structure ....................................................................................................... 107 107 11. Office Locations ............................................................................................................................... 108 12. Indebtedness and Funds ................................................................................................................ 108 13. Material Contracts ............................................................................................................................ 108 14. Insurance Agreements .................................................................................................................... 109 15. Litigation ........................................................................................................................................... 109 16. Disclosure of Interests by Directors .............................................................................................. 109 17. Disclosure of Interests by Advisors .............................................................................................. 109 18. Related Party Disclosures .............................................................................................................. 109 19. Directors Fees for 2017 and estimated fees for 2018 ................................................................... 111 20. Related Party Agreements .............................................................................................................. 111 21. Tenure, rent and unexpired term of lease of Dannex ......................................................................... 112 22. Dannex’s Dividend Policy ...................................................................................................................... 112 23. Other Disclosures .................................................................................................................................. 112

i. Relationships among Directors .......................................................................................................................................... 112 ii. Bankruptcy Petitions ........................................................................................................................................................... 112 iii. Criminal Proceedings or Convictions for Fraud or Dishonesty ........................................................................................ 112 iv. Prohibition against Financial Advisory or Capacity to Hold Office .................................................................................. 112 v. Materiality of Management Interest in the Company’s Business and Affairs .................................................................. 112 vi. Directors Powers to Borrow and Charge the Company’s Assets ..................................................................................... 112 vii. Affiliations and Affiliated Companies and Businesses ..................................................................................................... 112

24. Risk Factors ............................................................................................................................................ 113 i. Risks related to the pharmaceutical industry .................................................................................................................... 113

25. Additional Information ........................................................................................................................... 113 i. Independent Reporting Accountants’ Review Report on Dannex ............................................................................................ 113 ii. Dannex Accounting Policies...................................................................................................................................................... 115 iii. Historical Income Statement of Dannex Ltd ............................................................................................................................ 123 iv.Historical Balance Sheet of Dannex Ltd ................................................................................................................................... 123 v.Historical Cash Flow Statement of Dannex Ltd ......................................................................................................................... 124

Part 9: Forecast & Unaudited Proforma Financial Information on Merged Company ........................... 125 i. Reporting Accountants’ Report on Financial Forecast and Projections............................................. 125 ii. Key Assumptions underlying the projected financial statements of the combined business of

Dannex, Starwin and Ayrton Drugs Ltd ................................................................................................. 126 iii. Projected Income Statement for the Merged Company ...................................................................... 132 iv. Projected Balance Sheet for the Merged Company ............................................................................. 132 v. Projected Cash flow Statement for the Merged Company ................................................................... 133

Part 10: Explanatory Statement ................................................................................................................... 134 1. Introduction ............................................................................................................................................... 134 2. Summary of the Legal structure of the Merger ..................................................................................... 135 3. Summary of Key Terms and Conditions of the Merger ........................................................................ 135


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i. Consideration....................................................................................................................................................................... 135 ii. Conditions ............................................................................................................................................................................ 136 iii. Resolutions for Shareholders’ Approval ............................................................................................................................ 136 iv. Value of the Merger.............................................................................................................................................................. 136

4. The Scheme ............................................................................................................................................... 136 5. Ayrton and Starwin Meetings and the Scheme Process ...................................................................... 137

i. The Scheme Meeting ........................................................................................................................................................... 138 ii. The Extraordinary General Meeting .................................................................................................................................... 138 iii. Attending the Scheme Meeting and the Extraordinary General Meeting ......................................................................... 138 iv. The Court Hearing ............................................................................................................................................................... 139 v. Attending the Court Hearing ............................................................................................................................................... 139 vi. Determination of fairness and effectiveness of the Scheme ............................................................................................ 139 vii. Delisting of Ayrton and Starwin Shares ............................................................................................................................. 140

6. Entitlement to Consideration Under the Merger ................................................................................... 140 7. Issue of Shares ......................................................................................................................................... 140 8. Dividends ................................................................................................................................................... 140

i. Ayrton Dividends ................................................................................................................................................................. 140 ii. Starwin Dividends ................................................................................................................................................................ 140 iii. Dannex Dividends ................................................................................................................................................................ 140

9. Major Shareholders of Ayrton ................................................................................................................. 140 i. Adcock and Dannex Voting Pool Agreement ..................................................................................................................... 140 ii. SSNIT Support Letter ........................................................................................................................................................... 141

10. Board of Dannex Ayrton Starwin ................................................................................................... 141 11. The Directors of Ayrton and Starwin and the Effect of the Scheme on their Interests ............ 141 12. The New Dannex Shares ................................................................................................................. 141

i. Listings ................................................................................................................................................................................. 141 ii. Change of Name .................................................................................................................................................................. 141

13. Information on Ayrton ..................................................................................................................... 141 14. Information on Starwin .................................................................................................................... 141 15. Information on Dannex .................................................................................................................... 142 16. Action to be Taken – Forms of Proxy and Voting Instruction Forms ......................................... 142

i. Ayrton Shareholders ........................................................................................................................................................... 142 ii. Starwin Shareholders .......................................................................................................................................................... 142

17. Further Information .......................................................................................................................... 143

Part 11: Conditions to the Implementation of the Scheme and the Merger ............................................ 143 1. Conditions to the Scheme ....................................................................................................................... 143 2. Conditions to the Merger ......................................................................................................................... 143

i. Admission of New Dannex Shares ..................................................................................................................................... 143 ii. Other Third-Party Clearances ............................................................................................................................................. 144 iii. Authorisations ..................................................................................................................................................................... 144 iv. Absence of adverse circumstances ................................................................................................................................... 145 v. No material transactions, claims or changes in the conduct of the business of the Parties .......................................... 146 vi. No adverse change, litigation, regulatory enquiry of similar ............................................................................................ 148

Part 12: The Scheme of Amalgamation ...................................................................................................... 150 1. Date of taking effect ................................................................................................................................. 150 2. Procedure of the Court Sanctioned Scheme of Amalgamation ........................................................... 150 3. Appraisal Rights and Squeeze Outs ....................................................................................................... 151 4. Transfer and Vesting of Undertaking ..................................................................................................... 151 5. Consideration ............................................................................................................................................ 153 6. Legal Proceedings .................................................................................................................................... 153 7. Contracts, Deeds and Other Instruments .............................................................................................. 153 8. Staff and Employees of the Transferor Companies .............................................................................. 153 9. Payment of Tax ......................................................................................................................................... 154 10. Dissolution of the Transferor Companies without Winding Up .................................................. 154 11. Application to the High Court Or such Other Appropriate Authority ......................................... 154 12. Modifications/Amendments to the Scheme .................................................................................. 154

Part 13: Additional Information ................................................................................................................... 155 1. Responsibility ........................................................................................................................................... 155 2. Details of the Voting Pool Agreement .................................................................................................... 155 3. Summary of SSNIT Support Letter ......................................................................................................... 156 4. Fairness Report ........................................................................................................................................ 156 5. New Dannex Shares ................................................................................................................................. 156 6. Working Capital ........................................................................................................................................ 156 7. Exchange Control Restrictions ............................................................................................................... 156

i. Exchange Control Act 1961, Act 71 .................................................................................................................................... 156 ii. Restriction on Foreign Share Ownership of Listed Securities.......................................................................................... 156

8. Post-Merger Taxation ............................................................................................................................... 157 i. Withholding Tax on Dividend .............................................................................................................................................. 157 ii. Capital Gains ........................................................................................................................................................................ 157 iii. Gift Tax ................................................................................................................................................................................. 157 iv. Stamp Duty ........................................................................................................................................................................... 157


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v. Corporate Tax ...................................................................................................................................................................... 157 9. Dividends and Payment Agents .............................................................................................................. 157 10. Documents Available for Inspection .............................................................................................. 158

Part 14: Notice of Scheme Meeting ............................................................................................................. 159

Part 15: Notice of Extraordinary General Meeting ..................................................................................... 161


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IMPORTANT INFORMATION AND DISCLAIMERS

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Introduction On 19

th December, 2018, the Boards of Dannex Ltd, Ayrton Drug Manufacturing Ltd and Starwin Products Ltd

announced that they had agreed to the terms of a recommended merger of the three companies to be effected by way of a Ghanaian Scheme of Amalgamation under Section 231 of the Companies Act. On the conclusion of the Merger, the Merged Company will be known as Dannex Ayrton Starwin Limited.

Legal Basis for the Scheme of Amalgamation of Dannex, Ayrton and Starwin The scheme of amalgamation for the merger of Dannex, Ayrton and Starwin is based on the process set out in the Companies Act, 1963 (Act 179). Under section 231 of the Companies Act a company can merge with another company by way of a court approved scheme of amalgamation. Amalgamation means any merger of the undertakings or any part of the undertakings of two or more companies or of the undertakings or part of the undertakings of one or more companies and one or more bodies corporate. Section 231 specifically provides that where any amalgamation is proposed, whether or not involving a compromise between a company and its creditors or members or any class or classes of them, the Court, on the summary application of the company or any member of the company, may either order that meetings of the various classes of members concerned to be summoned in such manner as the court directs. If a three-fourths majority of each class of members concerned or creditors concerned is obtained, the votes are referred to the Registrar who will appoint a reporter to investigate the fairness of the amalgamation and to report to the Court. The Court after considering the report may make an order confirming the amalgamation, with or without modifications, the order is then binding on the company and on all members and creditors and is subsequently unimpeachable. The court may also provide such terms as it shall think fit as a condition of its confirmation including a condition that any members shall be given rights to require the company to purchase their shares at a price fixed by the court or to be determined in a manner provided in the order. The scheme of amalgamation process is being adopted because it serves as an effective process for dealing with all issues of any affected member before the court. It also has appraisal rights which are built in as safeguards to provide protection to minority rights and to shareholders who do not intend to be a part of the merger.

If you are in doubt as to the action you should take, it is recommended that you seek financial advice immediately from your stockbroker or an independent investment advisor duly licensed by the SEC if you are resident in Ghana, or if not, any other appropriately authorized independent professional adviser.

If you have sold or otherwise transferred all your interests in Ayrton or Starwin securities, kindly send this document as soon as possible to the purchaser or transferee, or to the stockbroker or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee. If you are not the registered or beneficial owner of Ayrton or Starwin securities, please forward a copy of this document and its enclosures to such person(s).

The GSE has granted permission to Dannex to list the Dannex Shares on the First Official List of the GSE. The GSE assumes no responsibility for the correctness of any of the statements made or opinions or reports expressed or contained in this document. Admission on the First Official List of the GSE is not to be taken as an indication of the merits of Dannex or of the Dannex Shares. It is expected that dealings on the GSE will commence on or about 12

th February, 2019.

Copies of this document can be obtained from UMB Investment Holdings Limited, 57 Dr. Isert Street, North Ridge, P.O. Box GP 401 Accra – Ghana (Ref. Wilfred Agyei), UMB Stockbrokers Limited, 57 Dr. Isert Street, North Ridge, P.O. Box GP 401 Accra – Ghana (Ref. Benjamin Brighte Ackah), NTHC Registrars, 18 Gamel Abdul Nasser Avenue, Ringway Estates, P.O. Box KIA 9563, Airport, Accra, Ghana (Ref. Ken Mate-Kole), or by calling UMB Investment Holdings Limited or UMB Stockbrokers on +233(0)302 251137-8.


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Copies of this document can also be obtained online on the following websites: Dannex – www.dannexgh.com, Ayrton – www.ayrtondrug.com or Starwin - www.starwinproductsltdgh.com.

No person is authorized to give any information or to make any representation not contained in this document, and any information or representation not contained in this document must not be relied upon as having been authorized by Ayrton, Starwin, Dannex, UMB Investment Holdings, UMB Stockbrokers or any of the advisors. Neither the delivery of this document, nor any disposal made hereunder, will under any circumstances, create any implication that the information contained in this document is correct as at any time subsequent to its date. Ayrton, Starwin and Dannex shareholders will be given notice, published in a national daily newspaper, of any event that occurs during the notice of meeting period that materially affects the accuracy of the information contained in this document.

Your attention is drawn to the letter from the Chairman of Ayrton and Starwin in Part 1 of this document, which contains the recommendation of the Ayrton and Starwin Boards that you vote in favour of the Scheme at the Scheme Meeting, and in favour of the resolutions to be proposed at the Extraordinary General Meetings to be held in connection with the Merger. Notices of the Scheme Meetings and the Extraordinary General Meetings, all of which will be held on 27

th December, 2018, are set out at the end of this document. The Ayrton Scheme

Meeting will start at 9.00 am (GMT) and the Extraordinary General Meeting will start at 9.30 am (GMT) (or, if later, immediately after the conclusion or adjournment of the Scheme Meeting). The Starwin Scheme Meeting will start at 12.00 pm (GMT) and the Extraordinary General Meeting will start at 12.30 pm (GMT) (or, if later, immediately after the conclusion or adjournment of the Scheme Meeting). All Ayrton and Starwin Shareholders are entitled to attend and vote at their respective Scheme Meetings and at the Extraordinary General Meetings.

The Court Hearing to confirm the Scheme will be held at the High Court of Ghana in Accra on 23rd January, 2019 and will start at 11.00 am (GMT). All Ayrton and Starwin Shareholders are entitled to attend in person or to be represented by counsel at the Court Hearing to support or object to the Scheme.

If you are an Ayrton Shareholder, you will find enclosed with this document a BLUE proxy form for use in connection with the Scheme Meeting and a YELLOW proxy form for use in connection with the Extraordinary General Meeting. Please complete both proxy forms in accordance with the instructions on the forms and return them to NTHC Registrars if you do not intend to attend the Meetings in person. In each case, the proxy form must be received by the Registrar at its address set out in the relevant proxy form, not later than 3.00 pm (GMT) on 24

th December, 2018. If proxy forms for scheme meetings have not been lodged by this time, they

may be handed to the Chairman at the Scheme Meeting. However, proxy forms for the Extraordinary General Meeting will be invalid if received after this time.

If you are a Starwin Shareholder, you will find enclosed with this document a PINK proxy form for use in connection with the Scheme Meeting and a GREEN proxy form for use in connection with the Extraordinary General Meeting. Please complete both proxy forms in accordance with the instructions on the forms and return them to NTHC Registrars if you do not intend to attend the Meetings in person. In each case, the proxy form must be received by the Registrar at its address set out in the relevant proxy form, not later than 3.00 pm (GMT) on 24

th December, 2018. If proxy forms for scheme meetings have not been lodged by this time, they

may be handed to the Chairman at the Scheme Meeting. However, proxy forms for the Extraordinary General Meeting will be invalid if received after this time.

Declaration of Interest by Advisors UMB Investment Holdings is acting as financial advisors for the merger. To the best of their knowledge and belief, this Shareholders Circular constitutes full and fair disclosure of all material facts about the merger. UMB Investment Holdings consent to act in the specified capacity and to its name being stated in this Offer Document and confirms that it has not withdrawn its consent to any statement or report prepared by its being included in this Offer Document (in the form and context in which it is included). Neither UMB Investment Holdings nor any of their employees or principals has any material direct or indirect economic or financial interest in Dannex, Ayrton and Starwin Ltd. Holdings

UMB Stockbrokers is acting as sponsoring broker for the merger. To the best of their knowledge and belief, this Shareholders Circular constitutes full and fair disclosure of all material facts about the merger. UMB Stockbrokers consent to act in the specified capacity and to its name being stated in this Offer Document and confirms that it has not withdrawn its consent to any statement or report prepared by its being included in this Offer Document (in the form and context in which it is included). Neither UMB Stockbrokers nor any of their

http://www.dannexgh.com/

http://www.ayrtondrug.com/

http://www.starwinproductsltdgh.com/


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employees or principals has any material direct or indirect economic or financial interest in Dannex, Ayrton and Starwin Ltd.

Kimathi and Partners (KIMATHI) is acting as Legal Advisor in respect of the Transaction. KIMATHI consents to act in the specified capacity and to its name being stated in this Shareholders Circular and confirms that it has not withdrawn its consent to any statement or report prepared by its being included in this Shareholders Circular (in the form and context in which it is included). Neither KIMATHI nor any of its employees or principals have any material direct or indirect economic or financial interest in Dannex, Ayrton and Starwin Ltd.

Ernst and Young is acting as the Reporting Accountants in respect of the Transaction. Ernst and Young consents to act in the specified capacity and to its name being stated in this Shareholders Circular and confirms that it has not withdrawn its consent to any statement or report prepared by it being included in this Shareholders Circular (in the form and context in which it is included). Neither Ernst and Young nor any of its employees or principals has any material direct or indirect economic or financial interest in Dannex, Ayrton and Starwin Ltd

This document has been reviewed and approved by the SEC in accordance with the Securities Industry Act, 2016, and the Securities and Exchange Commission Regulations, 2003, L.I 1728. SEC in its review examined the contents of this document to ensure that adequate disclosures had been made.

This document has also been reviewed and approved by the GSE. The GSE has granted permission to list any additional Dannex shares issued under the Merger on the First Official List of the GSE. The GSE assumes no responsibility for the correctness of any of the statements made or opinions or reports expressed or contained in this document.

This document does not constitute an offer to sell or the solicitation of an offer to buy, nor there be any sale or distribution of the new Dannex shares to be issued pursuant to the Merger in any jurisdiction in which such offer or sale is not permitted.

In evaluating the Merger, you should consider the risks related to the Merger and to Dannex, Ayrton, Starwin and the Merged Company. See the risk factors set out in Part 3 of this document.

Directors Responsibly Statement The Board of Directors of Starwin Products Ltd (“Starwin”), Ayrton Drug Manufacturing Ltd (“Ayrton”) and Dannex Ltd (“Dannex”) accept responsibility for the information contained in this Shareholders Circular.

This Shareholders Circular has been reviewed and approved by the Boards of Starwin, Ayrton and Dannex, who collectively and individually, accept full responsibility for the accuracy of the information given and, after making all reasonable inquiries and to the best of their knowledge and belief, confirm that there are no facts the omission of which would make any statement in this Shareholders Circular referred to above misleading.

No Director has been involved in any of the following events: (a) a petition under bankruptcy laws in any jurisdiction filed against such person or any partnership in which he or she was a partner or any corporation of which he or she was a director or Chief Executive Officer (b) conviction of such person or fraud, misappropriation or breach of trust or any other similar offence and (c) such person being the subject of any order, judgement or ruling of any court of competent jurisdiction or administrative body preventing him from acting as an investment advisor, dealer’s representative, investment representative, a director of a financial institution or engaging in any type of business or professional activity.

Signed on behalf of the Board of Directors of Starwin Products Ltd, Ayrton Drug Manufacturing Ltd and Dannex Ltd

Nik Amarteifio

Chairman

Ayrton Drug Manufacturing Limited, Dannex Limited and Starwin Products Limited


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THE ACTION YOU SHOULD TAKE IS SET OUT IN PART 10 OF THIS DOCUMENT.

GENERAL INFORMATION To the best of the knowledge of the Financial Advisors, Sponsoring Broker, Legal Advisors and the Reporting Accountant (or any of their respective directors, affiliates, advisers or agents), the Circular constitutes full and fair disclosure of all material facts about the Merger.

Neither the Financial Advisor, Sponsoring Broker, Legal Advisors and the Reporting Accountant (or any of their respective directors, affiliates, advisers or agents) have independently verified the information contained herein. Accordingly, no representation or warranty, expressed or implied, is made by the Financial Advisor, Sponsoring Broker, Legal Advisors and the Reporting Accountant or any of their respective directors, affiliates, advisers or agents, with respect to the accuracy or completeness of such information, at any time, of this Circular. Nothing contained in this Circular is to be construed as, or shall be relied upon as a promise, warranty or representation, whether to the past or the future, by the Financial Advisor, Sponsoring Broker, Legal Advisors and the Reporting Accountant (or any of their respective directors, affiliates, advisers or agents, in any respect).

ROUNDING Certain figures included in this Circular have been subject to rounding. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

FORWARD-LOOKING INFORMATION This document (including the information incorporated by reference into this document) contains statements about Dannex Limited, Starwin Products Limited, Ayrton Drug Manufacturing Limited and Dannex Ayrton Starwin Limited, i.e. the merged entity, which are, or may be deemed to be, “forward looking statements” which are prospective in nature.

All statements other than statements of historical fact are forward-looking statements. They are based on current expectations and projections about future events and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements.

Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as “plans”, “expected”, “is subject to”, “budget”, “scheduled”, “estimates”, or words or terms of similar substance or the negative thereof, as well as variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “should”, “would”, “might” or “will” be taken, occur or be achieved.

Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Forward-looking statements may include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; and (ii) business and management strategies and the expansion and growth of Dannex, Ayrton, Starwin or Dannex Ayrton Starwin and potential synergies resulting from the Merger.

Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors may cause the actual results, performance or achievements of Dannex, Ayton and Starwin to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause actual results, performance or achievements of Dannex, Ayton and Starwin to differ materially from the expectations of Dannex, Ayton and Starwin, as applicable, include, among other things, general business and economic conditions globally, industry trends, competition, changes in government and other regulation, changes in political and economic stability, disruptions in business operations due to reorganisation activities, fluctuations in interest rates, foreign exchange rates, asset prices, equity markets, commodity prices, inflation or deflation, the failure to satisfy any conditions for the Merger on a timely basis or at all, the failure to satisfy the conditions of the Merger if and when implemented (including approvals or clearances from regulatory and other agencies and bodies) on a timely basis or at all, the failure of Ayrton and Starwin to combine with Dannex on a timely basis or at all, the inability of Dannex Ayrton Starwin to realise successfully any anticipated synergy benefits when the Merger is implemented, the inability of Dannex Ayrton Starwin to


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integrate successfully Dannex, Ayrton and Starwin’s operations and programmes when the Merger is implemented, Dannex Ayrton Starwin incurring and/or experiencing unanticipated costs and/or delays or difficulties relating to the Merger when the Merger is implemented and force majeure and other events beyond the control of the Merger Candidates or the Advisors. Such forward-looking statements should therefore be construed in light of such factors. Any representation, assurance or guarantee that the occurrence of the events or implied in any forward-looking statements in this document will occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

Other than in accordance with its legal or regulatory obligations, Dannex, Ayrton and Starwin are not under any obligation and Dannex, Ayrton and Starwin each expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

MARKET SHARE AND INDUSTRY INFORMATION Industry and market information on the Ghanaian pharmaceutical industry included in this Circular has been provided by Dannex or has been obtained from third-party sources that are believed to be reliable. No assurance can be given, however, as to the accuracy and completeness of such information, and such market and position data has not been independently verified.

NOT A PROSPECTUS This document does not constitute a prospectus or prospectus equivalent document. Any vote in respect of the Scheme should be made only on the basis of the information contained in this document.


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CORPORATE INFORMATION ON DANNEX LIMITED Directors: Nik Amarteifio – Board Chairman Daniel Apeagyei Kissi – Chief Executive Officer Alex Kobina Bonney Samuel Atta Mensah Dr. Barima Afranie Company Secretary: Opoku Amponsah Fugar & Company

2nd Floor, World Trade Centre Independence Avenue Ridge Ambassadorial Enclave Accra, Ghana

Registered Office: No 5, Dadeban Road Ring Road, North Industrial Area Accra, Ghana P. O. Box 5258 Accra, Ghana Auditors: KPMG Chartered Accountants 13 Yiyiwa Drive, Abelenkpe Accra, Ghana P. O. Box GP 242 Accra, Ghana Company Solicitors: Amarteifio & Co 2

nd Floor, Total House

25 Liberia Road Accra, Ghana P. O. Box 459 Accra, Ghana Bankers: GCB Bank Limited Societe Generale Limited Zenith Bank (Ghana)Limited Universal Merchant Bank Limited

Ecobank Ghana Limited


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CORPORATE INFORMATION ON AYRTON DRUG MANUFACTURING LIMITED Directors: Nik Amarteifio – Board Chairman Daniel Apeagyei Kissi – Chief Executive Officer Richard Adu-Poku Company Secretary Opoku Amponsah

Fugar & Company 2nd Floor, World Trade Centre Independence Avenue Ridge Ambassadorial Enclave Accra, Ghana

Registered Office: B1/24 Abeka Road Naa Attah Street South Tesano, Abeka Road Accra, Ghana P. O. Box 2149 Accra Auditors: Ernst & Young Chartered Accountants G 15, White Avenue, Airport Residential Area Accra, Ghana P. O. Box KA 16009 Airport, Accra Company Solicitors: Opoku Amponsah Fugar & Company 2nd Floor, World Trade Centre Independence Avenue Ridge Ambassadorial Enclave Accra, Ghana Registrars: NTHC Registrars 8 Gamel Abdul Nasser Avenue, Ringway Estates Accra, Ghana P. O. Box KIA 9563 Airport Accra, Ghana Bankers: GCB Bank Limited Ecobank Ghana Limited Stanbic Bank Limited


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CORPORATE INFORMATION ON STARWIN PRODUCTS LIMITED Directors: Nik Amarteifio – Board Chairman Daniel Apeagyei Kissi – Chief Executive Officer Kwasi Yirenkyi – Chief Human Resource and Corporate

Affairs Officer Amarteokor Amarteifio Alex Kobina Bonney Samuel Atta Mensah Dr. Barima Afranie Secretary Kwesi Austin Ayawaso Chambers 11

th Lane, Osu RE

P. O. Box 4916 Accra, Ghana Registered Office: Plot 16, Adjuma Crescent South Industrial Area, Ring Road West Accra, Ghana P. O. Box 5760 Accra – North Auditors: KPMG Chartered Accountants 13 Yiyiwa Drive, Abelenkpe Accra, Ghana P. O. Box GP 242 Accra, Ghana Company Solicitors: Amarteifio & Co 2

nd Floor, Total House

25 Liberia Road Accra, Ghana P. O. Box 459 Accra, Ghana

Opoku Amponsah Fugar & Company 2nd Floor, World Trade Centre Independence Avenue Ridge Ambassadorial Enclave Accra, Ghana

Registrars: NTHC Registrars 8 Gamel Abdul Nasser Avenue, Ringway Estates Accra, Ghana P. O. Box KIA 9563 Airport Accra, Ghana Bankers: GCB Bank Limited Ecobank Ghana Limited Standard Chartered Bank Limited


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ADVISORS TO THE MERGER Financial Advisors: UMB Investment Holdings Limited 57 Dr Isert Street, North Ridge Accra, Ghana P. O. Box GP 401 Accra, Ghana Tel/Fax: +233(0)302 251 137/ +233(0)302 251 138 Contact: Francis Nyoagbe, Yaw Saifah, Wilfred Agyei Email: [email protected],

[email protected], [email protected] Sponsoring Brokers: UMB Stockbrokers Limited 57 Dr Isert Street, North Ridge Accra, Ghana P. O. Box GP 401 Accra, Ghana Tel/Fax: +233(0)302 251 137/ +233(0)302 251 138 Contact: Benjamin Brighte Ackah, Kofi Kyei Email: [email protected], [email protected] Legal Advisors: Kimathi & Partners Corporate Attorneys No. 6 Airport Road, Airport Accra, Ghana P.O. Box CT 6217 Accra, Ghana Tel: +233 (0) 302 770 447 Contact: Kimathi Kuenyehia, Odame Sarpong Email: [email protected],

[email protected] Reporting Accountants: Ernst & Young G15, White Avenue Airport Residential Area Accra, Ghana P.O. Box KA 16009, Airport Accra, Ghana Tel/Fax: +233(0)302 779 868 / +233(0)302 778 894 Contact: Pamela Des-Bordes, Emmanuel Adekahlor Email: [email protected];

[email protected]

mailto:[email protected]









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DEFINITIONS

The following definitions apply in this document, unless the context requires otherwise:

“Adcock” Adcock Ingram International Proprietary Limited

“Advisors” UMB Investment Holdings, UMB Stockbrokers, Kimathi & Partners, Corporate Attorneys, and Ernst & Young

“Ayrton” Ayrton Drug Manufacturing Limited

“Ayrton Board” or “Ayrton Board of Directors”

The Directors of Ayrton Drug Manufacturing Limited

“Ayrton Shares” All 215,000,000 issued ordinary shares of Ayrton Drug Manufacturing Limited

“The Board” The Board or Boards of Directors of Ayrton, Starwin, and/or Dannex

“BOG” Bank of Ghana

“Companies Act” The Companies Act, 1963 (Act 179) as amended

“Court” The High Court of Ghana

“CSD” Central Securities Depositary

“CSD Account” An electronic account held with the CSD where the Ayrton and Starwin shares are deposited, and where the new Dannex Shares will be deposited

“Dannex” Dannex Limited

“Dannex Board” or “Dannex Board of Directors” or the “Directors”

The Directors of Dannex Limited

“Dannex Shares All 47,423,624 issued ordinary shares of Dannex Limited

“Dannex Ayrton Starwin” Dannex Ayrton Starwin Limited

“DCF” Discounted Cash Flow

“E&Y” Ernst & Young Chartered Accountants

“Effective Date” The date on which the Scheme becomes effective in accordance with its terms

“EGM” Extraordinary General Meeting

“Election Return Date” 28th December 2018 or such later date or dates as may be publicly

announced by Ayrton or Starwin, such announcement being made not less than seven days prior to a date that would otherwise be an Election Return Date

“Election Return Time” 4.30 pm (GMT) on the Election Return Date


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"EPA" Environmental Protection Agency

“Exchange Ratio”

The ratio of how many shares shareholders of Ayrton and Starwin will receive in Dannex

“Extraordinary General Meeting” The extraordinary general meeting of Ayrton and Starwin convened for 9.30 am (GMT) and 12.30 pm (GMT), respectively on 27

th December,

2018 (or as soon thereafter as the Scheme Meeting shall have concluded or been adjourned) at the Ebenezer Presbyterian Church Hall, Osu, Accra, Ghana, including any adjournment thereof.

“Fairness Reporter” The Reporter appointed by the Registrar of Companies pursuant to section 231(2) of the Companies Act to investigate the fairness of the Scheme and to report thereon to the High Court

“FCF” Free Cash Flow

"FDA" Food and Drugs Authority

“Gazette” The Government Gazette of the Republic of Ghana

“GAAP” Generally Accepted Accounting Principles

“GDP” Gross Domestic Product

“Ghana” The Republic of Ghana

"GHS" Ghanaian Cedis

"GRA" Ghana Revenue Authority

“GMT” Greenwich Mean Time

“GSE” or “the Exchange” Ghana Stock Exchange

"GSS" Ghana Statistical Service

“High Court” The High Court of the Republic of Ghana

“IFRS” International Financial Reporting Standards

“K&P” Kimathi & Partners, Corporate Attorneys

“Listing Date” 12th February, 2019

“Merger” The merger of Dannex, Ayrton and Starwin

“Merger Candidates” Dannex, Ayrton and Starwin

“Merger Circular” or “Document” Document detailing the offer proposal, terms and actions required of shareholders

“Merged Company” Dannex Ayrton Starwin Limited

“PWC” PricewaterhouseCoopers (Ghana) Limited

“Qualifying Date” The date 6th February, 2019, on which persons whose names appear on the register of Dannex, Ayrton or Starwin members, qualify for the


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Share Exchange

“Qualifying Ayrton Shareholder” or

“Qualifying Shareholder”

Ayrton shareholders on the register of shareholders as at the Qualifying Date, and who have no legal restrictions barring them from partaking in the Share Exchange

“Qualifying Starwin Shareholder” or “Qualifying Shareholder”

Starwin shareholders on the register of shareholders as at the Qualifying Date, and who have no legal restrictions barring them from partaking in the Share Exchange

“Record Time”

4.30 pm (GMT) on the business day immediately preceding the Effective Date

“Registrar of Companies” The Registrar of Companies in Ghana appointed in accordance with section 328 of the Companies Code

“Regulations” The regulations of Ayrton and Starwin governing their activities and relationship with their shareholders

“SAS” Strategic African Securities Limited

“Scheme of Amalgamation” or “Scheme”

This Scheme of Amalgamation in its present form or with any modification(s) approved, imposed, or directed by the Court

“Scheme Shares” i. The Ayrton or Starwin shares in issue at the date of this document (other than any such Ayrton or Starwin shares registered in the name of Dannex or held in treasury by Ayrton or Starwin)

ii. Any Ayrton or Starwin shares issued after the date of this document and prior to the Voting Record Time

iii. Any Ayrton or Starwin shares issued at or after the Voting Record Time and prior to the Record Time either on terms that the original or any subsequent holders thereof shall be bound by the Scheme or in respect of which the holder shall have agreed in writing to be bound by the Scheme

“Scheme Meeting” The meeting of Ayrton and Starwin Shareholders convened by order of the High Court pursuant to section 231 of the Companies Code to consider and, if thought fit, approve the Scheme, including any adjournment thereof

“SEC” Securities and Exchange Commission of Ghana

“Share Exchange” The issuance of new Dannex shares to Ayrton and Starwin shareholders in exchange of their holdings in Ayrton and Starwin

“SSNIT” Social Security & National Insurance Trust

“SSNIT Support Letter” A letter from SSNIT dated 6th July 2017 in which SSNIT reaffirmed its

earlier commitment to support the proposed merger of Dannex Ayrton and Starwin, as communicated in their earlier letter dated 6

th April 2017

“Starwin Board” or “Starwin Board of Directors”

The Directors of Starwin Products Limited

“Starwin Shares” All 259,814,797 issued ordinary shares of Starwin Products Limited

“Transferee Company” Dannex Limited


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“Transferor Company” or “Transferor Companies”

Ayrton Drug Manufacturing Limited and Starwin Products Limited

“Voting Pool Agreement” The Voting Pool Agreement entered into between Dannex and Adcock dated 15

th July 2016, as more particularly described in section 2 of Part

13 of this document

“Voting Pool Shares” The Adcock Shares and the Dannex Shares or either one as the context may indicate

"VAT"

Value Added Tax

“Voting Record Time” 4.30 pm (GMT) on the business day immediately preceding the date of the Scheme Meeting

All terms and words not defined in this Circular shall, unless repugnant or contrary to the context or meaning thereof, have the same meanings as ascribed to them under the Companies Code or other applicable laws, rules, regulations, and bylaws as the case may be, including any statutory modification or re-enactment thereof from time to time.


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SUMMARY This summary highlights selected information from this document. It does not contain all of the information that may be important to you. As such, it is important that you read this entire document to enable you fully understand the Merger.

In the Merger, each new Dannex share will be exchanged for 3.15 Ayrton shares, and each new Dannex share will be exchanged for 13.31 Starwin shares.

If the Merger becomes effective, each Ayrton shareholder will receive 0.32 new Dannex shares in exchange for each Ayrton share, and each Starwin shareholder will receive 0.08 new Dannex shares in exchange for each Starwin share. This is the Share Exchange Ratio.

Fractional Interests The Registrar exercises the right to round up fractional shares of shareholders to the nearest whole.

The Merger will be effected by way of a Scheme of Amalgamation The Merger is to be effected by means of a Ghanaian Scheme of Amalgamation under section 231 of the Companies Act, which requires the approval of the Ayrton and Starwin shareholders and the confirmation of the High Court of Ghana. This is a statutory procedure that can be used among other things, to implement mergers. If the conditions to the Merger are satisfied or, if permissible, waived, the Court Order confirming the Scheme will be delivered to the Registrar of Companies, whereupon the Scheme will become effective and Ayrton, Starwin and Dannex will merge, subject to the approval of Ayrton and Starwin shareholders, and will be known as Dannex Ayrton Starwin Limited.

Ayrton Valuation The Merger values each Ayrton share at GHS0.13 and values Ayrton at GHS26,900,000.00 based on the combination of the Discounted Cash Flow (DCF) and Market Comparable valuation of GHS26,900,000.00 Starwin Valuation The Merger values each Starwin share at GHS0.03 and values Starwin at GHS7,700,000.00 based on the combination of the Discounted Cash Flow (DCF) and Market Comparable valuation of GHS7,700,000.00

Dannex Valuation The Merger values each Dannex share at GHS0.3943 and values Dannex at GHS18,700,000.00 based on the combination of the Discounted Cash Flow (DCF) and Market Comparable valuation of GHS18,700,000.00

Share Capital The outstanding shares of Dannex Ayrton Starwin Ltd post-merger shall be 84,765,898.86 and the market capitalization post-merger shall be GHS33,424,740.14 The new Dannex shares to be issued in the Merger will be listed and traded on the GSE. Following the completion of the Merger, Dannex shares will be listed on the GSE as DASPHARMA (Dannex Ayrton Starwin Limited is the name by which Dannex Limited would be known, subject to the approval of Dannex shareholders, following implementation of the Merger)

Dannex’s Dividend Policy The board of Dannex may recommend the payment of dividends, which may be approved or otherwise by shareholders at a general meeting. Dannex, Ayrton and Starwin believe the Merger will benefit all three companies The Directors of Dannex, Ayrton and Starwin believe that the Merger will allow Dannex, Ayrton and Starwin shareholders to benefit from the establishment of a leader in the pharmaceutical industry and they expect that the Merger will produce a Merged Company with the following attributes:

growth potential


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expanded customer base

economies of scale from combined operations

leading market position

increased market share

synergies, increased efficiency and cost savings The Merger is expected to generate tangible pre-tax synergy benefits due to anticipated:

reduction in financing costs

consolidation of sales and distribution network

reduction in administration and procurement costs

consolidation of manufacturing plant

increase in the breadth of technical capabilities to ensure the optimal development of organic growth opportunities

Investment Appeal Dannex Ayrton Starwin Limited is anticipated to have the growth potential, size, liquidity and dividend yield to enhance its attractiveness to the investing public.

Further information of the anticipated benefits of the Merger is detailed in Part 3 of this document.

There are risks that you should consider in determining how to vote at the Scheme Meeting and the Extraordinary General Meeting.

See Risk Factors in Part 3 of this document for details of the risks relating to the implementation of the Merger, the operations of the Merged Company and the holding of the new Dannex shares.

The Ayrton and Starwin Boards recommend that Ayrton and Starwin shareholders vote in favour of the resolutions to be proposed at the respective Scheme Meetings and Extraordinary General Meetings. The Ayrton and Starwin Boards recommend the terms of the Merger to be in the best interests of Ayrton and Starwin shareholders as a whole and of Ayrton and Starwin.

The Ayrton Board recommends that all Ayrton shareholders vote in favour of the resolutions to be proposed at the Scheme Meeting and the Extraordinary General Meeting, as the directors of Ayrton intend to in respect of their own respective beneficial holdings, which amount in aggregate to 82,578,778.99 Ayrton Shares (representing 38.41% of the issued ordinary share capital of Ayrton).

The Starwin Board recommends that all Starwin Shareholders vote in favour of the resolutions to be proposed at the Scheme Meeting and the Extraordinary General Meeting, as the directors of Starwin intend to in respect of their own respective beneficial holdings, which amount in aggregate to 145,848,843.74 Starwin Shares (representing 56.14% of the issued ordinary share capital of Starwin).

SAS considers the Share Exchange Ratio to be fair from a financial point of view (see section 13 of Part 3 of this document) SAS, the financial adviser to Ayrton and Starwin, has delivered to the Ayrton and Starwin Boards its written opinion dated 26

th June 2018 that, as of such date, the Share Exchange Ratio was fair to Ayrton and Starwin

Shareholders from a financial point of view.

The Board of Dannex Ayrton Starwin Limited following the Merger Following the completion of the Merger, Nik Amarteifio, currently the Chairman of Ayrton, Starwin and Dannex will continue to be Chairman of the Merged Company. Daniel Apeagyei Kissi, currently the Chief Executive Officer of Ayrton, Starwin and Dannex, will be the Chief Executive Officer of the Merged Company, in addition to being an executive member of the board. All the current directors of Dannex and Starwin will continue as directors of the Merged Company.

Two additional members will be recommended to the Dannex Ayrton Starwin board upon the Merger becoming effective (subject to such person being acceptable to the Dannex Ayrton Starwin Board of Directors in accordance with the relevant applicable company laws).

Ayrton and Starwin Shareholders can vote at the Scheme Meeting and the Extraordinary General Meeting Ayrton and Starwin shareholders are entitled to attend and vote at their respective Scheme Meetings and


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Extraordinary General Meetings.

Accompanying this document are the necessary proxy forms for all four (4) Meetings.

Approval by not less than 75% of the votes cast by Ayrton and Starwin shareholders present and entitled to vote either in person or by proxy at the Scheme Meeting is required to approve the Scheme To become effective, the Scheme requires (amongst other things) approval by not less than 75% of the votes cast by Ayrton and Starwin shareholders present and entitled to vote either in person or by proxy at the Scheme Meeting.

The special resolution to be proposed at the Extraordinary General Meeting requires approval by Ayrton and Starwin shareholders The special resolution to be proposed at the Extraordinary General Meeting of Ayrton and Starwin requires approval by not less than 75% of the votes cast by Ayrton and Starwin shareholders present and entitled to vote either in person or by proxy (the ordinary resolution to delist Ayrton and Starwin from the GSE on the Effective Date requires approval by a majority of the vote cast).

Confirmation of the Scheme by the High Court is required Confirmation of the Scheme by the High Court is required for the Scheme to become effective. All Ayrton and Starwin shareholders are entitled to attend in person or to be represented by counsel at the Court Hearing to support or object to the scheme.

Adcock Ingram International (PTY) limited and Dannex Voting Pool Agreement Adcock which holds 25.10% shareholding of Ayrton, entered into a Voting Pool Agreement with Dannex on 15

th

July 2016, which sets out the terms and conditions agreed upon between them, relating to the exercise of the voting rights attaching to their respective Voting Pool Shares, the implementation of the Merger (including the Scheme) and matters incidental thereto. Adcock and Dannex collectively hold 78.57% of the shareholding in Ayrton and have agreed to act in concert in respect of exercising their voting rights.

For a summary of the material terms of the Voting Pool Agreement, see section 2 of Part 13 of this document.

SSNIT Support Letter SSNIT in a letter dated 6

th July 2017 reaffirmed its earlier commitment to support the proposed merger of

Dannex, Ayrton and Starwin, as communicated in their earlier letter dated 6th April 2017.

SSNIT in its earlier letter dated 6th April 2017 gave consent in principle to the merger.

Conditions to be satisfied or waived before the Scheme can be declared effective The completion of the Merger is subject to a number of conditions, including the approval of the Scheme and the approval of the special resolution to be proposed at the Extraordinary General Meeting by the requisite majority of Ayton and Starwin Shareholders, the confirmation of the Scheme by the High Court, no amendment or modification of any of the terms and conditions of the Scheme in a manner detrimental to Ayrton or Starwin without the prior written consent of Ayrton or Starwin, receipt of certain regulatory approvals and third party consents and the absence of any material adverse change to the business, financial condition, results of operations, assets or liabilities of Ayrton and Starwin.

The Companies

Ayrton Drug Manufacturing Limited Plot No. B1/24, Naa Attah Street South Tesano, Abeka Road, Accra P.O. Box 2149, Accra-Ghana Ayrton was incorporated on 24

th September 1965 by the late Mr. Samuel Benson Adjepong, a Ghanaian

entrepreneur and the first Ghanaian Chief Pharmacist at the Ministry of Health. Ayrton is listed on the Ghana Stock Exchange and currently has over thirty product lines. In 2010, Adcock Ingram acquired 65.59% shares in Ayrton to become the majority shareholder and subsequently increased its shareholding to 78.57%. In 2016, Dannex acquired 53.47% of the 78.57% voting shares held by Adcock in Ayrton, thus making Dannex the majority shareholder in Ayrton, with a shareholding of 53.47%.

Starwin Products Limited Plot 16 Adjuma Crescent


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South Industrial Area, Ring Road West, Accra P.O. Box 5760 Accra-North Starwin evolved from Sterling Products International Limited, an American pharmaceutical company which incorporated an affiliate, Sterling Products Ghana Limited in 1960. In 1993, Sterling Products Limited was acquired by Ghanaian investors, and the company’s name changed to Starwin Products Limited. In 2004 Starwin was the first in the Ghanaian pharmaceutical industry to be listed on the Ghana Stock Exchange. In 2014, Dannex increased its shareholding from 2.67% to 71.33% through Starwin’s Renounceable Rights Issue, thus becoming Starwin’s majority shareholder.

Dannex Limited No. 5 Dadeban Road Ring Road, North Industrial Area, Accra P.O. Box 5258, Accra Dannex was established in May 1964 expressly for the purpose of manufacturing and distribution of pharmaceutical products. Dannex has wholesalers, retailers, and distribution points in all ten regions of Ghana and also supplies to a few countries within the West African Sub Region. Equatorial Cross Acquisitions is the majority shareholder of Dannex, with a shareholding of 71.83%.

Additional information about the Merger, Dannex, Ayrton and Starwin is contained in this document.


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EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Activity Date Time (GMT)

Latest date and time for receipt of BLUE Proxy Form for Ayrton Scheme Meeting

(1) 24

th December, 2018 3.00 pm

Latest date and time for receipt of YELLOW Proxy Form for Ayrton Extraordinary General Meeting

(1) 24


Latest date and time for receipt of PINK Proxy Form for Starwin Scheme Meeting

(1) 24


Latest date and time for receipt of GREEN Proxy Form for Starwin Extraordinary General Meeting

(1) 24


Voting Record Time for Scheme Meeting 24th December, 2018 4.30 pm

Ayrton Scheme Meeting 27th December, 2018 9.00 am

Starwin Scheme Meeting 27th December, 2018 12.00 pm

Ayrton Extraordinary General Meeting(2)

27th December, 2018 9.30 am

Starwin Extraordinary General Meeting(2)

27th December, 2018 12.30 pm

Dannex General Meeting 28th December, 2018 9.00 am

Election Return Time 28th

December, 2018 4.30 pm

Preparation and completion of the Fairness Report by the Fairness Reporter appointed by the Registrar 18

th January, 2019 4.30pm

Court Hearing to Confirm Scheme(3)

23rd January, 2019 11.00 am

Ex-Record Date(4)

1st February, 2019 1.00 pm

Qualifying Date(4)

6th February, 2019 5.00 pm

Book Closure Date(4)


Last day of dealings in Ayrton and Starwin Shares(4)

11th February, 2019

Record Time(4)


Crediting of Depository Account and Issue of Letters of Entitlement

(4) 12th February, 2019 9.00 am

Delisting of Ayrton (AYRTN) and Starwin (SPL) Shares from the GSE

(4) 12th February, 2019 10.00 am

Share Exchange and Listing of Dannex (DASPHARMA) Shares on the GSE

(4) 12th February, 2019 10.00 am

Effective Date of the Scheme and Merger(4)

12th February, 2019

Commencement of Trading in Dannex Ayrton Starwin Securities on the GSE

(4) 12th February, 2019 10.00 am

Change of company name from Dannex to Dannex Ayrton Starwin

(4) 12th February, 2019 10.00 am

Notes:

1. If the BLUE and PINK proxy form for the Scheme Meeting is not returned by 3.00 pm (GMT), it may be

handed to the Chairman of the Scheme Meeting before the start of the meeting and will still be valid.

However, with regards to the YELLOW and GREEN Proxy Form for the Extraordinary General Meeting, it

will be invalid unless it is lodged with the relevant registrar so as to be received no later than the time

shown above

2. Or, if later, immediately after the conclusion or adjournment of the Scheme Meeting

3. The Court Hearing will be held at the High Court of Ghana in Accra, Ghana on 23rd January, 2019 at

11.00 am (GMT). If the date changes, the date of all subsequent steps, including the Effective Date set out

above, will be affected.

4. These dates are indicative only and will depend, inter alia, on the date upon which the High Court confirms

the Scheme.


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Ayrton and Starwin shareholders will be kept advised of the progress of the Scheme and of any significant changes to the expected timetable of the Merger by announcements through the news services of the GSE, as well as through publication in Daily Graphic and Ghanaian Times, or in such other manner as the High Court may direct.

If the scheduled date of the Court Hearing is changed, Ayrton and Starwin will both give at least five (5) business days’ notice thereof by delivering a press release for immediate dissemination through the news services of the GSE and by publication of such notice in Daily Graphic and Ghanaian Times, or in such other manner as the High Court may direct. If the scheduled date of the Court Hearing is changed by more than seven (7) days, both Ayrton and Starwin will also post notice of the date of the rescheduled Court Hearing to holders of Ayrton and Starwin shares.

An announcement will be made once the Merger becomes effective.


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Part 1: Letter from the Chairman of Ayrton and Starwin

To all Ayrton and Starwin shareholders

Dear Shareholder,

RECOMMENDED MERGER OF AYRTON AND STARWIN WITH DANNEX

The Boards of Dannex, Ayrton and Starwin are proposing a merger (the “Merger”) of the three companies to shareholders. At separate board meetings of Dannex, Ayrton and Starwin held on 18

th October 2017 and a joint

board committee meeting of Ayrton and Starwin held on 7th June 2018, your directors unanimously agreed to

jointly recommend the merger of the three companies to shareholders.

We are now in the position to furnish you with the documents that set out the terms of the Merger and provide information about the resulting Merged Company, to be named “Dannex Ayrton Starwin Limited”. These documents also advise of the actions which you as a shareholder of Ayrton and Starwin, need to take to enable you exercise your vote as part of the process to implement the Merger or otherwise.

The Merger signifies a very important stage on the lives of all three companies. Through the consolidation of the manufacturing assets, human capital, distribution and sales channels and financial capabilities of Dannex, Ayrton and Starwin, the Merger creates a more efficient and profitable pharmaceutical company, and a leading manufacturer and distributer of pharmaceutical products in Ghana. The Merger will enable the management of the Merged Company to leverage the synergies of the three companies to increase its market share in Ghana and also expand into other West African markets. Details of the benefits of the Merger are set out in Part 3 of this document.

The Merger has the unanimous support and recommendation of the boards of Ayrton and Starwin. It is your board’s firm conviction that this is a very positive development for Ayrton and Starwin, their shareholders, business associates, the investing public, employees of all the three companies and the Ghanaian pharmaceutical industry.

Please endeavour to carefully consider the document presented to you. We urge you to support the Merger and vote in favour of the resolutions to be proposed at the Scheme Meeting.

I look forward to welcoming you as a shareholder of the new Merged Company, Dannex Ayrton Starwin Limited.

Yours sincerely,

Nik Amarteifio Chairman Ayrton Drug Manufacturing Limited and Starwin Products Limited


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WRITTEN RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF

AYRTON DRUG MANUFACTURING LIMITED PERSUANT TO SECTION 200

(J) OF THE COMPANIES ACT, 1963 (ACT 179)

WHEREAS ON 7TH DAY OF JUNE, 2018, A BOARD MEETING was held in Accra: WHEREAS the Board of Directors resolved at the said meeting to merge Ayrton Drug Manufacturing

Limited with Dannex Limited and Starwin Products Limited; the Board of Directors having considered

the terms of the merger to be in the best interest of Shareholders of Ayrton Drug Manufacturing

Limited.

THAT the Board of Directors accordingly recommend to Shareholders to vote in favour of the

Resolutions to be proposed at the EGM for the proposed merger.

SIGNED:

………………………………………….. …………………………….

NIK AMARTEIFIO DIRECTOR (CHAIRMAN)

…………………………………….. OPOKU AMPONSAH (COMPANY SECRETARY)

KUMASI DEPOT P. O. BOX 2907, Ashtown, Kumasi. Tel: +233-3220-29037 Fax: +233-3220-29038 TAKORADI DEPOT Tel: +233-3120-25584 Fax: +233-3120-21764 NORTHEN DEPOT Tel: +233-3720-27233 Fax: +233-3720-27751


| 28

Ref. No. : DNX/ HR / 0299

WRITTEN RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF

DANNEX LIMITED PERSUANT TO SECTION 200 (J) OF THE COMPANIES

ACT, 1963 (ACT 179)

AT A BOARD OF DIRECTORS MEETING OF DANNEX LIMITED HELD ON 7TH JUNE, 2018 IT WAS RESOLVED AS FOLLOWS:

RESOLVED:

1. THAT Dannex Limited be and is hereby recommended to merge with Ayrton Drug

Manufacturing Limited and Starwin Products Limited; the said proposed merger being in the

best interest of the Shareholders of Dannex Limited.

2. THAT the Board of Directors accordingly recommend to Shareholders of Dannex Limited to

vote in favour of the proposed merger at the intended EGM to consider the merger.

DATED THE 7TH DAY OF JUNE 2018 ………………………………………….. …………………………….


…………………………………….. OPOKU AMPONSAH (COMPANY SECRETARY)

5 Dadeban Road, Ring Road North, North Ind. Area P.O .Box, Accra-Ghana Tel: (233)0302232574/5 (233) 0302234272 / Fax (233) 0302232575

DIRECTORS: NIK Amarteifio (Chairman), Yaw Opare Asamoah (Managing Director), Stanlay Amarteifio (Director), Dr. J A. Blukoo- Allotey (Director), Alex Kobina Braye Bonney (Director), Dr. Barima Afranie (Director), Samuel Atta Mensah (Director).


| 29

Website: www.dannexgh.com

STARWIN

PRODUCTS LTD.

WRITTEN RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF STARWIN

PRODUCTS LIMITED PURSUANT TO SECTION 200 (J) OF THE COMPANIES ACT, 1963

(ACT 179)

AT A BOARD OF DIRECTORS MEETING OF STARWIN PRODUCTS LIMITED HELD ON

7TH JUNE, 2018, IT WAS RESOLVED AS FOLLOWS:

RESOLVED:

1. THAT Starwin Products Limited be and is hereby recommended to be merged with Dannex

Limited and Ayrton Drug Manufacturing Limited; the said proposed merger being in the best

interest of the Shareholders of Starwin Products Limited.

2. THAT the Board of Directors accordingly recommend to Shareholders to vote in favour of the

merger at the intended EGM to consider the merger proposal.

DATED THE 7TH DAY OF JUNE 2018

………………………………………….. ………………………


…………………………………….. COMPANY SECRETARY (COMPANY SECRETARY)

Telephone: 030221788,220416 Fax: 030225039 Email: [email protected]

Plot: 16, Ajuma Cresent South Industrial Area, Ring Road West, Accra P.O. Box 5760 Accra-North Ghana

DIRECTORS: MR. NIK AMARTEIFIO (CHAIRMAN), MR. YAW OPARE-ASAMOAH, DR. BARIMA AMISSAH AFRANE, MR. ALEX B.B. BONNEY, MS. AMARTOEKOR AMARTEIFIO, MR. KWASI YIRENKYI, REV. DR.

Our Ref:


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Part 2: Overview and Key Terms of the Merger

1. Introduction On 24

th November 2014 Dannex which already had 2.61% shareholding in Starwin, increased its

shareholding to 71.33% through Starwin’s Renounceable Rights Issue, thus resulting in Dannex holding 71.33% shareholding in Starwin. The acquisition was in furtherance of Dannex’s objective of increasing its market share in Ghana. The acquisition gave Dannex a single majority stake in Starwin beyond 25% of Starwin’s issued shares, and thus triggered a mandatory takeover as prescribed by the SEC’s Code on Takeovers and Mergers. Dannex requested for an exemption from SEC from undertaking a mandatory takeover which was granted by SEC on 1

st September, 2016.

On 1st December 2016, Dannex acquired 53.47% of the 78.57% voting shares held by Adcock in Ayrton,

thus making Dannex the majority shareholder in Ayrton with a shareholding of 53.47%. Dannex requested for an exemption from SEC from undertaking a mandatory takeover of Ayrton which was granted by SEC on 20

th October 2016 under the following conditions; that Dannex:

i. Enter into negotiations with SSNIT as a related party to discuss the merger and a buy-out option plan if SSNIT does not intend to be part of the merger;

ii. Publish in two newspapers of national circulation its interest to purchase shares of the remaining shareholders, at least one month before submission of the Merger Document to the SEC for approval; and

iii. Offer same or better price as offered to SSNIT after the negotiations to the remaining shareholders of Ayrton who may wish to sell their shares to Dannex.

Thus, the two operating companies, Ayrton and Starwin, have Dannex as their controlling shareholder. The Boards of Dannex, Ayrton and Starwin are proposing a merger of Ayrton and Starwin with Dannex to create a single company to be named Dannex Ayrton Starwin Limited. It is expected that the new Merged Company will be a leading pharmaceutical manufacturing and distribution company in Ghana, with a significant market share which will enhance value for both its customers and shareholders.

This document seeks to provide shareholders of Ayrton and Starwin with the background, importance and key terms of the Merger, and also to seek your approval for the Merger and explain the actions you should take after carefully reading this document which contains further information of the Merger.

On 19th December, 2018 Dannex, Ayrton and Starwin announced that they had agreed to the terms of a

recommended merger of the three companies to be effected by way of a Ghanaian Scheme of Amalgamation under Section 231 of the Companies Act. On the conclusion of the Merger, the Merged Company will be known as Dannex Ayrton Starwin Limited. Adcock Ingram International (PTY) and SSNIT who are both the major institutional shareholders of Ayrton together own 43.10% of Ayrton’s issued ordinary share capital and have both agreed to support the Merger. The Transaction advisors (UMB Investment Holdings Limited) and the Legal Advisors (Kimathi Partners) made a presentation at the joint Board Meeting of the three companies held on 7

th June, 2018 pursuant to the Boards’ agreement to the

terms of the recommended merger. The memo from the management of Dannex to the Boards of Dannex, Ayrton and Starwin notifying the Boards of the presentation by UMB Investment Holdings Ltd and Kimathi and Partners is on page 31.

Based on the combination of the Discounted Cash Flow (DCF) valuation of Ayrton as at 31st December

2017, and Market Comparable valuation of Ayrton as at 31st December 2017, the Merger values each

Ayrton share at GHS0.13, which further translates into Ayrton’s ordinary share capital value of GHS26.9 million. Based on the combination of the Discounted Cash Flow (DCF) valuation of Starwin as at 31

st

December 2017, and Market Comparable valuation of Starwin as at 31st December 2017, the Merger

values each Starwin share at GHS0.03, which further translates into Ayrton’s ordinary share capital value of GHS7.7 million. On completion of the Merger and based on the current issued ordinary share capital of


| 31

each of the three companies, Dannex shareholders will own approximately 55.95%, Ayrton shareholders will own approximately 37.45% and Starwin shareholders will own approximately 6.61%, of the Merged Company.

This document is to explain the background, importance and benefits of the Merger and the terms of the Merger, and also to seek your approval for the Merger and explain the actions you should take after carefully reading this document.

Ref. No. : DNX/ HR / 0299

MEMO

To: The Board of Directors- Dannex Ltd, Ayrton Drugs

Manufacturing Ltd & Starwin Products Ltd

From: Management- Dannex Limited

Date: 15th May, 2018

Subject: Proposed Merger- Scheme of Arrangement Document

We wish to inform you that, our Transaction Advisors, UMB Investment Holdings Ltd and our

Legal Advisors, Kimathi Partners will make a presentation regarding the Scheme of

Arrangement Document pertaining to the proposed merger, during the upcoming Board

Meeting of the three companies to be held on the 7th of June, 2018.

We are sending you herewith, a pre-read of the said document for your attention and

consideration.

Thank you.

DANIEL APEAGYEI KISSI

5 Dadeban Road, Ring Road North, North Ind. Area P.O .Box, Accra-Ghana Tel: (233)0302232574/5 (233) 0302234272 / Fax (233) 0302232575

DIRECTORS: NIK Amarteifio (Chairman), Yaw Opare Asamoah (Managing Director), Stanlay Amarteifio (Director), Dr. J A. Blukoo- Allotey (Director), Alex Kobina Braye Bonney (Director), Dr. Barima Afranie (Director), Samuel Atta Mensah (Director).


| 32

Website: www.dannexgh.com

2. Legal structure of the Merger The Merger will be effected by way of a Scheme of Amalgamation (Under Sections 231 to 235 of the Companies Act, 1963 (Act 179), as amended which requires the approval of the Dannex, Ayrton and Starwin shareholders and the confirmation of the High Court of Ghana. This is a statutory procedure that can be used among other things to implement mergers. If the conditions to the Merger are satisfied or, if permissible, waived, the Court Order confirming the Scheme will be delivered to the Registrar of Companies, whereupon the Scheme will become effective and Dannex, Ayrton and Starwin will merge, subject to the approval of Ayrton and Starwin shareholders, and will be known as Dannex Ayrton Starwin.

The steps to be taken to effect the Merger would include the following:

i. Ayrton and Starwin shareholders to meet separately to consider and approve the Scheme at the Scheme Meeting, and approve of the special resolution proposed at the Extraordinary General Meeting by the requisite majority of Ayrton and Starwin shareholders

ii. General Meeting of Dannex shareholders to consider special resolutions

iii. Appointment of Independent Advisor by the Registrar General to investigate the fairness of the Scheme and issue a Fairness Report

iv. Confirmation of the Scheme by the High Court

v. Receipt of certain regulatory approvals and third-party consents and the absence of any material adverse change to the business, financial condition, results of operations, assets or liabilities of Ayrton and Starwin

vi. On confirmation of the Scheme by the Court, the entire issued ordinary capital of Ayrton and Starwin will be acquired by Dannex

vii. The Registrars of Dannex will register the number of new securities as per the entitlement list in the name of CSD in the physical Share Register

viii. CSD will inform GSE of the completion of the share allotment

ix. Dannex shares will be formally admitted to the official list of the GSE and Ayrton and Starwin shares simultaneously delisted

x. Change of name from Dannex Limited to Dannex Ayrton Starwin Limited

3. Key Terms and Conditions of the Merger The Merger is subject to the following key terms and conditions:

i. Consideration Dannex will issue 37,342,274.86 new ordinary shares to Ayrton and Starwin shareholders in consideration for Ayrton and Starwin shareholders assigning all their rights to Dannex. The new Dannex shares would be distributed among Ayrton and Starwin shareholders in proportion to their rights in Ayrton and Starwin.

The consideration was determined following financial valuations of Dannex, Ayrton and Starwin carried out by PWC, verified by SAS – financial advisor to the Ayrton and Starwin Boards, and agreed by the Dannex, Ayrton and Starwin Boards.

http://www.dannexgh.com/


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ii. Valuation PwC recommended a valuation range of GHS16.7 million to GHS20.6 million for Dannex, GHS24.2 million to GHS29.6 million for Ayrton and GHS7.4 million to GHS8.0 million for Starwin. PwC estimated valuation midpoints of GHS18.7 million for Dannex, GHS26.9 million for Ayrton and GHS7.7 million for Starwin.

The relative valuations took into consideration the current and potential future market positions of Dannex, Ayrton and Starwin. The valuation methods used were the Discounted Cash Flow (DCF) analysis, which was based in part on observed trends in the past performances of the companies and their business plans, and Market Comparable analysis.

Following from the final valuations of Dannex, Ayrton and Starwin, an indicative share exchange ratio for the companies was determined. Dannex has a total of 47,423,624 outstanding ordinary shares, Ayrton has 215,000,000 outstanding ordinary shares and Starwin has 259,814,797 outstanding ordinary shares. Based on the adopted valuation of GHS18.7 million for Dannex, GHS26.9 million for Ayrton and GHS7.7 million for Starwin, Ayrton and Starwin shareholders will be entitled to elect to receive:

For each Ayrton share – 0.32 new Dannex shares

For each Starwin share – 0.08 new Dannex shares

And so in proportion for any other number of Ayrton and Starwin shares held (the “Share Exchange Ratio”)

Therefore, Dannex will issue 37,342,274.86 new shares for all of Ayrton and Starwin shareholders rights. The directors of Ayrton and Starwin believe this valuation presents best value and is fair to the shareholders of both Ayrton and Starwin.

The Share Exchange will be carried out in proportion for any other number of Ayrton and Starwin shares held.

Fractional Interests The Registrar exercises the right to round up fractional shares of shareholders to the nearest whole.

Dannex’s Valuation by PwC a. Dannex’s Discounted Cash Flow Valuation - Management Base Case

1-Jan-18

31-Dec-18

1-Jan-19

31-Dec-19

1-Jan-20

31-Dec-20

1-Jan-21

31-Dec-21

1-Jan-22

31-Dec-22

GHS000

Terminal value

Earnings Before Interest & Tax (EBIT)

4,030 6,007 8,122 9,616 9,442

Less:

Taxes on EBIT

1,008

1,502

2,030

2,404

2,360

Net Profit 3,023 4,505 6,091 7,212 7,081

Add:


| 34

Depreciation 958 1,085 1,228 1,410 1,632

Less:

Changes in Working Capital 1,271 1,726 (2,296) (2,365) (2,019)

Capital Expenditure (1,000) (1,500) (1,800) (2,000) (2,400)

Free Cash Flow 4,252 5,816 3,223 4,258 4,294 30,908

Partial Period Factor 1.0 1.0 1.0 1.0 1.0 1.0

Mid-Year Discounting 0.5 1.5 2.5 3.5 4.5 4.5

Discount Factor 0.9 0.8 0.6 0.5 0.4 0.4

Present Value of Cash Flows 3,870 4,384 2,013 2,202 1,840 13,243

Enterprise Value 27,552

Less Debt (22,035)

Add: Investment in Subs 17,055

Equity Value 22,572

Marketability discount (3,386)

Adjusted Equity Value 19,186

Terminal Value

Having estimated the cash flows over the projected five (5) year period, we estimated the cash flows after that period into perpetuity.

We adopted the Gordon Growth Model which estimates the terminal value by the formula: Final Projected Year Cash Flow X (1+ Long-Term Cash Flow Growth Rate) / (Discount Rate – Long-Term Cash Flow Growth Rate)

Our discount rate as earlier indicated is the WACC of Dannex. We also assumed Dannex’s long-run growth rate to be that of the long term inflation rate in Ghana as estimated by the International Monetary Fund in its quarterly World Economic Outlook, dated October 2017 which is 6%.

Enterprise Value and Equity Value

We summed up the discounted cash flows over the forecast period and the discounted terminal value to arrive at our estimated Enterprise Value of GHS27.6 million

To obtain the Equity Value of Dannex, we subtracted the total debt owed by Dannex as at December 2017 from the Enterprise Value and adjusted for a 15% marketability discount.

We arrived at an Equity Value of GHS19.2 million.


| 35

Sensitivity Analysis- Management Base Case

We conducted a sensitivity analysis on our valuation range based on a WACC range of c.18.7% to c.22.9%, and a terminal growth rate of 4% to 8%.

Based on the range of discount rates and terminal growth rates assumed, we estimated the valuation range for 100% of the shares of Dannex to be between c.GHS17.8 million and c.GHS20.7 million; with a median value of c.GHS19.2 million.

Source: Management Information & PwC Analysis

Dannex’s Valuation Sensitivities- GHS’000

Terminal Growth Rate WACC

19,186 18.7% 19.7% 20.7% 21.8% 22.9%

4.0% 20,297 18,925 17,653 16,529 15,479

5.0% 21,290 19,769 18,371 17,144 16,007

6.0% 22,441 20,736 19,186 17,837 16,598

7.0% 23,787 21,856 20,120 18,625 17,263

8.0% 25,386 23,168 21,201 19,527 18,017


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Dannex’s Discounted Cash Flow Valuation -PWC Adjusted

We estimated a revised stream of cash flows based on the adjustment to revenue growth rates for the forecast periods.

1-Jan-18

31-Dec-18

1-Jan-19

31-Dec-19

1-Jan-20

31-Dec-20

1-Jan-21

31-Dec-21

1-Jan-22

31-Dec-22

GHS000

Terminal value


4,600 6,405 7,694 9,095 8,551

Less:

Taxes on EBIT 1,150 1,601 1,923 2,274 2,138

Net Profit 3,450 4,804 5,770 6,821 6,413

Add:

Depreciation 958 1,085 1,228 1,410 1,632

Less:

Changes in Working Capital 1,271 1,726 (2,296) (2,365) (2,019)


Free Cash Flow 4,680 6,114 2,902 3,867 3,626 26,101



Discount Factor 0.9 0.8 0.6 0.5 0.4 0.4



Less Debt (22,035)

Add: Investment in Subs 17,055

Equity Value 20,437

Marketability discount (3,386)


| 37


Adjusted Revenue

We have adjusted management’s projected revenue to what we believe is more reasonable based on our knowledge of the industry and historical trends exhibited by Dannex. PwC expect revenue to increase by 30% to c.GHS27.2m relative to the reported amount in FY 17, which is lower compared to the c.40% increase to c.GHS29.3m projected by management.

Thereafter, we projected revenue to increase by a CAGR of c.19% over the forecast period, which is marginally lower than management’s projection of c.20% CAGR.

Terminal Value

Having estimated the revised set of cash flows over the projected five (5) years, we estimated the cash flows after that period into perpetuity, by adopting the Gordon Growth Model.


We summed up the discounted cash flows of the revised projections to arrive at an estimated Enterprise Value of c.GHS25.4 million.

We then subtracted the total debt owed by Dannex and adjusted for a 19.2% marketability discount to arrive at an estimated Equity Value of c.GHS17.4 million

Sensitivity Analysis

We conducted a sensitivity analysis on our valuation range based on a WACC range of c.18.7% to c.22.9%, and a terminal growth rate of 4% to 8%.

Based on the range of discount rates and terminal growth rates assumed, we estimated the valuation range for 100% of the shares of Dannex to be between c.GHS16.7 million and c.18.1 million with a median value of c.GHS17.4 million.

Dannex’s Valuation Sensitivities: PwC Adjusted - GHS’000

29,269 38050

45660

52508

60385

27,178

38,973 40,767 46,883

51,571

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2018 Proj

2019 Proj

2020 Proj

2021 Proj

2022 Proj

Projected Revenue: Management case vs PwC adjusted

Management projections PwC projections


| 38


17,371 18.7% 19.7% 20.7% 21.8% 22.9%

4.0% 17,205 16,619 16,077 15,598 15,151

5.0% 17,983 17,305 16,683 16,138 15,634

6.0% 18,883 18,091 17,371 16,746 16,173

7.0% 19,937 19,001 18,160 17,437 16,780

8.0% 21,188 20,066 19,073 18,229 17,470


a. Market Valuation of Dannex

Selection Criteria

Public companies in emerging and developing economies whose main business is the manufacture and distribution of pharmaceutical products.

We note that since the industry is very specialized, we broadened our search for comparables outside Ghana to other markets similar to sub-Saharan Africa.

Assessment of Appropriate Multiple

We considered the use of the P/E, the EV/EBITDA and the EV/Rev multiples.

Since Dannex’s immediate past earnings have been affected by exceptional challenges, we deemed its past earnings not to be an accurate measure of value.

Company Name Country EV/EBITDA EV/REV

Taro Pharmaceutical Industries Ltd. (NY SE:TARO) Israel 6.8x 3.8x

Adcock Ingram Holdings Limited (JSE-AIP) South Africa 10.8x 1.6x

Egyptian International Pharmaceutical Industries Company (CASE:PHAR)

Egypt 11.8x 4.9x

Aspen Pharmacare Holdings Limited (JSE: APN) South Africa 15.4x 4.0x

Neimeth International Pharmaceuticals Plc (NGSE: NEI METH) Nigeria 45.1x 1.4x

Pharma Deko Plc (NGSE:RMDEKO) Nigeria NM 0.3x

May & Baker Nigeria Plc (NGSE:MAY BAKER) Nigeria 3.1x 0.5x

Dar Al Dawa Development and Investment Co. Ltd (ASE: DADI) Jordan 73.5x 1.5x

Glaxo SmithKline Consumer Nigeria Plc (NGEE:GLAXOSMITH) Nigeria 2.5x 0.9x

Starwin Products Company Limited (GHSE:SPL) Ghana 5.4x 1.2x

Ayrton Drugs Manufacturing Company Ltd. (GHSE: AYRTN) Ghana 4.7x 0.8x

Fidson Healthcare Plc (NGSE: FIDSON) Nigeria 3.8x 0.7x


| 39

Ascendis Health Limited (JSE:ASC) South Africa 13.3x 1.9x

Intravenous Infusions Plc (GHSE:IIL) Ghana 5.3x 1.2x

Median 6.8x 1.3x

Valuation Range Based on EV/EBITDA

The average EV/EBITDA multiple of the peer group identified for Dannex is 6.8x. Based on this multiple, we estimate the valuation range of Dannex to be between c.GHS6.6 million and c.GHS10.2 million with a median value of c.GHS8 million.

EBITDA Multiple

Median EV/EBITDA Multiple 6.8x

LTM EBITDA 2,117.1

Enterprise Value 14,395.9

Add: Non-core assets 17,055.3

Less: Net Debt (22,035.2)

Less: Marketability Discount (1,412.4)

Adjusted Equity Value (GHS’000) 8,003.7

10.0 13,762.1

8.0 10,163.1

6.8 8,003.7

6.0 6,564.1

5.0 4,764.6



| 40

Market Approach Valuation Range of Dannex using the EV/Revenue Multiple

The average EV/Revenue multiple of the peer group identified for Dannex is 0.9x. We estimated the valuation range of Dannex based on the market approach to be between c.GHS17.1 million and c.GHS20.6 million with a median value of c.GHS18.9 million

Company Name Country EV/EBITDA EV/REV

Taro Pharmaceutical Industries Ltd. (NY SE:TARO Israel 6.8x 3.8x

Adcock Ingram Holdings Limited (JSE-AIP) South Africa 10.8x 1.6x

Egyptian International Pharmaceutical Industries Company (CASE:PHAR)

Egypt 11.8x 4.9x

Aspen Pharmacare Holdings Limited (JSE: APN) South Africa 15.4x 4.0x

Neimeth International Pharmaceuticals Plc (NGSE: NEI METH) Nigeria 45.1x 1.4x

Pharma Deko Plc (NGSE:RMDEKO) Nigeria NM 0.3x

May & Baker Nigeria Plc (NGSE:MAY BAKER) Nigeria 3.1x 0.5x

Dar Al Dawa Development and Investment Co. Ltd (ASE: DADI) Jordan 73.5x 1.5x

Glaxo SmithKline Consumer Nigeria Plc (NGEE:GLAXOSMITH) Nigeria 2.5x 0.9x

Starwin Products Company Limited (GHSE:SPL) Ghana 5.4x 1.2x

Ayrton Drugs Manufacturing Company Ltd. (GHSE: AYRTN) Ghana 4.7x 0.8x

Fidson Healthcare Plc (NGSE: FIDSON) Nigeria 3.8x 0.7x

Ascendis Health Limited (JSE:ASC) South Africa 13.3x 1.9x

Intravenous Infusions Plc (GHSE:IIL) Ghana 5.3x 1.2x

Median 6.8x 1.3x


| 41

REVENUE Multiple

Median EV/REV Multiple 1.3X

LTM REVENUE 20,906.4

Enterprise Value 27,178.3

Add: Non-core assets 17,055.3

Less: Net Debt (22,035.2)

Less: Marketability Discount (3,329.8)

Adjusted Equity Value (GHS’000) 18,868.7

1.5 22,422.8

1.4 20,645.7

1.3 18,868.7

1.2 17,091.6

1.1 15,314.6


Ayrton Valuation by PwC

a. Ayrton’s Discounted Cash Flow Valuation- Management Base

1-Jan-18

31-Dec-18

1-Jan-19

31-Dec-19

1-Jan-20

31-Dec-20

1-Jan-21

31-Dec-21

1-Jan-22

31-Dec-22

GHS000

Terminal value


| 42


6,687 9,063 11,239 14,875 20,191

Less:

Taxes on EBIT

(1,672)

(2,266)

(2,810)

(3,719)

(5,048)

Net Profit 5,015 6,798 8,429 11,156 15,143

Add:

Depreciation 1,226 1,391 1,600 1,920 2,304

Less:

Changes in Working Capital 1,959 231 (2,297) (2,237) (6,801)


Free Cash Flow 6,400 3,920 3,532 5,839 5,646 35,011



Discount Factor 0.9 0.7 0.6 0.5 0.4 0.4



Less Debt (7,330)

Add: Cash 109

Equity Value 22,301

Marketability discount -


Terminal Value



Our discount rate as earlier indicated is the WACC of Ayrton. We also assumed Ayrton’s long-run growth rate to be that of the long term inflation rate in Ghana as estimated by the International Monetary Fund in its quarterly World Economic Outlook, dated October 2017 which is 6%.


We summed up the discounted cash flows over the forecast period and the discounted


| 43

terminal value to arrive at our estimated Enterprise Value of GH29.5 million

To obtain the Equity Value of Dannex, we subtracted the total debt owed by Ayrton as at December 2017 from the Enterprise Value and added cash as at 31 December, 2017.

We arrived at a final Equity Value of GHS22.3 million

Sensitivity Analysis- Management Base Case

We conducted a sensitivity analysis on our valuation range based on a +/-10% range on Ayrton’s WACC of 23.1%, as well as a terminal growth rate range of 4% to 8%

Based on the range of discount rates and terminal growth rates assumed, we estimated the valuation range for 100% of the shares of Ayrton to be between GHS20.6 million and GHS24.2 million

Ayrton’s Valuation Sensitivities- GHS’000


22,301 20.8% 21.9% 23.1% 24.2% 25.5%

4.0% 24,043 22,272 20,629 19,175 17,818

5.0% 25,133 23,200 21,419 19,853 18,399

6.0% 26,371 24,244 22,301 20,604 19,040

7.0% 27,788 25,428 23,293 21,443 19,751

8.0% 29,425 26,783 24,416 22,386 20,542

Ayrton’s Discounted Cash Flow Valuation - PwC Adjusted

1-Jan-18

31-Dec-18

1-Jan-19

31-Dec-19

1-Jan-20

31-Dec-20

1-Jan-21

31-Dec-21

1-Jan-22

31-Dec-22

GHS000

Terminal value


6,687 9,063 11,239 14,875 20,191

Less:

Taxes on EBIT (1,672) (2,266) (2,810) (3,719) (5,048)

Net Profit 5,015 6,798 8,429 11,156 15,143

Add:

Depreciation 1,226 1,391 1,600 1,920 2,304

Less:


| 44

Changes in Working Capital (PwC Adjusted)

1,181 (1,985) (1,479) (4,179) (2,212)


Free Cash Flow 5,622 1,704 4,350 3,897 10,235 63,468



Discount Factor 0.9 0.7 0.6 0.5 0.4 0.4



Less Debt (7,330)

Add Cash 109

Equity Value 32,499



Adjusted Working Capital

Having reviewed management’s projections for reasonableness and consistency with the historical trends as well as management’s plans going forward, we have adjusted Ayrton’s working capital days which translates into adjusted working capital balances and changes in working capital.

This formed the basis of our adjusted free cash flow (FCF) projections for Ayrton as we have not adjusted any other parameter for the purposes of this valuation.


By discounting and summing up our adjusted FCF and terminal values, we arrived at an estimated Enterprise Value of GHS39.7 million.

To obtain the Equity Value of Ayrton, we subtracted the total debt owed by Ayrton as at 31 December, 2017 from the Enterprise Value and added cash as at 31 December, 2017. We did not apply any marketability discount as Ayrton’s stock, being listed on the GSE, is considered adequately marketable.

We arrived at an adjusted equity value of GHS32.5 million.

Sensitivity Analysis- PwC Adjusted Case


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We conducted a sensitivity analysis on our valuation range based on a +/-10% range on Ayrton’s WACC of 23.1%, as well as a terminal growth rate range of 4% to 8%.

Based on the range of discount rates and terminal growth rates assumed, we estimated the valuation range for 100% of the shares of Ayrton to be between GHS20.6 million and GHS24.2 million.

Ayrton’s Discounted Cash Flow Valuation Sensitivities- GHS’000


32,499 20.8% 21.9% 23.1% 24.2% 25.5%

4.0% 35,221 32,227 29,468 27,045 24,800

5.0% 37,199 33,909 30,900 28,273 25,854

6.0% 39,443 35,802 32,499 29,636 27,015

7.0% 42,011 37,949 34,297 31,156 28,303

8.0% 44,979 40,404 36,333 32,864 29,739

b. Market Valuation of Ayrton

Sensitivities based on a range of control premiums

Similar to the calculations shown for the base case of market value of Ayrton’s equity, and based on the range of control premiums sourced from the PwC Valuation Methodology Survey 2017, we estimated the valuation range for 100% of the shares of Ayrton to be between GHS23.6 million and GHS25.4 million. This is presented in the table below:

Base Case Lower Limit Upper Limit

GHS

Stock market price of Ayrton’s shares as at 31 Dec, 2017 0.10 0.10 0.10

Shares outstanding as at 31 Dec, 2017 215,000,000 215,000,000 215,000,000

Market value of equity before control premium 21,500,000 21,500,000 21,500,000

Control premium-sensitivities 15.2% 9.8% 18.2%

Equity Value 24,768,000 23,607,000 25,413,000

Source: Audited Accounts, Ghana Stock Exchange, PwC Valuation Methodology Survey 2017 & PwC Analysis.


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Market Valuation of Ayrton - Base Case

Since Ayrton is listed on the Ghana Stock Exchange (GSE), we have applied the listed stock price of Ayrton’s shares as at close of business (COB) 31 December, 2017 (GHS0.10) and the shares outstanding as at same date (215,000,000) to arrive at a base case value (prior to control premium) of GHS21.5 million. This was calculated as follows:

Shares outstanding=215,000,000

Share price=GHS0.10

Equity value (no premium) = 215,000,000*0.10= GHS21.5 million

Applying a base case control premium of 15.2% on the equity value results in additional value of GHS3.3 million, and a total estimated market value of GHS24.8 million

Starwin Valuation by PwC

a. Discounted Cash Flow Valuation- Management Base Case

1-Jan-18

31-Dec-18

1-Jan-19

31-Dec-19

1-Jan-20

31-Dec-20

1-Jan-21

31-Dec-21

1-Jan-22

31-Dec-22

GHS000

Terminal value


4,386 4,811 5,240 5,703 6,207

Less:

Taxes on EBIT (1,097) (1,203) (1,310) (1,426) (1,552)

Net Profit 3,290 3,608 3,930 4,278 4,655

Add:

Depreciation 465 669 854 1,094 1,406

Less:

Changes in Working Capital 1,152 (808) (533) (647) (787)

Capital Expenditure (1,551) 2,326 (2,340) (3,042) (3,955)

Free Cash Flow 3,356 1,143 1,910 1,683 1,320 8,079



Discount Factor 0.9 0.7 0.6 0.5 0.4 0.4

Present Value of Cash Flows 3,022 835 1,131 808 514 3,145



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Less Debt (2,312)

Add Cash 13

Equity Value 7,155



Terminal Value



Our discount rate as earlier indicated is the WACC of Starwin. We also assumed Starwin’s long-run growth rate to be that of the long term inflation rate in Ghana as estimated by the International Monetary Fund in its quarterly World Economic Outlook, dated October 2017 which is 6%.


We summed up the discounted cash flows over the forecast period and the discounted terminal value to arrive at our estimated Enterprise Value of GHS9.5 million

To obtain the Equity Value of Dannex, we subtracted the total debt owed by Starwin as at December 2017 from the Enterprise Value and added cash as at 31 December, 2017. We did not apply any marketability discount as Starwin’s shares, being listed on the GSE is considered adequately marketable.

We arrived at a final Equity Value of GHS7.2 million.

Starwin Sensitivity Analysis- Management Base Case

We conducted a sensitivity analysis on our valuation range based on a +/-5% range on Starwin’s WACC of 23.3%, and ranging between 21.9% to 26.8%.The analysis was also based on a +/-1 percentage point on the terminal growth rate of 6%, within a range of 4% to 8%.

Based on the range of discount rates and terminal growth rates assumed, we estimated the valuation range for 100% of the shares of Starwin to be between GHS6.7 million and GHS7.6 million.

Starwin’s Valuation Sensitivities- GHS’000


7,155 21.0% 22.2% 23.3% 24.5% 25.7%

4.0% 7,625 7,186 6,777 6,411 6,068

5.0% 7,872 7,397 6,956 6,565 6,199


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Starwin’s Discounted Cash Flow Valuation- PwC Adjusted Case

1-Jan-18

31-Dec-18

1-Jan-19

31-Dec-19

1-Jan-20

31-Dec-20

1-Jan-21

31-Dec-21

1-Jan-22

31-Dec-22

GHS000

Terminal value

Earnings Before Interest & Tax (EBIT) 3,778 4,178 5,459 6,046 7,166

Less:

Taxes on EBIT (945) (1,044) (1,365) (1,512) (1,792)

Net Profit 2,834 3,133 4,094 4,535 5,375

Add:

Depreciation 465 669 854 1,094 1,406

Less:

Changes in Working Capital (1,355) (683) (462) (309) (574)


Free Cash Flow 393 793 2,147 2,278 2,253 13,786


6.0% 8,152 7,633 7,155 6,735 6,345

7.0% 8,472 7,901 7,380 6,925 6,505

8.0% 8,841 8,206 7,633 7,138 6,684


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Discount Factor 0.9 0.7 0.6 0.5 0.4 0.4

Present Value of Cash Flows 353 579 1,271 1,094 877 5,367


Less Debt (2,312)

Add Cash 13

Equity Value 7,242



Source: Audited Accounts, Management Information & PwC Analysis

Adjusted Working Capital

Having reviewed management’s projections for reasonableness and consistency with the historical trends as well as management’s plans going forward, we have adjusted Starwin’s SG&A and working capital days which translates into adjusted EBIT, as well as working capital balances and changes in working capital.

This above adjustments formed the basis of our adjusted free cash flow (FCF) projections for Starwin as we have not adjusted any other parameter for the purposes of this valuation.


By discounting and summing up our adjusted FCF and terminal values, we arrived at an estimated Enterprise Value of GHS9.5 million

To obtain the Equity Value of Starwin, we subtracted the total debt owed by Starwin as at December 2017 from the Enterprise Value and added cash as at 31 December, 2017. We did not apply any marketability discount as Starwin’s shares, being listed on the GSE is considered adequately marketable

We arrived at a final Equity Value of GHS7.2 million

Sensitivity Analysis- PwC Adjusted Case

We conducted a sensitivity analysis on our valuation range based on a +/-5% range on Starwin’s WACC of 23.3%, and ranging between 21.0% to 25.7%.The analysis was also based on a +/-1 percentage point on the terminal growth rate of 6%, within a range of 4% to 8%.

Based on the range of discount rates and terminal growth rates assumed, we estimated the valuation range for 100% of the shares of Starwin to be between GHS6.6 million and GHS8.0 million.


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b.Market Valuation of Starwin - Base Case

Sensitivity Analysis on the Base Case Market Value

We have applied a margin of +/-5% on the listed share price of Starwin as at 31 December, 2017

Based on our analysis, we estimated the valuation range for 100% of the shares of Starwin to be between GHS7.4 million and GHS8.2 million. This is presented in the table below:

Sensitivity Analysis on the Base Case Market Value of Starwin

Base Case Lower Limit

Upper Limit

GHS

Stock market price of Ayrton’s shares as at 31 Dec, 2017

0.030 0.030 0.030

Shares outstanding as at 31 Dec, 2017 259,814,797 259,814,797 259,814,797

Market value of equity 7,794,444 7,794,444 7,794,444

Sensitivity-% adjustment on share price (r) -5.0% 0.00% 5.0%

Adjusted stock market price (Pi=Po*r) 0.029 0.030 0.032

Equity Value (Pi*S) 7,404,722 7,794,444 8,184,166

Source: Audited Accounts, Ghana Stock Exchange, PwC Valuation Methodology Survey 2017 & PwC Analysis.

Since Starwin is listed on the Ghana Stock Exchange (GSE), we have applied the listed stock price of Starwin’s shares as at close of business (COB) 31 December, 2017 (GHS0.030) and the shares outstanding as at same date (259,814,797) to arrive at a base case value (prior to control premium) of GHS7.8million. This was calculated as follows:

Shares outstanding=259,814,797

Share price=GHS0.03

Starwin’s Valuation Sensitivities- GHS’000


7,242 21.0% 22.2% 23.3% 24.5% 25.7%

4.0% 7,923 7,234 6,595 6,031 5,505

5.0% 8,345 7,593 6,901 6,293 5,730

6.0% 8,823 7,996 7,242 6,584 5,978

7.0% 9,369 8,453 7,624 6,907 6,252

8.0% 9,999 8,947 8,057 7,270 6,557


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Equity value (no premium)= 259,814,797*0.03= GHS7.8 million

ii. Issue of Shares The following process will apply after the approval by the courts for the merger to proceed:

The management of the proposed merger will inform the Central Securities Depository through writing of the proposed merger and the applicable effective dates. The registrar will forward to shareholders of Ayrton and Starwin allotment letters specifying their entitlements under the arrangement. Share Certificates will not be issued in respect of this merger. Shareholders who have CSD account already set up will have their accounts credited with the shares of the merged company as per their allotment on the entitlement day. Shareholders who do not have CSD accounts should contact UMB Stockbrokers or their Preferred Broker to open CSD accounts and present their allotment letter for the shares to be deposited into their accounts.

An entitlement list containing the list of shareholders eligible for the new Dannex shares and the number of new Dannex shares to be credited to each shareholder will be provided to CSD by the Registrar

The Registrar will round up fractional shares of shareholders to the nearest whole.

From the Entitlement Date all Ayrton and Starwin Shares will cease to be of value. Ayrton and Starwin Shareholders will not be obliged to transfer their shares to Ayrton, Starwin or Dannex.

iii. Conditions The completion of the Merger is subject to a number of conditions including the approval of the Scheme at the Scheme Meeting and the approval of the special resolution proposed at the Extraordinary General Meeting by the requisite majority of Ayrton and Starwin shareholders, the Confirmation of the Scheme by the High Court, receipt of certain regulatory approvals and third party consents and the absence of any material adverse change to the business, financial condition,

results of operations, assets or liabilities of Ayrton and Starwin. The Merger is also conditional upon the High Court not amending or modifying the terms or conditions of the Scheme in a manner detrimental to Dannex without the prior written consent of Dannex. The conditions are set out in full in Part 11 of this document. Dannex, Ayrton and Starwin anticipate that the Merger will be completed during February 2019.

Dannex at an Extraordinary General Meeting of its shareholders passed a special resolution to change its name to Dannex Ayrton Starwin Limited as of the Effective Date.

Adcock Ingram International (PTY) Ltd, who hitherto were majority shareholders of Ayrton entered into a Voting Pool Agreement on 15

th July, 2016 with Dannex whereby Adcock Ingram

International (PTY) Ltd agreed to implement the Merger. Further details of the Voting Pool Agreement are contained in section 2 of Part 13 of this document.

iv. Resolutions for Ayrton Shareholders’ Approval The approval of the following resolutions by Ayrton shareholders at the EGM to be held on 27

th

December, 2018.

a) To approve the merger of Ayrton with Starwin and Dannex; b) To approve the delisting of Ayrton from the GSE; c) To authorise the Directors of Ayrton to take all necessary steps and execute any

documents necessary to give effect, complete and perfect the delisting and merger

v. Resolutions for Starwin Shareholders’ Approval The approval of the following resolutions by Starwin shareholders at the EGM to be held on 27

th

December, 2018.

a) To approve the merger of Starwin with Ayrton and Dannex ; b) To approve the delisting of Starwin from the GSE;


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c) To authorise the Directors of Starwin to take all necessary steps and execute any documents necessary to give effect, complete and perfect the delisting and merger

vi. Resolutions for Dannex Shareholders’ Approval The approval of the following resolutions by Dannex shareholders at the EGM to be held on 28

th

December, 2018.

a) authorise the listing of 47,423,624 Dannex shares on the GSE; b) authorise the directors to issue and allot 37,342,275 new Dannex shares to Ayrton and

Starwin shareholders and to have the new shares listed on the GSE; and c) approve the increase of the total number of Dannex directors from five (5) to nine (9)

vii. Share Capital Following the approval of the resolutions, the outstanding shares of Dannex Ayrton Starwin Ltd post-merger will be 84,765,899. This translates to a market capitalization post-merger of GHS33,424,740.14.

viii. Other Authorisations All other authorisations, clearances, undertakings, approvals and notifications necessary to implement the Merger having been obtained from each appropriate third party and all such authorisations, clearances, undertakings, approvals and notifications remaining in full force and effect and there being no intimation of any intention to revoke, withhold or modify the same.

ix. Material Legal Proceedings Except as disclosed below, there are no legal or arbitration proceedings in which any member of either Dannex, Ayrton or Starwin is or has been engaged, including any such proceedings which are pending or threatened of which either Dannex, Ayrton or Starwin are aware, which may have, or have had during the 12 months preceding the date of this document, a significant effect on the financial position of either Dannex, Ayrton or Starwin or prevent either part from entering into this transaction or following the merger, the Merged Company.

x. Floatation Expenses of the Merger

Expense Item Amount (GHS) Percentage of Transaction

Professional Fees

Legal Advisory Fees 469,238 1.40%

Reporting Accountant Fees 42,510 0.13%

Financial Advisory and Brokerage Fees - -

Enterprise Valuation- PwC 284,938 0.85%

Enterprise Valuation Review- SAS 58,750 0.18%

Due Diligence (KPMG& EY) 128,970 0.39%

Regulatory Fees

GSE Fees 120,961.85 0.36%

SEC Fees 16,712.37 0.05%

Central Security Depository Fees 7,500 0.02%

Other Fees

Registrar of companies 73,620.30 0.22%

Media Publicity, Marketing, Printing, etc.

150,000 0.45%

Total 1,353,200.52 4.05%


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Note: The floatation expenses schedule excludes Financial Advisory and Brokerage Fees

4. Boards’ Recommendation

The Boards of Ayrton, Starwin and Dannex consider the terms of the Merger to be in the best interest of shareholders of the three Merger Candidates. The Boards are fully convinced about the positive synergies to be derived from merging the operations of the three companies to provide quality pharmaceutical products to the general public and deliver superior returns to shareholders.

The Boards therefore recommend that all Dannex, Ayrton and Starwin shareholders vote in favour of the resolutions to be proposed at the EGMs, as the Directors intend to do in respect of their own respective beneficial holdings, which amounts in aggregate to 262,493,875.07 Dannex, Ayrton and Starwin shares.

ECA which holds 71.83% of the issued shares of Dannex intends to vote in favour of the resolutions at the Dannex EGM. Dannex which holds 71.33% of the issued shares of Starwin, intends to vote in favour of the resolutions at the Starwin EGM. SSNIT which holds 18.00% of the issued shares of Ayrton, intends to vote in favour of the resolutions at the Ayrton EGM. Dannex and Adcock, who together hold 78.57% of the issued shares of Ayrton also intend to vote in favour of the resolutions at the Ayrton EGM.

Part 3: Overview of the Proposed Merger

1. Introduction The new company resulting from the merger of the three companies will be growth focused and will become a leading pharmaceutical manufacturing and distribution company in Ghana. The combined assets, sales and distribution network, diverse product range and increased customer base of the Merged Company will help maximise organic growth.


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2. Change of Name The shareholders of Dannex on 12

th July 2018 passed a special resolution to change the name of their

company name to “Dannex Ayrton Starwin Limited” as of the Effective Date. The Registrar General’s Department has reserved the use of the name “Dannex Ayrton Starwin Limited” for Dannex.

3. Listing on the Ghana Stock Exchange Application was made to the GSE for the existing and new Dannex shares to be issued under the Merger to be listed on the First Official List of the GSE. Dannex has received no formal notification of any decision of the GSE (i) not to agree to the listing of the 47,423,624 Dannex shares and 37,342,275 new Dannex shares on the First Official List of the GSE and/or (ii) to impose special conditions in connection with such listing which Dannex, Ayrton or Starwin acting reasonably, considers to be unduly onerous

Following approval of the Merger, Dannex Ayrton Starwin will trade on the GSE with a ticker symbol of DASPHARMA. It is expected that trading in the new shares will commence by 12

th February, 2019.

4. Benefits of the Merger The Directors of Dannex, Ayrton and Starwin believe the Merger will allow the shareholders of all three companies to benefit from the establishment of a premier pharmaceutical company with the following attributes:

i. Growth potential Dannex’s proven track record in the Ghanaian pharmaceutical industry will enhance the opportunity for the Merged Company to expand its customer base and also penetrate other neighbouring countries. Management expects to harness the effect of synergy from the combined operations of the three entities to drive efficiency, cost optimisation and revenue growth, as well as the expansion and efficiency to be obtained by the anticipated infusion of additional capital.

Growth will also be propelled by the increased product volumes driven by the expansion in factory capacity and distribution capabilities. Dannex Ayrton Starwin intends to introduce 18 new products over the next 5 years.

ii. Leading Market Position Dannex, Ayrton and Starwin have dominant positions in the Ghanaian pharmaceutical industry; thus, the merger of the three companies will create a single entity with a leading market position. The new company will become the premier indigenous pharmaceutical manufacturing and distribution company in Ghana.

It is anticipated that the new company will have a combined balance sheet valued at GHS73 million as at December 31, 2018. The Ghanaian pharmaceutical industry is currently highly competitive; therefore, an entity with the combined assets, human capital, sales and distribution network of the Merged Company has the potential of being amongst the industry leaders and also delivering superior returns to shareholders.

iii. Synergies, Increased Efficiency and Cost Savings The Merger is expected to generate tangible synergies through reduced financing costs, merging of administration, procurement, production, distribution and sales, marketing operations.

The synergies created will translate into reduced operational, administration and procurement costs and increased efficiency which will increase the Merged Company’s profitability and also maximize shareholder value. The merger will also increase the breadth of technical capabilities to ensure the optimal development of organic growth opportunities. Administrative operations and manufacturing will be centralized at one head office location.

Revenue is projected to be GHS86 million in 2018 and will increase to GHS102 million in 2019.

Earnings per share which was GHS0.0036 for Ayrton and GHS0.0026 for Starwin in 2017 is expected to increase to GHS0.11 by end of 2018 and further increase to GHS0.15 by end of year 2019. It is important to note that none of the three companies could have been able to individually generate such returns.

iv. Investment appeal The combined market capitalization of approximately GHS33.42 million (based on the combination of the Discounted Cash Flow (DCF) valuation and Market Comparable valuation of Dannex,


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Ayrton and Starwin as at 31st December 2017) and the anticipated growth potential, size, liquidity

and dividend yield will enhance Dannex Ayrton Starwin’s investor appeal, thus attracting investment from local and other international investors.

5. Risk Factors In addition to the other information contained in this document, you should carefully consider the following risk factors which could affect the Merged Company. Additional risk factors not presently known to the Merger Candidates or that the Merger Candidates currently deem immaterial could later turn out to be material to the Merged Company.

i. Risks related to a failure to implement or delay in implementing the Scheme The Merger is subject to a number of conditions, including the approval by the requisite majority of Ayrton and Starwin shareholders of the Scheme at the Scheme Meeting and the special resolution proposed at the Extraordinary General Meeting, the confirmation of the Scheme by the High Court, the receipt of certain regulatory approvals and third party consents, and the absence of any material adverse change to the business, financial condition, results of operations, assets or liabilities of Ayrton and Starwin since 31

st December, 2017. A complete list of the conditions to the

Merger is set out in Part 2 of this document. There is no guarantee that the conditions to the Merger will be fulfilled and that the Merger will be completed.

ii. Risks related to the shares of the Merged Company The sale of large amounts of Dannex Ayrton Starwin shares, or the perception that these sales may occur, could adversely affect the prevailing market prices of such shares. The sale, if substantial, or the perception that these sales may occur and be substantial, could exert downward pressure on the prevailing market price of Dannex Ayrton Starwin shares, causing its market price to decline.

iii. Risks related to the operations of the Merged Company and the pharmaceutical industry The operations of Dannex Ayrton Starwin is dependent on the ability of third parties to deliver critical services to enable the company manufacture, store and distribute its products. Dannex Ayrton Starwin and its competitors within the pharmaceutical industry are exposed to supply chain risks, utility shortfalls such as power and water supply from their third-party providers, and shortage of raw materials, just to mention a few. The insufficient provision of utility services may adversely impact the operational efficiencies and income of Dannex Ayrton Starwin and its competitors within the pharmaceutical industry. As such, the impact of these risks to the operations of Dannex Ayrton Starwin has been recognised and measures have been implemented to invest in systems to create flexible processes to adapt to changes and disruptions and curtail the effects of these risks thereby minimising their impact on the operations of Dannex Ayrton Starwin.

iv. Price and foreign exchange risk In the pharmaceutical industry, the price of raw materials, most of which are imported, are subject to international pricing standards and costs which are open to all pharmaceutical drug manufacturers. However, the prices of imported raw materials and equipment fluctuate with the exchange rate, thus posing a risk to the operations and profitability of Dannex Ayrton Starwin.

v. Liquidity risk Liquidity risks arises in the event where a company has insufficient resources to enable it meet its obligations as they become due. Dannex Ayrton Starwin will ensure that its operations and cash flow is managed efficiently and effectively to enable the company meet all its obligations whenever they are due.

vi. Credit Risk Customers and trade partners’ inability to settle their debts or contractual obligations to Dannex Ayrton Starwin may create credit risk or increase the risk of financial loss to Dannex Ayrton Starwin.

vii. Competitor risk The merged company shall operate in a highly competitive market. As of Q2 2018, the Pharmaceutical Manufacturers Association of Ghana had 30 registered members, with domestic


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companies representing a third of Ghana’s pharmaceutical market. In addition to the main domestic players, there is a multinational presence in Ghana, with some firms working in collaboration with local firms through domestic partnerships. Dannex Ayrton Starwin Ltd will need to adapt measures that will enable it thrive in this competitive environment. The company will leverage on the synergies created through merging of administration, procurement, production, distribution, sales and marketing operations to maintain and improve its dominant position in the Ghanaian pharmaceutical industry. However, there is no assurance that these measures will be adequate to minimise or mitigate such risks.

viii. Country Risk The operational results and income of the merged company may depend to an extent on the stability of Ghana’s macro-economy. The merged company like all entities operating within Ghana is exposed to economic risks associated with the country. The merged company’s experienced and qualified management team shall ensure that procedures and systems are in place to minimize the company’s exposure to adverse economic conditions. However, this cannot provide an assurance that adverse economic conditions will not hamper the company’s performance.

ix. Share Liquidity Risk

Dannex Ayrton Starwin shares (DASPHARMA) shall be listed on the GSE to enable trading in the company’s shares. However, it is possible that there could be inadequate liquidity for the company’s shares on the GSE at certain periods, meaning that investors may not be able to sell or buy DASPHARMA shares whenever they want to and at their desired price.

6. Corporate Governance of the Merged Company

Following the Merger, Nik Amarteifio, the current Chairman of Ayrton, Starwin and Dannex, will become Chairman of the Merged Company. Daniel Apeagyei Kissi, the current Chief Executive Officer of Ayrton, Starwin and Dannex, will be the Chief Executive Officer of the Merged Company.

All the current directors of Dannex and Starwin will continue as directors of the Merged Company; these include:

Nik Amarteifio Board Chairman Daniel Apeagyei Kissi CEO Alex Kobina Bonney Non-Executive Director Kwasi Yirenkyi Chief Human Resource and Corporate Affairs

Officer Amarteokor Amarteifio Non-Executive Director Samuel Atta Mensah Non-Executive Director Dr. Barima Afranie Non-Executive Director

The other members of the Dannex Ayrton Starwin Limited Board following the Effective Date and shareholders’ approval will include:

Henry Ocansey

Chief Finance Officer

Samuel Nkansah

Non-Executive Director

7. Date of Birth of Directors and other directorships held by them in respect of the merged entity

Name Date of Birth Other Directorships


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Theophilus Niikai Amarteifio 27-09-1945 1. GCb Bank Ltd 2. Chemu Power Company Ltd 3. N.F.B Company Ltd 4. Omni Media Company Ltd 5. Starwin Products Ltd 6. Regulus Energy Ltd 7. Subim Resources Ghana Ltd 8. Merman Response Ghana

Ltd 9. Yaro Capital Ghana Limited 10. Equatorial Cross Acquisitions

Ltd

Dr. Afranie Barimah 23-12-1948 1. Gulf Integrated Biochemical Solutions Ltd,

2. Entrance Pharmaceuticals &Research Center,

3. Starwin Products Ltd

Samuel Attah Mensah 13-7-1967 1. Omni Media Company Ltd 2. Starwin Products Ltd 3. Herdon Construction Limited 4. Regulus Energy Ltd 5. Pneuma Hydrocarbons Ltd 6. P&K Technologies Ltd 7. Subim Resources Ghana Ltd 8. Malipo Solutions Ltd 9. Notice Board Ltd 10. Ocean Merchants Ltd 11. The Voice Ova Company Ltd

Alex Bonney 6-6-1954 1.Navajna Technologies Ghana Ltd

2. Starwin Products Ltd

Daniel Kissi Apeagyei 14-09-1967 Ayrton Manufacturing Drugs Ltd

8. Selected Financial Information relating to Ayrton

The selected financial information relating to Ayrton set forth below for the years ended 2013 to 2017 will have to be read in conjunction with Ayrton’s financial statements prepared in accordance with GAAP. The


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selected financial information for these years has been extracted without material adjustment to Ayrton’s audited financial statements.

The financial statements of Ayrton are set out in Part 6 of this document.

Sep - 2013 Jun - 2014 Jun - 2015 Jun - 2016 Dec – 2017

GHS GHS GHS GHS GHS

Revenue 24,077,076 21,338,571 34,892,733 38,772,241 35,016,640

Gross Profit 9,702,732 8,976,634 10,539,113 17,753,387 18,243,122

Other Income 27,462 37,039 370,747 1,108,602 193,896

Operating Profit 876,620 (1,776,398) (3,576,718) 5,458,195 2,101,479

Profit After Tax 340,806 (1,584,003) (4,822,000) 2,598,241 4,474,028

Total Assets 23,339,289 28,830,027 30,620,797 27,267,339 30,051,987

Total Liabilities 3,827,410 11,118,265 17,731,035 11,779,336 12,278,009

Shareholders’ Funds 19,295,765 17,711,762 12,889,762 15,488,003 17,773,978

Net Profit per Share 0.0016 (0.0074) (0.0224) 0.0121 0.0106

Net Assets per Share 0.0907 0.0824 0.0600 0.0720 0.0850

Dividend per Share - - - - -

Issued shares 215,000,000 215,000,000 215,000,000 215,000,000 215,000,000

9. Selected Financial Information relating to Starwin

The selected financial information relating to Starwin set forth below for the years ended 31st December

2013 to 31st December 2017 will have to be read in conjunction with Starwin’s financial statements

prepared in accordance with GAAP. The selected financial information for these years has been extracted without material adjustment to Starwin’s audited financial statements.

The financial statements of Starwin are set out in Part 7 of this document.

2013 2014 2015 2016 2017

GHS GHS GHS GHS GHS

Revenue 6,678,090 6,946,716 5,762,183 9,172,862 8,892,697

Gross Profit 3,804,441 3,542,568 2,886,892 5,186,511 4,874,914

Other Income 4,000 67,410 1,388,066 3,464,060 1,370,100

Operating Profit 1,075,381 617,599 89,814 5,552,896 2,224,542

Profit After Tax 646,102 174,123 (131,201) 3.821,164 665,033

Total Assets 5,195,087 10,672,010 10,612,537 18,376,890 18,409,397


Shareholders’’ Funds 3,028, 457 8,213,916 8,082,715 11,644,064 12,309,097

Net Profit per Share 0.0081 0.0022 (0.0004) 0.0147 0.0026



Issued shares 79,391,778 79,391,778 259,814,797 259,814,797 259,814,797

10. Selected Financial Information relating to Dannex

The selected financial information relating to Dannex set forth below for the years ended 31st December

2013 to 31st December 2017 will have to be read in conjunction with Dannex’s financial statements


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prepared in accordance with GAAP. The selected financial information for these years has been extracted without material adjustment to Dannex’s audited financial statements.

The financial statements of Dannex are set out in Part 8 of this document.

2013 2014 2015 2016 2017

GHS GHS GHS GHS GHS

Revenue 10,242,894 11,696,326 12,596,576 12,625,447 20,906,380

Gross Profit 4,563,809 4,219,648 4,728,137 5,921,532 8,106,746

Other Income 160,709 24,535 (56,772) - 187,458

Operating Profit 45,993 (3,513,676) 3,458,338 (3,791,232) (2,073,348)

Profit After Tax 182,061 (4,702,939) 1,986,698 4,212,200 (3,095,618)

Total Assets 25,941,938 28,372,634 30,492,263 41,333,908 44,264,605


Shareholders’ Funds 12,570,627 8,138,555 11,158,304 16,324,464 13,801,235

Net Profit per Share 0.0059 (0.0858) (0.0284) (0.0572) (0.0274)



Issued shares 30,963,262 33,228,016 41,063,891 47,423,624 47,423,624

11. Shareholders

Equatorial Cross Acquisitions through its majority shareholding in Dannex, and Dannex’s subsequent acquisition of Ayrton and Starwin will become the largest shareholder of the new Merged Company, controlling 40.19% of the issued shares of the Merged Company. The Top 10 shareholders of the Dannex Ayrton Starwin Limited following the merger would be as follows:

Shareholder Number of Shares Shareholding

Equatorial Cross Acquisitions 34,066,252.33 40.19%

Adcock 17,122,971.49 20.20%

SSNIT 14,467,504.79 17.07%

Yaw Opare-Asamoah 6,627,039.67 7.82%

Ms. Amarteokor Amarteifio 3,247,297.00 3.83%

Mirfield Properties 1,523,204.05 1.80%

Dr. J. A. Q. Blucoo-Allotey 399,367.00 0.47%

Worldwide Securities 318,665.00 0.38%

DAMSEL/Oteng-Gyasi Anthony 214,340.19 0.25%

Starwin Products 194,295.26 0.23%

Others 6,584,962.08 7.61%

TOTAL 84,765,898.86 100.00%

12. Ayrton and Starwin Meetings

The Merger will require the approval of Ayrton and Starwin shareholders of the Scheme at their respective Scheme Meetings, and their approval of the special resolutions to be proposed at their respective Extraordinary General Meetings. The Scheme Meeting and Extraordinary General Meeting of Ayrton will be held on 27

th December, 2018 at the Ebenezer Presbyterian Church Hall, Osu, Accra, Ghana, and the

Scheme Meeting and Extraordinary General Meeting of Starwin will be held on 27th December, 2018 at the

Ebenezer Presbyterian Church Hall, Osu, Accra, Ghana. The Extraordinary General Meeting is being held to approve the amendment of the Regulations and to seek the approval of Ayrton and Starwin shareholders for the resolutions as described in section 3 of Part 2 of this document. The Merger is not conditional upon the approval of the ordinary resolution required to delist Ayrton and Starwin from the GSE. However, the approval of such resolution is required for the delisting of Ayrton and Starwin to occur.

Notices of both the Scheme Meeting and the Extraordinary General Meeting of Ayrton and Starwin are set out at the end of this document. Entitlement to attend and vote at the Scheme Meeting and the number of


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votes which may be cast thereat will be determined by reference to the Ayrton and Starwin Registers at 4.30 pm (GMT) on the day prior to the day immediately preceding the Scheme Meeting.

Further information of the Scheme Meeting and the Extraordinary General Meeting is set out in section 5 of Part 10 of this document.

13. Action to be taken by Ayrton and Starwin Shareholders The Merger requires the approval of the Ayrton and Starwin shareholders of the Scheme at their respective Scheme Meetings, and their approval of the special resolution to be proposed at their respective Extraordinary General Meetings. It is important that as many votes as possible are cast at the Scheme Meeting so that the High Court may be satisfied that there is a fair representation of Ayrton and Starwin shareholders’ opinion.

You are therefore strongly urged to sign and return your form(s) of proxy and Voting Instruction Form(s) as soon as possible. The Scheme, if it becomes effective will be binding on all Ayrton and Starwin shareholders, including any shareholder who did not vote (in person, by proxy) to approve the Scheme.

Whether or not you propose to attend any of the Meetings in person, Ayrton shareholders are urged to complete and return their BLUE and YELLOW proxy forms to the relevant registrar, and Starwin shareholders are urged to complete and return their PINK and GREEN proxy forms to the relevant registrar as soon as possible, and in any event to be received not later than 3.00 pm on 24

th December,

2018.

14. Recommendation The Ayrton and Starwin Boards recommend the terms of the Merger to be in the best interest of Ayrton and Starwin shareholders as a whole and of Ayrton and Starwin.

The Ayrton Board recommends that all Ayrton Shareholders vote in favour of the resolutions to be proposed at the Scheme Meeting and the Extraordinary General Meeting, as the directors of Ayrton intend to in respect of their own respective beneficial holdings, which amount in aggregate to 82,578,778.99 Ayrton Shares (representing 38.41% of the issued ordinary share capital of Ayrton).

The Starwin Board recommends that all Starwin Shareholders vote in favour of the resolutions to be proposed at the Scheme Meeting and the Extraordinary General Meeting, as the directors of Starwin intend to in respect of their own respective beneficial holdings, which amount in aggregate to 145,848,843.74 Starwin Shares (representing 56.14% of the issued ordinary share capital of Starwin).

The Ayrton and Starwin Boards have received a written opinion dated 26th June, 2018, from its financial

adviser, SAS, that as of the date of the opinion, the Share Exchange Ratio was fair to Ayrton and Starwin shareholders from a financial point of view.

15. Further Information Your attention is drawn to the explanatory statement in Part 10 of this document which gives more detailed information about the Scheme.

Part 4: Compliance letter from Kimathi & Partners, Corporate Attorneys


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13

th July 2018.

The Director General Securities and Exchange Commission 30, Third Circular Road Cantonments, Accra Ghana The Managing Director Ghana Stock Exchange 5

th Floor, Cedi House

Liberia Road, Accra F Ghana

Dear Sirs,

SCHEME OF AMALGAMATION FOR THE MERGER OF DANNEX LIMITED, STARWIN PRODUCTS LIMITED AND AYRTON DRUG MANUFACTURING LIMITED

1. Introduction We have acted as legal advisors in connection with the proposed merger of Dannex Limited (“Dannex”), Starwin Products Limited (“Starwin”) and Ayrton Drug Manufacturing Limited (“Ayrton”) under a scheme or arrangement (“Scheme”) under the Scheme Document, and the proposed listing of the Merged Company on the Ghana Stock Exchange (“GSE Listing”).

This opinion is as of the date of issuance and we assume no responsibility to update or supplement the opinion to reflect any facts or circumstances that may thereafter come to our attention or any changes in the laws of Ghana that may hereafter occur.

2. Scope and Purpose of Opinion 2.1 We are qualified to practice law in Ghana. Therefore, this opinion is limited to the laws of Ghana as in

force and applied by the courts of Ghana as at the date of this opinion and is given on the basis that it will be governed by and construed in accordance with the laws of Ghana.

2.2 We have not investigated the laws of any country other than Ghana and we express no opinion on the laws of any other country.

2.3 This opinion is given on the basis of the assumptions in Schedule A and is subject to the qualifications set out in Schedule B.

3. Documents Examined 3.1 For the purpose of giving this opinion, we have examined the following documents:

3.1.1 proposed scheme of amalgamation document (“Scheme Document”);

3.1.2 board resolutions of Dannex, Ayrton and Starwin (the “Merging Entities”) approving the Scheme Document; and

3.1.3 extract of shareholders’ resolution of Extraordinary General Meeting held on 12th July 2018 to

convert Dannex from a private company to a public company.


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3.2 Unless otherwise indicated, all expressions defined in the Scheme Document have the same meanings when used in this opinion.

4. Opinion Based on the preceding paragraphs, we are of the opinion that:

4.1 Status and Powers 4.1.1 Dannex, Ayrton and Starwin have been duly incorporated under the laws of Ghana. Dannex is

a duly incorporated private company limited by shares. Ayrton and Starwin are duly incorporated public limited liability companies under the laws of Ghana.

4.1.2 The Merging Entities have perpetual corporate existence and the capacity to sue or be sued in their name and to carry on their business as currently conducted.

4.1.3 The boards of the Merging Entities have passed the appropriate resolutions to approve the Scheme under the Scheme Document.

4.1.4 The Merging Entities have all the necessary powers and authority to own their property and assets and to carry on their businesses as currently conducted.

4.1.5 No moratorium has been declared on the payment of any indebtedness of the Merging Entities, as far as we are aware.

4.1.6 The Merging Entities: (a) have the power to enter into, and perform their obligations, under the Scheme

Document;

(b) have taken all necessary action to authorise the entry into, and performance of their obligations under, the Scheme Document; and

(c) have taken all necessary action to authorise the signature and delivery of all notices, certificates, communications, and other documents to be delivered by each of them under the Scheme Document.

4.2 Merging Entities Condition 4.2.1 To the best of our knowledge:

(a) the Merging Entities are not involved in any litigation, arbitration, administrative, regulatory, or governmental proceedings or investigations, and no such proceedings or investigations are threatened against them which would have a material adverse effect on their rights and obligations under the Scheme Document;

(b) no judgment or order has been issued against the Merging Entities which would have a material adverse effect on their rights and obligations under the Scheme Document; and

(c) the Merging Entities have not been charged, convicted, fined, or otherwise sanctioned in any litigation, administrative, regulatory or criminal investigation or proceeding which would have a material adverse effect on their rights and obligations under the Scheme Document.

4.3 Regulatory Approvals and Consents Apart from the approval of the SEC for the Scheme Document, the approval of the GSE for the listing on the GSE of the Merged Company, and the approval of the Court of the Scheme, no regulatory approvals, consents, licensing or authorisations are required for the establishment of the Scheme, under the Scheme Document.

4.4 Scheme Document Subject to any changes which may be proposed by the Court, the Scheme Document constitutes the legal, valid and binding obligations of the Merging Companies, enforceable in accordance with their

terms.


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4.5 Contractual Obligations To the best of our knowledge, and upon due enquiry, there are no contractual agreements, obligations or undertakings preventing the Merging Entities from undertaking the Scheme under the Scheme Document.

4.6 The Regulations 4.6.1 Apart from the Regulations of Dannex which will be duly restated and replaced upon its

conversion to a public company, the Regulations of Ayrton and Starwin comply with all legal requirements on the contents of the regulations of a public company.

4.6.2 The Scheme does not contravene any provision of the Regulations of Dannex, Ayrton and Starwin and or any applicable law.

4.7 Taxes and Stamp Duty 4.7.1 The statements in the Scheme Document regarding taxation in Ghana are correct in all

material respects.

4.7.2 Dividend payments under the Scheme will be subject to a withholding tax of 8%, except in relation to shareholders who are exempt from withholding tax.

4.7.3 There will be no stamp duty chargeable on the Scheme Document under the Stamp Duty Act, 2005 (Act 689). The Scheme Document is not subject to a nominal stamp duty in order to be admissible in evidence, and enforceable, in the courts of Ghana.

4.8 Registrations and Filings The Scheme document is required to be filed with the SEC and subsequently with the Court in connection with obtaining a court sanction of the Scheme, in order to be valid, binding and enforceable in accordance with their respective terms.

Yours faithfully, KIMATHI & PARTNERS, Corporate Attorneys

________________________________________ Kimathi Kuenyehia Sr. | Managing Partner


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SCHEDULE A

ASSUMPTIONS

In giving this opinion, we have assumed, and this opinion is given on the basis that:

1. all copy documents supplied to us are complete and conform to the originals;

2. each of the written resolutions of the Board of Directors of the Merging Entities was duly executed by all the directors of each of the Merging Entities and all requirements relating to disclosure of interest and due consideration of the commercial interests of the Merging Entities were complied with;

3. the extract of the resolution of the shareholders of Dannex was passed at a duly convened Extraordinary General Meeting after the Board of Directors fully disclosed all material details relating to the transaction; and

4. all disclosures made to us by the Merging Entities and its officers as reflected in the Scheme Document are materially correct as at the date of this opinion and no event has occurred which undermines or may undermine the correctness of those disclosures.

We have found nothing to indicate that the above assumptions are not justified.

SCHEDULE B

QUALIFICATIONS

This opinion is subject to the following qualifications.

1. Enforcement of the Scheme Document may be limited by any laws relating to liquidation, bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors’ rights generally.

2. Any claim may be or become barred under laws relating to the limitation of actions or may be or become subject to set-off or counterclaim.

3. We will 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 the Merging Entities and/or any of their officers, representatives or agents which may take place, or which may be made in connection with the preparation and/or rendering of this opinion.

4. We express no opinion as to:

(a) the creditworthiness of any of the parties to the Scheme;

(b) the suitability or adequacy of the provisions of the Scheme Document; and

(c) the term “enforceable” as used in this opinion means that the obligations assumed by the Merging Entities under the Scheme Document is of a type which the courts enforce but does not necessarily mean that those obligations will ultimately be enforced.


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Part 5: The Pharmaceutical Industry

1. Overview According to the Pharmaceutical Manufacturers Association of Ghana, pharmaceutical manufacturing is one of the most vibrant components of the manufacturing sector of the Ghanaian economy. Manufacturing of medicines has been in existence in Ghana for more than 40 years. Over these years, there has been a gradual yet consistent improvement in this sector both in quality and quantity of medicines produced.

Drug manufacturing in Ghana was given a boost when the plant and machinery installations of the State Pharmaceutical Corporation, one of the parastatal companies conceived during the First Republic, were completed in 1969 and production started in early 1970. As a result of this, commonly used drugs which were previously imported into the country was now manufactured locally.

According to the ECOWAS secretariat, within the sub region, Ghana had the best quality of locally produced pharmaceuticals as at 2016 due to the stringent criteria, inspection and enforcement procedures of the Ghana Food and Drugs Authority (FDA) and the recent efforts made by local manufacturers to meet the FDA’s requirements for manufacturing and trading licenses.

The FDA reported that there were about 5,000 registered pharmaceutical companies in Ghana as at 2017, with the Pharmaceutical Manufacturers Association of Ghana also reporting a total of 30 registered members as of Q2 2018. Out of the pharmaceutical products used by Ghanaians, only 30% of these drugs are produced locally, with the remaining 70% imported mainly from India and China. Local drug manufacturers normally produce generic malarial, anti-retroviral and over-the-counter (OTC) medicines. The complex drugs which are relatively more difficult to manufacture are imported. European multinationals also command a presence in Ghana, with GlaxoSmithKline, Novartis, Roche, Sanofi and Merck KGaA all importing pharmaceutical products into Ghana. Local drug manufacturers normally produce generic malarial, anti-retroviral and over-the-counter (OTC) medicines.

2. The Regulatory Environment The main regulators of the Ghanaian pharmaceutical industry are the Ministry of Health (MOH) and FDA. The overall legal framework for the pharmaceutical sector is set by the Food and Drugs Law 1992, amended by Act 523 in 1996. It defined the role of the FDA as a separate entity under the control of MOH, responsible for regulating the sector. The FDA also operates the official drug quality control laboratory which is responsible for the quality testing of samples obtained from manufacturers, importers, distributors or other sources. At the FDA, the Registration and Inspectorate Division is responsible for the evaluation of medicine registration applications leading to the registration of medical products. The Safety, Monitoring and Clinical Trials Division ensures the safety of regulated products as per the Public Health Act 2012 (Act 851).

The Ghanaian pharmaceutical market boasts some advantages over its neighbouring counterparts; these include an open economic policy and a comparatively well-established pharmaceutical industry regulatory body – the FDA. A positive development in the Ghanaian pharmaceutical industry is the government’s establishment of a more rigorous regulatory environment in the form of its own drug-testing facilities as part of its post-marketing surveillance strategy. While this bodes well for investor sentiments and comes across favourably as compared to the surrounding pharmaceutical markets, the drug regulatory environment in Ghana remains in need of supply chain tightening and improved policy enforcement. As such, multinational drug makers remain cautious of investing in the local production of drugs; a pickup in interest is expected to come about only gradually. Additionally, the high cost of borrowing coupled with the low purchasing power of patients, severely limits returns and deters foreign direct investments (FDIs) in the Ghanaian pharmaceutical industry.

Ultimately, streamlined regulatory processes should increase access to medicines. Moreover, the drug registration process in Ghana takes between 6 and 18 months, which is relatively shorter as compared to other African countries. In recent times, local drug manufacturers have also begun upgrading their production facilities to conform to Good Manufacturing Practices (GMP).

It is worth noting that Ghana’s proximity to Nigeria, and other West African neighbours with less stringent regulatory practices, places it on an ideal transit route for illegal drug and counterfeit trafficking. Therefore, the activities of the regulatory bodies of Ghana’s neighbours are even more significant for the development of Ghana’s pharmaceutical industry. Moreover, regulatory improvements would likely give a boost to the patented drug manufacturers in Ghana.


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3. Major Pharmaceutical Companies The major pharmaceutical manufacturing companies in Ghana include Danadams, LaGray Chemical, M&G Pharmaceutical and Ayrton. According to BMI Research, there is a considerable multinational presence in Ghana, with some firms working in collaboration with local firms through domestic partnerships. GlaxoSmithKline, for example, uses Ernest Chemists (which works in retail, distribution and drug manufacturing). Ernest Chemists packages analgesic Panadol for GlaxoSmithKline and also works with Roche and Johnson & Johnson.

Other multinational drug manufacturers who operate in Ghana either directly or through representatives include Novartis, Pfizer, Sanofi and Merck & Co.

4. Market Share Analysis According to the BMI Research Ghana Pharmaceuticals & Healthcare Report for Q2 2018, Ghana’s pharmaceutical market is amongst the largest in the West African region. Ghana’s pharmaceutical market was valued at GHS1.29 billion (USD293 million) in 2017, which was fairly modest in global terms and by regional standards, representing just under USD11 per capita. Prescription medicines dominate the market, representing 73% by value, while OTC medicines occupy a considerably smaller share of 27%. The prescription market share is split relatively evenly between patented drugs and generic drugs. However, the market is expected to become increasingly penetrated by generic medicines over the long-term, somewhat eroding patented medicine’s share. Pharmaceutical sales accounted for 0.7% of GDP and 25% of total healthcare expenditure in 2017. As of Q2 2018, the Pharmaceutical Manufacturers Association of Ghana had 30 registered members, with domestic companies accounting for around a third of the country’s pharmaceutical market. In addition to the main domestic players, there is a multinational presence in Ghana, and some firms work in collaboration with local firms through domestic partnerships. GlaxoSmithKline, for example, uses Ghanaian firm Ernest Chemists (which works in retail, distribution and drug manufacturing). The company also work with Roche and Johnson & Johnson.

5. Outlook of the Pharmaceutical Industry The growth outlook for Ghana’s pharmaceutical market is high on a regional level as driving factors are expected to remain robust, with generic drug sales expected to rapidly increase from a low base. The expansion of the National Health Insurance and robust economic growth should add momentum for pharmaceutical expenditure over the long term. Income distribution will be a significant driver behind increased medicine spending.

In line with the view that Ghana will enjoy robust economic growth over the coming 10 years, per capita income is expected to increase steadily, generating demand for a range of services including pharmaceuticals and healthcare. Increasing social infrastructure and raising employment levels will massively boost purchasing power, the effects of which should gradually filter into the country’s pharmaceutical market.

Ghana’s drug pricing policy is still under scrutiny as regional disparities in mark-ups are hindering access to medicines. Ultimately, this policy needs to be revised and implemented properly in order for the pharmaceutical market to expand beyond essential medicine purchases. Despite these driving factors, this is not expected to be mirrored by a significant uptick in multinational investment, as industry-specific barriers remain firmly in place. Moreover, the absolute market size in Ghana will remain underdeveloped when compared to regional players such as Nigeria, somewhat overshadowing Ghana’s growth potential and appeal to foreign drug makers.

Total healthcare expenditure in Ghana rose to GHS5.2 billion (USD 1.2 billion) in 2017, accounting for 2.6% of the country’s GDP. According to BMI research, healthcare expenditure is forecasted to reach GH5.7 billion (USD1.3 billion) in 2018, corresponding to a marginally lower percentage of GDP at 2.2%. Over the long term, healthcare expenditure is forecasted to reach GHS12.4 billion (USD2.9 billion) by 2027, corresponding to a 10-year CAGR of 9.1% and 9.3% in local currency and US Dollar terms respectively.

Although government contributions to healthcare have historically been erratic, the percentage is expected to increase as a result of the continued investment in the subsidised National Health Insurance Scheme (NHIS). Long-term growth of Ghana’s healthcare sector will be largely driven by the success of the scheme. However, underlying public healthcare sector issues are likely to limit the uptake among much of the population. Rising healthcare expenditure does not necessarily equate to quality healthcare provision, and downside risks remain, particularly in the near term. Low per capita spending and poor access will continue


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to weigh on healthcare expenditure growth, especially given the high rural population in Ghana.

Government health expenditure as a percentage of total health spending is forecasted to increase moderately from around 60% in 2017 to 65% in 2027. About 6% of private healthcare expenditure is spent on health insurance, leaving plenty room for further participation in the government’s national health coverage scheme. Out-of-pocket payments will still make up a large share, and many are not willing to subscribe to NHIS as they do not want their income to be deducted in any way. They are likely to opt for pay-as-you-go service-although this trend is diminishing as awareness and education increase.

As with most emerging African countries, Ghana has a negative trade balance, with only 30% of the national requirements of pharmaceutical products being produced locally, and the remaining 70% imported. However, the Ghanaian government has emphasised the need to manufacture more locally produced medicines over the next decade, an ambition it shares with many African governments.

Ghana’s pharmaceutical trade performance is relatively erratic. Although a few key local drug makers are known to produce essential medicines for local demand and exports, data from the UN Trade Database suggest an unpredictable output. Pharmaceutical imports were estimated at GH960 million (USD218 million) in 2017. BMI Research forecasts this to reach GHS1.22 billion (USD311 million) by 2022, posting a local currency compound annual growth rate (CAGR) of 4.9%, and 7.4% in US dollar terms.

According to the UN Comtrade Database, Ghana exports most of its pharmaceuticals to Nigeria, Cote d’Ivoire, Burkina Faso, Senegal and Mali. It presently serves as the regional hub for pharmaceutical manufacturing and distribution to over 300 million people who live within the Economic Community of West African States (ECOWAS). There is still room for lots of growth in the industry. Even though most factories in Ghana are not operating at full capacity, Ghana’s pharmaceutical exports to other countries in the region are valued because of its high quality. The industry has many advantages for investors, such as a sound and a stable structure in place and access to a large and in-need market.

It is important to note that there are several hospitals yet to be completed and others scheduled to be built in Ghana. Increasing access to medicine will raise demand for drugs and therefore imported products, while local manufacturing also expands, owing to expected European funding and domestic political support.


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Part 6: General Information on Ayrton Drug Manufacturing Limited

1. Background Ayrton was incorporated on the 24

th September 1965 by the Late Mr. Samuel Benson Adjepong, a

Ghanaian entrepreneur and the first Ghanaian Chief Pharmacist at the Ministry of Health. Ayrton is listed on the Ghana Stock Exchange and currently has over thirty product lines. In 2010, Adcock Ingram acquired 65.59% shares in Ayrton to become the majority shareholder and subsequently increased its shareholding to 78.57%. In 2016, Dannex acquired 53.47% of the 78.57% voting shares held by Adcock in Ayrton, thus making Dannex the majority shareholder in Ayrton with a shareholding of 53.47%.

2. Share Issue History The table below summarises Ayrton’s share issue history as at 31

st December 2017:

Financial Year Description Issued Shares

Cumulative Issued Shares

Stated Capital (GHS)

2010 Ordinary Share of no par value 215,000,000 215,000,000 4,475,000

2011 Ordinary Share of no par value - 215,000,000 4,475,000







3. Shareholders Below is the list of Top 20 Shareholders of Ayrton as at 31

st December 2017:

Shareholder No. of Shares Shareholding (%)

Dannex 114,957,904.00 53.47%

Adcock 53,965,000.00 25.10%

SSNIT 38,700,000.00 18.00%

Worldwide Securities Ltd Trust A/C 274,300.00 0.13%

Teachers Fund 250,000.00 0.12%

Databank Brokerage Ltd. 235,300.00 0.11%

Egya Jallow 145,000.00 0.07%

Ernest Anthony Buadoo 143,800.00 0.07%

SIC Provident Fund Account 126,079.00 0.06%

Sharp Pharmaceuticals Ltd. 120,000.00 0.06%

Patrick Beaudoin 95,000.00 0.04%

Oson's Co. Ltd 70,500.00 0.03%

Llord Loveson Abeka Quansah 60,000.00 0.03%

Joseph Adom 50,000.00 0.02%

Grace Francisca Adzroe 50,000.00 0.02%

Beatrice Nortey 47,100.00 0.02%

SCGN/Petra Advantage Portfolio Equities NDK Account 45,600.00 0.02%

Kwabena Sefah Ayim 41,200.00 0.02%

Harry Augustus Lemuel Imbeah 40,000.00 0.02%

SCGN/Frontline Capital Advisors Trans A/C 38,710.00 0.02%

Other Shareholders 5,544,507.00 2.58%

TOTAL 215,000,000 100.00

4. Products

Product Description Process Line

Amoxycillin Capsules Betalactam antibiotic Encapsulation

Amoxycillin Suspension Betalactam antibiotic Dry powder suspension

Ayrton Multivitamin Syrup Multivitamin Syrup

Ayrton Muscle Heat Rub Topical analgesic Cream

Ayrton Muscle Heat Rub Extra Strong Topical analgesic Cream

Bella Cough Syrup Antitussive (Anti-Cough) Syrup

Clobet Cream Antifungal/Antibacterial/Anti-inflammatory Cream

Clofen Gel Cream Topical analgesic Cream

Ferrodex Syrup Haematinic (Blood tonic) Syrup


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Haemoglobin Syrup Haematinic (Blood tonic) Syrup

Heptamin Syrup Appetite stimulant Syrup

Menazole 500mg Antihelmintic Tablet

Metronidazole Suspension Antiprotozoan Syrup

Minavita Syrup Multivitamin Syrup

ORS Hydration & electrolyte replacement Powder filling

Panacin Extra Strong Analgesic/ Anti-inflammatory Tablet

Paralex-D Analgesic Tablet

RES-Q Antacid Suspension

Samalin Adult Cough Syrup Antitussive (Anti-Cough) Syrup

Samalin Infant Cough Syrup Antitussive (Anti-Cough) Syrup

Samalin Junior Cough Syrup Antitussive (Anti-Cough) Syrup

Virol Blood Tonic Haematinic(Blood tonic) Syrup

5. Directors The Ayrton Board is comprised of three (3) directors who assume complete responsibility for activities of Ayrton. One (1) of the board members is an executive, while the remaining two (2) are non-executive directors.

Below are the brief profiles of the current Board members of Ayrton:

Nik Amarteifio - Board Chairman Mr. Amarteifio is the majority shareholder of Equatorial Cross Acquisition Limited (ECA), an investment holding firm with majority shareholding in Dannex Limited and Omni Media, owners of Citi FM and The Globe Newspaper. He is also currently the Vice Chairman of Ghana Agro Foods Company (GAFCO).

Nik is a seasoned entrepreneur who has been involved in many domestic and international transactions within different industries such as mining, real estate, telecommunication, and oil and gas. Through his investment vehicle ECA, he has invested and held executive board positions in many companies including International Gold Resources, Magnesium Alloy Company Limited and African Selection Company. Mr. Amarteifio was the Marketing Manager of Nestle Ghana. He served as a member on the Ghana Investors Advisory Council, an advisory board formed to advise the former president of the Republic of Ghana John A. Kufour, on foreign direct investment strategies. He also served as the Lead Director on the board of Bank of Ghana.

Nik holds a Degree in Economics from Wesleyan University and an MBA in Finance and Marketing from Harvard Business School.

Daniel Apeagyei Kissi – Chief Executive Officer Mr. Kissi is a seasoned senior business executive with over 27 years’ experience in working with multinational institutions, with extensive experience in general management, business leadership, manufacturing, and supply chain management.

Prior to his role as Chief Executive of Ayrton he worked with Unilever for 22 years, during which he held various leadership positions in different countries, namely Ghana, Kenya and South Africa, including a role as Operations Excellence Director of Unilever South Africa and a Regional Director role with responsibility across the Africa, Middle East and Turkey region.

He is also the Chief Executive Officer of Dannex and Starwin.

Richard Adu-Poku Mr. Adu-Poku is the Deputy Managing Director of SIC Insurance Company Limited. He is a Certified Public Accountant (CPA) and also a Certified Valuation Analyst (CVA) by profession. Richard is a Management Consultant with over 20 years’ experience. He has undertaken various complex business-restructuring assignments, including those commissioned by the World Bank, European Union and other major international donor agencies, with distinction. He has an MBA in Finance, from the Yale School of Management, Yale University, New Haven, Connecticut, USA. He has a Bachelor of Arts Degree in Accounting from Claremont McKenna College, California, USA. Richard was the Treasurer for Mobil Oil Ghana Limited and also worked as a Financial Analyst with Mobil Oil Corporation in Virginia, USA. Mr. Adu-Poku has performed several valuation and pricing exercises of the unlisted equities of the Social Security & National Insurance Trust (SSNIT) and SIC Insurance Company Limited, as well as several other international valuation assignments.


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He is currently the Governor of International Association of Consultants, Valuers and Analyst, the Chairman of the Board of Directors of Ecobank Development Corporation (iFund), and a member of the Board of Fidelity Capital Fund. He is also a non-executive director of Beige Bank.

6. Senior Management Ayrton’s senior management team includes the following:



He is also the Chief Executive Officer of Dannex and Starwin.

Henry Ocansey – Chief Finance Officer Mr. Ocansey holds an Executive MBA in Finance, University of Ghana Business School, Legon and a BSc. In Business Administration (Accounts/Finance) from GIMPA.

Henry is also the Chief Finance Officer of Dannex, where he joined in 2000 as a Management Accountant and was subsequently appointed as Chief Accountant in 2004 and Head of Finance in 2006. He is also the Chief Finance Officer of Starwin.

Prior to joining Dannex he worked with Pharmaplast Limited initially as a Cost Accountant and later as a Management Accountant. He is a seasoned accountant with experience in commercial, audit management and finance.

Kwasi Yirenkyi – Chief Human Resource and Corporate Affairs Officer Mr. Yirenkyi has over 20 years business operations experience and was previously the Managing Director of Starwin, and currently serves as an Executive Director of Starwin.

He previously worked with Merchant Bank Ghana Limited (now known as Universal Merchant Bank) as Manager, Corporate and Institutional Banking, with responsibilities in marketing. He also worked with Deloitte and Touche Ghana (now known as Deloitte) and was involved in projects with some key companies such as Ashanti Goldfields Company Limited (now known as AngloGold Ashanti), Tema Oil Refinery and the Zimbabwe National Insurance.

Kwasi has a BSc. in Business Administration from the George Mason University in Fairfax, Virginia USA. He further obtained a Diploma in Management and Micro Enterprise Development from Southern New Hampshire University, USA.

He is also the Chief Human Resource and Corporate Affairs Officer of Dannex and Starwin.

Dr. Agyeman Kuma-Mintah - Chief Regulatory Affairs, Quality Assurance and Control Officer Dr. Kuma-Mintah is also the Chief Regulatory and Quality Officer of Dannex.

He previously held Scientist and Senior Scientist positions at Abbot Labs, New Jersey, USA. He also served in senior management roles with Geopharma Inc., Belcher Pharmaceuticals, Largo, Florida, USA. and American Antibiotics, Baltimore, Maryland, USA. He also worked with Apotex Pharmachem, Brantford, Canada as an Analytical Operation Compliance and Training Specialist.

Agyeman is a former Health Canada employee and had his graduate studies at University of British Columbia, Vancouver, Canada.

He is also the Chief Regulatory Affairs, Quality Assurance and Control Officer of Dannex and Starwin.

Charles Addo-Cobbiah – Chief Sales and Marketing Officer


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Mr. Cobbiah was previously the Sales Capability Manager of Guinness Ghana Breweries Limited where he

played various roles including Retail Development Manager and Key Distributor Manager, He also implemented strategies that resulted in the doubling of sales volumes within 3 years. As Head of Sales and Marketing at Dannex, he grew sales by 154% within 4 years.

He is also the Chief Sales and Marketing Officer of Dannex and Starwin.

7. Corporate Governance and Board Practices Ayrton recognises the importance of good corporate governance to sustain the long-term viability of its business and the Board and Management are strongly committed to the attainment of its business objectives.

i. Role of the Board Ayrton has three (3) directors, two (2) of whom are non-executive directors. The board meets once every quarter and where necessary additional meetings are arranged to discuss or review the Company’s operations. The non-executive directors complement Ayrton’s objective of having experienced people with independent but objective ideas on deliberations in decision-making. The directors shall be appointed by members in an annual general meeting. Non-executive directors derive no benefits other than the fees approved for them by the shareholders.

ii. Audit Subcommittee Ayrton has an Audit Subcommittee appointed by the board. The Audit Subcommittee comprises of the Chief Executive Officer and one (1) Non-executive Director who are responsible for reviewing the effectiveness of the internal control systems, including controls related to financial, operational and reputational risks identified by the company. The Chief Finance Officer reports to the Audit Subcommittee. The Audit Subcommittee has responsibility delegated from the Board of Directors for making recommendations on the appointment, reappointment, removal and remuneration of the external auditor.

iii. Internal Control Ayrton has internal control systems for identifying, managing and monitoring risks, these controls are intended to provide reasonable assurances that the risks faced by the company are being controlled. The directors have reviewed the effectiveness of the internal control systems, including controls related to financial, operational and reputational risks identified by the company as at the reporting date and no significant failings or weaknesses were identified during this review.

8. Employees The table below is a breakdown of Ayrton’s staff strength over the past four years:

Position 2014 2015 2016 2017

Management 16 15 11 11

Supervisors 27 24 15 15

Non-supervisors 413 368 324 334

Total 458 407 350 360

As at the date of this document, Ayrton had three hundred and thirty-four (334) of its staff belonging to labour unions, mainly the Industrial and Commercial Workers Union of the TUC

9. Office Locations Ayrton currently operates from its Head Office at Abeka in Accra, which also houses its liquid dosage factory, with the solid dosage factory also close to the Head Office. Ayrton has four branch offices in the following locations: Tamale - which serves the Northern, Upper East and Upper West Regions, Kumasi - which serves the Ashanti and Brong-Ahafo Regions, Takoradi - which serves the Western and Central Regions and Accra – which serves the Greater Accra, Volta and Eastern Regions.


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10. Indebtedness and Funds

The table below shows the indebtedness and funds of Ayrton over the past five (5) years:


Bank Overdraft - 1,814,063 3,992,459 3,520,129 -

Loans - - 3,811,854 1,603,764 6,245,018

Cash & Bank Balances 1,022,402 477,146 211,663 311,380 125,676

(i) Details of Indebtedness

Loans

GCB Bank 2,324,305

Stanbic Bank 7,131,483

(ii) Terms of Loan Agreements

The company has an approved credit facility of GHS2.3 million with Ghana Commercial Bank with an interest rate of 25% to finance working capital and importation of raw materials. The company also has an approved credit facility of GHS7.5million and GHS2.0 million with Stanbic Bank to finance working capital and importation of raw materials at an interest rate of 23%. The 7.5 million facility was secured by an industrial property (Plot No: B1/24 Abeka, Accra) of the company. The 2.0 million facility has been refinanced and is currently on the books of Dannex.

11. Material Contracts

Except for the agreements referred to and described below, no contract, not being a contract entered into in the ordinary course of business, has been entered into by Ayrton within the two years immediately preceding the date of this document and which is material or contains provisions under which Ayrton has an obligation or entitlement which is material as at the date of this document.

12. Insurance Policies

Ayrton has the following insurance policies:

Name of Insurance Policy Sum Insured Sum Assured a. Product Liability (ALP) 100,000.00

b. Assets All Risks 33,523,566.86

c. Goods in Transit Insurance Policy 1,000,000.00

d. Fidelity Guarantee 250,000.00

e.Cash in Transit 250,000.00

f. Group Life Policy- Senior Staff 4,082,178.36

g Group Life Policy- Junior Staff 3,295,287.60

13. Litigation As at 30

th April 2018, there were no pending cases or litigation by or against Ayrton.


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14. Disclosure of Interests by Directors As at 13th July 2018 (the last practicable date prior to the posting of this document), the interests of Ayrton directors in Ayrton shares were as follows:

Name Shares Held Debenture Holdings

Nik Amarteifio Nil Nil

Daniel Apeagyei Kissi Nil Nil

Richard Adu-Poku Nil Nil

Mr. Nik Amarteifio (Board Chairman of Ayrton Ltd) has 4,500 shares in Equatorial Holdings Ltd; Equatorial Holdings Ltd holds 34,066,252 (71.834%) shares in Dannex; and Dannex holds 114,957,904 (53.469%) shares in Ayrton.

15. Disclosure of Interests by Advisors As at the date of this document, neither UMB Investment Holdings (Financial Advisor) nor UMB Stockbrokers (Sponsoring Broker) held Ayrton Shares. None of the UMB Investment Holdings and UMB Stockbrokers affiliates, Universal Merchant Bank, UMB Capital and Strategic Debt Solutions held any Ayrton Shares. As at the date of this document, Kimathi and Partners, Corporate Attorneys (Legal Advisors) did not hold Ayrton Shares. As at the date of this document, Ernst & Young (Reporting Accountant) did not hold Ayrton Shares.

16. Other Disclosures i. Relationships Among Directors

There are no family relationships among the Directors.

ii. Bankruptcy Petitions No petition under any bankruptcy law has been filed against any director, or any partnerships of which such persons were partners, or of any company in which such persons were directors.

iii. Criminal Proceedings or Convictions for Fraud or Dishonesty No person who is a director or has been nominated to become a director has been convicted in a criminal proceeding or is a named subject of any pending criminal proceeding relating to an offence involving fraud or dishonesty.

iv. Prohibition against Financial Advisory or Capacity to Hold Office No person who is a director or has been nominated to become a director has been subject of any judgement or ruling of any court of competent jurisdiction, tribunal or government body permanently or temporarily enjoining him from acting as an investment advisor, dealer in securities, director or employee of a corporate body or engaging in any type of business practice or activity or profession.

v. Materiality of Management Interest in the Company’s Business and Affairs No member of management or any other persons related to them have any material interest in the company either directly or indirectly.

vi. Directors Powers to Borrow and Charge the Company’s Assets The directors may exercise all the powers of the company to borrow money and to mortgage or charge its property and undertaking or on any part thereof, and to issue debentures. Such powers can be varied by amending the Company’s Regulations.

vii. Affiliations and Affiliated Companies and Businesses Ayrton has affiliations with Dannex Limited and Adcock Ingram International (PTY) who hold 53.47% and 25.10%, respectively of Ayrton’s issued shares. It is the responsibility of Ayrton to recruit and appoint the senior level executives of Ayrton, among others.


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17. Risk Factors

i. Risks related to the pharmaceutical industry Ayrton and other companies within the pharmaceutical industry are exposed to supply chain risks, utility shortfalls such as power and water supply from their third-party providers, and shortage of raw materials, just to mention a few. The insufficient provision of utility services may adversely impact the operational efficiencies and income of Ayrton and other companies within the pharmaceutical industry. As such, the impact of these risks to the operations of Ayrton has been recognised and measures have been implemented to invest in systems to create flexible processes to adapt to changes and disruptions and curtail the effects of these risks thereby minimising their impact on the operations of Ayrton.

18. Additional Information i. KPMG, the reporting accountants of Ayrton, have given and have not withdrawn their written

consent to the issue of this circular with the inclusion herein of their reports in Part 6 of this document and the references thereto in the form and context in which they appear.

ii. Save as disclosed in this circular, there has been no material change in the financial or operating position of Ayrton other than in the ordinary course of business since 31

st June 2017, the date to

which the last audited accounts of Ayrton were prepared.

iii. Ayrton has not engaged in any litigation or arbitration of material importance to affect its financial position, and the Directors are not aware of any such litigation or arbitration.


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i. Historical Financial Statements of Ayrton 3

rd July 2018

The Managing Director Dannex Limited No.5 Dadeban Road Ring Road North North Industrial Area P. O. Box 5258 Accra -Ghana

Dear Sir,

FINAL REPORT – UPDATE OF FINANCIAL AND TAX DUE DILIGENCE ON AYRTON DRUG MANUFACTURING LIMITED

We have the pleasure in presenting our final due diligence report in accordance with the scope of work set out in our Engagement Letter dated 11 May 2018.

This report covers the financial and tax due diligence on Ayrton Drug Manufacturing Ltd (“Ayrton Drug” or the “Target”) and is based on the objective to ascertain the financial and tax health of the Company as well as assess the reasonableness of financial forecasts prepared by management of Ayrton Drug.

We trust that the report will prove useful for your purposes. We are grateful for the opportunity to be part of this transaction.

Yours faithfully,

Daniel S. Adoteye Partner


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ii. Accounting Policies of Ayrton 1. Basis of Preparation The financial statements have been prepared on a historical cost basis unless otherwise indicated. The financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and also in a manner required by the Companies Act, 1963 (Act 179). The financial statements are prepared on a going concern basis. 2. Functional and Reporting Currency The financial statements are presented in Ghana Cedis (GH¢) except when otherwise indicated. The Ghana Cedi is the functional and reporting currency of the company. 3. Foreign Currencies Translations Transactions in foreign currencies are measured and recorded on initial recognition in the functional currency at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate prevailing at the reporting date. At the reporting date non-monetary items at historical cost are translated using the exchange rates as at the dates of the initial transactions. 4. Leases Finance leases that transfer to the company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the statement of profit and loss and other comprehensive income. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. No finance leases were entered into/existed at the reporting dates. Land held d under operating leases are recognised at cost and amortised over the lease term. The current amount t for leasehold land is amortised over a lease term of 50 years. 5. Property, Plant and Equipment The company recognises an item of property, plant and equipment (PPE) as an asset when it is probable that future economic benefits will flow to it and the cost can be reliably measured by the company. Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. Depreciation is provided on the depreciable amount of each component of property, plant and equipment on a straight-line basis over the anticipated useful life of the asset. When significant parts of property, plant and equipment are required to be replaced in intervals, the company recognises such parts as individual assets with specific useful lives and depreciated respectively. The current annual depreciation rates for each class of property, plant and equipment are as follows:

Leasehold land Over the lease term % Factory buildings 3 Plant and equipment 15 Laboratory, equipment and furniture 10


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Office furniture and equipment 15 Motor vehicles and bicycles 25 Computer and accessories 33.3 Medical books 8.5 Costs associated with day-to-day servicing and maintenance of assets is expensed as incurred. Subsequent expenditure is capitalised if it is probable that future economic benefits associated with the item will flow to the company. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is recognised in profit or loss in the year the item is derecognised. Residual values, useful lives and methods of depreciation for property, plant and equipment are reviewed, and adjusted prospectively if appropriate, at each financial year end. Judgments are utilised in determining the useful lives (depreciation and amortisation rates) of these assets. These financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the summarised accounting policies. 6. Inventories Inventories are valued at the lower of cost and net realisable value. 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. Costs incurred in bringing each product to its present location and conditions are accounted for as follows: Raw materials are measured at the weighted average cost method. Finished goods and work in progress comprises the cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. Finished goods are also measured at the weighted average cost method. 7. Financial Assets

i. Initial recognition Financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace (regular way purchases) are recognised on the trade date, i.e., the date that the company commits to purchase or sale of the asset. The company’s financial assets include cash, short term-term deposits, trade and other accounts receivable and loans and other accounts receivable.

ii. Subsequent Measurement

The subsequent measurement of financial assets depends on their classification as described below: Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise of cash at bank and on hand and short-term deposits with a maturity of three months or less.

For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term


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deposits as defined above, net of outstanding bank overdrafts which are repayable on demand and which form an integral part of the company’s cash management. Cash and cash equivalents are measured subsequently at amortised cost. Loans and accounts receivable

Loans and accounts receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method, less impairment. 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 effective interest rate. The effective interest rate amortisation is included in finance income in the statement of profit or loss and other comprehensive income. The losses arising from impairment are recognised in the statement of profit or loss and other comprehensive income in finance costs for loans and in cost of sales or other operating expenses for receivables. Loans and accounts receivable include trade and other accounts receivable. Derecognition of financial assets

A financial asset (or where applicable a part of a financial asset or part of similar financial assets) is derecognised when:

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 risks and rewards of the asset, or (b) the company has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.

When the company has transferred its rights to receive cash flows from an asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under the “pass-through” arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, a new asset is recognised to the extent of the company’s continuing involvement in the asset.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash settled option or similar provision) on the transferred asset, the extent of the company’s continuing involvement is the amount of the transferred asset that the company may repurchase, except that in the case of a written put option (including a cash settled option or similar provision) on an asset measured at fair value, the extent of the company’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

Impairment of financial assets The company assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. A financial asset 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 has an impact on the estimated future cash flows of the financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors are experiencing significant financial difficulty, default or delinquency in interest or principal 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 change in arrears or economic conditions that correlate with defaults. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as


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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 present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a write off is later recovered, the recovery is credited to the statement of profit or loss and other comprehensive income. 8. Financial Liabilities i. Initial recognition

Financial liabilities are recognised initially at fair value and in the case of loans and borrowings and payables, directly attributable to transaction costs.

Ayrton Drug Manufacturing Limited’s financial liabilities include trade and other accounts payable, bank overdraft, loans and borrowings. ii. Subsequent measurement The measurement of financial liabilities depends on their classifications as follows: Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Liabilities for trade and other amounts payable and accounts payable to related parties are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are derecognised as well as through the amortisation process. iii. Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability and the difference in the respective carrying amounts is recognised in the statement of profit or loss and other comprehensive income.

9. Employee Benefits The Company contributes to the defined Contribution Scheme (the Social Security Fund) on behalf of the employees. i. Social security contributions

This is a National Pension Scheme under which the company pays 13% of employees’ basic monthly salaries to a state managed Social Security Fund for the benefit of the employees. All employer contributions are charged to the statement of profit or loss and other comprehensive income as incurred and included under employee benefits. Employees contribute 5.5% of basic salaries to the Fund. ii. Provident Fund Employees contribute a minimum of 5% of their basic salary and the employer contributes the 5% in to provident fund. This is a defined Contribution Scheme. 10. 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 sales taxes or duty. The company assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The company has concluded


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that it is acting as a principal in all of its revenue arrangements. Sale of goods Revenue from the sale of goods is recognised when the significant risk and rewards of ownership have passed to the buyer, usually on delivery of the goods. 11. Taxation

i. Income tax Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in shareholders’ equity or other comprehensive income, in which case it is recognised in shareholders’ equity or other comprehensive income. Current 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 tax assets and liabilities are offset when the Company intends to settle on net basis and the legal right to set-off exists.

ii. Deferred income tax Deferred 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 tax liabilities are recognised for all taxable temporary differences, except when the deferred income tax liability arises from 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. Deferred tax assets are recognised 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 utilised, except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition 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. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to 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 directly in equity is recognised in equity or other comprehensive income and not in statement of profit or loss. 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 income taxes relate to the same taxable entity and the same taxation authority. iii. 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 the taxation authority, in which case the value added tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable. The net amount of VAT recoverable from, or payable to, the Ghana Revenue Authority is included as part of receivables or payables in the statement of financial position. 12. Intangible assets Intangible assets acquired are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the statement of profit or loss and other comprehensive income in the year in which


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the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. There are no indefinite useful life intangible assets. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.

The current annual amortisation rates for each class of intangibles are as follows: % Trademark 10 Computer software 33.3 Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised. 13. Use of estimates and assumptions and judgments The preparation of the financial statements in conformity with International Financial Reporting Standards requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenditure during the year. Actual results could differ from those estimates. In the process of applying the company’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the financial statements: i. Allowance for doubtful debts The allowance for doubtful accounts involves management judgment and review of individual receivable balances based on an individual customer’s prior payment record, current economic trends and analysis of historical bad debts of a similar type. ii. Useful lives of Property, plant and equipment and intangible assets Management uses judgments when determining the useful lives (depreciation and amortisation rates) of these assets. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes

are reflected in the assumptions when they occur. iii. Impairment of non-financial assets Impairment exists when the carrying value of an asset or cash generating unit (CGU) exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. iv. Inventories Net realisable value tests are performed at each reporting date and represent the estimated future sales price


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of the product the entity expects to realise when the product is processed and sold, less estimated costs to complete production and bring the product to sale. Where the time value of money is material, these future prices and costs to complete are discounted. 14. Standards issued but not yet effective The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective. i. IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before 1 February 2015. The adoption of IFRS 9 will have an effect on the classification and measurement of the company’s financial assets, but no impact on the classification and measurement of the company’s financial liabilities. ii. lFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014 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 assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date. iii. IFRS 16 Leases IFRS 16 Leases (IFRS 16 or the new standard), which requires lessees to recognise assets and liabilities for most leases. For lessors, there is little change to the existing accounting in IAS 17 Leases. Under the new standard, a lease is 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. To be a lease, a contract must convey the right to control the use of an identified asset, which could be a physically distinct portion of an asset such as a floor of a building. A contract conveys the right to control the use of an identified asset if, throughout the period of use, the customer has the right to: (1) obtain substantially all of the economic benefits from the use of the identified asset; and (2) direct the use of the identified asset (i.e., direct how and for what purpose the asset is used). The new standard will be effective for annual periods beginning on or after 1 January 2019. Early application is permitted, provided the new revenue standard, IFRS 15 Revenue from Contracts with Customers, has been applied, or is applied at the same date as IFRS 16. 15. Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). On initial application of the amendment, entities are not required to provide comparative information for preceding periods. The Company is not required to provide additional disclosures in its financial statements, but will disclose additional information in its annual financial statements for the year ended 30 June 2017. 16. Changes in accounting policies and disclosures


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There were no changes in accounting policies as a result of the adoption of new or revised IFRS standards or IFRIC interpretations.

iii. Historical Income Statement of Ayrton Drugs Manufacturing Ltd


GHS GHS GHS GHS GHS

Revenue 24,077,076 21,338,571 34,892,733 38,772,241 35,016,640

COS (14,374,344) (12,361,937) (24,353,620) (21,018,854) (16,773,518)

Gross profit 9,702,732 8,976,634 10,539,113 17,753,387 18,243,122

Other income 27,462 37,039 370,787 1,108,602 193,896

Selling and distribution costs (3,041,967) (3,687,879) (6,252,865) (5,549,641) (4,896,998)

Administrative expenses (5,811,607) (7,102,192) (8,233,753) (7,854,153) (9,065,992)

Operating Profit/(Loss) 876,620 (1,776,398) (3,576,718) 5,458,195 4,474,028

Finance income 146,884 76,140 - 750 130,149

Finance costs - (128,894) (1,198,747) (2,215,182) (1,206,109)

Impairment Loss on Investment - (17,500) - -

Profit/(Loss) before tax 1,023,504 (1,846,652) (4,775,465) 3,243,763 3,267,919

Income Tax Expense (including deferred tax) (682,698) 262,649 (46,535) (645,522) (981,944)

Profit/(Loss) After Tax 340,806 (1,584,003) (4,822,000) 2,598,241 2,285,975

Earnings per share 0.0016 (0.0074) (0.0224) 0.0121 0.0106

No. of shares 215,000,000 215,000,000 215,000,000 215,000,000 215,000,000

iv. Historical Balance Sheet of Ayrton Drugs Manufacturing Ltd


Non-current assets GHS GHS GHS GHS GHS

Property, plant and equipment 6,246,224 6,677,303 7,706,958 7,238,719 6,780,467

Prepaid lease and land 405,939 399,404 390,689 381,975 373,262

Intangible 180,613 156,742 109,775 53,418 17,062

Equity Investment 17,500 - - - -

Deferred tax assets - 46,535 - - 420,257

Total non-current assets 6,850,276 7,279,984 8,207,422 7,674,112 7,591,048

Current assets

Inventories 7,016,934 11,552,109 11,756,450 10,232,051 11,351,244

Trade and Other Receivables 8,449,677 9,139,916 9,852,839 8,640,992 10,984,019

Amount due from related parties - - - - 4,118,871

Current taxation - 380,872 592,421 408,803 -

Cash and bank 1,022,402 477,146 211,663 311,380 125,676

Total current assets 16,489,013 21,550,043 22,413,374 19,593,226 26,824,726

Total Assets 23,339,289 28,830,027 30,620,796 27,267,339 30,051,987


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Equity

Issued capital 4,475,000 4,475,000 4,475,000 4,475,000 4,475,000

Other capital reserve 1,739,436 1,739,436 1,739,436 1,739,436 1,739,436

Income surplus 13,081,329 11,497,326 6,675,326 9,273,567 11,559,542

Total equity 19,295,765 17,711,762 12,889,762 15,488,003 17,773,978

Non-current liabilities

Deferred tax 216,114 - - -

Total non-current liabilities 216,114 - - - -

Current liabilities

Overdraft - - 3,992,459

3,520,129 -

Trade and other payable 3,737,808 8,216,006 8,594,247

5,467,648 5,086,720

Amount due related parties - 1,088,196 1,332,474 1,033,337 -

Income tax payable 89,602 - - - 946,271

Short term borrowings - 1,814,063 3,811,854 1,603,764 6,245,018

Total current liabilities 3,827,410 11,118,265 17,731,034 11,624,877 12,278,009


Total Equity and Liabilities 23,339,289 28,830,027 30,620,796

27,267,339 30,051,987

iv. Historical Cash Flow Statement of Ayrton Drug Manufacturing Ltd


GHS GHS GHS GHS GHS

Operating Activities

Operating (loss)/profit before tax 1,023,504 (1,846,652) (4,775,465) 3,243,763 3,267,919

Adjustment

Depreciation and Amortization 684,293 571,020 1,449,595 1,426,034 1,499,951

Write off of property, plant and equipment 1,920 - - - -

Stock write off - 1,484,594 513,670 468,399

Bad debts written off 577,152 - - 283,963

Investment written off 17,500 - - -

Unrealized exchange gain 967,473 54,221 (577,322) 47,456

Profit / loss on disposal (171,152) (26,729) (34,500)

Interest income (76,140)

(750) -

Interest expense (146,884) 128,894 1,198,747 2,215,182 1,206,109

Operating cash flow before working capital changes: 1,562,833 339,247 (759,461) 6,793,847 6,739,297

Increase in inventories (195,725) (4,535,175) (1,688,935) 1,010,730 (1,587,593)

Increase in trade and other accounts receivable (312,365) (2,234,864) (712,924) 1,211,847 (2,626,987)

Increase in trade and other accounts payable 2,070,846 5,566,395 553,827 (2,848,415) (1,464,722)

Operating cash flow before interest and tax 3,125,589 (864,397) (2,607,493) 6,168,009 1,059,995

Interest received 76,140

750 -

Interest paid 146,884 (128,894) (1,198,747) (2,215,182) (1,206,109)

Income tax paid (935,308) (470,474) (197,078) (307,445) (201,586)

Net cash flows from operating activities 2,337,165 (1,387,625) (4,003,318) 3,646,132 (347,700)


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Investing Activities

Purchase of property, plant and equipment (57,919) (957,813) (2,434,724) (961,661) (996,630)

Purchase of intangible asset (2,058,901) (13,880) (7,350) - -

Proceeds from disposal of property plant and equipment 189,659 95,666 34,500

Net cash flows used in investing activities (2,116,820) (971,693) (2,252,415) (865,995) (962,130)

Financing Activities

Dividends paid to equity holders (268,750) - - - -

Net receipts from short term borrowings - - - - -

Due to/from related companies - - - - -

Net cash flows used in financing activities (268,750) - - - -

Net (decrease)/increase in cash and cash equivalents (48,405) (2,359,318) (6,255,733) 2,780,137 (1,309,830)

Net foreign exchange difference on cash and cash equivalents 3,000

Cash and cash equivalents at beginning 1,070,807 1,022,401 (1,336,917) (7,592,650) (4,812,512)

Cash and cash equivalents at close of the period 1,022,402 (1,336,917) (7,592,650) (4,812,513) (6,119,342)


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Part 7: General Information on Starwin Products Limited

1. Background Starwin evolved from Sterling Products International Limited, an American pharmaceutical company which incorporated an affiliate, Sterling Products Ghana Limited in 1960. In 1993, Sterling Products Limited was acquired by Ghanaian investors, and the company’s name changed to Starwin Products Limited. Starwin was the first in the industry to be listed on the Ghana Stock Exchange in 2004. In 2014, Dannex increased its shareholding from 2.67% to 71.33% through Starwin’s Renounceable Rights Issue, thus becoming Starwin’s majority shareholder.

2. Share Issue History The table below summarises Starwin’s share issue history as at 31

st December 2017:












3. Shareholders Below is the list of Top 20 Shareholders of Starwin as at 31

st December 2017:


Dannex 185,317,279 71.33

Mirfield Properties 20,266,470 7.80

Damsel/Oteng-Gyasi 2,991,230 1.15

Starwin Products 2,585,129 0.99

Estate of E. Boohene 2,475,511 0.95

ICGC 2,080,000 0.80

Amissah 1,416,219 0.55

Mad Comfort Asiedu 1,335,138 0.51

Godfried Ampofo 1,335,138 0.51

Dr. Albert Gyang Boohene 1,254,813 0.48

Estate of Bernard Forson 1,225,538 0.47

Starwin Trust Fund 1,218,476 0.47

Estate of Patrick Okai 967,323 0.37

Mr. George Anakwa 851,025 0.33

Worldwide Securities Limited 820,000 0.32

Enviro Solutions 819,600 0.32

Teachers Fund 787,250 0.30

Pentecost Pension Fund 640,000 0.25

Belshaw Ltd 610,000 0.23

HFC Equity Trust 600,000 0.23

Other Shareholders 30,218,658 11.63

TOTAL 259,814,797 100.00

4. Products


Rapinol Analgesic Dry mixed tablets

Paracetamol Analgesics Dry mixed tablets

Painoff Analgesics Wet mixed tablets


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Asmadrin Anti-asthmatic Dry mixed tablets

Anti-rhinitis Star Cold Tablets Anti-asthmatic Dry mixed tablets

Starwins Milk of Magnesia Antacid Liquid mixing

Starwins Liver Salt Antacid Antacid

Paraking Syrup Analgesic syrup and cough mixture Syrup

Expectolyn Syrup Analgesic syrup and cough mixture Syrup

Starprovite Syrup Multivitamin and appetite stimulant Syrup

5. Directors The Starwin Board is comprised of seven (7) directors who assume complete responsibility for activities of Starwin. Two (2) of the board members are executives while the remaining five (5) are non-executive directors.

Below are the brief profiles of the current Board members of Starwin:






He is also the Chief Executive Officer of Dannex and Ayrton.

Kwasi Yirenkyi – Chief Human Resource and Corporate Affairs Officer Mr. Yirenkyi has over 20 years business operations experience and was previously the Managing Director of Starwin.

He previously worked with Merchant Bank Ghana Limited (now known as Universal Merchant Bank) as Manager, Corporate and Institutional Banking, with responsibilities in marketing. He also worked with Deloitte and Touche Ghana (now known as Deloitte) and was involved in projects with some key companies such as Ashanti Goldfields Company Limited (now known as AngloGold Ashanti), Tema Oil Refinery and the Zimbabwe National Insurance.


Amarteokor Amarteifio Miss Amarteifio has over 42 years’ experience in social work and organising cultural festivals and events across Canada, Ghana and Africa. She is currently the Executive Director for Accra Symphony Orchestra,


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Accra, Ghana. Amarteokor holds a Master’s and a Bachelor’s Degree in Social Work from McGill University, School of Social Work. Montreal, Quebec.

Alex Kobina Bonney Mr. Bonney is the President of the Organization of Trade Unions in West Africa (OTUWA) and has been the Chairman of the Ghana Trades Union Congress from 1992 to date. As a unionist, he is an expert in mediation and arbitration and has worked extensively in and around the world on labour issues. Alex is a cost accountant and holds a diploma in Regulatory Economics from the University of Florida.

Samuel Atta Mensah Mr. Mensah's expertise as a media practitioner and marketer positions him as an advantage to the board of Starwin. He is an accomplished media practitioner with a total of about 19 years of practice, and currently the Managing Director of Citi FM. Samuel holds a Bachelor’s Degree in Computer Science from the Kwame Nkrumah University of Science and Technology and an MBA from the University of Leicester in the United Kingdom.

Dr. Barima Afranie Dr. Afrane is a renowned pharmacologist and has many years of experience as a lecturer and medical advisor in the US and some Middle Eastern countries. He brings a wealth of his experience in the design of solution to matters of pharmaceutical innovation and application. He is currently a senior lecturer and Head of Pharmacy Practice and Clinical Pharmacy Department at the University Of Ghana School Of Pharmacy.

Barima holds a Doctorate Degree in Pharmacy from the University of Southern California and a Degree in Chemistry (MCL) from the University of New York.

6. Senior Management Starwin’s senior management team includes the following:



He is also the Chief Executive Officer of Dannex and Ayrton.


Henry is also the Chief Finance Officer of Dannex, where he joined in 2000 as a Management Accountant and was subsequently appointed as Chief Accountant in 2004 and Head of Finance in 2006. He is also the Chief Finance Officer of Ayrton.



He previously worked with Merchant Bank Ghana Limited (now known as Universal Merchant Bank) as Manager, Corporate and Institutional Banking, with responsibilities in marketing. He also worked with Deloitte and Touche Ghana (now known as Deloitte) and was involved in projects with some key


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companies such as Ashanti Goldfields Company Limited (now known as AngloGold Ashanti), Tema Oil Refinery and the Zimbabwe National Insurance.

Kwasi has a BSc. in Business Administration from the George Mason University in Fairfax, Virginia USA. He further obtained a Diploma in Management and Micro Enterprise Development from Southern New

Hampshire University, USA. He is also the Chief Human Resource and Corporate Affairs of Dannex and Ayrton.

Dr. Agyeman Kuma-Mintah - Chief Regulatory, Quality Assurance and Control Officer Dr. Kuma-Mintah is also the Chief Regulatory, Quality Assurance and Control Officer of Dannex and Ayrton.

He previously held Scientist and Senior Scientist positions at Abbot Labs, New Jersey, USA... He also served in senior management roles with Geopharma Inc., Belcher Pharmaceuticals, Largo, Florida, USA. and American Antibiotics, Baltimore, Maryland, USA. He also worked with Apotex Pharmachem, Brantford, Canada as an Analytical Operation Compliance and Training Specialist. Agyeman is a former Health Canada employee and had his graduate studies at University of British Columbia, Vancouver, Canada.

Charles Addo-Cobbiah – Chief Sales and Marketing Officer Mr. Cobbiah was previously the Sales Capability Manager of Guinness Ghana Breweries Limited where he played various roles including Retail Development Manager and Key Distributor Manager, He also implemented strategies that resulted in the doubling of sales volumes within 3 years. As Head of Sales and Marketing at Dannex, he grew sales by 154% within 4 years.

He is also the Chief Sales and Marketing Officer of Dannex and Ayrton.

7. Corporate Governance and Board Practices Starwin upholds the principles of good corporate governance and appreciates the valuable contribution this makes to the long-term prosperity of the business. The Board and Management of Starwin are committed to managing the company in a manner that maximises shareholder value.

i. Role of the Board Starwin has seven (7) directors, five (5) of whom are non-executive directors. The board meets once every quarter and where necessary additional meetings are arranged to discuss or review the Company’s operations. The non-executive directors complement the Company’s objective of having experienced people with independent but objective ideas on deliberations in decision-making. The directors shall be appointed by members in an annual general meeting. Non-executive directors derive no benefits other than the fees approved for them by the shareholders.

ii. Audit Subcommittee Starwin has an Audit Subcommittee appointed by the board. The Audit Subcommittee comprises of three (3) Non-executive Directors who are responsible for reviewing the effectiveness of the internal control systems, including controls related to financial, operational and reputational risks identified by the company. The Audit Subcommittee has responsibility delegated from the Board of Directors for making recommendations on the appointment, reappointment, removal and remuneration of the external auditor.

iii. Internal Control Starwin has internal control systems for identifying, managing and monitoring risks, these controls are intended to provide reasonable assurances that the risks faced by the company are being controlled. The directors have reviewed the effectiveness of the internal control systems, including controls related to financial, operational and reputational risks identified by the company as at the reporting date and no significant failings or weaknesses were identified during this review.

8. Employees The table below is a breakdown of Starwin’s staff strength over the past four years:


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Position 2014 2015 2016 2017

Management 10 8 5 5

Supervisors 5 5 6 6


Total 97 97 96 72

As at the date of this document, Starwin had sixty-one (61) of its staff belong to labour unions, mainly the Industrial and Commercial Workers Union of the TUC.

9. Investments and Subsidiaries Starwin holds direct investments in one (1) company. Starwin’s major investment holdings as reported in its annual report of 2017 include:

i.Stanbic Bank Ghana Limited Starwin holds 280,385 ordinary shares in Stanbic Bank Ghana Limited valued at GHS182,250 as 31

st December 2017. The shares are privately held and not actively traded.

10. Office Locations Starwin currently operates one (1) head office location in Accra, which also houses its factory and warehouse where customers are served in Accra. Starwin also has four (4) distribution vans serving the Eastern, Northern, Upper East, Upper West, Ashanti, Central and Western Regions.

11. Indebtedness and Funds The table below shows the indebtedness and funds of Starwin over the past five (5) years:

2013 2014 2015 2016 2017

Bank Overdraft 834,117 980,360 863,978 719,208 1,691,822

Loans - - - 2,765,587 955,899

Cash & Bank Balances 41,031 19,024 50,009 12,858 12,864

(i) Details of Indebtedness

Bank Overdraft

Standard Chartered Bank

Ecobank

GHS

994,413 697,409

Loans

Standard Chartered Bank

955,899

(ii) Terms of Agreements Standard Chartered Bank The company has an overdraft facility not exceeding GHS 1,000,000 with Standard Chartered Bank to finance working capital, mainly payment of utilities, salaries, custom duty, VAT and other operating expenses. The company’s floating assets, land and buildings have been pledged as security for the facility. Interest rate is 30% per annum. The company has a short-term loan facility not exceeding GHS 4,000,000 with Standard Chartered Bank. Out of the total amount, GHS 2,000.000 is to provide short-term finances to finance local raw materials and the remaining GHS 2,000,000 to finance payments under import Letter of Credit covering stocks and documentary collections. The company floating assets, land and buildings have been pledged as


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security for the facility. Interest is at 30% per annum. The company has an additional loan facility of GHS 400,000 with Standard Chartered Bank. The loan was acquired to finance the purchase of distribution vehicles to replace old and faulty ones to boost the company’s operations. The loan has a tenure of 24 months with an interest rate of 30% per annum and subject to changes in prevailing market conditions. Ecobank The company has an overdraft facility not exceeding GHS 700,000 with Ecobank Ghana Ltd to finance working capital, mainly payment of utilities, salaries, custom duty, VAT and other operating expenses. The company floating assets, land and buildings have been pledged as security for the facility. Interest rate is at Ecobank base rate of (25.95% per annum) plus a margin of 2.5%.

12. Material Contracts Except for the agreements referred to and described below, no contract, not being a contract entered into in the ordinary course of business, has been entered into by Starwin within the two years immediately preceding the date of this document and which is material or contains provisions under which Starwin has an obligation or entitlement which is material as at the date of this document.

13. Insurance Policies Starwin has the following insurance policies:

Insurance Policy Sum Insured Sum Assured a. Assets All Risk 4,942,078.01

b. Product Liability 200,000.00

c. Fidelity Guarantee 250,000

d. Group Life Policy 1,288,611.36

14. Litigation As at 1

st June 2018, there were no pending cases or litigation by or against Starwin.

15. Disclosure of Interests by Directors As at 13

th July 2018 (the last practicable date prior to the posting of this document), the interests of

Starwin directors in Starwin shares were as follows:

Name Shares Held Debenture Holdings



Kwesi Yirenkyi 38,700 Nil

Amarteokor Amarteifio 12,689,461.36 Nil

Alex Kobina Bonney Nil Nil

Samuel Atta Mensah Nil Nil

Dr. Barima Afranie Nil Nil

Mr. Nik Amarteifio (Board Chairman of Ayrton Ltd) has 4,500 shares in Equatorial Holdings Ltd; Equatorial Holdings Ltd holds 34,066,252 (71.834%) shares in Dannex; and Dannex holds 133,120,682.39 (71.33%) shares in Starwin.

16. Disclosure of Interests by Advisors As at the date of this document, neither UMB Investment Holdings (Financial Advisor) nor UMB


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Stockbrokers (Sponsoring Broker) held Starwin Shares. None of the UMB Investment Holdings and UMB Stockbrokers affiliates, Universal Merchant Bank, UMB Capital and Strategic Debt Solutions held any Starwin Shares. As at the date of this document, Kimathi and Partners, Corporate Attorneys did not hold Starwin Shares. As at the date of this document, Ernst & Young did not hold Starwin Shares.

17. Other Disclosures

i. Relationships Among Directors

Two (2) of the Directors are related; Nik Amarteifio, the Chairman of Starwin is the brother of Amarteokor Amarteifio, a Director of Starwin.






vii. Affiliations and Affiliated Companies and Businesses Starwin has affiliations with Dannex Limited who holds 71.33% of Starwin’s issued shares. It is the responsibility of Starwin to recruit and appoint the senior level executives of Starwin, among others.

18. Risk Factors i. Risks related to the pharmaceutical industry

Starwin and other companies within the pharmaceutical industry are exposed to supply chain risks, utility shortfalls such as power and water supply from their third-party providers, and shortage of raw materials, just to mention a few. The insufficient provision of utility services may adversely impact the operational efficiencies and income of Starwin and other companies within the pharmaceutical industry. As such, the impact of these risks to the operations of Starwin has been recognised and measures have been implemented to invest in systems to create flexible processes to adapt to changes and disruptions and curtail the effects of these risks thereby minimising their impact on the operations of Starwin.

19. Additional Information i. Ernst & Young, the reporting accountants, have given and have not withdrawn their written

consent to the issue of this circular with the inclusion herein of their reports in Parts 7, 8 and 9 of this document and the references thereto in the form and context in which they appear.


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ii. Save as disclosed in this circular, there has been no material change in the financial or operating position of Starwin other than in the ordinary course of business since 31

st December 2017 the

date to which the last audited accounts of Starwin were prepared.

iii. Starwin has not engaged in any litigation or arbitration of material importance to affect its financial position, and the Directors are not aware of any such litigation or arbitration.

20. Historical Financial Statements

i. Independent Reporting Accountants’ Review Report on Starwin 6

th July 2018

The Board of Directors Dannex Limited No 5, Dadeban Road Ring Road, North Industrial Area P. O. Box 5258 Accra, Ghana

Dear Sirs,

INDEPENDENT AUDITORS REVIEW REPORT TO THE BOARD OF DIRECTORS OF DANNEX LIMITED

We have reviewed the annual audited financial statements of Starwin Products Limited that comprise the statement of financial position as at 31 December, 2013, 2014, 2015, 2016 and 2017 the statement of comprehensive income and cash flows for the years the then ended and a summary of significant accounting policies and other explanatory notes as set out in the financial statements.

KPMG, Chartered Accountants of Accra have acted as auditors of Starwin Products Limited throughout the period covered by our review (2013 to 2017). The auditors did not issue a qualified opinion for any of the financial statements of Starwin Products Limited from 2013 to 2017.

Directors’ Responsibility The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Companies Act 1963 (Act 179) and for such internal controls as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Independent Reviewer’s Responsibility Our responsibility is to express a conclusion on the annual audited financial statements based on our review. We conducted our review in accordance with International Standards on Review Engagements (ISRE) 2400, Engagements to Review Historical Financial Statements. ISRE 2400 requires us to conclude whether anything has come to our attention that causes us to believe that the financial statements, taken as a whole, are not prepared in all material respects in accordance with the applicable financial reporting framework. This Standard also requires us to comply with relevant ethical requirements.

A review of financial statements in accordance with ISRE 2400 (Revised) is a limited assurance engagement. A review of financial statements in accordance with ISRE 2400 consists primarily of making inquiries of management and others within the entity involved in financial and accounting matters, applying analytical procedures, and evaluating the sufficiency and appropriateness of evidence obtained. A review also requires performance of additional procedures when we become aware of matters that cause us to believe the financial statements as a whole may be materially misstated.

The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on these financial statements.

We believe that the evidence we obtained in our review is sufficient and appropriate to provide a basis for our conclusion.


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Conclusion Based on our review, nothing has come to our attention that causes us to believe that the annual financial statements do not present fairly, in all material respects, the financial position of Starwin Products Limited as at 31 December 2013, 2014, 2015, 2016 and 2017 and of its financial performance and cash flows for the years then ended, in accordance with the International Financial Reporting Standards (IFRS) and the requirements of the Companies Act, 1963 (Act 179).

Yours faithfully,

Signed by Pamela Des-Bordes (ICAG\P\1329) For and on behalf of Ernst & Young (ICAG/F/2018/126) Chartered Accountants Accra, Ghana


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ii. Accounting Policies of Starwin a. Financial Instruments (i) Non-derivative financial instruments Non-derivative financial instruments comprise investment in shares and treasury bills, trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instrument not at fair value through profit and loss, any directly attributable transaction cost. Subsequent to initial recognition non-derivative financial instruments are measured at amortised cost using the effective interest rate method, less any impairment losses, if any. Non-derivative financial instruments are categorised as follows:

Loans and receivables – these are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These assets are measured at amortised cost using the effective interest rate method, less any impairment losses.

Financial liabilities measured at amortised cost - this relates to all other liabilities that are not designated at fair value through profit or loss.

Available-for-sale financial assets - The Company’s investments in shares are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses are recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit or loss.

(ii) Off setting Financial assets and liabilities are set off and the net amount presented in the statement of financial position when, and only when, the company has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions. (iii) Amortised cost measurement The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment. (iv) Stated capital (Share capital) Ordinary Shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. Repurchase of stated capital (treasury shares)


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When stated capital recognised as equity is repurchased, the amount of the consideration paid, which includes

directly attributable costs, is net of any tax effects, and is recognised as a deduction from equity. Repurchased

shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on transaction is transferred to/from retained earnings.

(b) Property, Plant and Equipment

(i) Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components). (ii) Subsequent costs The cost of replacing part of an item of property, plant or equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the company and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

(iii) Depreciation

Depreciation is recognised in the profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated.

The estimated useful lives for the current and comparative periods are as follows: Machinery and Equipment - 5 years Motor Vehicles - 3 years Office Machines - 5 years Furniture and Fittings - 10 years Leasehold Properties - over period of lease Depreciation methods, useful lives and residual values are reassessed at each reporting date. Gains and losses on disposal of property, plant and equipment are included in the profit or loss.

(c) Intangible Assets Software Software acquired by the company is stated at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Amortisation is recognised in the profit or loss on a straight-line basis over the estimated useful life of the software, from the date that it is available for use. The estimated useful life of software is three years.

(d) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the

weighted average principle, and includes expenditure incurred in acquiring the inventories and bringing them to


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their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of

business, less estimated selling expenses.

(e)Trade and Other Receivables

Trade receivables are stated at amortised costs, less impairment losses. Specific allowances for doubtful

debts are made for receivables of which recovery is doubtful.

Other receivables are stated at their cost less impairment losses.

(f) Cash and Cash Equivalents

Cash and cash equivalents comprise cash on hand and bank balances and these are carried at amortised cost

in the statement of financial position.

(g)Employee Benefits

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions to a separate entity and will have no legal or constructive obligation to pay future amounts. Obligations for contributions to defined contribution schemes are recognised as an expense in the profit or loss when they are due.

(h) Revenue

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of

returns, trade discounts, taxes and volume rebates. Revenue is recognised when the significant risks and

rewards of the ownership have been transferred to the buyer, recovery of the consideration is probable, the

associated costs and possible return of goods can be estimated reliably, there is no continuing management

involvement in the goods, and the amount of revenue can be measured reliably.

(i) Finance Income and Expense Finance income comprises interest income on funds invested (including available-for-sale financial assets) and dividend income. Interest income is recognised in the income statement using the effective interest method. Dividend income is recognised in profit or loss on the date that the company’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date. Finance expenses comprise interest expense on borrowings. All borrowing costs are recognised in profit or loss using the effective interest method. (j) Impairment Financial assets A financial asset is considered impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised.


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Non-financial assets The carrying amounts of the company’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. (k) Income Tax Income tax expense comprises current and deferred tax. The company provides for income taxes at the current tax rates on the taxable profits of the company. Income tax is recognised in the profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (l) Dividend Dividend payable is recognised as a liability in the period in which they are declared.

(m) Post Balance Sheet Events Events subsequent to the reporting date are reflected in the financial statements only to the extent that they relate to the year under consideration and the effect is material. (n) Segment reporting A segment is a distinguishable component of the company that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. (o) Earnings per Share The company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. (p) Comparatives Where necessary the comparative information has been changed to agree to the current year presentation. (q) New standards and interpretation not yet adopted There are new or revised Accounting Standard and Interpretations in issue that are not yet effective for the year 31 December 2017, and have not been applied in preparing these financial statements. These include the following Standards and Interpretations that may have an impact on future financial statement:

Standard/Interpretation Effective date Periods beginning on or after


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IFRS 15 Revenue from Contracts with Customers 1 January 2018

IFRS 9 Financial Instruments

1 January 2018

IFRS 22 Foreign Currency Transactions and Advance Consideration

1 January 2018

IFRS 23 Uncertainty over Income Tax Treatment

1 January 2019

IFRS 9 amendment Prepayment Features with Negative Compensation

1 January 2019

IFRS 15 Revenue from contracts with customers This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, and IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue- Barter of Transactions Involving Advertising Service. The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised. The standard is effective for annual periods beginning on or after I January 2018, with early adoption permitted under IFRS The Company is yet to assess the effect of the standard on its financial statement as at 31 December 2017. IFRS 9 Financial Instruments A finalised version of IFRS has been issued which replaces IAS 39 Financial Instrument: Recognition and Measurement. The complete standard comprises guidance on Classification and Measurement, Impairment Hedge Accounting and DE recognition:

- IFRS 9 introduces a new approach to the classification of financial assets, which is driven by the

business model in which the asset is held and their cash flow characteristics. A new business model

was introduced which does allow certain financial assets to be categorised as “fair value through other

comprehensive income” in certain circumstances. The requirements for financial liabilities are mostly

carried forward unchanged from IAS 39.

However, some changes were made to the fair value option for financial liabilities to address the issue of

own credit risk. - The new model introduces a single impairment model being applied to all financial instruments, as well

as an “expected credit loss” model for the measurement of financial assets.

- IFRS 9 contains a new model for hedge accounting that aligns the accounting treatment with the risk

management activities of an entity, in addition enhanced disclosure will provide better information

- about risk management and the effect of hedge accounting on the financial statement.

- IFRS 9 carries forward the DE recognition requirement of financial assets and liabilities from IS 39.

The standard is effective for annual periods beginning on or after 1 January 2018 with retrospective application, early adoption is permitted. The Company is yet to assess the effect of the standard on its financial statement as at 31 December 2017. Prepayment Features with Negative Compensation (Amendments to IFRS 9) The amendments clarify that financial assets containing prepayment features with negative compensation can now be measured at amortised cost or at fair value through other comprehensive income (FVOCI) if they meet the other relevant requirements of IFRS 9. The Company is yet to assess the effect of the standard on its financial statements as at 31 December 2017. IFRIC 22 Foreign Currency Transactions and Advance Consideration


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When foreign currency consideration is paid or received in advance of the item it relates to – which may be an asset, an expense or income – IAS 21. The Effects of Change in Foreign Exchange Rate is not clear on how to determine the transaction date for translating the related item. This has resulted in diversity in practice regarding the exchange rate used to translate the related item. IFRIC 22 clarifies that the transaction date on which the company initially recognises the prepayment or deferred income arising from the advance consideration. For transactions involving multiple payments or receipts, each payments or receipt gives rise to a separate transactions date. The Company is yet to assess the effect of the standard on its financial statement as at 31 December 2017. IFRIC 23 Uncertainty over Income Tax Treatments IFRIC 23 clarifies the accounting for income for tax treatments that have yet to be accepted by tax authorities. Specifically, IFRIC 23 provides clarity on how to incorporate the uncertainty into the measurement of tax as reported in the financial statement. IFRIC 23 does not introduce any new disclosures but reinforces the need to comply with existing disclosure requirements about:

Judgements made;

Assumptions and other estimated used; and

The potential impact of uncertainties that are not reflected.

The Company is yet to assess the effect of the standard on its financial statements as at 31 December 2017.

iii. Historical Income Statement of Starwin Products Ltd

2013 2014 2015 2016 2017

GHS GHS GHS GHS GHS

Revenue 6,678,090 6,946,716 5,762,183 9,172,862 8,892,697

Cost of Sales (2,873,649) (3,404,148) (2,875,291) (3,986,352) (4,017,783)

Gross Profit 3,804,441 3,542,569 2,886,892 5,186,511 4,874,914

Other Income 4,000 67,410 1,388,066 3,464,060 1,370,100

General & Admin Expenses (2,733,060) (2,992,379) (4,185,145) (3,097,675) (4,020,472)

Profit/(Loss) from operations 1,075,381 617,600 89,814 5,552,896 2,224,542

Finance cost (342,572) (398,381) (298,712) (407,154) (1,206,032)

Profit/(Loss) before income tax 732,808 219,219 (208,898) 5,145,742 1,018,510

Income tax (240,077) (45,095) 93,034 (1,324,578) (353,477)

Profit after Tax 492,731 174,124 (115,864) 3,821,164 665,033

Other Comprehensive Income 153,371 - - - -

Related tax effect - - (15,337) - -

Profit/(Loss) for the period 646,102 174,124 (131,201) 3,821,164 665,033

Outstanding Shares 79,391,778 79,391,778 259,814,797 259,814,797 259,814,797

Earnings per share 0.0081 0.0022 (0.0004) 0.0147 0.0026

iv. Historical Balance Sheet of Starwin Products Ltd

2013 2014 2015 2016 2017

GHS GHS GHS GHS GHS

Assets Property, plant and equipment 1,424,874 1,349,966 1,229,428 1,033,019 1,345,308

Intangible assets 1,536 - - - -

Long term investments 182,250 182,250 182,250 182,250 182,250

Deferred tax assets - - 17,558 - -



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Current Assets

Inventories 2,048,486 2,063,239 1,786,412 3,629,803 1,794,459

Income tax asset

127,719 139,834 - -

Trade and other receivables 1,496,909 1,754,542 864,667 893,440 188,043

Cash and cash equivalents 41,031 19,024 50,009 12,858 12,864

Short term investments

5,175,268 6,342,379 - -

Due from Related Parties

12,625,520 14,886,474


Total assets 5,195,087 10,672,010 10,612,537 18,376,891 18,409,397

Equity

Share capital 1,982,028 6,993,364 6,993,364 7,549,127 7,549,127

Issue reserve - - - (555,763) (555,763)

Capital Surplus - - - 115,028 115,028

Retained earnings 1,046,429 1,220,552 1,089,351 4,535,672 5,200,705

Total equity 3,028,457 8,213,916 8,082,715 11,644,064 12,309,097

Non-current liabilities

Deferred tax liabilities 93,541 60,139 - 68,079 110,090

Total non-current liabilities 93,541 60,139 - 68,079 110,090

Current liabilities

Bank overdraft 834,117 980,360 863,987 719,208 1,691,822

Trade and other payables 1,231,116 1,410,852 1,659,092 1,857,072 1,393,808

Short-term loan

- - 2,765,587 955,899

Income tax liability 1,113 - - 1,056,322 436,522

Dividend Payable 6,743 6,743 6,743 266,558 -

Due to related party - - - - 1,512,159


Total liabilities 2,166,630 2,458,094 2,529,822 6,732,828 6,100,301

Total liabilities and equity 5,195,087 10,672,010 10,612,537 18,376,891 18,409,397

v. Historical Cash Flow Statement of Starwin Products Ltd

2013 2014 2015 2016 2017

GHS GHS GHS GHS GHS

Cash flows from operating activities Profit before taxation 732,808 219,218 (208,898) 5,145,742 1,018,510

Adjustments for:

Depreciation 171,194 179,891 185,124 312,585 332,100

Amortization of intangible assets 13,195 1,536 - - -

Interest received - - - (1,699,465) (1,368,131)

Interest expense 342,572 398,381 298,712 407,154 1,206,032

Impairment loss - - - 9,533 -

Doubtful debt provision 81,661 (201,275) 75,365 115,186 43,962

(Profit)/Loss on disposal of PPE - - 6,564 (1,694,800) (1,968)

1,341,430 597,751 356,867 2,595,935 1,230,505

Change in inventories (337,762) (14,754) 276,828 (1,843,392) 1,835,345

Change in trade and other receivables (449,767) (56,357) 814,510 (143,959) 661,436


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Change in trade and other payables 283,536 148,125 248,240 197,979 (463,263)

Due from related parties - - - (11,645,714) 546,832

Cash generated from operations 837,437 674,765 1,696,445 (10,839,151) 3,810,855

Interest received - - - - -

Interest paid (342,572) (398,381) (298,712) (407,154) (1,133,528)

Income taxes paid (191,325) (207,330) (12,114) (42,785) (931,266)

Net cash flow from operating activities 303,540 69,054 1,385,619 (11,289,090) 1,746,061

Cash flows from investing activities

Purchase of property, plant and equipment (88,401) (104,983) (71,150) (330,908) (646,290)

Proceeds from sale of property, plant and equipment - - - 1,900,000 3,870

Interest income received - - - 719,660 -

Increase in investment (968) - - - -

Net cash flow used in investing activities (89,369) (104,983) (71,150) 2,288,752 (642,420)

Cash flows from financing activities

Loan proceeds - - - 2,765,587 1,026,778

Loan Repaid - - - - (2,836,469)

Proceeds from issuance of share capital - 5,567,099 - - -

Costs related to issuance of share capital - (524,152) - - -

Dividend Paid (165,989) - - - (266,558)

Net cash flow from financing activities (165,989) 5,042,947 - 2,765,587 2,076,249

Net (decrease)/increase in cash and cash equivalents 48,182 5,007,018 1,314,469 (6,234,751) (972,608)

Balance at 1 January (841,268) (793,086) 4,213,932 5,528,401 (706,350)

Net Cash Flow 48,182 5,007,018 1,314,469 (6,234,751) (972,608)

Balance at 31 December (793,086) (4,213,932) 5,528,401 (706,350) (1,678,958)


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Part 8: General Information on Dannex Limited

1. Background Dannex was established in May 1964 expressly for the purpose of manufacturing and distribution of pharmaceutical products. Dannex has wholesalers, retailers, and distribution points in all 10 regions of Ghana and also supplies to a few countries within the West African Sub Region. Equatorial Cross Acquisitions is the majority shareholder of Dannex, with a shareholding of 71.83%.

2. Share Issue History The table below summarises Dannex’s share issue history as at 31

st December 2017:




2012 Ordinary share of no par value 30,963,262, 30,963,262 4,411,140

2013 Ordinary share of no par value - 30,963,262 4,411,140

2014 Ordinary share of no par value 2,264,754 33,228,016 4,682,911



3. Shareholders Below is the list of Top 20 Shareholders of Dannex as at 31

st December 2017:


Equatorial Cross Acquisitions 34,066,252 71.83

Yaw Opare Asamoah 6,627,040 13.97

Ms. Amarteokor Amarteifio 3,247,297 6.85

SSNIT 2,188,083 4.61

Dr. J. A. Q. Blukoo-Allotey 399,367 0.84

Worldwide Securities Limited 170,000 0.36

P.I.A. Quaye (Estate of) 88,757 0.19

Mrs. Mercy O. Bannerman 76,858 0.16

I.Y. Mireku 68,491 0.14

Avenida Enterprise Ltd. 61,770 0.13

Dannex Staff Welfare Association 45,040 0.09

J.E.K. Ansah 42,908 0.09

Agnes K. Achampong 40,720 0.09

E.H. Boohene 38,684 0.08

Brig. (Dr.) J.K. Bandoh 37,323 0.08

W.K. Ahadzie 37,323 0.08

Dr. S.B.K. Quartey 37,323 0.08

Michael Asafo Boakye 21,436 0.05

E.A. Kissi (Estate of) 18,663 0.04

Prof. J.K.M. Quartey 18,663 0.04

Other Shareholders 91,626 0.19

TOTAL 47,423,624 100.00

Equatorial Cross Acquisitions Ltd Equatorial Cross Acquisitions Ltd is a private company incorporated in Ghana on 28th October, 2013. It was authorised to commence business on 28th October, 2013. Its principal activity and nature of business is to provide investment consultancy services. As at the date of publication of this document,


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Equatorial Cross Acquisitions Ltd holds 34,066,252 (71.83%) of the issued shares of Dannex.

4. Products


Rapinol Analgesic Dry mixed tablets

Paracetamol Analgesics Dry mixed tablets

Painoff Analgesics Wet mixed tablets

Asmadrin Anti-asthmatic Dry mixed tablets

Anti-rhinitis Star Cold Tablets Anti-asthmatic Dry mixed tablets

Starwins Milk of Magnesia Antacid Liquid mixing

Starwins Liver Salt Antacid Antacid

Paraking Syrup Analgesic syrup and cough mixture Syrup

Expectolyn Syrup Analgesic syrup and cough mixture Syrup

Starprovite Syrup Multivitamin and appetite stimulant Syrup

5. Directors

The Dannex Board is comprised of five (5) directors who assume complete responsibility for activities of Dannex. One (1) of the board members is an executive while the remaining four (4) are non-executive directors.

Below are the brief profiles of the current Board members of Dannex:







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He is also the Chief Executive Officer of Ayrton and Starwin.

Alex Kobina Bonney Mr. Bonney is the President of the Organization of Trade Unions in West Africa (OTUWA) and has been the Chairman of the Ghana Trades Union Congress from 1992 to date. As a unionist, he is an expert in mediation and arbitration and has worked extensively in and around the world on labour issues. Alex is a cost accountant and holds a diploma in Regulatory Economics from the University of Florida,

Samuel Atta Mensah Mr. Mensah's expertise as a media practitioner and marketer positions him as an advantage to the board of Starwin. He is an accomplished media practitioner with a total of about 19 years of practice, and currently the Managing Director of Citi FM. Samuel holds a Bachelor’s Degree in Computer Science from the Kwame

Nkrumah University of Science and Technology and an MBA from the University of Leicester in the United Kingdom.

Dr. Barima Afranie Dr. Afrane is a renowned pharmacologist and has many years of experience as a lecturer and medical advisor in the US and some Middle Eastern countries. He brings a wealth of his experience in the design of solution to matters of pharmaceutical innovation and application. He is currently a senior lecturer and Head of Pharmacy Practice and Clinical Pharmacy Department at the University Of Ghana School of Pharmacy.

Barima holds a Doctorate Degree in Pharmacy from the University of Southern California and a Degree in Chemistry (MCL) from the University of New York.

6. Senior Management Dannex’s senior management team includes the following:



He is also the Chief Executive Officer of Ayrton and Starwin.


Henry joined Dannex in 2000 as a Management Accountant and was subsequently appointed as Chief Accountant in 2004 and Head of Finance in 2006. He is also the Chief Finance Officer of Ayrton and Starwin.



He previously worked with Merchant Bank Ghana Limited (now known as Universal Merchant Bank) as Manager, Corporate and Institutional Banking, with responsibilities in marketing. He also worked with Deloitte and Touche Ghana (now known as Deloitte) and was involved in projects with some key companies such as Ashanti Goldfields Company Limited (now known as AngloGold Ashanti), Tema Oil


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Refinery and the Zimbabwe National Insurance.


He is also the Chief HR and Corporate Affairs of Ayrton and Starwin.

Dr. Agyeman Kuma-Mintah - Chief Regulatory Affairs, Quality Assurance and Control Officer He previously held Scientist and Senior Scientist positions at Abbot Labs, New Jersey, USA... He also served in senior management roles with Geopharma Inc., Belcher Pharmaceuticals, Largo, Florida, USA. and American Antibiotics, Baltimore, Maryland, USA. He also worked with Apotex Pharmachem, Brantford, Canada as an Analytical Operation Compliance and Training Specialist.

Agyeman is a former Health Canada employee and had his graduate studies at University of British Columbia, Vancouver, Canada.

He is also the Chief Regulatory Affairs Quality Assurance and Control Officer of Ayrton and Starwin.

Charles Addo Cobbiah – Chief Sales and Marketing Officer Mr. Cobbiah was previously the Sales Capability Manager of Guinness Ghana Breweries Limited where he played various roles including Retail Development Manager and Key Distributor Manager, He also implemented strategies that resulted in the doubling of sales volumes within 3 years. As Head of Sales and Marketing at Dannex, he grew sales by 154% within 4 years.

He is also the Chief Sales and Marketing Officer of Ayrton and Starwin.

7. Corporate Governance and Board Practices

Dannex upholds the principles of good corporate governance and appreciates the valuable contribution this makes to the long-term prosperity of the business. The Board and Management of Dannex are committed to managing the company in a manner that maximises shareholder value.

i. Role of the Board Dannex has five (5) directors, four (4) of whom are non-executive directors. The board meets once every quarter and where necessary additional meetings are arranged to discuss or review the Company’s operations. The non-executive directors complement the Company’s objective of having experienced people with independent but objective ideas on deliberations in decision-making. The directors shall be appointed by members in an annual general meeting. Non-executive directors derive no benefits other than the fees approved for them by the shareholders.

ii. Internal Control Dannex has internal control systems for identifying, managing and monitoring risks, these controls are intended to provide reasonable assurances that the risks faced by the company are being controlled. The directors have reviewed the effectiveness of the internal control systems, including controls related to financial, operational and reputational risks identified by the company as at the reporting date and no significant failings or weaknesses were identified during this review.

8. Employees The table below is a breakdown of Dannex’s staff strength over the past four years:

Position 2014 2015 2016 2017

Management 12 8 10 10

Supervisors 40 52 48 48


Total 191 197 174 213

As at the date of this document, Dannex had one hundred and fifty-five (155) of its staff belong to labour unions, mainly the Industrial and Commercial Workers Union of the TUC.

9. Investments and Subsidiaries


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Dannex holds direct investments in two (2) companies. Dannex’s major investment holdings as reported in its annual report of 2017 include:

i. Ayrton Drug Manufacturing Limited Ayrton is a pharmaceutical manufacturing and distribution company incorporated in Ghana. Dannex owns 53.47% of the issued shares of Ayrton.

ii. Starwin Products Limited Starwin is a pharmaceutical manufacturing and distribution company incorporated in Ghana. Dannex owns 71.33% of the issued shares of Starwin.

10. Group Shareholding Structure

On 2nd

December, 2016, Dannex acquired 53.47% of the 78.57% voting shares held by Adcock Ingram International in Ayrton, thus making Dannex the majority shareholder in Ayrton, with a shareholding of

Equatorial Cross Acquisitions Other Shareholders

Dannex

Ayrton Starwin

71.83% 28.17%

53.47% 71.33%


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53.47%.

11. Office Locations Dannex currently operates from its Head Office location in Accra, which also houses its factory.

12. Indebtedness and Funds The table below shows the indebtedness and funds of Dannex over the past five (5) years:

2013 2014 2015 2016 2017

Bank Overdraft 258,601 578,005 469,174 1,004,889 737,910

Loans 8,743,443 14,152,086 15,249,475 19,069,700 19,265,213

Cash & Bank Balances 4,953,191 3,169,275 234,741 149,542 80,331

(i) Details of Indebtedness GHS

Bank Overdraft 737,910

Loans:

Related Party

10,447,212

EDAIF Loan

7,265,520

Zenith Loan

1,552,481

SG Finance Lease

296,314

(ii) Terms of Loan Agreements Zenith Bank Dannex Ltd obtained a loan of GHS 4,080,333 from Zenith Bank (Ghana) Ltd through EDAIF in December 2013. The Loan is secured by a legal mortgage over the factory premises. Interest rate of 12.5%. Dannex Ltd obtained a loan of GHS 3,026,058 from Zenith Bank (Ghana) Ltd through EDAIF in May 2014 at an interest rate of 12.5%. The Loan is secured by a legal mortgage over the factory premises. The facility was sourced on 4 September 2014 and the outstanding balance was restructured to a new facility with an interest rate of 28%. This facility comprises of outstanding balance on term loan, EDAIF payments made by Zenith on behalf of Dannex and other accrued interest charged restructured by Zenith Bank in October 2017 for the company. The facility was secured by an industrial property of the company. The carrying amounts of the short-term borrowings approximates their carrying amounts. Societe Generale Bank The finance lease facility from SG Limited was obtained on 10 August 2016. The facility is secured on the vehicles purchased. The sale price of the assets to the lessee (Dannex Ltd) upon the expiry of the lease agreement (where the lessee opts to purchase the assets) shall be 1% of the cost of the assets before VAT plus NHIL, which provisionally is GHS 4,244.40

13. Material Contracts Except for the agreements referred to and described below, no contract, not being a contract entered into in the ordinary course of business, has been entered into by Dannex within the two years immediately


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preceding the date of this document and which is material or contains provisions under which Dannex has an obligation or entitlement which is material as at the date of this document.

14. Insurance Agreements

Dannex has the following insurance policies:

Policy Sum Insured Sum Assured

Assets all Risk 12,281,323.00

Workmen’s Compensation/Employers Liability Insurance

1,698,387.60

Fidelity Guarantee Insurance 250,000.00

Public Liability Policy 250,000.00

Fire-Homeowner’s comprehensive 560,000.00

Accident Goods-in-Transit Policy 100,000.00

Cash-in-Transit Policy 150,000.00

Group Life Policy 8,047,221.00

15. Litigation

As at 1st June 2018, there were no pending cases or litigation by or against Dannex.

16. Disclosure of Interests by Directors

As at 3rd

July, 2018 (the last practicable date prior to the posting of this document), the interests of Dannex directors in Dannex shares were as follows:

Shareholder Shares Held Debenture Holdings



Alex Kobina Bonney Nil Nil

Samuel Atta Mensah Nil Nil

Dr. Barima Afranie Nil Nil

Mr. Nik Amarteifio (Board Chairman of Ayrton Ltd) has 4,500 shares in Equatorial Holdings Ltd, and

Equatorial Holdings Ltd holds 34,066,252 (71.834%) shares in Dannex.

Amarteifio & Co are the Company lawyers for Dannex and Starwin.

17. Disclosure of Interests by Advisors As at the date of this document, neither UMB Investment Holdings (Financial Advisor) nor UMB Stockbrokers (Sponsoring Broker) held Dannex Shares. None of the UMB Investment Holdings and UMB Stockbrokers affiliates, Universal Merchant Bank, UMB Capital and Strategic Debt Solutions held any Dannex Shares.

As at the date of this document, Kimathi and Partners, Corporate Attorneys did not hold Dannex Shares. As at the date of this document, Ernst & Young did not hold Dannex Shares.

18. Related Party Disclosures

i. Group and Company (a) Ownership Structure The parent company, Dannex Limited is 71.83% owned by Equatorial Cross Acquisitions Limited (ECA). The remaining 28.17% is owned by a number of individual shareholders. Dannex Limited owns 71.33%

and 53.47% in two subsidiaries; Starwin Products Limited and Ayrton Drugs Manufacturing Limited.

(b) Transactions with key management personnel


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The compensation of key management personnel (including the directors) is as follows:

Group Company 2017

GHS 2016 GHS

2015 GHS

2017 GHS

2016 GHS

2015

Directors’ emoluments including social security costs

1,240,800 655,532 357,242 604,397 521,937 357,242

Compensation paid to the Group’s key management personnel include salaries, non-cash benefits and contributions to defined contribution schemes.

Company The company has related party relationships with its subsidiaries. In the course of normal operations, related party transactions entered into by the company and its subsidiaries have been contracted on an arm’s length basis.

2017 2016 2015

Transactions with related parties GHS GHS GHS Equatorial Cross Acquisitions Consultancy services to Dannex Ltd - 240,000 120,000 Advances received from ECA 83,894 1,000,460 - Transfers from Dannex 307,435 - - Ayrton Drugs Purchase of goods 1,449,397 80,236 - Advances received 1,104,351 - - Starwin Products Limited Related party loan 10,447,212 11,779,972 - Purchase of goods & inventory stock 896,498 845,549 21,019 Sales 2,593,823 - - Inventory Loan - 193,582 - Group MD Advances received from MD 625,863 - -

Transfers from Dannex 619,686 - - Issue of shares

788,267

-

- Amounts due to related parties

Equatorial Cross Acquisitions - 71,151 82,726 Ayrton Drugs Manufacturing Ltd 2,553,748 80,236 - Group MD 2,746 176,847 112,568 Starwin Products Ltd 14,783,082 12,625,520 21,019 17,339,576 12,953,754 216,313 Amounts due from related parties


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Equatorial Cross Acquisitions 152,389 - -

(c) Other Transactions with Related parties

Dividend due from Starwin amounting to GHS180,406 was used as repayment for the outstanding

loan of GHS1,046,877with Starwin

Collateral fee payable by Starwin to Group MD amounting to GHS257,690 was paid by Dannex. Amount was used as repayment for the outstanding loan with Starwin

MD sold a VW Toureg at a cost of US$45,000 equivalent to GHS198,806 to Dannex

19. Directors Fees for 2017 and estimated fees for 2018

GHS

Directors Fees for 2017 390,522

Estimated Directors Fees for 2017 420,000

20. Related Party Agreements Distribution Agreement between Ayrton and Dannex Summary agreement: The Agreement was made on 6

th February, 2017

In the agreement: a) Ayrton agreed with Dannex, for Dannex to become a sole distributor of Ayrton Products b) Dannex shall make regular payments on account in proportion of the ratio of sales c) Dannex shall buy on credit and make payment on regular basis d) Ayrton shall give Dannex a discount of 15% on all pharmaceutical products purchased from Ayrton e) Sales delivery expense of 5% would be charged on all pharmaceutical products purchased from Ayrton f) Either party may terminate this agreement by providing two months prior written notice to the other party

Distribution Agreement between Starwin and Dannex Summary agreement The agreement was made on 6

th February, 2017

In the agreement: a) Starwin has agreed with Dannex, for Dannex to become a sole distributor of Starwin Products b) Dannex shall make payment within 15 days, from invoice date, for all purchases of products specified as

“cash products” c) Dannex shall buy on credit and make payment within forty five (45) days from invoice date, for all products

specified as Credit products d) Starwin shall give Dannex a discount of 16% on all pharmaceutical products purchased from Starwin to

cover general and distribution costs


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e) Either party may terminate this agreement by providing two months prior written notice to the other party

21. Tenure, rent and unexpired term of lease of Dannex a. Lease agreement between the president of Ghana acting by Nana Adjei Ampofo and Dannex Ltd

Date of Lease Initial Term of Lease Premium Payment Ground Rent Unexpired term of

lease

1st April, 2010 50 years GHS78,700.00 GHS2,500.00 41 years

22. Dannex’s Dividend Policy Dannex Limited has a dividend pay-out target of 30% of annual profits out of its distributable net earnings as consistent with its operating and investment plans subject to approval of the Board and shareholders. The payment and level of any dividend by the merged entity as determined and proposed by the Board shall be approved by the shareholders at a general meeting of shareholders. In determining the amount of dividend to be distributed for each fiscal year, the Board will take into account the debt-to-equity ratio of the company and allow for working capital and capital expenditure requirements.

23. Other Disclosures

i. Relationships among Directors

There are no family relationships among the Directors.






vii. Affiliations and Affiliated Companies and Businesses


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Dannex holds 71.33% of Starwin’s issued shares, and 53.47% of Ayrton’s issued shares. It is the responsibility of Dannex to recruit and appoint the senior level executives of Dannex, among others.

24. Risk Factors i. Risks related to the pharmaceutical industry

Dannex and other companies within the pharmaceutical industry are exposed to supply chain risks, utility shortfalls such as power and water supply from their third-party providers, and shortage of raw materials, just to mention a few. The insufficient provision of utility services may adversely impact the operational efficiencies and income of Dannex and other companies within the pharmaceutical industry. As such, the impact of these risks to the operations of Dannex has been recognised and measures have been implemented to invest in systems to create flexible processes to adapt to changes and disruptions and curtail the effects of these risks thereby minimising their impact on the operations of Dannex.

25. Additional Information i. Ernst & Young, the reporting accountants, have given and have not withdrawn their written

consent to the issue of this circular with the inclusion herein of their reports in Parts 7, 8 and 9 of this document and the references thereto in the form and context in which they appear.

ii. Save as disclosed in this circular, there has been no material change in the financial or operating position of Dannex other than in the ordinary course of business since 31

st December, 2017 the

date to which the last audited accounts of Starwin were prepared.

iii. Dannex has not engaged in any litigation or arbitration of material importance to affect its financial position, and the Directors are not aware of any such litigation or arbitration.

26. Historical Financial Statements

i. Independent Reporting Accountants’ Review Report on Dannex 6

th July 2018

The Board of Directors Dannex Limited No 5, Dadeban Road Ring Road, North Industrial Area P. O. Box 5258 Accra, Ghana

Dear Sirs,

INDEPENDENT AUDITORS REVIEW REPORT TO THE BOARD OF DIRECTORS OF DANNEX LIMITED

We have reviewed the annual audited financial statements of Dannex Limited that comprise the statement of financial position as at 31 December 2013, 2014, 2015, 2016 and 2017, the statement of comprehensive income and cash flows for the years then ended and a summary of significant accounting policies and other explanatory notes as set out in the financial statements.

PricewaterhouseCoopers (PwC), Chartered Accountants of Accra were auditors of Dannex Limited from the years 2012 to 2014. KPMG, Chartered Accountants of Accra acted as auditors of Dannex in the years 2015, 2016 and 2017. The auditors did not issue a qualified opinion for any of the financial statements of Dannex Limited from 2013 to 2017.

Directors’ Responsibility


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The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Companies Act, 1963 (Act 179) and for such internal controls as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Independent Reviewer’s Responsibility Our responsibility is to express a conclusion on the annual audited financial statements based on our review. We conducted our review in accordance with International Standard on Review Engagements (ISRE) 2400, Engagements to Review Historical Financial Statements. ISRE 2400 requires us to conclude whether anything has come to our attention that causes us to believe that the financial statements, taken as a whole, are not prepared in all material respects in accordance with the applicable financial reporting framework. This Standard also requires us to comply with relevant ethical requirements.

A review of financial statements in accordance with ISRE 2400 (Revised) is a limited assurance engagement. A review of financial statements in accordance with ISRE 2400 consists primarily of making inquiries of management and others within the entity involved in financial and accounting matters, applying analytical procedures, and evaluating the sufficiency and appropriateness of evidence obtained. A review also requires performance of additional procedures when we become aware of matters that cause us to believe the financial statements as a whole may be materially misstated.

The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on these financial statements.

We believe that the evidence we obtained in our review is sufficient and appropriate to provide a basis for our conclusion.

Conclusion Based on our review, nothing has come to our attention that causes us to believe that the annual financial statements do not present fairly, in all material respects, the financial position of Dannex Limited as at 31 December 2013, 2014, 2015, 2016 and 2017, and of its financial performance and cash flows for the years then ended, in accordance with the International Financial Reporting Standards (IFRS) and the requirements of the

Companies Act, 1963 (Act 179).

Yours faithfully,



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ii. Dannex Accounting Policies

The significant accounting policies set below have been applied consistently to all periods presented in these

financial statements by Group entities.

1. Consolidation Business Combinations

Business combinations are accounted for using the acquisition method at the acquisition date, which is the

date on which control is transferred to the Group.

Acquisitions

The Group measures goodwill at the acquisition date as:

the fair value of the consideration transferred; plus

the recognised amount of any non-controlling interests in the acquiree; plus

the fair value of the existing equity interest in the acquiree; less

the net recognised amount (generally fair value) of identifiable assets acquired and liabilities assumed.

The consideration transferred in the acquisition is generally measured at fair value, as is the identifiable net assets acquired. Any investment in the acquiree that was held before obtaining control derecognised with any gains or loss recognised in profit or loss.

Goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit

or loss immediately. Transaction costs are expensed as incurred, except if they relate to the issue of debt or

equity securities.

The consideration transferred does not include amounts that relate to the settlement of pre-existing relationships, such amounts are generally recognised in profit or loss.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent

consideration is classified as equity, it is not remeasured and settlement is accounted for within equity.

Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.


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Non-controlling interests

Non-controlling interest are measured at their proportionate share of the acquiree’s identifiable net assets at

the acquisition date.

Changes in the Group’s interests in a subsidiary that do not result in a change of control are accounted for

as transactions with owners in their capacity as owners.


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Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an investee if it is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The financial statements of subsidiaries are included in the consolidated financial statements from the date

that control commences until the date that control ceases. There are currently two subsidiaries: Starwin Product

Limited and Ayrton Drug Manufacturing Limited. Dannex assumed control on these entities on 8 July 2015

and 30 November 2016 respectively.

Investment in subsidiary is measured at fair value in the separate financial statements of Dannex Limited.

Subsequent changes to the fair value of the investment is recognised in other comprehensive income.

The financial statements of the subsidiaries used to prepare the consolidated financial statements were

prepared as of Dannex Limited’s reporting date.

Loss of control

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of the equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. Subsequently any retained interest is accounted for as an equity-accounted investee or in accordance with the Group’s accounting policy for financial instruments.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses (except foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

2. Foreign currency

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss. Non- monetary assets and liabilities that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined.

3. Financial instruments

The Group classifies non-derivative financial assets into the following categories: held to maturity, loans and

receivables and available-for-sale financial assets.

The Group classifies non-derivative financial liabilities into the other financial liabilities category.


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Non-derivative financial assets and liabilities – recognition and derecognition

The Group initially recognises loans and receivables and debt securities issued on the date when they are originated. All other financial assets and financial liabilities are initially recognised on the trade date.

Financial assets and liabilities are offset and the net amount presented when and only when, the Group has

a legally enforceable right to offset the amounts and intends either to settle them on a net basis or realise the

asset and settle the liability simultaneously.

The Group derecognises a financial asset when the contractual rights to cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial assets are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Held-to-maturity financial assets

The Group classifies investments in Government securities as held-to-maturity. These are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method.

Any sale or reclassification of a significant amount of held to maturity asset not close to their maturity would

result in the reclassification of all held to maturity assets as available-for-sale, and would prevent the Group

from classifying investment securities as held-to-maturity for the current and the following two financial years.

Differences between the carrying amount (amortized cost) and the fair value on the date of the

reclassification are recognized in other comprehensive income.

Loans and receivables

Loans and receivables comprises cash and cash equivalents and trade and other receivables.

Loans and receivables are initially recognized at fair value plus incremental direct transaction costs and are

subsequently measured at amortized cost using the effective interest method less any impairment losses.

Cash and cash equivalents comprise cash at banks and in hand as well as short-term deposits and highly

liquid

investments with a term of three months or less from the date of acquisition that are readily convertible to

known amounts of cash and that are subject to insignificant risks of changes in value. For the purpose of the

consolidated and separate statements of cash flows, cash and cash equivalents consist also of bank

overdrafts

that are repayable on demand as forming an integral part of the Group’s and Company’s cash management.

Available-for-sale financial assets

Available-for-sale financial assets represent other investments in equity instruments. These are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, are recognised in other comprehensive income and accumulated in fair value reserves. When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.


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Non-derivative financial liabilities – measurement and derecognition

Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.

The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled, or

expired.

Other liabilities comprise of loans and borrowings, trade and other payables and bank overdraft.

4.Impairment

Non-derivative financial assets

Financial assets not classified at fair value through profit or loss, including interests in equity-accounted

investees, are assessed at each reporting date to determine whether there is objective evidence of

impairment.

Objective evidence that financial assets are impaired includes:

i. default or delinquency by a debtor;

ii. restructuring of an amount due to the Group on terms that the Group would not otherwise consider;

iii. indications that a debtor or issuer will enter bankruptcy;

iv. adverse changes in the payment status of borrowers or issuers;

v. the disappearance of an active market for a security; or

vi. observable data indicating that there is measurable decrease in expected cash flows from a group

of financial assets

Financial assets measured at amortised cost

The Group considers evidence of impairment for these assets at both individual and collective levels. All individually significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are not individually significant are collectively assessed for impairment. Collective assessment is carried out by grouping together assets with similar risk characteristics.

In assessing collective impairment, the Group uses historical information on the timing of recoveries and the amounts of loss incurred, and makes an adjustment, if current economic and credit conditions are such that actual losses are likely to be greater or lesser than suggested by historical trends.

An impairment loss is calculated as the difference between an asset’s carrying amount and the present

value of estimated future cash flows discounted at the asset’s original effective interest rate. Losses are

recognised in profit or loss and reflected in an allowance account.

Financial assets measured at amortised cost

When the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through profit or loss

Available-for-sale financial assets

The Group assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired at each reporting date. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is objective evidence of impairment resulting in the recognition of an impairment loss. In general, the Group considers a decline of 20% to be significant and a period of nine months to be prolonged. However, in specific circumstances a


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smaller decline or a shorter period may be appropriate. Impairment losses on available-for-sale financial assets are recognised by re-classifying the losses accumulated in the fair value reserve to profit or loss. The amount reclassified is the difference between the acquisition cost (net of any principal repayment and amortisation) and the current fair value, less any impairment loss previously recognised in profit or loss. If the fair value of an impaired available-for-sale debt security subsequently increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed through profit or loss; otherwise, it is reversed through other comprehensive income.

Non- financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (except inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generates cash flows from continuing use that are largely independent of the cash inflows of other assets of Cash Generating Units (CGUs).

Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to

benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rates that reflect current market assessments of the time value of money and risks specific to the asset or CGU.

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

5.Property, Plant and Equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment


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Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset

are classified as finance leases. Where land and buildings are held under leases the accounting treatment of

the land is considered separately from that of the buildings.

Leased assets acquired by way of finance lease are stated at an amount equal to the lower of their fair value the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and accumulated impairment losses. Lease payments are accounted for as described below.

Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Freehold land is not depreciated. The estimated useful lives are as follows:

Leasehold land and buildings Over lease period

plant and machinery 10%

motor vehicle 25%

furniture and equipment 20%

computer equipment 25%

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

Property, plant and equipment are derecognised upon disposal or when no future economic benefits are expected to flow to the Group from either their use or disposal. Gains or losses on derecognition of an item of property and equipment are determined by comparing the proceeds from disposal, if applicable, with the carrying amount of the item and are recognised directly in profit or loss.

6. Intangible assets and goodwill

Other intangible assets

Other intangible assets (Computer software and trademarks) that are acquired by the Group are measured at cost less accumulated amortisation and any accumulated impairment losses.

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the

specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill

and brands, is recognized in the profit or loss as incurred.

Amortisation is charged to profit or loss on a straight-line basis over the estimated useful lives of intangible

assets. Computer software development costs recognised as assets are amortised over their estimated

useful lives, which does not exceed four years. Trade mark is amortised over an expected useful life of 10 years.

7. Inventories

Inventories are stated at the lower of cost or net realisable value. Net realisable value is the selling price less costs to sell. Cost is determined using the weighted average method and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity


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8. Employee benefits

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions

to a separate entity and will have no legal or constructive obligation to pay further amounts.

Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or

loss in the periods during which services are rendered by employees.

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the

related service is provided. A liability is recognised for the amount expected to be paid under short-term cash

bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as

a result of past service provided by the employee and the obligation can be estimated reliably.

9. Revenue

Sales of goods

Revenue from the sale of goods is measured at the fair value of consideration received or receivable, net of returns, trade discounts, taxes and volume rebates. Revenue is recognised when significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, associated costs and the possible return of goods can be estimated reliably, there is no continuing management involvement in the goods and the amount of revenue can be measured reliably.

10. Expenses

Minimum lease payments are apportioned between the finance charge and a reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Finance income and cost

Finance costs comprise interest cost, and finance lease charges recognised in profit or loss using the effective interest method, unwinding of discounts on provisions, and net foreign exchange losses that are recognised in profit or loss (see foreign currency accounting policy in note 5.2).

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial time to be prepared for use, are capitalised as part of the cost of that asset. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying assets are recognised in profit or loss using the effective interest method.

Finance income comprise interest receivable on funds invested, dividend income, and net foreign exchange gains.

Interest income is recognised in profit or loss as it accrues, using the effective interest method. Dividend

income is recognised in profit or loss on the date the Group’s right to receive payments is established.

Foreign currency gains and losses are reported on a net basis as either finance income or finance expense

depending on whether foreign currency movements are in a net gain or net loss position.

Finance Lease Payments


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11. Income Tax

Income tax on profit or loss for the year comprises current and deferred tax. Tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable or receivable on taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax is measured at tax rates that are expected to be applied to temporary differences when they reverse.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax

liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity,

or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or the tax

assets and liabilities will be realised simultaneously.

12. New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 31 December 2017, and have not been applied in preparing these (consolidated and separate) financial statements. Those which may be relevant to the Group and Company are set out below. The Group and Company do not plan to adopt these standards early. These will be adopted in the period that they become mandatory unless otherwise indicated.

Standard/Interpretation Effective date

Periods beginning on or after

IFRS 15 Revenue from Contracts with Customers 1 January 2018

IFRS 9 Financial Instruments 1 January 2018

IFRS 16 Leases 1 January 2019

IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019

IFRIC 22 Foreign Currency Transactions and Advance

Considerations

1 January 2018

a. IFRS 15 Revenue from contracts with customer

This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC 31 Revenue – Barter of Transactions Involving Advertising Services.

The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract based five step analysis of transactions to determine whether, how much and when revenue is recognised.


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This new standard includes a possible change in the timing of when revenue is recognised and the amount of revenue recognised. No assessment has been carried out to determine the impact of the new standard on the Group therefore the impact is unknown.

The standard is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted.

b. IFRS 9 Financial Instruments

On 24 July 2014, the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier

versions of IFRS 9 and completes the IASB’s project to replace IAS 39 Financial Instruments: Recognition and

Measurement.

This standard will include changes in the measurement bases of the Group’s financial assets to amortised cost, fair value through other comprehensive income or fair value through profit or loss. Even though these measurement categories are similar to IAS 39, the criteria for classification into these categories are significantly different. In addition, the IFRS 9 impairment model has been changed from an “incurred loss” model from IAS

39 to an “expected credit loss” model, which is expected to increase the provision for bad debts recognised by

the Group.

The standard is effective for annual periods beginning on or after 1 January 2018 with retrospective application,

early adoption is permitted.

The Group is yet to assess the effect of the standard on its financial statements as at 31 December 2017.

c. IFRS 16- Leases

IFRS 16 was published in January 2016. It sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (‘lessee’) and the supplier (‘lessor’). IFRS 16 replaces the previous leases Standard, IAS 17 Leases, and related Interpretations. IFRS 16 has one model for lessees which will result in almost all leases being included on the Statement of Financial position. No significant changes have been included for lessors.

The standard is effective for annual periods beginning on or after 1 January 2019, with early adoption permitted only if the entity also adopts IFRS 15. The transitional requirements are different for lessees and lessors. The group and company have begun assessing the potential impact on the financial statements resulting from the application of IFRS 16. The Group is yet to assess the potential impact on the financial statements resulting from the application of IFRS 16.

d. IFRIC 23- Uncertainty over Income tax treatments

IFRIC 23 clarifies the accounting for income tax treatments that have yet to be accepted by tax authorities. Specifically, IFRIC 23 provides clarity on how to incorporate this uncertainty into the measurement of tax as reported in the financial statements. IFRIC 23 does not introduce any new disclosures but reinforces the need to comply with existing disclosure requirements about:

judgments made;

assumptions and other estimates used; and

the potential impact of uncertainties that are not reflected

When foreign currency consideration is paid or received in advance of the item it relates to – which may be an asset, an expense or income – IAS 21. The Effects of Changes in Foreign Exchange Rates is not clear on how to determine the transaction date for translating the related item. This has resulted in diversity in practice regarding the exchange rate used to translate the related item. IFRIC 22 clarifies that the transaction date is the date on which the company initially recognises the prepayment or deferred income arising from the advance consideration. For transactions involving multiple payments or receipts, each payment or receipt gives rise to a separate transaction date. The Group is yet to assess the effect of the standard on its financial statements as at 31 December, 2017.


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iii. Historical Income Statement of Dannex Ltd

2013 2014 2015 2016 2017

GHS GHS GHS GHS GHS

Turnover 10,242,894 11,696,326 12,596,576 12,625,477 20,906,380

Cost of Sales (5,679,085) (7,476,678) (7,868,439) (6,704,125) (12,799,635)

Gross Profit 4,563,809 4,219,648 4,728,137 5,921,352 8,106,745

Finance cost-interest expense (795,861) (1,984,375) (3,150,047) (3,471,601) (3,676,975)

Selling, general & admin expenses (3,721,955) (5,748,949) (5,036,428) (6,240,983) (6,503,119)

Trading profit/ (loss) 45,993 (3,513,676) (3,458,338) (3,791,232) (2,073,348)

Finance income - 377,454 - - -

Other Income 160,709 24,535 (56,772) - 187,458

Profit before tax 206,702 (3,111,687) (3,515,110) (3,791,232) (1,885,890)

Income tax expense/credit (24,641) 261,921 2,350,902 1,077,837 514,866

Profit /loss after tax transferred to Income Surplus Account 182,061 (2,849,766) (1,164,208) (2,713,395) (1,371,024)

Other comprehensive income - (1,853,173) 3,150,906 6,925,595 (1,724,594)

Total comprehensive income 182,061 (4,702,939) 1,986,698 4,212,200 (3,095,618)

iv.Historical Balance Sheet of Dannex Ltd

2013 2014 2015 2016 2017

GHS GHS GHS GHS GHS

Non- current assets

Property Plant & equipment 12,770,429 14,025,467 13,579,351 13,522,310 13,691,120

Intangible Asset 200,437 145,152 106,199 25,397 1,998

Investment 60,422 3,706,345 7,413,293 19,354,768 17,055,309


Current Assets

Inventories 3,002,207 2,314,043 2,392,103 3,616,367 4,651,998

Trade and Other payables 4,775,649 4,598,387 6,178,276 3,875,600 7,839,320

Current Income tax 179,603 413,965 588,300 789,924 944,529

Bank and cash balances 4,953,191 3,169,275 234,741 149,542 80,331


Total assets 25,941,938 28,372,634 30,492,263 41,333,908 44,264,605

Current Liabilities

Related party loan - - - - 10,447,212

Trade & Other payables 1,245,335 2,641,977 2,548,159 3,378,399 10,565,912

Borrowings 133,150 6,211,324 7,797,023 13,477,917 4,527,546

Bank overdraft 258,601 578,005 469,174 1,004,889 737,910


Non -current liabilities

Borrowings 8,610,293 7,940,762 7,452,452 5,591,783 4,290,456

Deferred income tax 3,123,932 2,862,011 1,067,151 1,556,456 466,725

Total non-current liabilities 11,734,225 10,802,773 8,519,603 7,148,239 4,757,181


Equity attributable to owners


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Stated capital 4,411,140 4,682,911 5,715,962 6,669,922

6,669,922

Capital surplus 8,927,256 8,768,163 8,768,163 8,768,163 8,768,163

Retained earnings (767,769) (5,312,519) (3,325,821) 886,379 (2,423,117)

Total equity 12,570,627 8,138,555 11,158,304 16,324,464 13,801,235


v.Historical Cash Flow Statement of Dannex Ltd

2013 2014 2015 2016 2017

GHS GHS GHS GHS GHS

Cash flows from operating activities

Cash generated from /used in operations 386,718 1,499,218 (950,713) 2,386,468 4,727,104

Interest paid (795,859) (990,680) (3,150,047) (1,603,359) (2,293,708)

Interest received - 278,614 - - -

Tax paid (112,544) (234,362) (174,335) (201,624) (154,605)

Net cash used in operating activities (521,685) 552,790 (4,275,095) 581,485 2,278,791

Cash flows from investing activities

Purchase of properties, plant and equipment (983,833) (1,532,666) (431,742) (667,927) (901,770)

Purchase of intangible assets (20,166) (13,368) - - -

Proceeds from sale of property, plant and equipment 505,468 24,000 79,000 8,300 8,500

Proceeds from sale of scrap - 12,000 - - -

Net cash used in/ generated from investing activities (498,531) (1,510,034) (352,742) (659,627) (893,270)

Cash flows from financing activities

Loan drawdowns 8,596,775 10,266,933 2,397,637 11,459,154 4,428,063

Loan repayments (4,292,436) (5,913,009) (1,300,250) (9,507,149) (5,615,816)

Acquisition of shares in Starwin (59,518) (5,500,000) - - -

Acquisition of shares in Ayrton - - - (3,448,737)

Proceeds from share issue - - 704,747 953,960 -

Net cash generated from financing activities 4,244,821 (1,146,076) 1,802,134 (542,772) (1,187,753)

Net increase/decrease in cash and cash equivalents 3,224,605 (2,103,320) (2,825,703) (620,914) 197,768

Movement in cash and cash equivalents and bank overdraft

At 1 January 1,469,985 4,694,590 2,591,270 (234,433) (855,348)

Net increase in cash and cash equivalent 3,224,605 (2,103,320) (2,825,703) (620,914) 197,768

At 31 December 4,694,590 2,591,270 (234,433) (855,347) (657,580)


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Part 9: Forecast & Unaudited Proforma Financial Information on Merged Company

i. Reporting Accountants’ Report on Financial Forecast and Projections 6

th July 2018

The Board of Directors Dannex Limited No 5, Dadeban Road Ring Road, North Industrial Area P. O. Box 5258 Accra, Ghana Dear Directors,

REPORTING ACCOUNTANTS’ REPORT ON FINANCIAL FORECAST AND PROJECTIONS TO THE BOARD OF DIRECTORS OF DANNEX LIMITED

We have examined the prospective financial information for the years ending 31 December 2018 to 2022, in accordance with International Standards on Assurance Engagements (ISAE) 3400, The Examination of Prospective Financial Information. The Directors are responsible for the prospective financial information and the assumptions on which it is based.

The forecast and projections have been prepared for inclusion in this Circular for the purpose of the merger between Dannex Limited, Starwin Products Limited and Ayrton Drugs Manufacturing Limited. These forecasts and projections have been prepared using a set of assumptions that include hypothetical assumptions about future events and management’s actions that are not necessarily expected to occur. Consequently, readers are cautioned that these assumptions may not be appropriate for purposes other than those described above.

Based on our examination of the evidence supporting the assumptions, nothing has come to our attention which causes us to believe that these assumptions do not provide a reasonable basis for the projections. In our opinion, the prospective financial information, so far as the accounting policies and calculations are concerned, have been properly compiled on the basis of the assumptions made by the Directors of Dannex Limited and are presented on a basis consistent with the accounting policies normally adopted by the Company.

We do not express an opinion as to whether the actual results for the prospective period will approximate the forecast and projected figures, because events and circumstances do not frequently occur as expected, and those differences may be material

Yours faithfully,



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ii. Key Assumptions underlying the projected financial statements of the combined business of Dannex, Starwin and Ayrton Drugs Ltd

Management expects the combined business after the merger between Dannex, Starwin and Ayrton to benefit significantly from synergies brought

Key Targets Key Management Assumptions Independent assessment of assumptions Turnover driven by product and volume growth

Management projects the following:

Management projects a turnover Compound Annual Growth Rate (CAGR) of 18.1%

Increase in Turnover will be as a result of increased products volumes, driven by the expansion in factory capacity and distribution capabilities, and yearly price increments.

Management anticipates: An increase of 40% in the volume of products sold The demand for pharmaceutical products will continue to increase at about 15% per year. Socio-economic indicators namely population growth of about 3%, Gross Domestic Product growth of about 4.5% and 3% in disposable income are expected to induce growth in aggregate demand for pharmaceutical products. Capex investment to increase capacity to support growth in existing product volumes of 35% over the planned period. The introduction of over 18 new products over the five years period will increase institutional sales and enhance the market share of the company. Market will be extended to other West African countries to increase distribution channels and support volume growth

Based on the review of the five year historical financial statements, we noted that Dannex, Starwin and Ayrton individually achieved a CAGR of 15%, 6% and 10% respectively. This represents an average growth rate of 10% across these entities. Comparing this to the projected CAGR of 18.1% appears not to be an overly aggressive forecast. Also, the assumptions supporting the projected growth in turnover of 18.1% do not seem unreasonable based on the following: -Dannex and Starwin have witnessed fluctuations in the level of growth in volumes over the five years mainly as a result of financial constraints (working capital challenges) and events beyond the control of the entities (flood, fire outbreak and lock out). These two companies have had excess capacities in the years under review with existing market demand which could not be met -The above excess capacities combined with the expected synergy to be realized from the combined business provides a reasonable expectation of the projected volume growth target. -There have been instances in the years under review where demand appeared to have outstripped supply evidencing availability of a ready market for increased volumes being projected. Assumptions regarding increase in volume therefore appear reasonable Also, changes in socio-economic indicators used to support projected growth in volume seems reasonable since they are in line with historical trends and projected figures. GDP growth however is a macroeconomic factor widely outside the company’s control. However, there is still and opportunity for increased demand given the increasing health care needs of the country.


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The planned growth anticipated is reasonably supported by a planned capex investment. Given a CAGR in the capex of 35%, 3% and about 10% for Dannex, Starwin and Ayrton respectively over the five year period, the projected capex investment does not appear farfetched. Despite the depreciation rates remaining unchanged, the company anticipates accelerating deprecation of some assets in the near future. This is in line with the Company’s decision to impair unusable assets in line with Government’s position to ensure all pharmaceutical manufacturing companies are (Current Good Manufacturing Practice) GMP complaint by the end of 2018. The introduction of new products to enhance market share appears reasonable given that the product development plans are far advanced with two of the veterinary products (Piperadan and Amproluim) having been produced on a full scale currently on the market. The impact of these products on the market needs to be assessed to ensure that these new products can contribute to the turnover that has been projected. -Extension of market to other West African country is not far-fetched following the implementation of the Economic Community of West African States’ (ECOWAS) Common External Tariff (CET). The tariff places zero import tariffs on finished pharmaceuticals, but a 5-20% import tariff on raw materials and packaging for the pharmaceutical sector. -Overall, the ability of Mangement to meet the product and volume growth target and hence turnover targets are very much dependent on: the ability of the company to ensure consistent increase in volume performance taking into consideration the unavailability of some products which have affected supply in the past. -The above forcast also needs to be supported by adequate investment in capex hence the ability of the merged entity to raise the needed financing to fund this growth and sustain it into the medium to long term is crucial. -The growth forecast should also be supported by product research and development and aggressive marketing especially with respect to the product categories subject to tough competition.


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Costs -Cost of sales and General Administrative Expenses as a percentage of Turnovers will decrease by 10% over the planned period as a result of efficiencies envisaged in the merged operations. This will include: -Sourcing cheaper sources of raw and packaging materials; -The implementation and monitoring of a budgetary allocation system to minimize various expenses; and -Increases in the volume of existing products manufactured and the introduction of new ones, which will improve the efficiency levels. This is expected to reduce cost of production in the medium to long term

- Over the five year period, Dannex, Starwin and Ayrton have recorded average percentages of Cost of Sales and Administrative expenses as a percentage of Revenue of 103%, 93% and 95% respectively with CAGRs of 0.3%, 1.5% and about -1%. The projected 10% decline appears to be a rather ambitious target. -Management is however confident of achieving these targets because of a number of factors including the following: 1. The merged entity will have a larger revenue base while at the same time have costs reduced as a result of the synergies to be reaped from the merger. 2. The sourcing of cheaper sources of raw and packaging materials appear reasonable since the merged entity could negotiate for better rates and also enjoy quantity discounts. The separate entities as they existed before sourced for similar products from the same suppliers. 3. Economies of scale that will come with the increased production volumes and new products intended to be manufactured -The ability to achieve the projected forecasts may be significantly affected by inflationary pressures, exchange rate variations and general performance of the economy. Management will need to build a robust strategy to handle some of these externalities to guarantee the successful achievement of these projected targets.


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Profitability -Management projects an Operating Profit CAGR of 16.5% -Management projects a Net Profit CAGR of 18.3% -The infusion of additional working capital will enable the company record significant growth and efficiency leading to increase in profits, majority of which will be ploughed back into the Company to support future operations -The significant decrease in finance costs will lead to the corresponding significant growth in Net Profit -Any excess funds will be invested in short term investments over the planned period to gain additional income.

-While CAGRs of 9%, 16% and 18% in operating profit for Darwin, Starwin and Ayrton respectively show a projected CAGR of 16.5% to be relatively reasonable, net profit CAGRs of -254% and 6% for Dannex and Starwin make it seem unlikely that the combined entities will achieve the projected net profit CAGR of 18.3%, even though Ayrton achieved a CAGR of 46%, without drastically reducing high administrative and finance costs. -Management expect to harness the effect of synergy from the combined operations of these three entities to drive efficiency, cost optimization and revenue growth as well as the expansion and efficiency to be obtained by the anticipated infusion of additional capital to achieve this growth target. -Additionally, there is also the assumption of retiring some of the debts being carried by the individual companies after the merger. Given that over the five years reviewed, the finance costs contributed up to an average of 19% and 7% of the total cost for Dannex and Starwin respectively, the elimination or minimization of this will no doubt increase the profitability of the business.

-Also, the projected plough back of profits needs to be worked out in a manner that meets the dividend policy agreed with key shareholders (if any)

-Overall, the infusion of additional working capital appears to be a critical success factor for achieving the profitability targets as it is expected to drive growth, efficiency and allow for plough back of profits. It is therefore imperative that this working capital is injected into the merged entity to guarantee the achievement of the set targets. Also, the elimination/minimization of finance cost, (invariably borrowing) will however require that there is an alternative funding mechanism to support working capital and capex investments.


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Finance cost Finance cost will be nil by 2022 -This assumption seems reasonable as management intends to allow current debts being carried by the individual companies to run till maturity without drawing down on any new loans -The ability to sustain this position will however be dependent on the injection of additional working capital and new funding to replace the debt and to fund the company’s growth plan.

Trade and other Receivables

-The company projects a net growth CAGR of 22.4%. -With the projected increase in revenue over the period. Trade and other receivables would be held at 26% of revenue.

-This assumption appears reasonable since the projected growth in receivables is supported by projected growth in volumes and products as well as demand. -As demand grows, the level of receivables is also expected to grow. -Collection mechanisms will however need to be put in place to ensure that the accounts receivable cycle is reasonable and working capital is not tied in receivables. Again, efforts will

have to be made to ensure that these projected receivables are recovered to prevent bad and doubtful debts that might eat into the company’s capital base.

Inventories -CAGR of ᷈16.4%

-Inventories held will increase at a similar rate as the growth of sales over the period. However, the percentage to revenue will remain at about 20.3% CAGR.

-The projected growth in inventory does not seem unreasonable given historical rates and also increased inventory levels will be needed to support the projected growth in volumes. -However inventory turnover needs to be continuously monitored and controlled to ensure that efficiency is achieved in the management of the company’s working capital. -Ability to deliver on this target is again dependent on the ability of management to raise the needed working capital to drive these growth targets.

PP&E

- A 1% growth in CAPEX annually to increase capacity to support the projected growth in volumes expected over the period.

-This does not seem unreasonable as even though CAGR in net capex additions for Dannex and Ayrton were negative 1% and negative 14% respectively, it was also 49% % for Starwin over the five year period.

-Funding is, however, required to sustain the capex additions given that the merged entity intends to liquidate outstanding loan exposures.


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Intangible Assets

-Estimated goodwill arising from the merger of Dannex, Starwin and Ayrton.

-This goodwill will need to be assessed on an annual basis to determine if there any indicators of impairments so appropriate impairment adjustments are made to reduce the value to the recoverable amounts. In 2017, goodwill for Ayrton was impaired as a result of a fall in Ayrton’s share price on the Ghana Stock Exchange.

Long Term Investments

Investment in Stanbic Bank will be held over the period.

-The shares are not actively traded and as such no reliable stock price can be ascertained. Management measures this investment at cost and has recorded no movements in this account since 2013.

Trade and other Payables

-CAGR of ᷈16.3%.

-The Company will leverage on its economies of scale to obtain suppliers credits for all trade imports.

-The merged entity will be in a position to negotiate better rates and also obtain suppliers’ credit for its imports. -The separate entities source for similar products from the same suppliers, as such the assumption is not unreasonable.

Long Term Debt The long term loans will run their full repayment period. The main portion is the loan from EDAIF.

-This assumption seems reasonable since the merged entity intends to allow current debts to run till maturity without drawing down on any new loans. -Management may however need to find an alternative source of funding the growth agenda supporting the projections.


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iii. Projected Income Statement for the Merged Company

2018 2019 2020 2021 2022

GHS GHS GHS GHS GHS

Revenue 86,301,718 101,719,739 120,557,508 143,700,816 172,284,777

Cost of sales (44,506,252) (52,146,186) (61,413,793) (72,719,538) (86,587,853)

Gross Profit 41,795,467 49,573,553 59,143,715 70,981,277 85,696,923

Finance cost-interest expense (879,793) (518,317) (313,486) (156,743) -

Selling, general & admin expenses (27,219,907) (32,067,282) (37,991,425) (45,271,925) (54,267,198)

Trading profit/ (loss) 13,695,766 16,987,954 20,838,804 25,552,609 31,429,725

Interest and other income 35,583 25,000 270,504 669,216 1,181,295

Other extraordinary losses (1,600,000) - - - -

Profit before tax 12,131,349 17,012,954 21,109,308 26,221,825 32,611,020

Income tax expense/credit (3,032,837) (4,253,239) (5,277,327) 6,555,456 (8,152,755)

Profit /loss after tax 9,098,512 12,759,715 15,831,981 32,777,281 24,458,265

iv. Projected Balance Sheet for the Merged Company

2018 2019 2020 2021 2022

GHS GHS GHS GHS GHS

Assets

Property, plant and equipment 23,348,069 23,147,643 23,301,538 23,607,101 24,099,940

Long term investments 182,250 182,250 182,250 182,250 182,250

Deferred tax assets 7,373 7,394 7,554 7,764 8,035

Intangible asset 4,140,620 4,140,620 4,140,620 4,140,620 4,140,620

Total non -current assets 27,678,312 27,477,907 27,631,961 27,937,735 28,430,845

Current assets

Inventories 19,302,558 22,303,863 25,886,157 30,186,774 35,379,933

Trade and other receivables 20,301,862 26,443,049 31,531,300 37,816,244 45,618,347

Current income tax 577,950 577,950 577,950 577,950 577,950

Bank and cash balances 5,210,072 10,784,436 20,873,823 46,752,979 64,117,487


Total assets 73,070,754 87,587,205 106,501,191 143,271,681 174,124,562

Current Liabilities

Current income tax 109,306 251,223 459,519 752,239 1,166,256

Trade & Other payables 23,093,916 26,684,763 30,960,639 36,080,721 42,246,444

Dividend payable 35,137 36,860 38,745 40,805 43,054


Non -current liabilities

Borrowings 3,761,829 2,507,886 1,253,943 - -

Deferred income tax 420,614 96,694 98,781 101,528 105,069

Total non-current liabilities 4,182,443 2,604,580 1,352,723 101,528 105,069


Equity attributable to owners

Stated capital 18,671,166 18,671,166 18,671,166 18,671,166 18,671,166

Capital surplus 8,768,162 8,768,163 8,768,163 8,768,163 8,768,163

Retained earnings 18,210,624 30,570,450 46,250,236 78,857,058 103,124,410

Total equity 45,649,952 58,009,779 73,689,565 106,296,387 130,563739



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v. Projected Cash flow Statement for the Merged Company

2018 2019 2020 2021 2022

GHS GHS GHS GHS GHS

Total Comprehensive Income for the Year 9,098,512 12,759,715 15,831,981 32,777,281 24,458,265

Depreciation & Depletion 1,291,327 1,356,676 1,267,354 1,442,122 1,657,118

Interest expense - - - - -

Cash flow from operations 10,389,839 14,116,391 17,099,335 34,219,403 26,115,383

Changes in working capital

Trade and other Receivables (3,902,569) (6,141,187) (5,088,251) (6,284,944) (7,802,103)

Inventories (2,168,052) (3,001,305) (3,582,294) (4,300,617) (5,193,159)

Trade and other Payables 14,177,977 3,590,847 4,275,876 5,120,082 5,120,082

Cash generated from operations 8,107,356 (5,551,645) (4,394,669) (5,465,479) (6,829,539)

Dividend payable (145,269) 1,724 1,885 2,060 2,249

Deferred tax (1,350,439) (323,921) 2,086 2,747 3,541

Taxes paid (236,417) (1,126,397) (1,212,350) (1,298,434) (1,368,112)

Changes in other assets/liabilities 5,186,076 868,403 1,268,291 1,420,486 1,590,945

Net cash flow generated from operations 21,951,146 7,984,555 12,764,578 28,880,783 19,514,467

Cash Flow From Investing Activities:

Capital Expenditures (3,794,349) (1,156,249) (1,421,249) (1,747,686) (2,149,957)

Net cash used in investing activities (3,794,349) (1,156,249) (1,421,249) (1,747,686) (2,149,957)

Cash Flow From Financing Activities:

Existing Debt (562,519) (1,253,943) 1,253,943 1,253,943 -

Overdraft/ Bank Revolver (5,778,172) - - - -

Senior Bank Term "A" - - - - -

Senior Bank Term "B" 1,429,380 - - - -

Other Short-Term Debt - - - - -

Net cash flow from financing activities (7,770,071) (1,253,943) 1,253,943 1,253,943 -

Net (decrease)/increase in cash and cash equivalents 10,386,725 5,574,363 10,089,388 25,879,156 17,364,508

Analysis of changes in cash and cash equivalents during the year

Balance at 1 January (5,176,653) 5,210,072 10,784,436 20,873,823 46,752,979

Net Cash Flow 10,386,725 5,574,363 10,089,388 25,879,156 17,364,508

Balance at 31 December 5,210,072 10,784,436 20,873,823 46,752,979 64,117,487


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Part 10: Explanatory Statement

(in compliance with Section 233 of the Companies Act) in relation to a

SCHEME OF AMALGAMATION between

AYRTON DRUG MANUFACTURING LIMITED & STARWIN PRODUCTS LIMITED and

THE HOLDERS OF THE SCHEME SHARES (as defined in the Scheme)

EXPLANATORY STATEMENT

AYRTON DRUG MANUFACTURING LIMITED

Plot No. B1/24, Naa Attah Street, South Tesano, Abeka Road, Accra P.O. Box 2149, Accra-Ghana

STARWIN PRODUCTS LIMITED 16 Adjuma Crescent, South Industrial Area, Accra P.O. Box 5760 Accra-North 19

th December, 2018

RECOMMENDED MERGER OF AYRTON AND STARWN WITH DANNEX

1. Introduction On 24

th November 2014, Dannex which already had 2.61% shareholding in Starwin, increased its

shareholding to 71.33% through Starwin’s Renounceable Rights Issue, thus resulting in Dannex holding 71.33% shareholding in Starwin. The acquisition was in furtherance of Dannex’s objective of increasing its market share in Ghana. The acquisition gave Dannex a single majority stake in Starwin beyond 25% of Starwin’s issued shares, and thus triggered a mandatory takeover as prescribed by the SEC’s Code on Takeovers and Mergers. Dannex requested for an exemption from SEC from undertaking a mandatory takeover which was granted by SEC on 1

st September, 2016.

On 1st December 2016, Dannex acquired 53.47% of the 78.57% voting shares held by Adcock in

Ayrton, thus making Dannex the majority shareholder in Ayrton with a shareholding of 53.47%. Dannex requested for an exemption from SEC from undertaking a mandatory takeover of Ayrton which was granted by SEC on 20

th October 2016 with some conditions. These conditions are set out

in section 1 of Part 2 of this document.

Your attention is drawn to the letter from the Chairman of Ayrton and Starwin set out in Part 1 of this document, Overview and Key Terms of the Merger set out in Part 2 and Overview of the Proposed Merger set out in Part 3. Parts 2 and 3 contain among other things, information on the background to and reasons for the Merger, the benefits of the Merger and the recommendation by the Ayrton and Starwin Boards to the Ayrton and Starwin Shareholders, respectively to vote in favour of the Scheme at their respective Scheme Meetings and in favour of the resolutions to be proposed at their respective Extraordinary General Meetings.


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The principal term of the Scheme and its effect are summarized in this Explanatory Statement and the Scheme itself is contained in Part 12 of this document. In addition to this Explanatory Statement, you should read this entire document, which contains further information about the Merger.

2. Summary of the Legal structure of the Merger The Merger will be effected by way of a Scheme of Amalgamation (Under Sections 231 to 235 of the Ghana Companies Act, 1963 (Act 179), as amended which requires the approval of the Dannex, Ayrton and Starwin Shareholders and the confirmation of the High Court of Ghana. This is a statutory procedure that can be used among other things, to implement mergers. If the conditions to the Merger are satisfied or, if permissible, waived, the Court Order confirming the Scheme will be delivered to the Registrar of Companies, whereupon the Scheme will become effective and Ayrton, Starwin and Dannex will merge, subject to the approval of Ayrton and Starwin Shareholders, and will be known as Dannex Ayrton Starwin.

Section 2 of Part 2 contains information of the steps to be taken to effect the Merger.

3. Summary of Key Terms and Conditions of the Merger The Merger is subject to the following key terms and conditions:

i. Consideration Dannex will issue 37,342,274.86 new ordinary shares to Ayrton and Starwin shareholders in consideration for Ayrton and Starwin shareholders assigning all their rights to Dannex. The new Dannex shares would be distributed among Ayrton and Starwin shareholders in proportion to their rights in Ayrton and Starwin.

The consideration was determined following financial valuations of Dannex, Ayrton and Starwin carried out by PWC, verified by SAS – financial advisor to the Ayrton and Starwin Boards, and agreed by the Dannex, Ayrton and Starwin Boards. PWC recommended a valuation range of GHS16.7 million to GHS20.6 million for Dannex, GHS24.2 million to GHS29.6 million for Ayrton and GHS7.4 million to GHS8.0 million for Starwin. PWC estimated valuation midpoints of GHS18.7 million for Dannex, GHS26.9 million for Ayrton and GHS7.7 million for Starwin.

The relative valuations took into consideration the current and potential future market positions of Dannex, Ayrton and Starwin. The valuation methods used were the Discounted Cash Flow (DCF) analysis, which was based in part on observed trends in the past performances of the companies and their business plans, and Market Comparable analysis.

Following from the final valuations of Dannex, Ayrton and Starwin, an indicative share exchange ratio for the companies was determined. Dannex has a total of 47,423,624 outstanding ordinary shares, Ayrton has 215,000,000 outstanding ordinary shares and Starwin has 259,814,797 outstanding ordinary shares. Based on the adopted valuation of GHS18.7 million for Dannex, GHS26.9 million for Ayrton and GHS7.7 million for Starwin, Ayrton and Starwin shareholders will be entitled to elect to receive:

For each Ayrton share – 0.32 new Dannex shares

For each Starwin share – 0.08 new Dannex shares

And so in proportion for any other number of Ayrton and Starwin shares held (the “Share Exchange Ratio”)

Therefore, Dannex will issue 37,342,274.86 new shares for all of Ayrton and Starwin shareholders rights. The directors of Ayrton and Starwin believe this valuation presents best value and is fair to the shareholders of both Ayrton and Starwin.


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The Share Exchange will be carried out in proportion for any other number of Ayrton and Starwin shares held.

a. Fractional Interests The Registrar exercises the right to round up fractional shares of shareholders to the nearest whole.

b. Settlement Details of the mode of settlement of the consideration to which any Ayrton and Starwin Shareholder is entitled will be effected as set out in section 7 in this Part 10.

ii. Conditions The completion of the Merger is subject to a number of conditions including the approval of the Scheme at the Scheme Meeting and the approval of the special resolution proposed at the Extraordinary General Meeting by the requisite majority of Ayrton and Starwin shareholders, the Confirmation of the Scheme by the High Court, receipt of certain regulatory approvals and third party consents and the absence of any material adverse change to the business, financial condition, results of operations, assets or liabilities of Ayrton and Starwin. The Merger is also conditional upon the High Court not amending or modifying the terms or conditions of the Scheme in a manner detrimental to Dannex without the prior written consent of Dannex. The conditions are set out in full in section 2 of Part 11 of this document. Dannex, Ayrton, Starwin anticipate that the Merger will be completed during November 2018.

Dannex convened an Extraordinary General Meeting to pass a special resolution to change its name to Dannex Ayrton Starwin Limited as of the Effective Date.

iii. Resolutions for Shareholders’ Approval Resolutions for Dannex, Ayrton and Starwin Shareholders’ approval are set out in section 3 of Part 2 of this document.

iv. Value of the Merger Based on the combination of the Discounted Cash Flow (DCF) valuation of Ayrton as at 31st December 2017, and Market Comparable valuation of Ayrton as at 31st December 2017, the Merger values each Ayrton share at GHS0.13 and each Starwin Share at GHS0.03. On a fully diluted basis, this amounts to an aggregate consideration for Ayrton’s ordinary share capital of GHS26.9 million and Starwin’s ordinary share capital of GHS7.7 million.

On completion of the Merger and based on the current issued ordinary share capital of each company, existing Dannex Shareholders will own approximately 55.95%, Ayrton Shareholders will own 37.45% and Starwin Shareholders will own 6.61% of the Merged Company.

4. The Scheme The Merger will be effected by way of the Scheme. The purpose of the Scheme is to enable Dannex acquire the entire issued share capital of Ayrton and Starwin. The Scheme is set out in Part 12 of this document.

Before the Scheme can become effective, it must be approved by not less than 75% of the votes cast by Ayrton and Dannex Shareholders present and entitled to vote, in person or by proxy, as their respective Scheme Meetings.

In addition, implementation of the Scheme requires the approval of the special resolution set out in the Notice of the Extraordinary General Meeting at the end of this document. The Scheme is not, however, conditional on Ayrton and Starwin Shareholders passing the ordinary resolution to delist


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Ayrton and Starwin from the GSE. In order for the delisting of Ayrton and Starwin from the GSE to take place however, the approval of such resolution is required. All Ayrton and Starwin Shareholders will be entitled to vote at their respective Extraordinary General Meetings, which will be held immediately following their Scheme Meetings. The special resolution proposed requires approval by not less than 75% of the votes cast (the ordinary resolution to delist Ayrton and Starwin from the GSE on the Effective Date requires approval by a majority of the votes cast) by Ayrton and Starwin Shareholders present and entitled to vote, either in person or by proxy, at their respective Extraordinary General Meetings.

SSNIT has agreed to vote in favour of the Scheme at the Scheme Meeting and in favour of the resolutions to be proposed at the Extraordinary General Meeting.

Under the Companies Code, the Scheme also requires the conformation of the High Court. The Court Hearing to confirm the Scheme is scheduled to be held at the High Court in Accra, Ghana on 18

th January, 2019 at 11.00 am (GMT). All Ayrton and Starwin Shareholders are entitled to attend

the Court Hearing in person or to be represented by counsel to support tor object to the Scheme.

Dannex has agreed to appear by counsel at the Court Hearing and to undertake to the High Court to be bound by the Court Order in accordance with the terms set out in Part 12 of this document to the extent that the terms and conditions of the Scheme are not amended or modified in a manner detrimental to Ayrton and Starwin without the prior written consent of Dannex.

The completion of the Merger is subject to a number of conditions, including the approval of the Scheme and the approval of the special resolution proposed at the Extraordinary General Meeting by the requisite majority of Ayrton and Starwin Shareholders, the confirmation of the Scheme by the High Court, no amendment or modification to any of the terms and conditions of the Scheme in a manner detrimental to Dannex without the prior written consent of Dannex, receipt of certain regulatory approvals and third party consents and the absence of any material adverse change to the business, financial condition, results of operations, assets or liabilities of Ayrton and Dannex. For more information on the conditions to the Scheme and the Merger, see Part 11 of this document.

The Scheme will become effective on the delivery of the Court Order confirming the Scheme to the Registrar in Ghana for registration and publication in the Gazette. Such delivery is expected to occur on the next business day after the date on which the Court Order is issued by the Court. If the Scheme becomes effective, it will be binding on all holders of Scheme Shares irrespective of whether or not they vote in favour of the Scheme at the Scheme Meeting or in favour of the resolutions proposed at the Extraordinary General Meeting. The Scheme will extend to any Ayrton and Dannex Shares issued prior to the Record Time.

5. Ayrton and Starwin Meetings and the Scheme Process The Merger will require the approval of Ayrton and Starwin Shareholders of the Scheme at their respective Scheme Meetings and the special resolution proposed at their respective Extraordinary General Meetings. Ayrton Shareholders’ Scheme Meeting and Extraordinary General Meeting will both be held on 27

th December, 2018, and Starwin Shareholders’ Scheme Meeting and

Extraordinary General Meeting will both be held on 27th December, 2018. The Merger is not

conditional upon the approval of the ordinary resolution required to delist Ayrton and Starwin from the GSE. In order for the delisting of Ayrton and Starwin from the GSE to take place however, the approval of such resolution is required. The Scheme Meeting is being held at the direction of the High Court to seek the approval of Ayrton and Starwin Shareholders for the Scheme. The Extraordinary General Meeting is being held to seek the approval of the Ayrton and Starwin Shareholders for the resolutions described below.

Notices of both the Scheme Meetings and the Extraordinary General Meetings are set out at the end


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of this document.

i. The Scheme Meeting The Scheme Meeting for Ayrton has been convened for 27

th December, 2018 at 9.00 am

(GMT) at the Ebenezer Presbyterian Church Hall, Osu, Accra, Ghana to enable Ayrton Shareholders to consider and, if thought fit, approve the Scheme. At the Scheme Meeting, voting will be by poll and each Ayrton Shareholder present, in person or by proxy, and voting will be entitled to one vote for each Ayrton Share held. The approval required at the Scheme Meeting is 75% of the votes cast by Ayrton Shareholders present and entitled to vote either in person or by proxy. Entitlement to attend and vote at the Scheme Meeting and number of votes which may be cast thereat will be determined by reference to the register of members of Ayrton at the Voting Record Time.

The Scheme Meeting for Starwin has been convened for 27th December, 2018 at 12.00 pm

(GMT) at the Ebenezer Presbyterian Church Hall, Osu, Accra, Ghana to enable Starwin Shareholders to consider and, if thought fit, approve the Scheme. At the Scheme Meeting, voting will be by poll and each Starwin Shareholder present, in person or by proxy, and voting will be entitled to one vote for each Starwin Share held. The approval required at the Scheme Meeting is 75% of the votes cast by Starwin Shareholders present and entitled to vote either in person or by proxy. Entitlement to attend and vote at the Scheme Meeting and number of votes which may be cast thereat will be determined by reference to the register of members of Starwin at the Voting Record Time.

It is important for the Scheme Meeting that as many votes as possible are cast so that the High Court may be satisfied that there is a fair representation of Ayrton and Starwin Shareholders opinion. You are therefore strongly urged to sign and return your form(s) of proxy and Voting Instruction Form(s) as soon as possible.

ii. The Extraordinary General Meeting In addition, the Extraordinary General Meetings of Ayrton and Starwin have been convened for the same dates to consider and, if thought fit, approve the special resolutions to be proposed (which requires approval by not less than 75% of the votes cast by Ayrton and Starwin Shareholders present and entitled to vote either in person or by proxy) to amend the regulations of Ayrton and Starwin in the manner described below and on the ordinary resolution to be proposed (which requires approval by a majority of the votes cast by Ayrton and Starwin Shareholders present and entitled to vote) to approve the delisting of Ayrton and Starwin from the GSE on completion of the Merger. At the Extraordinary General Meetings of Ayrton and Starwin, voting will be by poll and each Ayrton and Starwin Shareholder present in person or by proxy will be entitled to one vote for each Ayrton and Starwin Share held.

The special resolution to be proposed will amend the Regulations of Ayrton and Starwin to ensure that any Ayrton and Starwin Shares issued to any person other than Dannex or any person acting on behalf of Dannex at or after the Record Time will be automatically exchanged for new Dannex shares on the same terms as under the Scheme. This will void any person (other than Dannex or any person acting on behalf of Dannex) being left with Ayrton or Starwin Shares after such shares have ceased to be listed on the GSE (which will occur on at the close of business on the business day before the Effective Date).

iii. Attending the Scheme Meeting and the Extraordinary General Meeting a. Ayrton Shareholders

Ayrton Shareholders are entitled to attend and vote and be heard at the Scheme Meeting and the Extraordinary General Meeting, which are both to be held at the Ebenezer Presbyterian Church Hall, Osu, Accra, Ghana on 27

th December, 2018 at


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9.00 am (GMT). Ayrton Shareholders should complete and return the forms of proxy that accompany this document, whether or not they propose to attend such Meetings in person.

b. Starwin Shareholders Starwin Shareholders are entitled to attend and vote and be heard at the Scheme Meeting and the Extraordinary General Meeting, which are both to be held at the Ebenezer Presbyterian Church Hall, Osu, Accra, Ghana on 27

th December, 2018 at

12.00 pm (GMT). Starwin Shareholders should complete and return the forms of proxy that accompany this document, whether or not they propose to attend such Meetings in person.

iv. The Court Hearing Following the approval by the requisite majority of Ayrton and Starwin Shareholders at the Scheme Meetings, the High Court will be requested to confirm the Scheme at the Court Hearing.

The Court Hearing will be held after the conditions to the implementation of the Scheme set out in Part 11 of this document have been satisfied, or, if permissible, waived. If any of the conditions set out in Part 11 of this document have not been satisfied or, if permissible, waived on or prior to the sixth business day immediately preceding the scheduled Court Hearing Date, Ayrton and Starwin will apply to the High Court for a postponement of the Court Hearing until such later date and time as Ayrton, Starwin and Dannex reasonably believe is necessary for all such remaining conditions to be satisfied or, if permissible, waived.

The Court Hearing is scheduled to begin at 11.00 am on 23rd January, 2019 and will be held at the High Court in Accra. If this scheduled date is changed, Ayrton and Starwin will both give at least five business days’ notice of the change by issuing press releases. The change in the scheduled date will also be published in Daily Graphic and Ghanaian Times, or in such manner as the High Court may direct. If the scheduled date of the Court Hearing is changed by more than seven days, Ayrton and Starwin will also post notice of the date of the rescheduled Court Hearing to Ayrton and Starwin Shareholders.

Ayrton and Starwin will appear at the Court Hearing to request that the High Court confirm the Scheme. If objections are lodged against the Scheme by an Ayrton or Starwin Shareholder, the High Court may determine to continue the Court Hearing at a later date to permit Ayrton and/or Starwin and Dannex to respond to the objections. If the High Court determines to continue the Court Hearing at a later date, the High Court will notify persons that have lodged objections of the time of the continued Court Hearing by issuing a press release in Daily Graphic and Ghanaian Times, or in such manner as the High Court may direct.

v. Attending the Court Hearing Any Ayrton and Starwin Shareholder will be entitled to appear and object to the confirmation of the Scheme at the Court Hearing. Ayrton and Starwin Shareholders need not retain separate counsel or file a notice of appearance and affidavit in order to appear at the Court Hearing but may appear in person.

vi. Determination of fairness and effectiveness of the Scheme The Registrar of Companies (as instructed by the High Court) will appoint the Fairness Reporter. The Fairness Reporter will investigate the fairness of the Scheme and report thereon to the High Court. After considering the fairness report prepared by the Fairness Reporter, the Court will consider whether to confirm the Scheme. The High Court may prescribe such terms as it thinks fit as a condition of its confirmation. Dannex has agreed to


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appear by Counsel at the Court Hearing and undertaken to the High Court to be bound by the Court Order in accordance with the terms set out in Part 11 of this document to the extent the terms and conditions of the Scheme are not amended or modified in a manner detrimental to Dannex without the prior written consent of Dannex.

The Scheme will become effective when the Court Order issued by the High Court confirming the Scheme is delivered to the Registrar of Companies for publication in the Gazette.

vii. Delisting of Ayrton and Starwin Shares An ordinary resolution will be proposed at the Extraordinary General Meeting to approve the delisting of Ayrton and Starwin from the GSE with effect from the Effective Date.

6. Entitlement to Consideration Under the Merger Each Ayrton and Starwin Shareholder will receive new Dannex Shares. The Registrar exercises the right to round up fractional shares of shareholders to the nearest whole.

7. Issue of Shares All documents and remittances sent by or to Ayrton and Starwin Shareholders (or as their appointed agents may direct) will be sent at their own risk.

Letters will be sent to shareholders prior to the Effective Date to inform them of the crediting of their electronic accounts with the new Dannex shares. All Ayrton and Starwin shareholders without electronic accounts will be requested to present their letters to their brokers for their shares to be deposited in the electronic accounts. All shareholders of Ayrton and Starwin without electronic accounts will have to open electronic accounts at UMB Stockbrokers or any other preferred broker.

An entitlement list containing the list of shareholders eligible for the new Dannex shares and the number of new Dannex shares to be credited to each shareholder will be provided to CSD by the Registrar.


From the Effective Date all Ayrton and Starwin shares will cease to be of value. Ayrton and Starwin shareholders will not be obliged to transfer their shares to Ayrton, Starwin or Dannex.

New Dannex Shares Shareholders’ electronic accounts will be credited with the new Dannex shares due them; however, any transfers of new Dannex shares will be certified against the Dannex register of members.

8. Dividends i. Ayrton Dividends

Ayrton did not pay any dividends for the year ended 30th June 2017.

ii. Starwin Dividends Starwin did not pay any dividends for the year ended 31

st December 2017.

iii. Dannex Dividends Dannex did not pay any dividends for the year ended 31

st December 2017. The board of

Dannex Ayrton Starwin may recommend the payment of dividends, which may be approved or otherwise by shareholders at a general meeting.

9. Major Shareholders of Ayrton i. Adcock and Dannex Voting Pool Agreement


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Adcock which holds 25.10% Shareholding of Ayrton, entered into a Voting Pool Agreement with Dannex, which sets out the terms and conditions agreed upon between them relating to the exercise of the voting rights attaching to their respective Voting Pool Shares and matters incidental thereto. Adcock and Dannex collectively hold 78.57% of the Shareholding in Ayrton and have agreed to act in concert in respect of exercising their voting rights.

ii. SSNIT Support Letter SSNIT, the holder of approximately 4.61% of Dannex’s current issued share capital, and 18.00% of Ayrton’s current issued share capital, in a letter dated 6

th July 2017 reaffirmed its

earlier commitment to support the proposed merger of Dannex, Ayrton and Starwin, as communicated in their earlier letter dated 6

th April 2017.


10. Board of Dannex Ayrton Starwin Information on the Board of Directors of Dannex Ayrton Starwin is set out in Part 3 of this document.

11. The Directors of Ayrton and Starwin and the Effect of the Scheme on their Interests Details of the directors of Ayrton and Starwin are set out in Parts 6 and 7 of this document. Details of the interests of the directors of Ayrton and Starwin Shares are set out in Parts 6 and 7 of this document.

Save as set out below, the effect of the Scheme on the interests of the directors of Ayrton and Starwin do not differ from its effect on the interests of any other Ayrton or Starwin Shareholder.

12. The New Dannex Shares i. Listings

Following completion of the Merger, the existing and new Dannex shares will be listed on the GSE as Dannex.

ii. Change of Name Following the listing of the existing and new Dannex shares, the Dannex company name will be changed from Dannex Limited to Dannex Ayrton Starwin Limited, and the ticker/symbol on the GSE will be DASPHARMA.

13. Information on Ayrton Ayrton was incorporated on the 24

th September 1965 by the Late Mr. Samuel Benson Adjepong, a

Ghanaian entrepreneur and the first Ghanaian Chief Pharmacist at the Ministry of Health. Ayrton is listed on the Ghana Stock Exchange and currently has over thirty product lines. In 2010, Adcock Ingram acquired 65.59% shares in Ayrton to become the majority shareholder and subsequently increased its shareholding to 78.57%. In 2016, Dannex acquired 53.47% of the 78.57% voting shares held by Adcock in Ayrton, thus making Dannex the majority shareholder in Dannex, with a shareholding of 53.47%.

14. Information on Starwin Starwin evolved from Sterling Products International Limited, an American pharmaceutical company which incorporated an affiliate, Sterling Products Ghana Limited in 1960. In 1993, Sterling Products Limited was acquired by Ghanaian investors, and the company’s name changed to Starwin Products Limited. Starwin was the first in the industry to be listed on the Ghana Stock Exchange in 2004. In 2014, Dannex increased its shareholding from 2.67% to 71.33% through Starwin’s Renounceable Rights Issue, thus becoming Starwin’s majority shareholder.


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15. Information on Dannex Dannex was established in May 1964 expressly for the purpose of manufacturing and distribution of pharmaceutical products. Dannex has wholesalers, retailers, and distribution points in all ten regions of Ghana and also supplies to a few countries within the West African Sub Region. Equatorial Cross Acquisitions is the majority shareholder of Dannex, with a shareholding of 71.83%.

16. Action to be Taken – Forms of Proxy and Voting Instruction Forms The Merger requires approval by Ayrton and Starwin Shareholders of the Scheme and of the special resolutions to be proposed at the Extraordinary General Meeting. It is important that for the Scheme Meeting as many votes as possible are cast so that the High Court may be satisfied that there is a fair representation of Ayrton and Starwin Shareholder option.

You are therefore strongly urged to sign and return your forms of proxy and Voting Instruction Forms as soon as possible. If the Scheme becomes effective, it will be binding on all holders of Ayrton and Starwin Shares, including any holder who did not vote (in person, by proxy) to approve the Scheme.

The Merger is not conditional upon the approval of the ordinary resolution required to delist Ayrton and Starwin from the GSE. In order for the delisting of Ayrton and Starwin from the GSE to take place however, the approval of such resolution is required.

Further details regarding completion of the forms of proxy and the Voting Instruction Forms are provided in the notes to those documents. Please ensure that all relevant sections of each form are completed. Failure to complete relevant parts or to ensure that properly endorsed forms are received by the relevant registrar by the time indicated on the form may mean that your votes cannot be counted.

i. Ayrton Shareholders Ayrton Shareholders will find enclosed within this document a BLUE and a Yellow form of proxy. The BLUE form of proxy is to be used in connection with the Scheme Meeting and the YELLOW form of proxy is to be used in connection with the Extraordinary General Meeting. Whether or not you intend to attend the Meetings in person, please complete both forms of proxy and sign and return them to the relevant Registrar. Your forms of proxy should be completed and returned as soon as possible and, in any event, so as to be received not later than 3.00 pm (GMT) on 24th December, 2018. Forms of proxy for the Extraordinary General Meeting will be invalid if received after this time. If forms of proxy for the Scheme Meeting are not lodged by this time they may be handed to the Chairman of the Scheme Meeting at the Scheme Meeting. Completion and return of the form of proxy will not affect your right to attend and vote at the Scheme Meeting or the Extraordinary General Meeting in person (in substitution for your proxy vote(s)) if you so wish.

ii. Starwin Shareholders Starwin Shareholders will find enclosed within this document a PINK and a GREEN form of proxy. The PINK form of proxy is to be used in connection with the Scheme Meeting and the GREEN form of proxy is to be used in connection with the Extraordinary General Meeting. Whether or not you intend to attend the Meetings in person, please complete both forms of proxy and sign and return them to the relevant Registrar. Your forms of proxy should be completed and returned as soon as possible and, in any event, so as to be received not later than 3.00 pm (GMT) on 24

th December, 2018. Forms of proxy for the Extraordinary General

Meeting will be invalid if received after this time. If forms of proxy for the Scheme Meeting are not lodged by this time they may be handed to the Chairman of the Scheme Meeting at the Scheme Meeting. Completion and return of the form of proxy will not affect your right to attend and vote at the Scheme Meeting or the Extraordinary General Meeting in person (in substitution for your proxy vote(s)) if you so wish.


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17. Further Information The Terms of the Scheme are set out in full in Part 11 of this document.

Part 11: Conditions to the Implementation of the Scheme and the Merger

The Merger is conditional upon the Scheme becoming unconditional and effective by the Effective Date or such later date (if any) as Starwin, Ayrton and Dannex may, with the consent of SEC (if required) agree and the Court may allow. PART A Conditions to the Scheme and the Merger

1. Conditions to the Scheme The Scheme is subject to the following conditions:

i. approval of the Scheme at the Scheme Meeting and at any separate class meeting which

may be required by the Court (or at any adjournment of any such meeting) by a majority in number representing 75% or more in value of the Scheme Shareholders (or the relevant class or classes thereof, if applicable) present and voting, either in person or by proxy;

ii. all resolutions required to approve and implement the Scheme as set out in the notice of the general meeting (including without limitation, any special resolutions) being duly passed by the requisite majority or majorities required to pass such resolutions at the general meeting or at any adjournment of that meeting; and

iii. the sanction of the Scheme by the Court with or without modification (but subject to any such modification being acceptable to Ayrton, Starwin and Dannex) and the delivery of an office copy of the Court order to the Registrar of Companies and the gazetting of the Court order for it to become effective.

2. Conditions to the Merger In addition, subject as stated in Part B below and to the requirements of the SEC, Starwin, Ayrton and Dannex have agreed that the Merger is conditional upon the following conditions and, accordingly, the necessary actions to make the Scheme effective will not be taken unless such conditions (as amended if appropriate) have been satisfied (and continue to be satisfied pending the commencement of the court hearing) or, where relevant, waived prior to the Scheme being sanctioned by the Court:

i. Admission of New Dannex Shares

a. the registration of the special resolution altering the Dannex Regulations with the Registrar of Companies within twenty-eight days of passing of the resolution and gazetting of the special resolution by the Registrar of Companies;


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b. the SEC having acknowledged to Dannex or its agent (and such acknowledgement not withdrawn) that this document has been approved;

c. the GSE having acknowledged to Dannex or its agent (and such acknowledgement not having been withdrawn) that the application for the admission of all the Dannex Shares to the Ghana Stock Exchange has been approved and (after satisfaction of any conditions to which such approval is expressed to be subject) will become effective as soon as the GSE’s decision to admit the Dannex Shares is announced in accordance with the GSE Listing Rules; and

d. the GSE having acknowledged to Dannex or its agent (and such acknowledgement not having been withdrawn) that all the Dannex Shares will be admitted to trading on the main market for listed securities for the GSE.

ii. Other Third-Party Clearances (other than in respect of or in connection with the matters referred to in Condition 2(i)) no central bank, government or governmental, quasi, governmental, supranational, statutory, administrative or regulatory body or association, institution or agency (including any trade agency) or any court, employee representative body or any other body (including without limitation any professional, environmental or investigative body or authority) or person whatsoever in any Ghana (each a “Third Party”) having given notice of a decision to institute or implement, or having instituted, implemented or threatened in writing, any action, proceeding, suit, investigation, enquiry or reference (and, in each case, not having expressly withdrawn the same) or having required any action to be taken or otherwise having done anything, or having enacted, made or proposed any statute, regulation, order or decision (and in each, not having expressly withdrawn the same) and there not continuing to be outstanding any statute, regulation, decision or order which would or might reasonably be expected to (in any case which is material in the context of the Merger):

a. make the Merger or its implementation, or the acquisition or proposed acquisition of

any shares or other securities in, or control or management of, Starwin, Ayrton or Dannex, void, unenforceable and/or illegal under the laws of any relevant jurisdiction, or otherwise, directly or indirectly, prevent or prohibit, restrict, restrain, or materially delay the same or otherwise interfere, or impose additional conditions or obligations with respect to, or otherwise challenge, impede, interfere or require amendment of the Merger or the acquisition or proposed acquisition of any shares or other securities in, or control or management of, Ayrton and Starwin by Dannex to an extent which is material in the context of the Merger;

b. require, prevent or materially delay the transfer (or materially alter the terms of any proposed transfer) by Starwin and Ayrton of all or a material portion of its businesses, assets or properties to Dannex;

c. impose any limitation on, or result in any delay in, the ability of the shareholders of Starwin and Ayrton, directly or indirectly, to acquire or hold or to exercise effectively all or any rights of ownership in respect of Dannex Shares or other securities in Dannex;

d. except pursuant to section 231(6) of the Companies Act (or in connection with the implementation of the Merger), require Dannex to acquire or offer to acquire any shares, other securities (or equivalent) or other interests of any shareholder of Starwin or Ayrton;

iii. Authorisations


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Other than in relation to the matters referred to in condition 2 (i), all material notifications, filings or applications in connection with the Merger which are deemed necessary or reasonably considered appropriate by Starwin, Ayrton and Dannex (the “Notifications”) having been made and all necessary waiting periods in respect of such Notifications (including any extensions thereof) under any applicable legislation or regulation having expired, lapsed or been terminated (as appropriate) and all statutory and regulatory obligations in respect of such Notifications having been complied with in each case in respect of the Merger and all Authorisations deemed necessary or reasonably considered appropriate by the Parties for or in respect of the Merger and, except pursuant to section 231(6) of the Companies Act, the acquisition or the proposed merger of Dannex, Starwin and Ayrton having been obtained in terms and in a form reasonably satisfactory to the Parties from all appropriate Third Parties and all Authorisations deemed to be necessary or reasonably considered appropriate by the Parties to carry on the business having been obtained and all such Authorisations remaining in full force and effect at the time at which the Merger becomes effective or otherwise wholly unconditional and there being no notice of an intention to revoke, suspend, restrict, modify or not to renew such Authorisations which is material in the context of Dannex Ayrton Starwin taken as a whole;

iv. Absence of adverse circumstances save as disclosed, there being no provision of any agreement, arrangement, lease licence, franchise, permit or other instrument to which any Party is a party or by or to which any such party or any of its assets is or may be bound, entitled or subject which, as a result of the implementation of the Merger or any Party would or might reasonably be expected to result in (in each case to an extent which is material in the context of Dannex Ayrton Starwin taken as a whole):

a. any such arrangement, agreement, lease, licence, franchise, permit or other instrument being terminated or the rights, liabilities, obligations or interests of any Party being adversely affected or any obligation or liability arising or any adverse action being taken or arising thereunder;

b. the rights, liabilities, obligations, interests or business of any Party under any such arrangement, agreement, lease, licence, franchise, permit or other instrument or the interests or business of any Party in or with any other person or body or firm or company (or any agreement or arrangement relating to any such interests or business) being or becoming capable of being terminated or adversely modified or affected or any onerous obligation or liability arising or any adverse action being taken thereunder;

c. any monies borrowed by, or any other indebtedness (actual or contingent) of, or any grant available to, any Party becoming repayable, or becoming capable of being declared repayable, immediately or earlier than the stated repayment date or the ability of such Party to borrow monies or incur any indebtedness being withdrawn or inhibited or becoming capable of being withdrawn or inhibited;

d. the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any Party or any such mortgage, charge or other security interests (whenever arising or having arisen) becoming enforceable;

e. any asset or interest of any Party being or falling to be disposed of or ceasing to be available to any Party or any right arising under which any such asset or interest could be required to be disposed of or could cease to be available to any Party otherwise than in the ordinary course of business of the relevant Party;


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f. any Party ceasing to be able to carry on business under any name under which it presently does so;

g. the value of any Party or its financial or trading position being prejudiced or adversely affected;

h. any liability of any Party to make severance, termination, bonus or other payment to its directors or other officers (or equivalent),

and no event having occurred which, under any provision of any agreement, arrangement, lease, licence, franchise, permit or other instrument to which any Party is a party or by or to which any such Party or any of its assets is or may be bound, entitled or subject, would be expected to result in any of the events or circumstances as a referred to in Conditions 2(d)(i) to 2(d)(viii).

v. No material transactions, claims or changes in the conduct of the business of the Parties except as disclosed, no Party having, since (but not including) 31

st December 2017:

a. issued or agreed to issue or authorised the issue of additional shares of any class, or

securities convertible into, or exchangeable for, or rights, warrants or options to subscribe for or acquire, any such shares or convertible or exchangeable securities or transferred or sold (or agreed to transfer or sell) any shares out of treasury;

b. other than to its members or as provided in this document, recommended or declared, paid or made or resolved to recommend, declare, pay or make any bonus, dividend or other distribution, whether payable in cash or otherwise;

c. other than pursuant to the Merger implemented or authorised any merger or demerger or (except for (i) transactions between the Party and its shareholders (ii) transactions entered into by the shareholders of a Party in connection with the implementation of the Transaction; and (iii) transactions in the ordinary and usual course of business consistent with past practice) acquired or disposed of or transferred, mortgaged or charged, or created any other security interest over, any asset or any right, title or interest in any asset or authorised or proposed or announced any intention to propose any merger, demerger, acquisition or disposal, transfer, mortgage, charge or security interest;

d. entered into, implemented or authorised the entry into, any joint venture, asset or profit sharing arrangement, partnership or merger of businesses or corporate entities;

e. purchased, redeemed or repaid or announced any proposal to purchase, redeem or repay any of its own shares or other securities, except in respect of matters mentioned in subparagraph (i) above as permitted issuances or transfers out of treasury or, other than pursuant to the Merger, made any other change to any part of its share capital;

f. made, authorised, proposed or announced an intention to propose any change in its loan capital, or issued authorised or proposed or announced an intention to authorise or propose the issue of or made any change in or to the terms of any debentures or incurred or increased any indebtedness or contingent liability (other than trade credit incurred in the ordinary course of business);

g. entered into, varied or terminated, or authorised, proposed or announced its intention to enter into, vary or terminate, any agreement, transaction, contract, commitment or


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arrangement (whether in respect of capital expenditure or otherwise) other than to an extent which is normal in the ordinary course of the business concerned which is of a long term, onerous or unusual nature or magnitude or which involves, or could reasonably be expected to involve, an obligation of such nature or magnitude which is reasonably likely to be restrictive on the business of any Party;

h. been unable or deemed unable, or admitted in writing that it is unable, to pay its debts as they fall due or stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business;

i. commenced negotiations with any of its creditors or taken any step with a view to rescheduling or restructuring any of its indebtedness or entered into a composition, compromise, assignment or arrangement with any of its creditors whether by way of a voluntary arrangement, scheme of arrangement, deed of compromise or otherwise;

j. terminated or varied the terms of any agreement or arrangement in a manner which would or might reasonably be expected to have a material adverse effect on the financial position of the Party;

k. taken or proposed any step or corporate action or had any legal proceedings instituted, served or threatened in writing against it or any documents filed in court for a moratorium of any indebtedness, for its winding-up (voluntary or otherwise), dissolution or reorganisation or for the appointment of a liquidator, provisional liquidator, receiver, administrator, administrative receiver, trustee or similar officer over all or any material part of its assets or revenues or received written notice of the intention to appoint or the appointment of any of the foregoing to it;

l. waived, compromised, settled, abandoned or admitted any dispute, claim or counter claim other than in the ordinary course of business;

m. save as envisaged in accordance with the terms of the Merger, made any alteration to its Regulations or other incorporation or constitutional documents;

n. entered into, or varied the terms of, or made any offer (which remains open for acceptance) to enter into or vary to a material extent the terms of, or terminated or given notice of termination of, any service agreement or arrangement with any director (or equivalent) or senior executive except for salary increases, bonuses or variations of terms which are consistent with past practice and in the ordinary course of business;

o. save as envisaged in accordance with the terms of the Merger, proposed, agreed to provide, modified or agreed to modify the terms of any share option scheme, incentive scheme or other benefit relating to the employment or termination of employment of any person employed;

p. except in relation to changes made or agreed as a result of, or arising from, changes to legislation, made, agreed or consented to any change to the terms of the trust deeds and rules constituting the pension schemes established for its directors (or equivalent) and/or employees and/or their dependants or the contributions payable to any such scheme(s) or to the benefits which accrue, or to the pensions which are payable thereunder, or to the basis on which qualification for, or accrual or entitlement to, such benefits or pensions are calculated or determined or the basis upon which the liabilities (including pensions) of such pension schemes are funded, valued, made or agreed or consented to;


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q. except for transactions in the ordinary course of business, granted any lease in respect of any of the leasehold or freehold property owned or occupied by it or transferred or otherwise disposed of any such property;

r. except for transactions in the ordinary course of business, disposed of, or transferred, mortgaged or created any security interest over any material asset or any right, title or interest in any material asset or authorised, proposed or announced any intention to do so; or

s. entered into any contract, agreement, commitment or arrangement or passed any resolution or made any offer (which remains open for acceptance) with respect to, or publicly proposed or announced any intention to effect or to propose to effect, any of the transactions, matters or events referred to in this Condition 2(v);

vi. No adverse change, litigation, regulatory enquiry of similar save as disclosed, since 1

st June 2018, there having been:

a. no adverse change and no circumstance having arisen which would or might be

expected to result in any adverse change in, the business, assets, financial or trading position or profits or prospects or operational performance of any Party;

b. no litigation, arbitration proceedings, prosecution or other legal proceedings in any relevant jurisdiction having been threatened in writing, announced or instituted by or against or remaining outstanding by, against or in respect of any Party;

c. no enquiry, review or investigation by, or complaint or reference to, any Third Party against or in respect of any Party having been threatened, announced or instituted or remaining outstanding by, against or in respect of any Party;

d. no steps having been taken and no omissions having been made which are reasonably likely to result in the withdrawal, cancellation, termination or modification of any licence held by any Party;

e. no contingent or other liability (other than trade creditors and any other liabilities arising in the ordinary course of business) having arisen or increased which would or might reasonably be expected to affect adversely the business, assets, financial or trading position or profits or prospects of any Party;

PART B Further terms of the Scheme and the Merger 1. Subject to the requirements of the SEC, Dannex reserves the right to waive, in whole or in part,

Conditions 2(ii) to 2(vii) (inclusive), so far as they relate to Starwin or Ayrton.

2. Subject to the requirements of the SEC, Starwin and Ayrton reserve the right to waive, in whole or in part, (i) Condition 2(ii) to 2(vii) (inclusive), so far as they relate to Dannex;

3. The Scheme shall not become effective unless the Conditions have been fulfilled or (if capable of waiver) waived or, where appropriate have been determined by Dannex, Starwin and Ayrton to be or remain satisfied by no later than the date referred to in Condition 1 (or such later date as Dannex, Starwin and Ayrton may agree and (if required) the SEC and the Court may allow);

4. Neither Dannex, Starwin or Ayrton shall be under any obligation to waive (if capable of waiver), to


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determine to be or remain satisfied or to treat as fulfilled any of the Conditions capable of waiver by it as set out in paragraph 1 or paragraph 2 of this Part B above (as applicable) by a date earlier than the latest date for the fulfilment of that Condition notwithstanding that the other Conditions of the Merger may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such Conditions may not be capable of fulfilment;

5. Dannex reserves the right to elect, with the consent of the SEC and with Starwin’s and Ayrton’s prior written consent, to implement the merger by way of a Merger Offer. In such event, the Merger will be implemented on substantially the same terms subject to appropriate amendments (including, without limitation an acceptance condition set at 90% or such other percentage as Dannex, Starwin or Ayrton may agree) of the Dannex Shares to which the Merger Offer relates, so far as applicable, as those which would apply to the Scheme.

6. If the Scheme becomes effective, the Dannex Shares to be issued pursuant to the Scheme will be transferred to the shareholders of both Starwin and Ayrton and free from all liens, charges, equities, encumbrances, rights of pre-emption and any other interests of any nature whatsoever and together with all rights attaching thereto, including voting rights and the rights to receive and retain in full all dividends and other distributions declared, made or paid on or after the Effective Date, save where the record time for such dividend or other distribution falls prior to the Effective Date or otherwise where Dannex, Starwin and Ayrton agree otherwise.

7. This Scheme is governed by Ghanaian law and is subject to the jurisdiction of the courts of Ghana and the Conditions set out in this document. The Scheme shall be subject to applicable requirements of the SEC Act, the SEC, and the GSE.

8. Each of the Conditions shall be regarded as a separate condition and shall not be limited by reference to any other Condition.


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Part 12: The Scheme of Amalgamation

1. Date of taking effect The Scheme set out herein in its present form or with any modification(s) approved or imposed or directed by the Court, the SEC or any other appropriate authority, shall be operative from the Effective Date.

2. Procedure of the Court Sanctioned Scheme of Amalgamation The Court Sanctioned Scheme of Amalgamation is one of the processes by which a merger can be undertaken. The procedure is set out under sections 231 to 235 of the Companies Code.

The procedure requires the company or any shareholder of the company to make a summary application to sanction a meeting of the shareholders in order to vote on a resolution for the amalgamation of the companies.

According to Section 231(2), if a 75% majority of the shareholders concerned approve the said amalgamation, the scheme of amalgamation shall be referred to the Registrar of Companies who is required to appoint one or more competent reporters to investigate the fairness of the said amalgamation and to report thereon to the Court.

If the court, after considering the said report from the Registrar General, makes an order confirming the amalgamation, with or without modifications, the amalgamation scheme shall become binding on the company and on all the shareholders. Such an order will be unimpeachable in any proceedings. Under the scheme, the assets and liabilities of the Transferor Companies would be transferred to the Transferee Company. Thus, the Court may make provision for all or any of the following matters:

i. the transfer to the transferee company of the whole or any part of the undertaking, assets and liabilities of any transferor company;

ii. the allotting or appropriation by the transferee company of any shares, debentures, or other like interests in that company which, under the arrangement or amalgamation, are to be allotted or appropriated by that company to or for any person;

iii. the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;

iv. the dissolution, without winding up, of any transferor company;

v. the provision to be made for any persons who, within such time and in such manner as the court directs, dissent from the amalgamation; and

vi. such incidental, consequential and supplemental matters as are necessary to secure that the


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amalgamation shall be fully and effectively carried out.

In order to have effect, the order will be delivered to the Registrar of Companies, who is required to register the order and cause the same to be published in the Gazette. A copy of the order would also be annexed to every copy of the company’s regulations issued by the company after the order has been made.

3. Appraisal Rights and Squeeze Outs Under the court sanctioned Scheme of Amalgamation, provision is made for dissenting shareholders to object to the Scheme. Every shareholder of the Transferor Companies has the right to object to the Scheme and under such circumstances, the court may order that the shares of the minority shareholder be appraised and bought by the transferee company.

Further, according to the law, the Transferee Company may compulsorily acquire the shares in the transferor company if it has made an offer to the holders of the shares in the company and has the met the following conditions:

i. the offer by the transferee company is made to the holders of the whole of the shares in the transferor company, other than those already held by the transferee company or any of its associated companies or by nominees for the transferee company or any of its associated companies;

ii. the consideration for the acquisition is either (i) the allotment of shares for the acquisition in the transferee company; or (ii) the allotment of shares in the transferee company or, at the option of the holders, a payment of cash;

iii. the same terms are offered to all the holders of the shares to whom the offer is made or, where there are different classes of shares, to all the holders of shares of the same class; and

iv. within four months after the making of the offer it has been accepted in respect of not less than nine-tenths of the whole of the shares, other than shares already held as aforesaid and the holders of such shares are not less than 75% in number of the holders of those shares.

If the above conditions are satisfied, the transferee company may, within two months, give notice to any shareholder who has not accepted the offer in respect of all of his shares that it desires to acquire his shares and when such notice is given the transferee company shall, unless on an application made by the shareholder the court thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms of the offer.

4. Transfer and Vesting of Undertaking i. Subject to the provisions of this Scheme as specified hereinafter and with effect from the

Effective Date, the entire business and undertaking(s) of the Transferor Companies including all the debts, liabilities, duties and obligations, including those arising on account of every description and also including, without limitation, all the movable and immovable properties and assets (whether tangible or intangible) of the Transferor Companies, comprising, amongst others, all furniture and fixtures, computers/data processing, office equipment, testing equipment, electrical installations, telephones, telex, facsimile and other communication facilities and business licenses, permits, authorisations, approvals, lease, tenancy, rights, permissions, incentives, if any, and all other rights, patents, know how, trademark, service mark, trade secret or other intellectual property rights, proprietary right, title, interest, contracts, consent, approvals and rights and powers of every kind, nature and description whatsoever, privileges, liberties, easements, advantages, benefits and approvals, shall, under the provisions of sections 231 to 235 of the Companies Code, and pursuant to the orders of the Court sanctioning this Scheme, and without further act, instrument or deed,


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but subject to the charges affecting the same as on the Effective Date, be transferred and/or deemed to be transferred to and vested in the Transferee Company so as to become the properties, assets, rights, business and undertaking(s) of the Transferee Company.

ii. With effect from the Effective Date all debts, liabilities, duties and obligations of the Transferor Companies as on the Effective Date whether provided for or not in the books of account of the Transferor Companies and all other liabilities which may accrue or arise after the Effective Date but which relate to the period on or up to the day of the Effective Date shall be the debts, liabilities, duties and obligations of the Transferee Company including any encumbrance on the assets of the Transferor Companies or on any income earned from those assets.

iii. With effect from the Effective Date, all inter-party transactions between the Transferor Companies and the Transferee Company shall be considered as intra-party transactions for all purposes.

iv. With effect from the Effective Date, all the Loans, advances, and other obligations (including any guarantees, letters of credit, letters of comfort or any other instrument or arrangement which may give rise to a contingent liability in whatever form), if any, due or which may at any time in future become due between the Transferor Companies and the Transferee Company shall, ipso facto, stand discharged and come to an end and there shall be no liability in that behalf on any party and appropriate effect shall be given in the books of accounts and records of the Transferee Company. It is hereby clarified that there shall be no accrual of interest or other charges in respect of any inter-company, loans, advances and other obligations with effect from the Effective Date.

v. All existing securities, mortgages, charges, encumbrances or liens, if any, as on the Effective Date and created by the Transferor Companies after the Effective Date, over the assets comprised in the undertaking or any part thereof transferred to the Transferee Company by virtue of this Scheme and in so far as such securities, mortgages, charges, encumbrances or liens secure or relate to liabilities of the Transferor Companies, the same shall, after the Effective Date, continue to relate and attach to such assets or any part thereof to which they are related or attached prior to the Effective Date and as are transferred to the Transferee Company, and such securities, mortgages, charges, encumbrances or liens shall not relate or attach to any of the other assets of the Transferee Company, provided however that no encumbrances shall have been created by any of the Transferor Companies over its assets after the date of filing of the Scheme without the prior written consent of the Board of Directors of the Transferee Company.

vi. All the existing encumbrances over the assets and properties of the Transferee Company or any part thereof which relate to the liabilities and obligations of the Transferee Company prior to the Effective Date shall continue to relate only to such assets and properties of the Transferor Companies transferred to and vested in the Transferor Company by virtue of this Scheme.

vii. It is expressly provided that, save as herein provided, no other term or condition of the liabilities transferred to the Transferee Company is modified by virtue of this Scheme except to the extent that such amendment is required statutorily or by necessary implication.

viii. With effect from the Effective Date all statutory licenses, permissions, approvals or consents to carry on the operations of the Transferor Companies shall stand vested in or transferred to the Transferee Company without any further act or deed and shall be appropriately mutated by the statutory authorities concerned in favour of the Transferee Company upon the vesting and transfer of the undertaking of the Transferor Companies pursuant to this Scheme. The benefit of all statutory and regulatory permissions, factory licences, environmental approvals and consents, sales tax registrations or other licences and consents shall vest in and


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become available to the Transferee Company pursuant to this Scheme.

ix. The amalgamation of the Transferor Companies with the Transferee Company, pursuant to and in accordance with this Scheme, shall take place with effect from the Effective Date and shall be in accordance with sections 231 to 235 of the Companies Act.

5. Consideration The consideration for the Merger shall be by way of a share exchange. The shareholders of the Transferor Companies shall transfer all their shares to Dannex in exchange for the Dannex shares in proportions determined by the financial advisor.

6. Legal Proceedings Any suit, appeal or other proceedings of whatever nature by or against the Transferor Companies is pending as on the Effective Date, the same shall not abate or be discontinued or in any way be prejudicially affected by reason of or by anything contained in this Scheme, but the said suit, appeal or other legal proceedings may be continued, prosecuted and enforced by or against the Transferee Company, as the case may be, in the same manner and to the same extent as it would or might have been continued, prosecuted and enforced by or against the Transferor Companies as if this Scheme had not been made.

In case of any litigation, suits, recovery proceedings which are to be initiated or may be initiated against the Transferor Companies after the Effective Date, the Transferee Company shall be made part thereto and any payment and expenses made thereto shall be the liability of the Transferee Company.

7. Contracts, Deeds and Other Instruments Subject to the other provisions of this Scheme, all contracts, deeds, bonds, insurance, letters of intent, undertakings, arrangements, policies, agreements, and other instruments, if any, of whatsoever nature pertaining to the Transferor Companies and to which the Transferor Companies is a party and subsisting or having effect on the Effective Date, shall be in full force and effect against or in favour of the Transferee Company, as the case may be, and may be enforced by or against the Transferee Company as fully and effectually as if, instead of the Transferor Companies, the Transferee Company had been a party thereto.

The Transferee Company shall enter into and/or issue and/or execute deeds, writings or confirmations or enter into any tripartite arrangements, confirmations or novations, to which the Transferor Companies will, if necessary, also be party in order to give formal effect to the provisions of this Scheme, if so required or becomes necessary. The Transferee Company shall be deemed to be authorized to execute any such deeds, writings or confirmations on behalf of the Transferor Companies and to implement or carry out all formalities required on the part of the Transferor Companies to give effect to the provisions of this Scheme.

8. Staff and Employees of the Transferor Companies On the Scheme taking effect as aforesaid, the employees, if any, of the Transferor Companies on the Effective Date shall be deemed to have become the employees of the Transferee Company and their employment with the Transferee Company shall be on the following terms and conditions:

i. the terms and conditions of service applicable to the employees shall not be less favourable

than those applicable to them as on the Effective Date;

ii. the services of such employees shall not be treated as having been broken or interrupted for the purpose of provident fund or gratuity or otherwise and for all purposes will be reckoned from the date of their appointment with the Transferor Companies; and

iii. The Transferee Company undertakes to continue to abide by the agreement/settlement if


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any entered into by the Transferor Companies with any of its employees, which is in force as on the Effective Date.

It is expressly provided that, on the Scheme becoming effective, the provident fund, superannuation fund or any other special fund or trusts, if any, created or existing for the benefit of the staff, workmen and employees of the Transferor Companies shall become trusts/funds of the Transferee Company for all purposes whatsoever in relation to the administration or operation of such fund or funds or in relation to the obligation to make contributions to the said fund or funds in accordance with the provisions thereof as per the terms provided in the respective trust deeds, if any, to the end and intent that all rights, duties, powers and obligations of the Transferor Companies in relation to such fund or funds shall become those of the Transferee Company. The Trustees including Board of Directors of the Transferee Company shall be entitled to adopt such course in this regard as may be advised provided however that there shall be no discontinuation or breakage in the service of the employee of the Transferor Companies.

9. Payment of Tax All taxes paid or payable by the Transferor Companies in respect of the operations and/or the profits before the Effective Date under Applicable Law, shall be on account of the Transferee Company and, insofar as it relates to the tax payment (whether by way of deduction at source, advance tax or otherwise howsoever) by the Transferor Companies in respect of the profits made from and after the Effective Date, the same shall be deemed to be the tax paid by the Transferee Company, and shall, in all proceedings, be dealt with accordingly.

10. Dissolution of the Transferor Companies without Winding Up On the Scheme becoming effective, the Transferor Companies shall, without any further act or deed, stand dissolved without winding up in accordance with the provisions of the Companies Act and the orders of the Court.

11. Application to the High Court Or such Other Appropriate Authority The Transferor Companies shall with all reasonable dispatch make applications to the High Court under sections 231 to 235 of the Companies Act, for sanctioning this Scheme.

12. Modifications/Amendments to the Scheme The Transferor Companies (by its Board of Directors) and the Transferee Company (by its Board of Directors) in their full and absolute discretion may asset to any modification(s) or amendment(s) in this Scheme which the High Court or such other appropriate authority and/or any other authorities may deem fit to direct or impose or which may otherwise be considered necessary or desirable for settling any question or doubt or difficulty that may arise for implementing and/or carrying out the Scheme. Further, the Transferor Companies (bv its Board of Directors) and after the dissolution of the Transferor Companies, the Transferee Company (by its Board of Directors) be and are hereby authorised to take such steps and do all acts, deeds and things as may be necessary, desirable or

proper to give effect to this Scheme and to resolve any doubts, difficulties or questions whether by

reason of any orders of the Court or such other appropriate authority or of any directive or orders of any such authorities or otherwise howsoever arising out of, under or by virtue of this Scheme and/or any matters concerning or connected therewith.

The Board of Directors of the Transferor Companies hereby authorise the Board of Directors of the Transferee Company or any committee thereof to give asset to any modification(s) or amendment(s) in the Scheme which may be considered necessary or desirable for any reason whatsoever and without prejudice to the generality of the foregoing, any modification to the Scheme involving withdrawal of any of the parties to the Scheme at any time and for any reason whatsoever, the implementation of the Scheme shall not get adversely affected as a result of acceptance of any such modification by the Board of Directors of the Transferee Company and the Board of Directors of the


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Transferee Company be and is hereby authorised by the Board of Directors of the Transferor Companies to take such steps and to do all acts, deeds and things as may be necessary, desirable or proper to give effect to this Scheme and to resolve any doubt, difficulties or questions howsoever arising out of, under or by virtue of this Scheme and/or any matters concerning or connected therewith.

Part 13: Additional Information

1. Responsibility This document has been seen and approved by the Directors of the Dannex, Ayrton and Starwin and we collectively and individually accept full responsibility for the accuracy of the information given and that after making all reasonable inquiries and to the best of our knowledge and belief there are no facts the omission of which would make any statement in the document referred to above misleading.

UMB Investment Holdings Limited (UMB IHL) are acting as financial advisors and UMB Stockbrokers Limited (UMBS) are acting as sponsoring brokers for the merger. To the best of their knowledge and belief this document constitutes full and fair disclosure of all material facts about the merger.

2. Details of the Voting Pool Agreement The Voting Pool Agreement was entered into on 15

th July 2016 between Dannex and Adcock and

sets out the terms and conditions agreed upon between Dannex and Adcock relating to the exercise of the voting rights attaching to their respective Voting Pool Shares and matters incidental thereto. Copies of the Voting Pool Agreement are available for inspection, as detailed in section of this Part 13. Subject to the terms and conditions of the Voting Pool Agreement and among other things:

i. Dannex and Adcock, pursuant to the implementation of the Sale of Shares Agreement, collectively hold 78.57% of the Shares of Ayrton and have agreed to act in concert in respect of exercising their voting rights.

ii. Dannex and Adcock agreed that it is Dannex’s intention to merge with Starwin and Ayrton into one entity, after the implementation of the Sale of Shares Agreement. Dannex shall, subject to prior consultation with Adcock, decide on the process to adopt for the merger of the three entities.

iii. Adcock agreed that on receiving the (i) the First Independent Valuation and provided that it does not deliver a Valuation Dispute Notice or (ii) the Second Independent Valuation, it will:

a. Consent, in writing, to any dilution that will occur pursuant to the merger; and

b. Not vote against any resolutions proposed to approve the merger of Ayrton with Starwin and Dannex


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3. Summary of SSNIT Support Letter SSNIT in a letter dated 6th July 2017 reaffirmed its earlier commitment to support the proposed merger of Dannex, Ayrton and Starwin, as communicated in their earlier letter dated 6th April 2017.


4. Fairness Report The Fairness Reporter will prepare a fairness report in accordance with section 231(2) of the Companies Code.

5. New Dannex Shares Following approval of the Merger by shareholders of Ayrton, Starwin and Dannex, the directors will approve the issue of 37,342,274.86 new Dannex shares to shareholders of Ayrton and Starwin.

All documents sent by or to Ayrton and Starwin Shareholders (or as their appointed agents may direct) will be sent at their own risk.

Letters will be sent to shareholders prior to the Effective Date to inform them of the crediting of their electronic accounts with the new Dannex shares. All Ayrton, Starwin and Dannex shareholders without electronic accounts will be requested to present their letters to their brokers for their shares to be deposited in the electronic accounts. All shareholders of Ayrton, Starwin and Dannex without electronic accounts will have to open electronic accounts at UMB Stockbrokers or any other preferred broker.

An entitlement list containing the list of shareholders eligible for the new Dannex shares and the number of new Dannex shares to be credited to each shareholder will be provided to CSD by the Registrar.


From the Effective Date all Ayrton and Starwin shares will cease to be of value. Ayrton and Starwin shareholders will not be obliged to transfer their shares to Ayrton, Starwin or Dannex.

Shareholders’ electronic accounts will be credited with the new Dannex shares due them; however, any transfers of new Dannex shares will be certified against the Dannex register of members.

6. Working Capital The Directors are of the opinion that the working capital available to Ayrton and Starwin is sufficient for their present requirements, that is, for at least the next 12 months from the date of this document.

7. Exchange Control Restrictions i. Exchange Control Act 1961, Act 71

Exchange control is currently governed by the Exchange Control Act 1961, Act 71, as amended, (ECA) which imposes restrictive measures on the dealings in, and transfers of foreign currency, as well as the issue of securities to external residents.

ii. Restriction on Foreign Share Ownership of Listed Securities External residents are required to obtain the consent of the Minister for Finance for shares to be issued to them in a Ghana resident company. Further, the consent of the Bank of Ghana is required for the transfer of shares if either the transferee or the transferor is an external resident. However, general consent was granted by a notice BG/EC/93/1dated July 22, 1993 (“the Notice”) by the Minister of Finance and Economic Planning and the Bank of Ghana for securities listed on the Ghana Stock Exchange to be issued to, and dealt in by, external


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residents through the Exchange.

Under the Notice, the holdings of a single external resident portfolio investor are limited to 10% of the shares of a listed company. The consent of the Minister of Finance is therefore required for any issue of more than 10% of the shares of a listed company to an external resident and in the case of a transfer to or from an external resident of over 10%, the consent of the Bank of Ghana is required. The total holdings of external residents (both individuals and institutions) in a listed security shall not exceed 74%. External resident Ghanaians and non-Ghanaians resident in Ghana may freely purchase and transfer listed shares without regulatory consent.

The Notice provides that the following may be fully and freely remitted by external residents in relation to listed securities:

a. Original capital or principal amounts

b. Any capital gains

c. Dividend or interest payments

d. Related earnings and refunds

8. Post-Merger Taxation

i. Withholding Tax on Dividend Under current Ghanaian tax law, all dividend payments are subject to a dividend withholding tax of 8%, except where the shareholder is exempted by the applicable law. No further tax is payable on dividends received.

ii. Capital Gains The securities of a company listed on the GSE are currently exempt from capital gains tax. No capital gains tax would therefore be payable on any realisation of capital gain from the sale of shares in the new Merged Company.

iii. Gift Tax Liability to gift tax may arise by a realization of shares in the Merged Company by way of a gift. The person making the gift is deemed to have derived a gain and is liable to pay tax on the amount derived at the rate of 15% where the amount derived is not charged as part of the chargeable income of the person for the relevant year of assessment. In the case of a company, the applicable taxable rate will be 25% as part of its corporate tax.

iv. Stamp Duty Under the Stamp Duty Act, 2005 (Act 689), transfer of shares is exempt from stamp duty.

v. Corporate Tax The Income Tax Act 2015 (Act 896), prescribes a corporate tax of 25% for all listed companies.

9. Dividends and Payment Agents The board may recommend the payment of dividends, which may be approved or otherwise by shareholders at a general meeting. Dividends are paid only to the extent of available profits which can lawfully be distributed. The payment of dividends would be made by the registrars, UMB Registrars. All payments in respect of dividends will be made net of withholding taxes imposed under Ghanaian tax laws in force at the time of the payment of the dividend. As at the date of this


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document, the applicable tax rate is 8%.

10. Documents Available for Inspection Copies of the following documents will be available for inspection during normal business hours on any weekday (excluding Saturdays, Sundays and public holidays) at the registered office of Kimathi & Partners, Corporate Attorneys up to and during the court hearing:

i. This document;

ii. The Regulations of Ayrton;

iii. The Regulations of Starwin;

iv. The amended Regulations of Dannex;

v. The proposed Regulations of Dannex Ayrton Starwin;

vi. The Voting Pool Agreement;

vii. The SSNIT Support Letters:

viii. The Audited Accounts of Ayrton for the past five (5) years ending 30th June 2017;

ix. The Audited Accounts of Starwin for the past five (5) years ending 31st December 2017;

x. The Audited Accounts of Dannex for the past five (5) years ending 31st December 2017;

xi. Financial Valuation Report for Ayrton, Starwin and Dannex;

xii. The Reporting Accountants’ Reports referred to in this document; and

xiii. Board and shareholder resolutions passed in connection with the Merger.


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Part 14: Notice of Scheme Meeting

NOTICE OF SCHEME MEETING

Notice is hereby given that the Scheme Meeting of Ayrton Drug Manufacturing Limited will be held as follows:

Date: 27th December, 2018

Time: 9:00 am (GMT)

Venue: Ebenezer Presbyterian Church Hall, Osu, Accra, Ghana

The agenda for the meeting is hereby attached as Schedule A for your information.

We have also attached the Scheme Document. All other relevant documents in connection with the meeting will be circulated before the meeting.

Dated this day of 2018

By order of the Board of Directors

Opoku Amponsah Fugar & Company (Company Secretary)


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SCHEDULE A

AGENDA

AGENDA FOR THE SCHEME MEETING TO BE HELD ON 27TH

DECEMBER, 2018 AT EBENEZER PRESBYTERIAN CHURCH HALL, OSU, ACCRA, GHANA AT 9:00 AM GMT

AGENDA

i. Opening

ii. Review of the Scheme Document and acceptance of questions on the Scheme.

iii. Passing of Resolution to approve the Scheme.

iv. Closing

NOTICE OF SCHEME MEETING

Notice is hereby given that the extraordinary general meeting of Starwin Products Limited will be held as follows:

Date: 27th

December, 2018

Time: 12:00 pm (GMT)






Kwesi Austin Ayawaso Chambers (Company Secretary)


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SCHEDULE A

AGENDA

AGENDA FOR THE SCHEME MEETING TO BE HELD ON 27th DECEMBER, 2018 AT EBENEZER

PRESBYTERIAN CHURCH HALL, OSU, ACCRA, GHANA AT 12:00 PM GMT

AGENDA

i. Opening

ii. Review of the Scheme Document and acceptance of questions on the Scheme.

iii. Passing of Resolution to approve the Scheme.

iv. Closing

Part 15: Notice of Extraordinary General Meeting

NOTICE OF EXTRAORDINARY GENERAL MEETING

Notice is hereby given that the extraordinary general meeting of Ayrton Drug Manufacturing Limited will be held as follows:

Date: 27th

December, 2018

Time: 9:30 am (GMT)






Opoku Amponsah Fugar & Company (Company Secretary)


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SCHEDULE A

AGENDA

AGENDA FOR THE EXTRAORDINARY GENERAL MEETING TO BE HELD ON 27TH

DECEMBER, 2018 AT EBENEZER PRESBYTERIAN CHURCH HALL, OSU, ACCRA, GHANA AT 9:30 AM GMT

AGENDA

i. Opening

ii. Approve the merger

iii. Delist Ayrton from the GSE after the merger

iv. Closing

NOTICE OF EXTRAORDINARY GENERAL MEETING

Notice is hereby given that the extraordinary general meeting of Starwin Products Limited will be held as follows:

Date: 27th

December, 2018

Time: 12:30 pm (GMT)






Kwesi Austin Ayawaso Chambers (Company Secretary)


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SCHEDULE A

AGENDA

AGENDA FOR THE EXTRAORDINARY GENERAL MEETING TO BE HELD ON 27TH

DECEMBER, 2018 AT EBENEZER PRESBYTERIAN CHIRCH HALL, OSU, ACCRA, GHANA AT 12:30 PM GMT

AGENDA

i. Opening

ii. Approve the merger

iii. Delist Ayrton from the GSE after the merger

iv. Closing

Private and Confidential

Ayrton Drug Manufacturing Limited (“Ayrton”)

FORM OF PROXY

to be used for the meeting of the holders of Ayrton Shares

IN THE SUPERIOR COURT OF JUDICATURE

IN THE HIGH COURT OF JUSTICE ACCRA GHANA

AD 2018

_________________________________________________________________________________________

IN THE MATTER OF AYRTON DRUG MANUFACTURING LIMITED

and

IN THE MATTER OF THE COMPANIES CODE 1963 (ACT 179) AS AMENDED

_________________________________________________________________________________________

I/We, (Note 1) ______________________________ of ____________________________ being the holder(s) of

Ayrton Shares, hereby appoint the Chairman of the meeting (Note 2) ________________________________ as my/our proxy to act for me/us at the meeting of the holders of Ayrton Shares (the “Scheme Meeting”) to be held at the Ebenezer Presbyterian Church Hall, Osu, Accra, Ghana on the 27

th day of December, 2018 at 9.00 am (GMT) for the purpose of considering and, if

thought fit, approving (with or without modification) the proposed scheme of arrangement referred to in


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the notice convening such meeting (the “Scheme”). At the Scheme Meeting (and at every adjournment thereof), the proxy is to vote for me/us on my/our behalf for the Scheme (either with or without modification as my/our proxy may approve) or against the Scheme as indicated below.

IMPORTANT: If you wish to vote for the Scheme, please sign in the box marked “FOR the Scheme”. If you wish to vote against the Scheme sign in the box marked “AGAINST the scheme” (Note 6)

FOR the Scheme

(Signature)__________________________________

AGAINST the Scheme (Signature)________________________________

Dated______________________________ 2018

To facilitate arrangements for the Scheme Meeting, please tick here (without commitment on your part) if you propose to attend the Scheme Meeting (having not appointed a proxy above) or if your proxy is to attend the Scheme Meeting on your behalf

This form of proxy should be read in conjunction with the accompanying Merger Circular and Ayrton Scheme Document, which contain important information regarding Ayrton, Starwin, Dannex, the Merged Company, Dannex Ayrton Starwin and the terms of the Merger.

Notes:

1. Full name(s) and address(es) to be inserted in BLOCK CAPITALS

2. If any person other than the Chairman is to be appointed as proxy, strike out the words “the Chairman of the meeting”, add the name and address of the proxy preferred in the blank space provided and initial the alteration. The person to whom this proxy is given need not be a shareholder of Ayrton but must attend the said meeting in person to represent you. Appointment of a proxy will not prevent a shareholder from attending and voting at the Scheme Meeting (or any adjournment thereof) in person.

3. In the case of joint shareholders, the vote of the senior who tenders a vote whether in person or by proxy will be accepted to the exclusion of the votes of the other joint shareholders. For this purpose, seniority is determined by the order in which the names stand in the Ayrton Register in respect of the joint holding. In the case of a corporation, this proxy must be given under its common seal or be signed on its behalf by an attorney or officer duly authorised.

4. This form of proxy and the power of attorney or other authority (if any) under which it is signed, or a copy of such authority certified notarially or in some other way approved by the directors of Ayrton must be duly executed and deposited at the offices of NTHC Registrars, 18 Gamel Abdul Nasser Avenue, Ringway Estates, P.O. Box KIA 9563, Airport, Accra, Ghana, not later than 3.00 pm (GMT) on 24th December, 2018

5. Any alterations made to this form of proxy should be initiated by the person who signs it.

6. Unless otherwise instructed, the proxy will vote, or abstain from voting, at his or her discretion. On any motion to amend the above resolution, to propose a new resolution, to adjourn the Scheme Meeting, or on any other motion put to the Scheme Meeting (other than to approve the above resolution), the proxy will act at his/her/their discretion.

SPECIAL NOTE: YOU ARE REQUESTED TO SIGN AND DATE THE ABOVE FORM OF PROXY


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Ayrton Drug Manufacturing Limited (“Ayrton”)

FORM OF PROXY

for use by Ayrton Shareholders at the Extraordinary General Meeting

to be held on 27th December, 2018 at 9.30 am (GMT)

_________________________________________________________________________________________ FORM OF PROXY _________________________________________________________________________________________ I/We, (Note 1) ______________________________ of ____________________________ being the holder(s) of

Ayrton Shares, hereby appoint the Chairman of the meeting (Note 2) ________________________________ as my/our proxy to act for me/us at the Extraordinary General Meeting (the “EGM”) to be held at the Ebenezer Presbyterian Church Hall, Osu, Accra, Ghana on the 27

th December, 2018,at 9.30 am (GMT) (or, if later, immediately after the conclusion of the Scheme

Meeting) for the purpose of considering and, if thought fit, approving the proposed resolutions referred to in the notice convening such meeting. At the EGM (and every adjournment thereof), the proxy is to vote for me/us on my behalf for or against the resolutions to be proposed at the EGM (and at any adjournment thereof) as indicated below.

IMPORTANT: Please indicate with an “X” in the appropriate box opposite each resolution how you wish your vote to be cast (Note 6)

SPECIAL RESOLUTION FOR AGAINST


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Resolution 1 – Approve the merger of Ayrton with Dannex and Starwin

ORDINARY RESOLUTION FOR AGAINST

Resolution 2 – Ordinary Resolution to approve the de-listing of Ayrton from the Ghana Stock Exchange on the Effective Date


Resolution 3 - To authorise the Directors of Ayrton to take all necessary steps and execute any documents necessary to give effect, complete and perfect the delisting and merger

Dated____________________________2018 Signature______________________________ (Note 3) To facilitate arrangements for EGM, please tick here (without commitment on your part) if you propose to attend the EGM (having not appointed a proxy above) or if your proxy is to attend the Scheme Meeting on your behalf.

This form of proxy should be read in conjunction with the accompanying Merger Circular and Ayrton Scheme Document, which contain important information regarding Ayrton, Starwin, Dannex, the Merged Company, Dannex Ayrton Starwin and the terms of the Merger.

Notes:


2. If any person other than the Chairman is to be appointed as proxy, strike out the words “the Chairman of the meeting”, add the name and address of the proxy preferred in the blank space provided and initial the alteration. The person to whom this proxy is given need not be a shareholder of Ayrton but must attend the said meeting in person to represent you. Appointment of a proxy will not prevent a shareholder from attending and voting at the Scheme Meeting (or any adjournment thereof) in person.

3. In the case of joint shareholders, the vote of the senior who tenders a vote whether in person or by proxy will be accepted to the exclusion of the votes of the other joint shareholders. For this purpose, seniority is determined by the order in which the names stand in the Ayrton Register in respect of the joint holding. In the case of a corporation, this proxy must be given under its common seal or be signed on its behalf by an attorney or officer duly authorised.

4. In order to be valid, this form of proxy and the power of attorney or other authority (if any) under which it is signed, or a copy of such authority certified notarially or in some other way approved by the directors of Ayrton must be duly executed and deposited at the offices of NTHC Registrars, 18 Gamel Abdul Nasser Avenue, Ringway Estates, P.O. Box KIA 9563, Airport, Accra, Ghana, not later than 3.00 pm (GMT) on 24

th December, 2018. FAILURE TO DEPOSIT THE FORM OF PROXY AS

REQUIRED WILL RESULT IN YOUR PROXY APPOINTMENT BEING INVALID.


6. Please indicate with an “X” how you wish your vote cast. Unless instructed, the proxy will vote, or abstain from voting, at his or her discretion. On any motion to amend the above resolutions, to


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propose a new resolution, to adjourn the EGM, or on any other motion put to the EGM (other than to approve the above resolutions), the proxy will act at his/her/their discretion.

SPECIAL NOTE: YOU ARE REQUESTED TO SIGN AND DATE THE ABOVE FORM OF PROX


Starwin Products Limited (“Starwin”)

FORM OF PROXY

to be used for the meeting of the holders of Starwin Shares

IN THE SUPERIOR COURT OF JUDICATURE

IN THE HIGH COURT OF JUSTICE ACCRA GHANA

AD 2018

_________________________________________________________________________________________

IN THE MATTER OF STARWIN PRODUCTS LIMITED

and

IN THE MATTER OF THE COMPANIES CODE 1963 (ACT 179) AS AMENDED

_________________________________________________________________________________________

I/We, (Note 1) ______________________________ of ____________________________ being the holder(s) of

Starwin Shares, hereby appoint the Chairman of the meeting (Note 2) ________________________________ as my/our proxy to act for me/us at the meeting of the holders of


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Starwin Shares (the “Scheme Meeting”) to be held at the Ebenezer Presbyterian Church Hall, Osu, Accra, Ghana on the 27

th December, 2018 at 12.00 pm (GMT) for the purpose of considering and, if

thought fit, approving (with or without modification) the proposed scheme of arrangement referred to in the notice convening such meeting (the “Scheme”). At the Scheme Meeting (and at every adjournment thereof), the proxy is to vote for me/us on my/our behalf for the Scheme (either with or without modification as my/our proxy may approve) or against the Scheme as indicated below.

IMPORTANT: If you wish to vote for the Scheme, please sign in the box marked “FOR the Scheme”. If you wish to vote against the Scheme sign in the box marked “AGAINST the scheme” (Note 6)

FOR the Scheme

(Signature)__________________________________

AGAINST the Scheme (Signature)________________________________

Dated______________________________ 2018

To facilitate arrangements for the Scheme Meeting, please tick here (without commitment on your part) if you propose to attend the Scheme Meeting (having not appointed a proxy above) or if your proxy is to attend the Scheme Meeting on your behalf

This form of proxy should be read in conjunction with the accompanying Merger Circular and Starwin Scheme Document, which contain important information regarding Ayrton, Starwin, Dannex, the Merged Company, Dannex Ayrton Starwin and the terms of the Merger.

Notes:


2. If any person other than the Chairman is to be appointed as proxy, strike out the words “the Chairman of the meeting”, add the name and address of the proxy preferred in the blank space provided and initial the alteration. The person to whom this proxy is given need not be a shareholder of Starwin but must attend the said meeting in person to represent you. Appointment of a proxy will not prevent a shareholder from attending and voting at the Scheme Meeting (or any adjournment thereof) in person.

3. In the case of joint shareholders, the vote of the senior who tenders a vote whether in person or by proxy will be accepted to the exclusion of the votes of the other joint shareholders. For this purpose, seniority is determined by the order in which the names stand in the Starwin Register in respect of the joint holding. In the case of a corporation, this proxy must be given under its common seal or be signed on its behalf by an attorney or officer duly authorised.

4. This form of proxy and the power of attorney or other authority (if any) under which it is signed, or a copy of such authority certified notarially or in some other way approved by the directors of Starwin must be duly executed and deposited at the offices of NTHC Registrars, 18 Gamel Abdul Nasser Avenue, Ringway Estates, P.O. Box KIA 9563, Airport, Accra, Ghana, not later than 3.00 pm (GMT) on 24

th December, 2018.



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6. Unless otherwise instructed, the proxy will vote, or abstain from voting, at his or her discretion. On any motion to amend the above resolution, to propose an new resolution, to adjourn the Scheme Meeting, or on any other motion put to the Scheme Meeting (other than to approve the above resolution), the proxy will act at his/her/their discretion.



Starwin Products Limited (“Starwin”)

FORM OF PROXY

for use by Starwin Shareholders at the Extraordinary General Meeting

to be held on 27th December, 2018 at 9.30 am (GMT)

_________________________________________________________________________________________ FORM OF PROXY _________________________________________________________________________________________ I/We, (Note 1) ___________________________ of ____________________________ being the holder(s) of

Starwin Shares, hereby appoint the Chairman of the meeting (Note 2) ________________________________ as my/our proxy to act for me/us at the Extraordinary General Meeting (the “EGM”) to be held at the Ebenezer Presbyterian Church Hall, Osu, Accra, Ghana on the 27

th December, 2018 at 12.30 pm (GMT) (or, if later, immediately after the conclusion of the Scheme

Meeting) for the purpose of considering and, if thought fit, approving the proposed resolutions referred to in the notice convening such meeting. At the EGM (and every adjournment thereof), the proxy is to vote for me/us on my behalf for or against the resolutions to be proposed at the EGM (and at any adjournment thereof) as indicated below.

IMPORTANT: Please indicate with an “X” in the appropriate box opposite each resolution how


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you wish your vote to be cast (Note 7)

SPECIAL RESOLUTION FOR AGAINST

Resolution 1 – Approve the merger of Starwin with Dannex and Ayrton


Resolution 2 – Ordinary Resolution to approve the de-listing of Starwin from the Ghana Stock Exchange on the Effective Date


Resolution 3 – To authorise the Directors of Starwin to take all necessary steps and execute any documents necessary to give effect, complete and perfect the delisting and merger

Dated_______________________2018 Signature______________________________ (Note 3)

To facilitate arrangements for EGM, please tick here (without commitment on your part) if you propose to attend the EGM (having not appointed a proxy above) or if your proxy is to attend the Scheme Meeting on your behalf.

This form of proxy should be read in conjunction with the accompanying Merger Circular and Starwin Scheme Document, which contain important information regarding Ayrton, Starwin, Dannex, the Merged Company, Dannex Ayrton Starwin and the terms of the Merger.

Notes:


2. If any person other than the Chairman is to be appointed as proxy, strike out the words “the Chairman of the meeting”, add the name and address of the proxy preferred in the blank space provided and initial the alteration. The person to whom this proxy is given need not be a shareholder of Starwin but must attend the said meeting in person to represent you. Appointment of a proxy will not prevent a shareholder from attending and voting at the Scheme Meeting (or any adjournment thereof) in person.

3. In the case of joint shareholders, the vote of the senior who tenders a vote whether in person or by proxy will be accepted to the exclusion of the votes of the other joint shareholders. For this purpose, seniority is determined by the order in which the names stand in the Starwin Register in respect of the joint holding. In the case of a corporation, this proxy must be given under its common seal or be signed on its behalf by an attorney or officer duly authorised.

4. In order to be valid, this form of proxy and the power of attorney or other authority (if any) under which it is signed, or a copy of such authority certified notarially or in some other way approved by the directors of Starwin must be duly executed and deposited at the offices of NTHC Registrars, 18


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Gamel Abdul Nasser Avenue, Ringway Estates, P.O. Box KIA 9563, Airport, Accra, Ghana, not later than 3.00 pm (GMT) on 24

th December, 2018. FAILURE TO DEPOSIT THE FORM OF PROXY AS

REQUIRED WILL RESULT IN YOUR PROXY APPOINTMENT BEING INVALID.


6. Please indicate with an “X” how you wish your vote cast. Unless instructed, the proxy will vote, or abstain from voting, at his or her discretion. On any motion to amend the above resolutions, to propose a new resolution, to adjourn the EGM, or on any other motion put to the EGM (other than to approve the above resolutions), the proxy will act at his/her/their discretion.
