Corporate Governance practice of Square Pharmaceuticals Ltd.

Square Pharmaceuticals
Limited
Introduction
SQUARE Group of Companies is one of the most reputed and largest company in our country. After a
54 year long journey, it is a symbol in the business world of Bangladesh. But the journey was not easy.
The company met its downfall in more than one occasion. But because of the great leadership skill of
Mr. Samson H Chowdhury, the company overcame all its hindrance and finally became what it is today.
What started as a small pharmaceutical company expanded its branches and became a huge group of
company. They have several branches all over the country providing and distributing product and
services. Now-a-days they capture most of the market shares of our country. Square today is a
corporate giant active in divergent business and industrial fields. Its present unassailable status is the
outcome of its successful diversification whether related diversification or unrelated.
With a slow but strong progress, SQUARE Group of Companies became a legend in the business
world of Bangladesh. It is one of the most revenue generating company of Bangladesh. Currently they
have over 3500 employees working in the company. Providing best quality product and customer
satisfaction is their primary motto.

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Corporate Governance practice of Square Pharmaceuticals Ltd.

Picture: List of companies include in the Square Group

This paper focuses on the voluntary reporting on corporate governance of one of the largest business
group of Bangladesh Square Pharmaceuticals Ltd. Though reporting on corporate governance may
include both the financial and non-financial aspects. In this paper only the non-financial portion is
included. The SPL recently has started reporting on corporate governance under a separate heading
in the annual reports of their listed companies. This is not common practice in Bangladesh and
obviously a go-heading practice performed by any Bangladeshi business concern having a very few
predecessor in that respect.

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Corporate Governance practice of Square Pharmaceuticals Ltd.

Historical Background & Growth of the SPL

Square Pharmaceuticals Ltd. is the largest pharmaceuticals company of Bangladesh. It is a reputed
name in the pharmaceutical industry of Bangladesh for manufacturing quality medicines for more
than four decades. SPL made its debut in a humble way in 1958 from a small house of the village
Ataikola near Pabna.
The first proprietary medicine was introduced in 1959 under the name of Eastons Syrup when the
number of working people was 12, turnover was Tk. 55000, and occupied a floor space of 3000 sq.ft.
Mr. Samson H Chowdhury, the owner of the SPL transferred the newly established company to Pabna
where a few people were accepted as co-workers accumulate more capital for smooth operation of the
company. The first processed tablet was introduced in 1962 under the generic name Santonin. In the
next year the introduction of Pathedine injection accelerated the growth of the firm with a rapid
expansion of business turnover. In 1964, the annual turnover of the company rose to Tk. 1 million and
the Square Pharmaceuticals was converted into Private Limited Company.
The company continued to engage itself in manufacturing of both officials preparation and a range of
proprietary items. In the mean time the company had been on the lookout of an acquiring know-how
and expertise from outside for manufacturing and marketing of more sophisticated products through
joint venture and collaboration. The company took necessary steps in adopting a strategic plan to
expand its manufacturing facilities to produce wide range of essential items within the parameter of the
WHO (World Health Organization) recommendations.
This enabled the company to market a wide range of products to fill up the gap created by the new
drug policy in 1982, when turnover reached to Tk. 2240 million and number of people employed
increased to nearly 400. In 1985 Square become the market leader in pharmaceuticals sector. As a
pioneer SPL has been exporting its antibiotics and other products to UK, Singapore and other
countries since 1986. In I987, Square set up new factory to meet expanding market demand.

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Corporate Governance practice of Square Pharmaceuticals Ltd.

Corporate History
Year of Establishment (Initially as a Partnership)

1958

Incorporated as a Private Limited Company

1964

Technical Collaboration Agreement with Janssen Pharmaceuticals of Belgium :

1975

(A subsidiary of Johnson & Johnson International Ltd.)

Technical Collaboration Agreement with F.Hoffman-La Roche & Co. Ltd.

1984

Converted into Public Limited Company

1991

Stock Exchange Listing (Dhaka & Chittagong)

1995

Agreement with M/s. Bovis Lanvec Ltd. of UK for implementation of Dhaka Plant :

1996

Awarded ISO-9001 Certificate

1998

Business Lines

Manufacturing

and

Marketing

of

Pharmaceuticals Finished Products, Basic

Chemicals and Agro Vet Products
Authorized Capital

Paid-up Capital

(Tk. 432 Million)

Number of Employees

2,394

US$

16.99

Million

(Tk. 1,000 Million)

Vision
To see business as a means to the well-being of the investors, employees and the society at large,
leading to accretion of wealth through financial and moral gains as a part of the process of the human
civilization.

Mission
Their Mission is to provide quality & innovative healthcare relief for people, maintain stringently ethical
standard in business operation also ensuring benefit to the shareholders and other stakeholders.

Objective
Their objectives are to conduct transparent business operations within the legal & social frame work
with aims to attain the mission reflected by our vision.

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Corporate Governance practice of Square Pharmaceuticals Ltd.

SPL Management
Types of ownership:
SPL made its debut in 1958 as a Partnership Firm with four partners. Afterward with rapid expansion of
business turnover in 1964, SPL converted into a Private Limited Company. In 1994 SPL converted into
a Public Limited Company and floated public share with highest premium.

Board of Directors:
Mr. Samson H. Chowdhury

Chairman

Mr. Tapan Chowdhury

Managing Director

Dr. Kazi Harunur Rashid

Director

Mr. Samuel S. Chowdhury

Director

Mr. Anjan Chowdhury

Director

Mr. Kazi Iqbal Harun

Director

Mrs. Jahanara Chowdhury

Director

Management Committee:
Mr. Tapan Chowdhury

Managing Director

Dr. A. R. Q. Baksh

Member

Dr. Jibon Roy

Member

Mr. Muhammadul Haque

Member

Mr.Md. Kabir Reza, FCMA

Member

The Key Departments Of SPL

Product Management Department (PMD).

Sales Department.

Medical Services Department (MSD).

Accounts & finance Department.

Personal & Administration (PAD).

Information Technology (IT) Department.

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Corporate Governance practice of Square Pharmaceuticals Ltd.

International Marketing Department.

Marketing Supply Chain Management.

Technical Service Department (TSD).

Distribution Department.

Human Resource.

Share & Corporate Affairs.

Commercial.

Core Competitors
Square Pharmaceuticals Ltd. is the leading company in the pharmaceuticals industry for more than four
decades. It has been in the top position for a long time but it faces competition from many other
Pharmaceuticals industry. A list of SPL competitors are given below.

INCEPTA PHARMA.

BEXIMCO.

OPSONIN PHARMA.

ESKAYEF.

RENATA.

ACME.

Corporate Governance
Corporate governance is concerned with methods, laws and policies that direct, control and administer
important functions of corporation. In other words, corporate governance is a system by which
companies are directed and controlled. Typically it is being managed by principal stakeholders in a
corporation mainly the shareholders, management and the board of directors. It also specifies the
relations and the distribution of right and responsibilities among these stakeholders. This system spells

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Corporate Governance practice of Square Pharmaceuticals Ltd.

out the rules and procedures for decision making on corporate affairs, provides structure through which
the company objective are set, as well as the means of attaining and monitoring the performance of
those objectives. Different authors view the meaning of corporate governance differently. For example,
one School of thought describe Corporate governance as a 'system by which companies are directed
and controlled' (Cadbury Report, 1992). To another School view Corporate governance with the
'structures and processes for decision making, accountability, control and behavior at the governing
body' (Public accounts and Estimates Committee, 2002). To others 'corporate governance is about
finding ways to ensure effective decision making' (pound, 1995). But it must be kept in our mind that
the fundamental concern of corporate governance is to ensure the conditions whereby a firms
directors and managers are held accountable to capital providers for the use of assets.
Good corporate governance practices and its proper reporting to the owners from time to time can be a
way to deal with agency problem. But even a decade ago the owners of the business were not as
much concerned as they are today about corporate governance. It is because that the returns were
spectacular and they paid very little attention behind-the-scenes manner in which companies went
about their business. The goal of corporate governance is to ensure that the goals of the management
of the corporation are in line with the goals of the other majors stakeholders. This is important since by
ensuring that goals are aligned through system, other stakeholders are able to make sure that their
rights are protected and the corporation is working for maximizing shareholder value and fairness.
Square Pharmaceuticals Ltd. believes that corporate governance is key to its sustenance and
maintenance of effective corporate governance should be a key priority for the organization. Thats
why they strive for practicing good governance in every spare of activities.

Board Of Directors:
The board of directors are essentially the policy makers and they mostly oversight whether the
corporate objectives are being fulfilled in an efficient way or not. The board or the governing body is an
important element of an organization as it gives direction and exercise judgment in setting the
objectives and observing their implementation. But it should be clearly stated here that the board is not
liable for performing the day-to-day activities of an organization but it rely on management to manage
the corporation.

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Corporate Governance practice of Square Pharmaceuticals Ltd.

The Board or we can also say that the Top Management tier is the highest level of authority in the
organizational framework. The Board is responsible for overall control and supervision of the entire
affairs of company, strategic development of the company, primarily through strategic planning and
budgetary mechanisms. The board of Directors hold periodic meeting to resolve of policies and
strategies, recoding of decisions for implementation by Executive management.

In order to perform the tasks of the board in a proper way the powers can be delegated to several
board sub-committees. Establishing these sub-committees enhances the effectiveness of the nonexecutive directors. Square Pharmaceuticals Ltd. maintains some sub-committees like Remuneration
committee. They call this committee as Employment relations committee and under this committee
there are three sub-committee namely Remuneration committee, Work environment committee and
Employees welfare and Recreation committee.

Role & Responsibilities:

The main role of the Board of Directors which is the highest level of authority is to provide general
superintendence, oversee the operations and control the affairs of the company through appropriate
delegation and accountability processes via the lines of command. However the Board of Directors
hold the ultimate responsibility & accountability with due diligence for conducting the activities of the
company as per provisions of law in the interest of the shareholders, the stakeholders, the state and
the society. The Board of Directors in fulfillment of its responsibility hold periodic meetings at least
once a quarter and provide appropriate decisions to the Executive Management. Such meetings
usually consider operational performance, financial results, review of budgets, capital expenditure
proposals or new projects/divisions/product lines, procurement of funds by issue of shares or
borrowing, procurement of raw materials, plant & machinery, pricing of products/discounts, recruitment,
training and promotion of officers, approval of audited accounts and distribution of dividends and other
interest of the stakeholders including the employees and workers. The Board of Directors take special
care in designing and articulating productivity and compensation plans of employees and workers and
rewarding them appropriately on the basis of quality and quantity of performance as an incentive.
Board also remains responsible for removal of operational hazards to life and health of workers,
friendly environmental work condition and social relationship as demanded of good citizen in a country.

Relationship with Shareholders & Public:

The shareholders as owners are required to be provided with material information on the companys
operation half-yearly and annually, the latter at the AGM. They are also provided routine services by
the Company Secretary in matters of transfer of shares, replacement in case of loss or damage of

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shares, payment of dividends etc. The Board is however responsible to the public for publication of any
price sensitive information as per SEC regulation. A qualified Chartered Secretary is in charge for all
these responsibilities as Company Secretary.

Relationship with Government:

In its role on accountability to the government, the Board of Directors ensure payment of all dues to
government in the form of import duty, custom duty and port charges, VAT, Corporate Taxes and other
levies as and when they become due on the basis of actual operations and make sure to avoid
corruption. This has enabled the company to enhance its contribution to the National Exchequer on a
progressive rate year after year.

Relationship with Financers/Bankers:

The Board oversees the financial transactions and ensures to meet companys commitments to the
lenders without default. This has resulted in securing lower interest rates from them.

Relationship with Suppliers:

As the company has to import plant and machinery and almost all the raw materials from abroad it
maintains cordial and mutually beneficial interest with its international as well as local suppliers. This
has enabled the company to avoid any legal disputes in international/local courts and enhanced the
companys image as a good customer.

Executive Management:
The Managing Director heads the Executive Management. The Executive Management operates
through further delegations of authority at every echelon of the line management. The Executive
Management is responsible for preparation of segment plans for every profit centers with budgetary
targets for every items of goods & services and are held accountable for deficiencies with appreciation
for exceptional performance. These operations are carried out by the Executive Management through
series of committees, sub-committees, ad-hock committees, standing committees assisting the line
management.

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Corporate Governance practice of Square Pharmaceuticals Ltd.

Pillars Of Good Governance

Square Pharmaceuticals Ltd. practice good governance in every sphere of activities covering inter
alliance not being limited to, disclosure & reporting to shareholders holding AGM in time, distribution of
dividends and other benefits to shareholders, reporting of price sensitive information, acquisition of
share by insiders, recruitment & promotion of staff, procurement & supplies, sale of assets etc. all that
directly and indirectly affect the interest of concerned groups like the shareholders, the creditors,
suppliers, employees, government and the public in general.

Participation:

It is not possible for all stakeholders to participate in the AGM or

decision making meetings but SPL make sure that most of the representatives of the
stakeholders group are present in the half-yearly and annually AGM meetings.

Accountability:

Accountability is for the safeguarding the interests of all the

stakeholders and the investors in the organization. Every business in SPL is modeled in a way
that enables the management to ensure highest degree of both financial and behavioral
accountability. Like other companies SPL is accountable to its stakeholders as well as to the
government. If any stakeholder need information the company provide it to them. Sometimes
SPL provide free tours of their factory for the stakeholders. SPL also pay high tax to the
government. National Board Of Revenue awarded VIP status to SPL for becoming the highest
taxpaying Public Limited Pharmaceutical Company of Bangladesh.

Responsiveness:

How you response when the employees of the company is in a

difficult situation or how fast you response. SPL provide salaries, compensation package &
other benefits to their workers. Details about it are given below.

WORK FORCE:
Square Concern

CHQ
Exe

Pharmaceuticals

151

Factory

Field

Non-Exe

Exe

Non-Exe

Exe

Non-Exe

179

120

1250

726

723

BENEFITS TO EMPLOYEES:

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Total
3358

Corporate Governance practice of Square Pharmaceuticals Ltd.

SL

Financial Benefits

Non-Financial Benefits

5 Bonuses

Job Enrichment

Profit Share

Participation in decision making

Special Increment & Regular Increment

Refreshment for shift workers

Leave Encashment

Lunch Facility

LFA

Job Rotation

Medical Facilities

Learning facility

Gratuity

Loan facility

Group Insurance

Easy communication with management

Technical Support

10

Study Leave

Transparency:

Transparency & business ethics is the core value of SPL and it is

strictly followed at every step of the business processes. It follows the ethical standard which is
"Business should work against corruption in all its forms, including extortion and bribery".

It

provide information about company's profit-loss, major decisions, share price, dividend payment,
major performances of the board and the management in the annual financial report. The board is
trying to make the company as much transparent as possible.

Efficiency:

SPL with its progressive business outlook believes and practices corporate

work culture with a classic blend of efficiency and equity. SPL believes in company growth by
increasing efficiency level of employees and for that offering excellent environment and support
for skill and knowledge up gradation.

Protects Interest of the Stakeholders

Square Pharmaceuticals Ltd. owe to its shareholders and strive for protection of their capital as
well as ensure highest return and growth of their assets.

SPL strive for best compensation to all the employees who constitute the back-bone of the
management and operational strength of the company through a pay-package composing
salary, allowances, bonus, profit participation, leave salary and superannuation & retirement
benefits.

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Corporate Governance practice of Square Pharmaceuticals Ltd.

SPL strive for best co-operation of the creditors & debtors, the banks & financial institutions
who provide financial support when it needs them, the suppliers of raw materials & suppliers
who offer it at the best prices, the providers of utilities-power, gas & water etc. and the
customers who buy its products & services by redeeming their claim in time by making prompt
payment and by distributing proper product on due dates.

Corporate Social Responsibilities

Corporate Social Responsibility (CSR) is the continuing commitment by business to behave ethically
and contribute to economic development while improving the quality of life of the workforce and their
families as well as of the local community and society at large. SPL's activity goes well beyond the
sphere of business. As socially conscious and responsible corporate body SPL is committed to the
improvement of the society as a whole. It helps many NGO's in their effort to make available
healthcare to the disadvantage population of the country. It sponsors programs to build awareness on
the healthcare need. SPL is also a major sponsor of sporting events in the country.
SPL is proud to be a Bangladeshi Company actively involved in various field of Corporate Social
Responsibility.

Social Responsibilities Of Square Pharmaceuticals

Ltd.:
Square Pharmaceuticals Ltd. is a part of social system. It cannot exist without social support. Different
social groups are:

Investors.

Customers.

Employees.

Suppliers.

Government.

Community.

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Corporate Governance practice of Square Pharmaceuticals Ltd.

Nation.

All of those above types of parties get some service from SPL. They are:

Social responsibilities to the investors:

SPL has a huge range of

investment. Most of the investments are well known to all. Therefore, it is safe to invest with them in
their investment. It will be more profitable for all. In addition, the capital will remain safe. People who
invest in share of SPL in the stock exchange can make a proper use of their untapped wealth and
expand their range of business. The responsibilities of SPL to the investors are:

Fair return.

Conduct the business profitable.

Expand the business.

Best use of resources, etc.

Social responsibilities to customers: SPL

always make their main goal is to

satisfy the customers. They keep this matter in the top of their head. They are always providing high
quality products in the markets for the customers. They also keep the range of the price of the
products in a reasonable rate so every level of people can have it. Besides this they are always

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making investigations to meet the demands of the customers. The responsibilities of SPL to the
customers are:

Considering the customers as essence.

Provide high qualities of goods at fair prices.

To make the goods available.

Meeting customers satisfaction.

Conducting research and development work.

Attention to customers welfare, etc.

Social responsibilities to the employees:

SPL has a huge range of work

force. They provide sufficient wages to the employees. Fulfill their social, economical and physiological
needs and demands. Maintain a very effective labor management relation system. SPL has a very
good and favorable working environment. There isnt any political harassment or groping problems.
The employees can work freely. SPL provide some very useful training facilities to their employees.
Their Training & Development enables their people to enhance their skills and keep them updated with
recent changes. They offer both on-the-job and off-the- job at both theoretical and practical training
opportunities through a range of Local, Regional and International Training programs. The
responsibilities of SPL to the employees are:

Treat employees with respect and dignity.

Reasonable and fair wages.

Providing training facilities.

Creating favorable working environment.

Ensuring job security.

To meet their social, economic and physiological needs.

Maintain good labor management relation.

Improving living standard qualities of workers life.

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Corporate Governance practice of Square Pharmaceuticals Ltd.

Providing promotional opportunities.

Social responsibilities to the suppliers: Suppliers are very important part of

the business. They provide the raw materials of the product. If the suppliers didn't provide the raw
materials on time then the product producing time will be delayed. SPL maintain good relationship with
all their suppliers. The responsibilities of SPL to the suppliers are:

To repay the claims timely.

Fair dealings.

Gain their confidence.

Behave cordially.

Social responsibilities to the government: SPL is one of the most leading

business organization in the country. They are doing their business activities by the rules and the
regulations of the country. They have a huge business range. They are earning a huge profit every
year and on this profit they are giving a huge number of tax every year. National Board Of Revenue
awarded VIP status to SPL for becoming the highest taxpaying Public Limited Pharmaceutical
Company of Bangladesh. So, the government also getting service. Beside this they are helping the
government by supplying many useful information to make important decision for the country. The
responsibilities of SPL to the government are:

Maintaining the rules and regulations of the country.

Payment of taxes.

Ensuring social and state security.

Supply government with relevant information.

Social responsibilities to the community:

SPL is creating a huge scope of

employment opportunity every year. Today a large number of the civilizations are working under this
organization. Therefore, it is reducing the unemployment. They also are looking after the environment.
They are following such ways so that the environment will not be polluted. They are making people
awareness to keep the environment safe. Besides all this responsibilities, they also operate many

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other social activities like organizing sports and organize many social programs. The responsibilities
of SPL to the community are:

Creating employment opportunity.

Conducting resources and development work in order to increase and quantity of

goods.

Increase productivity.

Protecting environment from pollution.

Eliminate social injustice.

Comply with government rules and regulations.

Social responsibilities to the nation: SPL is gaining a huge number of foreign

currency every year for the nation. Thus, they are increasing the total wealth of the nation. They are
ready to help the deserter affected people at any time. They are doing their activities all over the
country and always trying to reduce the waste of wealth. The responsibilities of SPL to the nation are:

Reducing wastes of natural resources.

Maintaining national integrity.

Donate to the natural calamity.

Increasing national wealth.

Environment and Culture

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Corporate Governance practice of Square Pharmaceuticals Ltd.

Every organization has its own organizational culture. SPL also has its own environment and culture. 33
percent of the respondents are highly satisfied in term of organizational culture and environment of the
company and 25 percent is satisfied. However, 17 percent of the entire respondents are somehow
satisfied and not satisfied in term of the present organizational environment and culture in the department.
Only 8 percent of them are dissatisfied with it.

Conclusion

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Corporate Governance practice of Square Pharmaceuticals Ltd.

Therefore, we can say that Square Pharmaceuticals Ltd. is playing a very vital role in the economy
development, social development, creating employment, working for the disaster affected people, and
many other useful activities for the nation. They are helping the government by working with them to
hand to hand and paying a huge amount of tax yearly. They are creating profitable opportunities for the
investors. They are satisfying the customers by their consumers products both in domestic and
abroad. They are incoming a large number of foreign currency for the nation. They are looking after the
environment by following certain rules and regulations of the government. So, instate of their little
limitations Square Pharmaceuticals Ltd. is still playing a major role to serve the society and the nation.
However, SPL is not concerned only on the quality of the product and the reputation of the company
but they are also concerned about the methods, laws and policies that direct, control and administer
important functions of corporation (Corporate Governance), concerned about the shareholders and
other stakeholders and also the satisfaction level of their employees for better improvement, higher
productivity as well as to produce quality product by providing different types of benefits and facilities.
Square Pharmaceuticals Ltd. believes that effective corporate governance should be a key priority for
the organization. Thats why they strive for practicing good governance in every spare of activities.
However, from the research paper it is found that SPL practice good corporate governance through
encouraging stakeholders to participate in the annual AGM meeting, share all relevant information with
the shareholders and also take views from them, protect the interest of the stakeholders, try to be
more accountable and transparent.
It is not possible for a company in Bangladesh to become 100% perfect. So there are some lacking.
But though these lacking most of the stakeholders are satisfied with the facilities giving to them by
SPL. Only few factors are not able to satisfy them.
Through the research paper it is clear that Square Pharmaceutical Limited's ultimate goal of corporate
governance is peoples welfare through better service delivery on sustained basis.

Reference

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Corporate Governance practice of Square Pharmaceuticals Ltd.

1. Lectures & Class slides of Dr. Zahurul Alam.
2. www.squarepharma.com.bd
3. www.thesquaregroup.com
4. http://en.wikipedia.org/wiki/Square_Pharmaceuticals
5.www.corporatebangladesh.net/index.php/top-corporate-groups/square-group-of-companies
6. http://en.wikipedia.org/wiki/Corporate_governance
7. www.squarepharma.com.bd/financial.../spl_annual-report_11-12.pdf
8. http://www.squarepharma.com.bd/corporate-social-responsibility.php
9. Robert Wearing. Cases in Corporate Governance.

The End

The
The End
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