HALAGEL PLANT (M) SDN. BHD.

BUSINESS PLAN Proposed JV for Hard Capsule a!"or#.

1. EXECUTIVE SUMMARY
Halagel Plant (M) Sdn Bhd a 100% subsidiary of Halagel (M) Sdn Bhd was established in order to provide the Muslim community locally and worldwide with a halal range of hard gelatin capsules and softgels !his was done in order to establish Malaysia as a country with a fully 100% Muslim owned" managed and operated company producing both empty Hard #elatin capsules and soft$gels Based on e%perience gained since the year &00'" Halagel (lant has determined that production of hard capsules in view of its initial high investment costs and technology and s)ills re*uired should preferably only be ventured into when it has been decided from the outset to embar) into mass production in order to ta)e advantage of the economics of scale Malaysia at present imports almost all of its empty hard capsule re*uirements+ and the doors into this segment of the mar)et alone is almost fully open for domestic manufacturers ,n addition" there is an increasing demand both in Malaysia and worldwide for genuine halal empty hard capsule shells ,t is based on this premise that we ma)e the following proposal for a separate new stand$alone company to concentrate fully and wholly on producing halal empty hard capsules for sale in the Malaysian and international mar)et -ith halal awareness growing globally and with Malaysia.s strategic halal hub advantages" this new venture should be able to grow at an e%ponential rate if managed carefully

/ote + According to MITI, Malaysian consumption of empty hard capsules is about 3.6 billion per annum and 100% of these capsules are imported and non halal

2. PROPOSED CAPITA STRUCTURE A. STRUCTURE SHAREHO DI!" Malaysian 0oreign Bumiputera ,ndian !echnology (artner /o of Shares % '0 % 10 %

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-. THE PROPOSED PRO.ECT

PRO.ECT OB.ECTIVES / DESCRIPTIO! !he proEect obEective is to establish a manufacturing plant to produce high *uality halal empty Hard #elatin capsules of various siFes" colors and printed as per mar)et re*uirements 2mpty Hard #elatin capsules consists of two$piece body and cap hard shells made from halal gelatin G a collagen derived from animal bones and s)in procured from halal sources to meet the highest international standards and specifications !his two piece hard capsule shells are the preferred medicinal dosage form in use today and for the foreseeable future !his is due to various reasons including adaptability of use with various fillings" end customer preference" ease of dosage measurement and bul) filling production !he proposed proEect is to setup a factory with an initial total of @ hard capsule production lines capable of a further future e%pansion by an additional & to 9 more production lines !he factory will initially be set up with 9 new hard capsule ma)ing machines in stages as soon as the machines are ready for delivery and at the same time arrangements will be made to transfer and install & units of e%isting hard capsule ma)ing machines from Halagel (lant together with all related accessories to the new proposed factory site ,t is envisaged that in order to accommodate this initial @ machines and the future 9 machines a total of >000 s*uare meters of factory floor space would be re*uired e%cluding wor)shop and storage area facilities for raw materials and finished goods !he budget for the first stage will consist of 1; (urchase D shipment cost of 9 units new hard capsule ma)ing machines" & units printing machines" gelatin mi%ers with sufficient capacity for continuous operation of this 9 machines and all other accessories" tan)s" e*uipment etc" etc re*uired for their

operation Since this machines are obtained from overseas ta%ation costs and fore% rates will also have to be ta)en into account 5; 2*uipment supplied by Safrroys G consisting of 9 units S0B$C01 0S' H 9 units drying hood H 9 units cyclone H @ sets dipping baths H 9 units presorters H 9 sets pin bars(' pin) H &9 units tan)s H & lot spares H & sets printing machines !otal 8ost < ISJ K1"CAA"C00 H >% e%cess ? ISJ K&"0AA"19> !a% at 10%< ISJ K@&@">09 Shipping 8ost< BM 1>0"000 00 8ommissioning D ,nstallation 8osts< ISJ K100"000 H BM @0"000 (6ocal 8osts) !otal 8ost :ISJ to BM rate of 1 111; ? BM C"0&A"C&& 00 B; 2*uipment supplied by others G consisting of gelatin mi%ers" homogeniFer mi%ers" fume cupboards" sorting tables" capsule measuring e*uipment" lab e*uipment and other small au%iliaries !otal 8ost< BM '00"000 00 T$tal C$(t Ite0 !$.11 RM 234253222.66

&; 8ivil wor)s re*uired to construct the production area and other areas including production rooms" mi%ing rooms" sorting and printing areas" washing rooms" raw material and finished goods storage and day use areas" laboratory etc" etc :0or @ machines with allowance made for easy e%pansion for a further 9 units; T$tal C$(t Ite0 !$.21 RM 237663666.66

1; 2lectrical wor)s and cabling for all areas and e*uipment :5gain for @ machines with allowance made for easy e%pansion for a further 9 units; T$tal C$(t Ite0 !$.#1 RM 137663666.66

9; Itilities and au%iliary machinery inclusive of main air conditioning chiller" boiler" hot water heaters" air compressors inclusive of all related piping :Main chiller preferably siFed for 9 machines while boilers and air compressors might be siFed for 10 machines; T$tal C$(t Ite0 !$.-1 RM 235663666.66

>; 8omplete 3athabar humidity control system for @ machines with easy e%pansion allowed for a further 9 machines 3athabar System for & machines< ISJ K&11"1@0 3athabar System for @ machines< ISJ K@90"0A0 Shipping 8ost< BM >0"000 !a%ation at 10%< ISJ K1C&"0&9 8urrency D ,nflation 2%cess at >%< ISJ K1&"009 !otal ISJ 8ost< ISJ KA@9"10A L 1 111 ? BM &"'0'"&>1 T$tal C$(t Ite0 !$.71 RM 234753666.66

@; (urchase" transport and re$installation costs of e%isting & machines with all au%iliaries from Halagel (lant Sdn Bhd T$tal C$(t Ite0 !$.81 RM -32663666.66

'; 2*uipment costs for wor)shop" laboratory" administrative office and storage 7 pac)aging facilities and waste water treatment facility T$tal C$(t Ite0 !$.41 RM 8663666.66 TOTA ESTIMATED I!ITIA CAPITA COST1 RM 2-36583222.66

MO!TH Y OPERATI!" COSTS 1 a) Staff -ages < BM &09"000 00 (1&1 staff) b) 2lectricity < BM 9>"000 00 c) -ater < BM @"000 00 d) Jiesel < BM 1@"000 00 e) 0actory Bental < BM 1>"000 00 f) Baw Materials < BM 9&>"000 00 T$tal M$nthl& C$(t(1 RM 4713666.66

"RA!D TOTA PRO.ECT COST1

a) ,nitial 8apital 8ost < BM &9"0A@"C&& 00 b) =perating 8osts 0or 0irst @ months of operations < BM 9">0@"000 00 c) (roEect 8onsultant 8osts at >% < BM 1"&0>"000 00 d) 8ontingency 8osts D 2%penses at 1>% < BM 1"@19"000 00 T$tal A0$)nt Re9),%ed +$% P%$:e*t In;e(t0ent 1 RM ##3-113222.66 MO!TH Y CAPSU E OUTPUT a) 0or the 9 new machines output is given as 1 > million capsules per machine daily on continuous basis 5lthough we e%pect to achieve this figure" as a precaution output is ta)en as 1 1 million capsules per machine per day for &@ wor)ing days per month !herefore total output for 9 new machines per month ? 11> & million capsules b) 0or & older machines output is ta)en as '00"000 capsules per machine per day !herefore total output for & old machines per month ? 1@ 9 million capsules T$tal M$nthl& Ca<()le O)t<)t1 14138663666 *a<()le( Yea%l& O)t<)t1 2367232663666 *a<()le(

!a)ing an average sales price of BM C per 1000 unprinted capsules" the above output gives a possible monthly sales figure of BM 1" >99"900 00 Based on costing calculations for hard capsule production :e%cluding initial investment costs;" the cost of production :Baw Material" Itilities" Staff -ages" 0actory Bental; per 1000 capsules is below BM >M giving an operating profit of at least BM 9 per 1000 capsules sold if the sale price is at BM C per 1000 capsules !his gives an estimated minimum operating profit monthly for the proposed capsule plant of BM 'C1"900 00 once the plant is operating at full normal capacity with the initial investment costs recovered in a period of 91 months of full operations and sales

7. DETAI S O+ PROPOSED A"REEME!T =ITH TECH!O O"Y PROVIDER

Safrroys Machines (vt 6td was established in 1C'@ to manufacture precision machinery and components ,n 1C'C the company started designing and developing 5utomatic 8apsule Machines and the first machine was completed in 1CA> Since 1CAC they have specialiFed solely in the manufacture of Hard #elatine 8apsule ma)ing machines and accessories !hey have also done complete turn)ey proEects and provide assistance from factory layout as per -H= and c#M( guidelines to final production of *uality capsules at customer.s site 5lthough Safrroy.s has decades of e%perience in manufacturing hard capsule machines and its operations" as of to date they have not ventured into capsule production themselves in the belief that it will be a conflict of interest to compete with their own clients and also due to the intense competition in the ,ndian capsule mar)et 5t present however they have indicated to us that they are prepared to do so in a foreign venture on terms that will have to be negotiated and agreed upon Based on Halagel.s past e%perience" we believe that it is essential for pioneer capsule producers to have the re*uired technical bac)up in operations and maintenance of capsule ma)ing machines to ensure long term stable plant operation and it is based on this that we propose a Eoint venture to be mutually agreed upon with Safrroys ,n this regard too" we believe that Safrroys is an ideal business partner for the proposed proEect since besides plant operations and maintenance they can act as consultants for the entire proEect on a turn)ey basis 8ontact Jetails of (roposed !echnology (artner< Safrroys Machines (rivate 6imited &17&5" #ora 8hand Boad" 3ol)ata '00019" ,ndia

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8. MA!U+ACTURI!" O+ HA A HARD "E ATI! CAPSU E

DESCRIPTIO! O+ TECH!O O"Y 1. Te*hn$l$g& Ba*>g%$)nd Hard gelatin capsule manufacturing is neither a pharmaceutical nor a sterile operation ,t is an operation of which products" hard gelatin capsules" are basically a pac)aging material for the pharmaceutical industries where the final filling material is encapsulated in and the final product is pac)aged to be delivered to the end users Manufacturing of two$piece empty halal hard gelatin capsules re*uires great commitment in terms of investment" )nowledge" high s)ills" competence and discipline Machineries used are comparatively modern high tech e*uipment housed in an appropriate building with all necessary facilities !his is a clean and respected industry wor)ing &9 hour a day"' day a wee)" 110 days a year operation which implies tight and precise schedules based on precise procedures

2. P%$*e(( De(*%,<t,$n Ra? Mate%,al( Halal (harmaceutical #elatin is the basic starting material which has to be melted and blended with other raw materials such as J,$water" edible dyes" plasticiFer" titanium dio%ide" preservatives etc of prOcised temperature and humidity Ca<()le P%$d)*t,$n ,t is a semi automated production line involving a chain of processes including dipping" drying" precision trimming" stripping and Eoining in a controlled environment

!he Eoined capsules are then subEected to inspection and sorting followed by printing (if re*uired) "pac)ing " steriliFing and cartoning Stringent Pin$process *uality control monitoring is carried out. throughout the manufacturing process to adhere to the specified pharmaceutical specifications 0ull process documentation and validation has to be carried out to fulfill all aspects of worldwide c#M( compliance status

#. Te*hn$l$g& Stage !he proposed Hard 8apsule (roEect is a commercial investment in a manufacturing facility to meet sophisticated pharmaceutical demand asides from meeting halal alternative demand in pharmaceutical products for a growing customer base who are more conscious of the products that they consume -. Te*hn$l$g& A<<l,*at,$n( (roviding Halal 2mpty #elatin 8apsules for pharmaceutical industries locally and worldwide #elatin capsules are the preferred pharmaceutical dosage form for pac)aging of antibiotics" potent analgesics" medicines and most dried herbal preparations 7. Te*hn$l$g& Ad;antage and ,'e*&*le Halal #elatin 8apsule Manufacturing is an e%clusive industry for a committed business organiFation 4uality and confidence have to be continuously instilled to every level of the organiFation to ensure a niche margin in the competitive nature of gelatin capsule business !he life e%pectancy for the Hard 8apsule industry is e%pected to remain unchanged for the few decades at the minimum as this form of innovative capsule pac)aging has yet to face any significant alternative competitor

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4. MAR@ET A!D BUSI!ESS ASPECTS

A. MAR@ET A!A YSIS ,t is estimated that the mar)et siFe for 2mpty Hard #elatin capsules in Malaysia is 9 0 billion capsules per annum !he mar)et siFe for traditional and health food products is about 1 billion capsules whereas for pharmaceutical products it is about 1 billion capsules per annum (see chart below) !he proposed proEect as per this document can yield about & billion capsules per annum

MAR KET SIZE OF CAP SU LE U SAGE IN MALAY SIA (T ota l usa ge : 4 b ll o! "#s "e $ a !!u%&

Traditional & Health Food products 25%

Pharmaceutical products 75%

B. MAR@ET STRATE"Y !he 2mpty Hard #elatin 8apsules produced will be mar)eted as a halal alternative product to traditional and health food products manufacturers and to pharmaceutical companies in Malaysia and around the world C. MAR@ET SUCCES +ACTOR 5rrangements for auditing by S53,M and certification by them can ensure that the hard capsules produced at the proposed plant are recogniFed as fully halal to prospective customers -ith the establishment of the proEect" we will become the one of the first 100% Muslim managed company in Malaysia to produce these halal hard capsules D. I!TE!DED MAR@ET !o supply to current Halagel customers who consume about 1A million capsules per month !he *uantity of usage of these customers will increase gradually as capsule availability is assured at reasonable prices !o supply to maEor pharmaceutical companies who consume about 100 million capsules per month !o supply to overseas companies e g S25 D Middle 2ast countries

E. CURRE!T OCA / " OBA P AYERS 6ocal players < #lobal players < /asmir Hard #elatin 8apsule Sdn Bhd 8apsugel" 4ualicaps" #lobal 8apsules" Medicaps 6td etc