Business Plan

Executive Summary

Company Summary

Product and Technology

Market Research

Marketing Plan

Financial Projection

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2

3

4

5

6

Fly Ash Bricks Manufacturing

Appendix7

Contents

1.0 Executive Summary 4

ı 1.1 Keys to Success 5

2.0 Company Summary 6

ı 2.1 Company Ownership 6

ı 2.2 Company History 7

ı 2.3.1 Company Facilities 8

ı 2.3.2 Company Intellectual Properties 8

3.0 Products and Technology 10

ı 3.1 Product Overview 10

ı 3.2 Technology Overview 10

ı 3.3 Fly Ash Brick 11

ı 3.4 Competitive Advantage 12

ı 3.5 Product Sample 14

4.0 Market Research 16

ı 4.1 Industry Analysis 16

ı 4.2 Market Analysis 18

ı 4.3 Target Market 20

ı 4.4 Market Characteristic 21

5.0 Marketing Plan 22

ı 5.1 Marketing Segmentation and Positioning 22

ı 5.2 Marketing Mix 22

ı 5.3 Prospective Customer 23

6.0 Financial Projection 24

ı 6.1 Pro Forma Income Statement 25

7.0 Appendix 26

Executive Summary4

1.0 Executive Summary

In the recent years, Vietnam has become an attractive destination for foreign infrastructure and construction companies due to its high economic growth, sustained urbanization, and rapid industrialization. The rise of construction sector has created increasing demand for brick and other building materials. However, the production and consumption of baked clay bricks have been under the scrutiny of environmentalists and the government due to it negative impact on the environment such as soil erosion, deforestation, and emission.

With over 20 years of experience in researching and developing building materials, TrungHau Ltd. had foreseen a potential demand for a cleaner, cheaper, yet more reliable type of brick that can be substituted for traditional clay bricks. Thus, in 2010, Trung Hau Ltd. launched its research project on non-baked materials and successfully invented fly ash brick using Trung Hau’s Hydraulic Technology in 2016. This advanced technology will allow TrungHau to gain a competitive edge over its rivals in the brick industry due to the superiority in size, shape, weight, physical and chemical characteristics of the fly ash brick.

As an effort to enter the construction market in Ho Chi Minh City, Vietnam, Trung Hau will launch its first fly ash manufacturing factory in November 2016. With an initial designed capacity of 40 million blocks, Trung Hau Ltd. plans to upgrade its factory’s total capacity to 550 million blocks after 5 years in order to adequately meet the expected market demand of over 2.8 billion blocks in 2020.

The factory will be located in Tan Uyen District, Binh Duong Provinces, Vietnam. This ideal location is only 35 miles away from Saigon, and is within 100 miles away from all of the input sources.

In order to finance for Tan Uyen Project, Trung Hau Ltd. is seeking to sell 30% stake of factory at $6.75 million dollars in order to fund for the investment and future expansion of the project.

Given the advanced technology, stable demand, and strategic location, this is a rare, one-of-a-kind opportunity not to be missed.

5

1.1 Keys to Success

“Must gain access to high quality inputs such as fly ash, cement, and sand in close proximity”

“Must take advantage of the abundance of waste aggregate materials to produce low cost, high quality, and environmental friendly products to enhance profit margin.”

“Must optimize productive capacity utilization of plant and equipment.”

“Must establish a tight quality control process to ensure uniform quality product.”

“Must quickly adopt new technology to keep abreast of technological advances and update machinery.”

“Must strategically locate factory in proximity to key construction sites and industrial facilities.”

“Must aggressively increase market share and growth in the construction material manufacturing industry.”

“Must efficiently distribute product to the market in order to reduce as much damage as possible.”

Company Summary6

2.0 Company Summary

TrungHau Ltd. is a science and technology enterprise which is managed by three executives representing technology, marketing and finance. These executives bring to the company a large degree of experience in the brick and equipment manufacturing industry. They perceived an opportunity to acquire a significant amount of market share by inventing unprecedented technology in concrete brick manufacturing industry and by creating products with better physical and chemical characteristics than their competitors. The company is organized as a closely-held corporation with a majority of the shares held by the three principal executives.

The company will be seeking to raise $6.75 million dollars from private investors for brick manufacturing purposes. The company will have one manufacturing facility of 1 hectare (2.47 acres) in Tan Uyen District, Binh Duong, Vietnam.

2.1 Company Ownership

The company is a closely-held corporation with three principal shareholders who will form the Board of Directors. The principal owners will seek to retain the majority of the company’s stock for the foreseeable future.

Director of External RelationsMr. Henry Leong

Director of TechnologyMr. Nghia Tran

General ManagerMr. Hiep Huynh

Mr. Huynh joint TrungHau Ltd. as a General Manager and as a major shareholder. Graduated from the Military Science Academy with a degree in Public Management, Mr. Huynh had dedicated more than 30 years of his life serving in the military before he retired as a Senior Colonel. Over the years of working as a military officer, Mr. Huynh had established strong connection with both the Central and the Local Government of Vietnam. Besides a career in military, Mr. Huynh is the founder of Mang Den Corporation, a leisure and hospitality corporation located in Central Highland of Vietnam. In addition, he also serves as a Senior Strategic Consultant and a Founding Shareholder of Viet CEO Corporation, RICO Feed Corporation, and Anco Family Food.

Mr. Leong is a major shareholder of TrungHau Ltd. and an experienced business executive with a focus on capital transactions and cross‐border joint‐venture relationships between the Asia‐Pacific region and the U.S. He graduated from University of California Berkeley with a degree in Oriental Languages and entered the securities business, where he began as a financial consultant with First Investors Corporation. For more than a decade he worked in investment banking and private client services successively with major national and international securities firms such as Dreyfus Financial Services, Charles Schwab, Oppenheimer and Morgan Stanley. Mr. Leong subsequently founded Vietbridge Capital Corp. to accelerate economic development in Vietnam.

Mr. Tran is the founder of TrungHau Private Enterprise and a major shareholder of TrungHau Ltd. He graduated from Ho Chi Minh University of Technology with a degree in Mechanical Engineering. Mr. Tran has more than 30 years of experience in Research and Development of automation machinery system with renowned inventions such as 3D-Construction Panel Manufacturing System, Lightweight Foam Concrete Brick Manufacturing System, Cement-Aggregate Brick Manufacturing System and Production Procedure for Inorganic Polymer Cement from Red Mud.

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2.2 Company History

Company Summary8

2.3.1 Company Facilities

The company has one office currently located in District 8, Ho Chi Minh City, Vietnam. The company is in the process of relocating to a new office in downtown of Ho Chi Minh City.

TrungHau’s machinery manufacturing factory is located in Binh Tan District, Ho Chi Minh city, Vietnam. This 5000 square feet facility is currently used for the purpose of manufacturing brick making machines.

TrungHau recently signed a long-term lease agreement to rent 2.47 acres of land and facilities in Tan Uyen District, Binh Duong Province, Vietnam. This will be the company’s first brick manufacturing factory in the South East Region of Vietnam. The project is expected to close the shortage of non-baked bricks in Ho Chi Minh’s construction market. The first phase of project is designed with a capacity of 40 million blocks per year. The first brick is expected to be on the market in January of 2017.

2.3.2 Company Intellectual Properties

TrungHau currently owns these properties:

1. Patent for Hollow Cement Concrete Bricks.

2. Patent for Inorganic Polymer Cement from Red Mud and Its Production Procedure.

3. Patent for Seawall Concrete Block (Patent Pending).

4. Fly Ash Brick Making Machinery Technology.

9

Products and Technology10

3.0 Products and Technology

3.1 Product Overview

Aims to provide a technology that is environmental friendly, with all materials available locally, and produce high quality products at a competitive price with clay bricks. A new generation of construction material is created that inherits characteristics, culture and the usage of traditional clay bricks.

Combining inorganic polymer synthesis and organic polymer in a sealed process of mineralization forms a polymer-mineral aggregate. The main ingredients are sand, highly reactive minerals, cement, additives organic polymer additives made of foam and active inorganic additives to achieve early crystallization. The production process is not using heat drying. The product reaches desirable compression strength and are ready to dispatch within 7 days.

Process of TrungHau’s Brick Production

3.2 Technology Overview

The materials are available locally: cement (can use cement PC30) and sand or stone powder (waste rock during mining), or industrial waste (coal residue, fly ash), or solid waste construction (debris of all kinds).

The shape and size of the product is similar to clay-brick so it does not change the habits of the majority of people.

The product reaches the desireable strength and is ready to be put in use only 5-7 days after production, thus saving manufacturing and warehouse space.

Providing a new method building technology: the bricks can be held together with diluted cement, thus reducing the costs of mortar and build time at a rate of 3-4 times faster.

Electric wire and telephone wire can be easily inserted through holes in the bricks without cutting the wall due to the brick’s highly precise geometric shape.

Requires a small manufacturing space and a small number of workers (Production line of 10 million bricks / year only needs 5-6 workers).

All equipment is designed and manufactured domestically, thus creating jobs for the machinery processing sector.

Contributes to solving issues of environmental pollution, including treatment of solid waste in the industry, limiting greenhouse effect, and protection groundwater and agricultural land by decreasing exploitation of clay resources for clay brick production.

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3.3 Fly Ash Brick

Fly ash is one of the residues generated in the combustion of coal. Fly ash is generally captured from the chimneys of coal-fired power plants, and is one of two types of ash that jointly are known as coal ash; the other, bottom ash, is removed from the bottom of coal furnaces. Fly ash material solidifies while suspended in the exhaust gases and is collected by electrostatic precipitates or filter bags. Since the particles solidify while suspended in the exhaust gases, fly ash particles are generally spherical in shape and range in size from 0.5 µm to 100 µm.

Fly ash bricks are made up of fly ash, sand, lime and gypsum. In these bricks, fly ash is used as a primary filler and sand is added as a secondary filler. Cement is used as a binder, which helps in holding all the raw materials together.

With coal being one of the main sources of thermal electricity in Vietnam, the problem of fly ash disposal has assumed huge proportion as the annual production of fly ash in Vietnam has surpassed 15 million tones. Its increasing accumulation every year, causes severe environmental and health hazards around the thermal power plants. Fly ash is a versatile material and its pozzolanic properties, permit its use in various construction applications.

Power Thermal Plants in Vietnam

Characteristics of Fly Ash Bricks

• Available throughout the year.

• Hydraulic technolgy gives highly

uniform geometry shape to fly ash

products.

• Water absorption rate is similar

to clay brick.

• As light as traditional clay bricks.

• Saving agriculture land

resources.

• Durability of the bricks is

increasing with time.

Products and Technology12

3.4 Competitive Advantage

Since the 1960s, most of non-baked bricks that were manufactured from cement-aggregate started to become industrialized with vibration pressed technology. Although vibration pressed brick is a well-known alternation of clay brick, however, due to limitation of technology, vibration pressed brick is still possessed weaknesses when comparing with traditional clay brick.

TrungHau’s hydraulic pressed technology has resolved all the weaknesses of vibration pressed technology.

Comparison of TrungHau’s Hydraulic Technology and Vibration Technology

Characteristics Comparison of TrungHau’s Bricks and Clay Brick

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The Economic Advantage

Using our own invention into fly ash brick manufacturing helps saving initial investment (in machinery and technology); By targeting numerous power thermal plants in Mekong Delta region, the abundant of input material (Fly Ash) helps securing the output and market in the long run. In addition, using fly ash as main material helps lowering production cost, making our products more competitive to traditional bricks, along with fast return rate.

The Evironmental Advantage

By using fly ash as main input material, our technology joins a hand in solving environmental issues such as solving industrial solid waste, reducing CO2 emission, reducing the affect on human’s health during manufacturing process, protecting underground water source by reducing exploitation of clay source.

The Social Advantage

Our technology is manufactured domestically, therefore it creates more jobs for machinery processing industry. Moreover, our technology is in line with government’s strategy of developing non-baked construction material. With cement is one of the main input material, we also help to create more market for cement industry.

Products and Technology14

3.5 Product Sample

BRICK FROM CHIPPING STONES

BRICK FROM HILLY LAND

BRICK FROM SAND

15

BRICK FROM CONSTRUCTION DEBRIS

BRICK FROM SOFT STONE

BRICK FROM FLY ASH

Market Research16

4.0 Market Research

4.1 Industry Analysis

Compares to most industries, the impact of external influences on brick industries is relatively high. There are several key external drivers that shape the structure of brick industry:

Economic Factors

The brick industry is susceptible to the national economic performance and conditions. While the world’s largest emerging economies including Russia, Brazil and China falter, Vietnam’s steady economic growth is among the fastest-growing markets in the world 1

In 2015, Vietnam’s real GDP grew 6.7 percent, surpassed the target growth rate of 6.2 percent. The industry and construction sector, which contributed approximately 33 percent of GDP, was the primary driving force behind real GDP growth. The industry and construction sector grew 9.6 percent, contributing 3.2 percentage points to overall growth. 2

Bricks and other building materials are the backbones of the construction industry. The two most prominent markets for bricks are residential construction and non-residential construction. The Vietnam’s residential construction market, which consumes almost all domestically produced bricks, is expected to remain vibrant over the next five years, driven by especially high numbers of new housing starts in 2016 and 2017 . The acceleration of commercial construction over the period will also boost the demand for bricks. In Hanoi, 6,100 new units were launched in the past three months, a quarter-on-quarter increase of 19%. From the third quarter of 2016 to 2018, more than 35,000 units are expected to enter the market in the southern metropolis. 3

Environment Factors

With growing environmental consciousness at all levels of society, the pollution caused by the brick industry is under the scrutiny of environmentalists and the government.

According to a research by the Ministry of Construction’s Department of Building Materials, during the 2015- 2020 period, Vietnam will discharge 50-60 million tonnes of aggregate waste which potentially pollutes the environment. However, this waste can be employed in the production of non-baked bricks using TrungHau’s technology. As a result, more than 1000 hectares of agricultural land and landfill area will be saved.

1 Bloomberg

2 Deloitte

3 Asia News Monitor

Industry and construction growth in Vietnam Vietnam’s Growth Back To Levels Before Crisis

Market Research 17

Political and Legal Factors

The Government of Vietnam has taken steps in response to the growing concerns regarding the adverse impact of brick industries. New restrictions and regulations have been introduced on the setting up and operating of traditional, baked bricks. Cement-Aggregate brick manufacturing has been given the topmost priority by the Government of Vietnam

Decision No 15/2000/QD-BXD dated 24 July 2000 of the Ministry of Construction ban the traditional brick making production within the urban perimeter. The decision will take full effect in the entire country by 2017.

Decision 567/QD-TTg on the development program for non-baked building materials was signed on April 28, 2010 by the Prime Minister. According to the program, Vietnam is striving to use 23-25 percent of non-baked materials in 2015 and 30-40 percent in 2020. From 2011, construction works which have more than nine floors must use at least 30 percent of slight non-baked materials.

Decree 96/2010/ND-CP of the Government of Vietnam provided tax incentives for Science and Technology Enterprises. Accordingly, non-baked brick manufacturing companies can enjoy a 0% corporate tax rate for the first 4 years and a tax abatement of 50% for the next 9 years.

In April, 2012, the Prime Minister issued Directive No. 10/CT-TTg. The Directive aimed to boost use of unbaked building materials and restricted production and use of baked clay bricks.

Industry and construction growth in Vietnam

Market Research18

4.2 Market Analysis

Total domestic demand for bricks is approximately 26 billion blocks in 2015, and predicted to reach 30 billion blocks in 2020.

Brick Market Data 2015 - 2020 in Vietnam

Due to the lack of understanding about non-baked materials and the inadequate supply of non-baked bricks, currently baked brick is still dominated the market. However, there is a trend toward decreasing consumption of traditional brick and increasing consumption of non-baked bricks. Using evolving technology, new generation of non-baked bricks with outstanding features are expected to completely replace traditional clay hollow brick in the market by 2025.

According to The Ministry of Construction’s Department of Building Materials, in the first 2 quarters of 2016, all registered brick manufacturing units around the countries produced 8.7 billion traditional, baked bricks and only 2.64 billion non-baked bricks. The 2016 year-end total production of non-baked brick is forecasted to be at 5.5 billion bricks. This will not be sufficient to meet a forecasted demand of more than 6 billion bricks for the year of 2016.

Overall, demand for building materials has grown by 10% to 12% on average per year over the past five years. However, as the Government of Vietnam accelerates the process of substitution and complete replacement of traditional, baked bricks within the next decades, the demand for non baked materials will continue growing at a much higher rate.

The moderate barriers to entry make it relatively difficult for outsiders to enter the non-baked brick industry. Thus, the supply of non-baked materials is unlikely to cover the growth of demand, causing a shortage in the brick market in the next few years.

Market Segment of total demand of Cement-Aggregate Brick vs Clay Brick

Market Research 19

Market Research20

4.3 Target Market

The main target market of TrungHau will be construction market in Ho Chi Minh City. The city is a metropolitan area in South East Region of Vietnam. With a population of roughly 8.1 million people, the city’s GDP per capita in 2015 was approximately $5,500, which was more than double the national average in 2015.

For the past 5 years, Ho Chi Minh City experienced a phenomenal economic growth rate of about 10 percent annually. Though this economy is likely cooling down this year. With a projected 8 percent GDP increase, the southern business hub will still settle at 2 percentage point above the national GDP and outperform most of the country.

Ho Chi Minh City is also the only market in Vietnam, as of now, has the demand for non-baked bricks well exceed the demand for traditional clay bricks. One of the reason is because of the inadequate supply of the non-baked bricks. Rapid growth rate of the construction and housing market is another reason. New figures released by CBRE Vietnam showed 10,107 units were launched in Ho Chi Minh City in the second quarter of 2016, up 20% from the first quarter. From the third quarter of 2016 to 2018, more than 35,000 units are expected to enter the market in the southern metropolis. 1

1 Asia News Monitor

Ho Chi Minh City’s GDP Growth Rate

Market Research 21

4.4 Market Characteristic

Ho Chi Minh City’s relative wealth makes it an attractive entry point for TrungHau. Individual buyers in Ho Chi Minh City are quality and price conscious. Hence, this group of buyers tend to be willing to pay premium price for clean, high quality bricks. Other bulk buyers such as contractors, Government’s projects, commercial projects consider price, quality, and reliability in making purchase decision. Usually, large buyers expect special discount when buying bricks in large quantity orders.

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5.0 Marketing Plan

5.1 Market Segmentation and Positioning

Brick is a commodity product purchased by a broad section of consumers. TrungHau’s Fly ash bricks using innovative Hydraulic Technology will be of a uniform finish and shape. Hence, the company will target the upper segment of the market. These buyers are more conscious of quality. The company’s principal target segments will be the high value private residences, large non-residential projects, commercial projects, and projects using Government’s budget.

5.2 Marketing Mix

Product

TrungHau will focus on producing and selling non-baked, 4-hole hollow concrete brick due to the usage of customer in Southern region of Vietnam. However, the possibility of introducing non-baked, 2-hole hollow concrete brick and 6 hole- hollow concrete brick using similar Hydraulic Technology will also be looked into in the later years. The following features of fly ash will be fundamental to competition:

Light Weight

Uniform Geometry Shape

High Compression Strength

Water Absorption Rate is Similar to Clay Brick

Pricing Strategy

TrungHau’s fly ash brick will possess superior shape, weight, finish and quality compared to other products in the market. Also, with clean and environment friendly technology, fly ash brick will enjoy a market premium of 10% - 20%. Despite this fact, TrungHau will initially price its product at 9 cents/brick, compare to prevalent price of 10 cents/brick. This penetrating pricing strategy will allow TrungHau’s brick to rapidly capture the market share and to gain acceptability in the market.

Distribution strategy

Logistics and distribution arrangements will play a key role in success. In order to ensure control over the market and to gauge customer feedback, TrungHau will handle the distribution aspect itself. TrungHau will be entering into contract with tractor and truck companies to transport finished from its warehouses to the customers on priority basis with a guarantee of reducing as much damage as possible.

Marketing Plan23

Promotional strategy

TrungHau will sell its products under its own brand name. The communications and selling efforts will focus on “quality” and “durability” as key attributes of the brand. There will be three channels to promote TrungHau’s fly ash brick. Personal selling to large institutional buyers will initially be established by Mr. Hiep Huynh (General Manager), as he has strong connections with the Government of Vietnam and other businesses. The other point of contact with the retailers and smaller residential and non-residential projects will be handled by the Sale Department. Commission rate will be about 0.06 cents/brick.

5.3 Prospective Customers

Hoa Binh Corporation

Hoa Binh Construction & Real Estate Corporation primarily provides industrial and civil construction services in Vietnam. It undertakes various construction projects, such as apartments, condominiums, and industrial and residential projects. In recently, Hoa Binh proudly contributed to completing 80 high–rise projects and is currently carrying out approximately 50 projects all around the country.

Vin Group

Vin Group Joint Stock Company, through its subsidiaries, primarily engages in the real estate business in Vietnam. It operates through Sales of Investment Properties; Leasing Investment Properties and Related Services.

Coteccons Group

C.T Group was established in 1992. C.T Group kept growing along the strong growth of the nation during the “Renovation” and “Integration” periods into the world economy. Presently, C.T Group key-businesses are focusing on 6 attractive sectors: Real Estate, Hi-end Retail, Construction, Corporate Finance, Food & Beverage - Entertainment & Education - Health Services, Plantation - Mining & Eco-Tourism.

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6.0 Financial Projection

Located in the North East of Ho Chi Minh city, Tan Uyen is an ideal location for TrungHau’s brick manufacturing factory. Materials needed for the brick manufacturing process such as fly ash, sand, and cement are all located within 100 miles from the factory. Raw materials can be easily transported using hopper barges since the factory is surrounded by many waterway systems. Approximately 35 miles by road from Ho Chi Minh City, this strategic location can also reduce the company’s cost of logistic and distribution of finished products to its target market.

Besides the 2.47 acres of land that TrungHau recently rents, the landlord also owns another 22 acres in the same location available for lease in future. In fact, as part of TrungHau’s expansion proposal, the company plans to expand its total capacity to 100 million bricks per year in 2018. In the second phase of this project, TrungHau will increase the capacity of Tan Uyen factory by 150 million blocks per year. By 2021, Tan Uyen factory will have a total designed capacity of 550 million brick per year.

Trung Hau Ltd. is seeking to sell 30% stake of the Tan Uyen Brick Manufacturing Factory at $6.75 million dollars in order to fund for the investment and future expansion of this project.

Financial Projection25

6.1 Pro Forma Income Statement

26

7.0 Appendix

Appendix27

28

Appendix29

MINISTRY OF SCIENCE AND TECHNOLOGY

NATIONAL OFFICE OF INTELLECTUAL PROPERTY

NATIONAL

EMBLEM

SOCIALIST REPUBLIC OF VIETNAM

Independence – Freedom - Happiness

CERTIFICATE OF MONOPOLY

USEFUL SOLUTION

No. 1203

Name of patent: INORGANIC POLYMER CEMENT MADEFROM RED MUD AND PRODUCTION PROCESS OF THIS CEMENT

Owner of Monopoly Certificate : TRUNG HAU PRODUCTION PRIVATE ENTERPRISE (VN)

: 168 Nguyen Duy, Ward 9, District 8, Ho Chi Minh

City

Author: : Tran Trung Nghia (VN)

Application No. : 2-2014-00195

Application date: : 12 October 2011

Number of points requested for protection: 05 Number of description pages: 12

Issued by Decision No.: 58064/QĐ-SHTT dated 29 September 2014

Effective from the date of issue until the end of 10 years from the date of application submission.

Code:2-0001203 FOR DIRECTOR OF DEPARMENT

DEPUTY DIRECTOR

(signed and sealed)

Pham Phi Anh

30

Appendix31

TRUNGHAU LTD.

168 NGUYEN DUY STREET

DISTRICT 8, WARD 9, HO CHI MINH CITY

VIETNAM