Fulbright University Vietnam

Ho Chi Minh City

+84 36 49 63 064
[email protected]

Fulbright Investment Club

Due Diligence for Minh Long Porcelain
I. Corporate Structure and Ownership.
Objectives: Identify if there are any issues with the ownership structure that may
cause us difficulties/conflicts of interest in the future, or be prejudicial to our
shareholder interest.

 What Corporate Structure is used?

MINH LONG I LIMITED LIABILITY COMPANY

 Shareholders:

Công ty TNHH Minh Long 1 has a charter capital of VND 500 billion, in which Mr.
Lý Ngọc Minh - President and CEO accounts for 21%, Mrs. Lý Ngọc Dung (19%),
Mr. Lý Huy Sáng – Deputy Directors ( 15%), Mrs. Lý Kha Trân (15%), Mr. Lý Huy
Đạt (15%) and Mr. Lý Huy Bửu (15%).

Ly Ngoc Bach, succeeded in switching to the production of export ceramics

according to the orders of Japanese partners and IKEA,
The younger sister of Phung Thi Van, who specializes in supplying raw materials
for the ceramics industry.
His four children: Ly Huy Sang, Ly Huy Dat, Ly Kha Tran, and Ly Huy Buu, all
participate in the operations of Minh Long 1.
Bà Lý Ngọc Dung (19%), ông Lý Huy Sáng - Phó Tổng giám đốc( 15%), bà Lý Kha
Trân (15%), ông Lý Huy Đạt (15%) và ông Lý Huy Bửu (15%).

II. Financial Statement.

Objective: Ensure we have a true and accurate picture of the financial state of the
company, and realistic projections going forward
What are the key revenue items for the business? How reliable are they going forward?

What are the key costs of the business? How are these likely to evolve over the next 3
years. How might they be reduced if circumstances required it?

Look at the debtors register. Is this company having difficulty getting paid. If so, why?
Has the company filed all necessary tax returns (TVA/VAT, Profit related Tax etc).

Is the company benefiting from any government grants/loans etc and if so on what
terms

Found Documents:

a. Projections for the current full financial year and four further years,
including sales turnover, gross margin, overhead costs, EBITDA, net cash
flow and year end cash balance.

b. Contact details of the company’s accountants and authority for us to

speak to them about the company’s financial affairs.

Contact: [email protected]
English name: MINH LONG I LIMITED LIABILITY COMPANY
Vietnamese name：CÔNG TY TRÁCH NHIỆM HỮU HẠN MINH LONG I
Tax ID：3700147620
Registration No.：3700147620
Phone No.：06503668899
Fax No.：06503724173

c. Details of any current or anticipated legal action or tax enquiries affecting the
company. Name of legal adviser and permission to speak to them if any legal
action pending

Serial Number: 88955682

Word Mark: LYS HORECA IVORY PORCELAIN BY MINH LONG 1970
Status Date: 2020-10-06
Filing Date: 2020-06-09
Attorney Name: Mary L. Grieco
Law Office Assigned Location Code: N10
Employee Name: MAHONEY, PAULA M

III. Business Plan.

Objective: To ensure that the business plan is realistic, based on reasonable
assumptions and that the ideas behind it have been tested.
1. What are the key assumptions behind the business plan What
evidence exists to support these assumptions?

 Minh Long 1 has far superior criteria, creating factors Minh Long I's
superiority is investing in research and development to create high
quality branded products that meet customers' requirements.

 With advanced and modern production lines of international stature,

ceramic products Minh Long has remarkably high and stable quality.

2. What will be the key challenges in achieving the business plan?

 Not focusing on factors such as product price, product consumption

market share, marketing due to the initial factor of Hoa People business.

3. What is the competitive position of the business? How are the

claims with respect to the competitive position justified?

Since 2000, realizing the importance of trademark protection in foreign

markets, the company has registered international trademarks under the
Madrid Agreement for ceramic products and is only registered in 16 host
countries. mainly countries with developed European ceramics industry
such as France, Germany, Czech Republic, Russia, Hungary ... Thanks to
the sense of branding and protecting intellectual property as well as
determination. In the heart of the business, Minh Long I High-end
Ceramics Co., Ltd. does not encounter problems with trademark lawsuits
when entering the international market, even though the company's
products are a group of products that are easily counterfeited.

4. Who are the main competitors? What are thier strengths and
weaknesses?

a) Cuong Phat High-Quality Ceramics Company:

Operation and development process with the motto:
"PRESTIGE OF QUALITY BRING TO SUCCESS ".
With the main activity is to specialize in production, import and export of
all kinds of ceramics and equipment. The forerunner was a civil ceramic
production facility serving the domestic market country, established in
1983, by ceaseless efforts, up to now the Company Cuong Phat Company
Limited (Cuong Phat) has become a famous high-end fine art ceramic
brand reputation and familiar with domestic and foreign consumers with
products brought bold identity .
  Pros: strong financial ability, large fuel storage capacity
 Cons: weak product research and development capabilities, simple
marketing, and brand-new development

b) Công ty Cổ Phần Gốm Chu Đậu

Responding to the policy of reviving and developing Chu Dau Pottery
Village, there were also the establishment of Công ty CP Sứ Chu Đậu, Công
ty CP Phục hồi Gốm cổ Chu Đậu An Bình, Công ty CP Gốm Sứ Chu Đậu
Hải Dương. Among the above units, Công ty CP Gốm Chu Đậu belongs to
Tổng Công ty Thương mại Hà Nội (Hapro) does the most professional
business, has outstanding scale and achieved the highest results and
efficiency.
▫ Pros: Based on the rich history of Chu Dau Ceramic from
Vietnamese history, the company's brand had already gained the
reputation from the costumers
▫ Cons:
 products are very meticulous, high quality and price, but
the quantity of products is small and the cost is large, so
there is a fierce competition with the same products. type
on the market.
 prioritizes the maintenance of work and income for
employees, because the quality of the products mostly
depends on them
 the forms of production and business are limited

IV. Sales and Marketing.

Sales: Minh Long Corp get the revenue about 1.000 billion VND annually.

Marketing:
- Minh Long advertise as the number one porcelain company in Vietnam with
premium products.
- Minh Long are focusing on the domestic market.
- The company is planning to get into Europe.

V. Assets.

VI. Management and Staff

VII. Operations
Objective: Understand how the business is run and controlled, and whether this is
“fit for purpose” both now, and under the growth planned for the next few years.

 How is the company run? What responsibilities have been defined?

 Are the powers of the Managing Director formally defined?

 Are the power and authority of other Directors or senior managers defined (e.g.
spending powers, authority to sign contracts etc).
 Is there a staff handbook or similar document

 What other documents exist defining company processes? What records exist of
what decisions have been taken and why

 What management/board meetings take place, and on what frequency? What

records exist of these?

 If the company plans to grow significantly, is there a plan to cope with all the
implications of this e.g. premises, Infrastructure, new roles in the company etc.

 To what extent does the company rely on suppliers to be able to offer its product
or service? What are the contractual arrangements in place? What is the supplier
management approach?

 How sensitive is the business to changes in the price of supply

1. Organizational - management - personnel factors:

 General Director: Head of the company, responsible for organizing and operating
all activities in the company, responsible before the law for all activities of the
company.
 The General Director is the person who represents the company to sign
economic contracts, is responsible for production and business, factory life
before the company, the staff.
 The Board of Directors assigns the tasks at the professional level and has smooth
coordination between the departments. The company has clear regulations on
employees' rights and obligations and is well observed by employees.

The company also invested many billion VND, attracting many good experts, step by
step, forming research, development, and new technology transfer facility.
Currently, the whole company has about 300 management staff in the company.
Simultaneously, because the company's manufacturing industry is specialized in
ceramic production, it needs many workers, especially young but skilled workers; the
average income per capita per year is 30 million VND / year/ people.
 2. Marketing factors:
Product (Product):
Minh Long ceramic products have more than 15,000 types. The quality of the product
has been proven when for many consecutive years, Minh Long I ceramics has been
voted "High-Quality Vietnamese Goods" by consumers and a series of gold medals at
domestic fairs and international exhibitions. Minh Long exports products made from
3,000 to 5,000 tons of material every year. Particularly for export, there are 3,000
different models. On each product of ceramics Minh Long I ceramics are printed with
pictures and company name.

Price (Price):
Having to deal with inflation, Minh Long has built a strategy not to be affected much.
The commodity is still okay, sales increase despite rising fuel prices, wage increases for
workers. But the company did not increase product prices, only adjusted products. Also,
Minh Long has pre-purchased several mines that supply clay and kaolin raw materials
to reduce input costs when going through intermediaries or importing raw materials
from abroad. Thus, the prices of inputs will decrease, making Minh Long I's products
more competitive than domestic companies producing the same product.
Being aware of the domestic market's important role in addition to the export market,
however, the problem is that domestic goods must be of high quality but at an
affordable price, suitable for the country's budget. The number of people is one of the
criteria for businesses to reach more domestic consumers.

Distribution (Place):
The current economic context has shown that focusing on the domestic market is the
most optimal solution to overcome difficulties and develop, especially in response to the
campaign "Vietnamese people prioritize using goods Vietnam" by the government.
To achieve the plan of domestic sales of 60%, Minh Long opens representative offices in
Hanoi, Ho Chi Minh City ..., and introduces products of the company through exhibitions,
brand festivals...
Parallel to the domestic market, Minh Long I's export market is continuously growing
and expanding. There are France, Germany, the Czech Republic, Sweden, Switzerland,
the US market, and Asia in Europe, Japan, Taiwan, Malaysia, and Singapore.

Promotion:
The company always participates in international trade fairs and exhibitions in many
countries to promote its brand and find partners. This is an effective way of marketing
and bringing in many new potential customers, thereby helping its market expand.
The function of Marketing is to help meet the needs of the target audience and enhance
the business's business efficiency.
All financial ratios of Minh Long from 2007 to 2009 increased, from total capital, total
revenue, and profit after tax ...
 3. Production factors - operations:
In Minh Long I, every product that has just left the production line is checked by a strict
quality control system, and only after meeting specified requirements can the product
be delivered to the customer. The company assures customers there will be no defective
products and meets all mandatory quality standards.
The company invests in applying the quality management system according to ISO 9001
version 2000 in production and was granted ISO 9001: 2000 certificate in 2002 and
became a company specializing in manufacturing and trading. The first export of fine art
ceramics and high-end household products in Vietnam are granted this certificate.

Machinery and equipment:

The "strong" investment in modern equipment and machinery and applying the most
advanced technology for production have shown commensurate results.
Minh Long has successfully applied Nanotechnology in product manufacturing, making
the product surface smooth, smooth, easy to wash, grease-free, without using much
detergent, contributing to saving cost.
Specifically, the company has spent more than 397 billion VND to import machinery and
equipment for production such as soil extrusion system, enamel injection system,
pressure filling machine, robot product cleaning machine. In 10 years (1996-2006), the
company successfully fabricated hydraulic molds for high hydraulic presses; research,
manufacture, and application of the continuous drying system. In terms of kilns, 2 4m
shuttle gas furnaces have been successfully researched and manufactured, with the
same quality as Taiwan's gas furnaces, but with more improvements, and the cost is
only 30%. Design of stage-based soil refining machines, automated imaging machines;
manufacturing enamel - color mixing machine automatically controlled via computer ...;
2005 produced machine-made relief products - this is considered a breakthrough for art
products manufactured by machines ...

Management of raw materials:

The first corpse of a ceramic product is clay. New Binh Duong has white clay and plastic
black soil mixed to make rice roll, soil in Vinh Phu, India ... an embryo has 12 to 16 kinds
of materials. To produce a quality product, Minh Long is very strict in selecting input
raw materials since it has a friendly relationship with the supplier and the facility's
location close to the source of raw material extraction. There are many choices,
proactive in sourcing raw materials at the lowest possible price (spending a low
shipping fee). The facility also has an extensive warehouse system capable of storing a
lot of fuel, which can be continuously supplied for the production process.
In parallel with the investment in improving equipment, machinery, changing the
management method ... are research projects on restoring color glaze that has been lost,
creating designs, designs, especially the manufacture of Some sets of fine arts products
show the national beauty.
 4. New product research and development factors:
New product research and development activities are regularly focused on by the
company to bring to market products that increasingly satisfy customers' needs. The
company periodically visits and meets with customers to capture the new demands of
customers and the market.
The company also regularly participates in fairs to introduce new products to listen to
customers' opinions about new products, and capture consumers' tastes.

5. Information system
The company is captured through many systems: the official system and the inofficial
system.
 Official system: authorities, newspapers, radio, internet, conferences,
exhibitions...
 Unofficial system: the experience of leaders, employees of the public companies,
experiences of other establishments ...
- Relationship with relevant agencies:
Because the company is one of Binh Duong province's successful companies, it has an
excellent relationship with related agencies. Besides, the board of directors' foreign
policy with relevant agencies has helped the company have a better relationship with
other agencies. The company has also received many awards and titles awarded by the
People's Committee of Binh Duong Province.

VIII. Legal
Objective: To understand if there are any unusual legal obligations entered into by
the business that may affect our view of its value

 Has the company signed any non-competition agreements (or agreements with
such clauses in them) with any other party

 Has the company signed any exclusivity agreements (i.e. to not work with
competitors of any of its customers) or agreements with such clauses in them
 What NDA’s are currently in force.

 Has the company ever been subject to legal proceedings, or the threat of them? If
so provide details

 Are there any other non-standard legal agreements the company has entered
into, which may affect the value of the company?

Studying the legal system's impact on the company's operations, Minh Long mainly
considers Economic law system.

Quyđịnhquyềnlợi, tráchnhiệmcủaDN: Luậtdoanhnghiệpsố 60/2005/QH11.

Bảo hộ quyền thương hiệu cho doanh nghiệp bằng Luật sở hữu trí tuệ số
50/2005/QH11, Luật chuyển giao công nghệ....
Stipulates the terms of doing business with corporations from foreign countries, there is
a basis, as well as protecting the interests of enterprises themselves, avoiding excessive
demands of foreign companies when exporting products.

Minh Long is a unit that always strictly complies with the government's regulations on
regimes and policies for employees such as health insurance, social insurance, fire
prevention, and occupational safety.

IX. Risk
Objective: Identify the key risks that might prevent the business achieving the
planned success, and any plans to mitigate them

What are the key risks to the business in the view of the Entrepreneurs? What plans
exist to mitigate these risks?

Are there any further key risks identified by the Investigator?

The risk of alternative products:

There is a risk to a substitute product for any product. The substitute product will
prevail when the goods are scarce or the price is too high, at which time the consumer
will find some products to replace. Vietnam's implementation of the open-door policy
and international integration has created the conditions for ceramic products of famous
companies in the world to appear in the domestic market, alongside with low quality
porcelain goods. This provides consumers with more choices and will also be pressure
for Minh Long.

However, it can be affirmed that Minh Long I branded porcelain products always win
the trust of the majority of consumers - those who love the cleanliness, convenience,
and safety of porcelain items and especially the top choice of famous restaurants. That
wave of increasing competition has created an opportunity for Minh Long.

Risk of lacking labor factor:

Despite the large population, the shortage of labor resources in the field of ceramic
production is a difficult problem. Binh Duong ceramic production enterprises have
difficulty finding skilled workers; many factories have to close their doors or produce in
moderation. At present, there are only 70 real ceramics production facilities called
production, of which about 30-40 factories can compete well in the market thanks to
adequate labor.

Due to the location of the Company located in Binh Duong - a place with a long tradition
of ceramics, although the labor force is abundant, skilled workers lack and compete
among real enterprises ceramic production. To retain workers, Minh Long 1 has paid
attention to training policies and incentives for the Company's employees. Besides,
several companies in the province specialize in providing labor resources for businesses
in need.

They have also overcome this issue by replacing labor with machinery, where the job
needs 400 workers before, now only 15.