Business Growth Fund (BGF)Sharing The Experience

byTengku Azahan

L.A. MAXWELL ENTERPRISE SDN BHD (“LAMAX”)

Who are we?•We manufacture cleaning products;•Our products are water-based thus environment friendly;•We commenced operation in 2005; and•We got our first client in 2006.

Our relationship with MTDC:•Nov 2008 via accommodation of CRDF Grant;•Amount was RM3.6M;•Successfully completed and closed after 4 years;•Recently accorded BGF - Grant RM1.0M + Equity (Soft Loan 3.0M);•The Grant portion has just completed.

What did we spend from the CRDF Grant?•Manufacturing equipment 85%•Testing Equipment 6%•Advertising/Marketing/Promotion 9%Note: Grant Amount represented 70% of total cost. Withdrawals in tranches. We forked out 30% before grant portion was released in every tranche.

Pre-CRDF Post-CRDF

BGFWho is eligible?•Entity that has commercialized and in the growing stage.

What is the amount?•Max RM4.0M•Combination of Grant & Equity•Max Grant RM1.0M and Max Equity RM3.0M•For example: An eligible entity may be offered RM500k Grant and RM2.5M Equity

BGF for LAMAX• Amount Offered – Grant RM1.0M and Equity of RM3.0M• Main Condition Precedents

– Application of MTDC;– Upon approval, Financial and Legal Due Diligence by MTDC.

• How does it work? –Grant Portion comes first (LAMAX must fully utilize this portion of BGF);–Equity Portion will come next after successful utilization of Grant Portion.

BGF for LAMAX• Current Status

– Grant Agreement executed in Mid 2012;– Grant Portion was fully utilized between Oct 2012 to April 2013;– Awaiting green light from MTDC to move to the next level, the Equity

Portion.

BGF Grant Portion of RM1.0M to LAMAXModus Operandi Upon Execution of Grant Agreement

– Setting up special bank account at our existing Bank;– Execution of Resolution determining the signatories

–LAMAX’s two signatories for any withdrawal below RM20k (USD6.5k)– Any withdrawal beyond would be signed between LAMAX and MTDC or solely MTDC;

– MTDC depositing RM1.0M;– LAMAX submitted withdrawals application based on the amount and purpose as prescribed in the Grant Agreement.

BGF Grant Portion of RM1.0M to LAMAXWhat did we spend on?•Raw Materials and Packaging Materials 73%•Expansion of Production/Storage Facility 17%•Others (ISO 9001, Trademark & Patent, Insurance, Due Diligence) 10%

Note: The detail is prescribed in the Schedule in the Grant Agreement and any drawdown must be consistent with the Schedule.

Post-CRDF Pre-BGF Grant Portion

Post- BGF Grant Portion

BGF Equity Portion to LAMAXThe Expectation•RM3.0M should be at our disposal to finance for growth•MTDC will formally come in as shareholder•MTDC stake is expected to be around 20% to 30%•MTDC has the option to exit where its stake shall be sold back to other shareholders of LAMAX at a predetermined price•MTDC would benefit via return on equity

Benefits to LAMAX•Part of LAMAX’s infrastructure is financed by MTDC through grant or equity (soft loan)•Problems associated in procuring financing from bank(s) can be avoided•Principals of LAMAX can focus on increasing sales•Good branding - MTDC as shareholder would give confidence to existing and potential clients

LAMAX’s Some Notable Clients