PUBLIC ACCOUNTS COMMITTEE (PAC)s

REPORT ON GOVERNANCE MANAGEMENT CONTROL OF

1MALAYSIA DEVELOPMENT BERHAD (1MDB)

1. INTRODUCTION

1.1 1Malaysia Development Berhad (1MDB), a company wholly owned by the

Minister of Finance Incorporated (MOF Inc) became the focus of the
international community with various negative reports on this companys
operation and financial position being widely reported by the media.

1.2 The Public Accounts Committee (PAC) has sent a letter dated 27 February
2015 to the National Audit Department (NAD) to ask NAD to carry out an audit
on 1MDB by focusing on five (5) aspects as follows:-

a. The source of RM2 billion raised by 1MDB to settle its loans from
several banks;

b. RM3 billion new injection of funds from the Ministry of Finance (MOF);

c. 1MDB investment agreement in PetroSaudi;

d. Whether 1MDB investment money in the Cayman Islands has been

brought back to Malaysia; and

e. The changes in international auditing firm to verify 1MDBs accounts.

1.3 The Cabinet meeting on 4 March 2015 decided that NAD was to verify
1MDBs accounts and reports regarding it must be submitted to the PAC.
The NAD began auditing 1MDB starting 10 March 2015.

1.4 The PAC instituted proceedings against 1MDB under the heading of
Governance Management Control 1MDB on 19 May 2015.

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2. OBJECTIVE OF DISCUSSION

In accordance with the mandate given under Article 77 of the Standing Orders
of the House of Representatives as well as Article 304 (a) Treasury Order
(Amendment 2008), the PAC has summoned the Ministry of Finance as a
shareholder of 1MDB before the Committee to assess the financial
performance and the activities of 1MDBs Group of Companies since its
inception until now to ascertain whether it meets the original objectives of the
companys establishment.

3. SCOPE AND METHODOLOGY

3.1 The scope of the PAC proceedings include governance and management of
investment activities undertaken by 1MDB, starting from its inception in 2009
until now. Proceedings were held with the parties involved, namely the
Ministry of Finance (MoF), the Economic Planning Unit (EPU), the Board of
Directors and Management of 1MDB, the former Board of Directors and senior
management of 1MDB other than two auditors of the 1MDB which are Deloitte
Malaysia and KPMG.

3.2 The PAC has conducted ten (10) proceedings under the heading 1MDB
Corporate Governance Control Management by calling:-

i. The Secretary General and Director General of the Economic

Planning Unit to give briefing and explanation on 19 May 2015;

ii. The Ministry of Finance and Deloitte Malaysia to provide

clarification on 10 June 2015;

iii. The Ministry of Finance and KPMG to provide clarification on 17

June 2015;

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 iv. The Ministry of Finance and Datuk Shahrol Azral Ibrahim Hilmi
(former CEO of 1MDB) for briefing and explanation on 25 and 30
November 2015;

v. The Ministry of Finance and Mr. Arul Kandasamy (1MDB Chief

Executive Officer) for briefing and explanation on 1 and 18
December 2015;

vi. The Ministry of Finance and Tan Sri Dato Seri Lodin Wok
Kamaruddin (Chairman of 1MDB) to give explanations on 19 and 20
January 2016;

vii. The Ministry of Finance, Tan Sri Mohd Bakke Salleh (former
chairman of 1MDB) and Datuk Shahrol Azral Ibrahim Halmi (former
CEO of 1MDB) to clarify issues on 11 February 2016.

3.3 PAC was given a presentation of the 1MDB audit report by NAD to comply
with the instructions from the Cabinet on 4 March 2015, namely:-

a) Presentation of Interim Report of the Auditor General on the audit

carried out on 9 and 10 July 2015 along with a report on the audit
carried out between 10 March 2015 to 15 June 2015. The Interim
Report was limited to deliberation on financial statement analysis
and investment in the joint venture with Petrosaudi, subscription of
murabaha notes and Segregated Portfolio Company (SPC).

b) On 4 and 7 March 2016, NAD then present the 1MDB Audit Report
to the PAC containing analysis of financial statements and the
financial position of the 1MDB Group of Companies until the financial
year ended 2014 and the performance of its investments in equities,
Murabahah Notes, funds portfolio, the SRC, the real estate sector
and the energy sector. The final report also takes into account the
issues that have been reported in the Interim Report and have been
updated based on the documents received up to 31 October 2015.

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4. THE COMPANY BACKGROUND

4.1 The establishment of 1MDB as a company under the Ministry of Finance

Incorporated (MOF) has a direct bearing with Terengganu Investment
Authority Berhad (TIA) which was established by Menteri Besar Incorporated
(MBI Terengganu) on 27 February 2009.

4.2 The original purpose of TIAs establishment was to create Sovereign Wealth
Fund with an initial fund of RM11 billion. The funds were to be obtained from
outstanding oil royalty revenue of RM6 billion and funds from the bond issued
in the local and foreign financial market along with the Federal Government's
proposal of providing RM5 billion allocation based against Terengganus
future oil revenue.

4.3 On 1 April 2009, the Cabinet approved the TIAs proposal to have the Federal
Government provide a guarantee for TIA to borrow up to RM5 billion from
local and overseas the financial markets through Islamic Medium Term Notes
(IMTN) for investment. The guarantee issued is pursuant to the Loan
Guarantee (Bodies Corporate) Act 1965 which covers repayment of principal
and interest for a period of 30 years.

4.4 Hence, on 15 May 2009, a programme agreement was signed between TIA
and AmInvestment Bank Berhad for the issuance of RM5 billion IMTN.
However, the agreement was opposed by MBI Terengganu.

4.5 The Federal Government then decided to take over TIA and the acquisition
process was successfully completed on 31 July 2009 and TIAs name was
changed to 1Malaysia Development Berhad (1MDB) on 25 September 2009.

4.6 Starting from 25 September 2009 it also changed the direction of 1MDB from
a sovereign wealth fund under TIA to a strategic development company,
wholly owned by the Minister of Finance Incorporated (MOF Inc) with an
authorized capital of RM1 billion and paid up capital of RM1,000,002.

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4.7 1MDB has visions to become a strategic catalyst to help bring ideas and new
sources of growth and improve the country's competitiveness in the economic
field, especially in a global environment. 1MDB main mandate among others
are:-

a) Invest in projects that can help drive strategic initiatives for long-term
sustainable development and promote the inflow of foreign direct
investment into the country;

b) Use the existing network of sovereign wealth funds in the Middle

East and China to bring in strategic foreign direct investment projects
to the country; and

c) Use a series of overseas investments as well as good relations

between countries in bringing foreign strategic investment into the
country.

d) Good relations between two countries are utilised to strengthen

investment and bilateral interests socially and economically, for
example, with Saudi Arabia and the United Arab Emirates (UAE).

e) This is evident when IPIC investment company belonging to the

Government of Abu Dhabi has agreed to guarantee 1MDBs bond of
USD3.5 billion and had given an advance loan of USD1 billion to
1MDB.

4.8 Since its inception 1MDB has been involved in various investments such as:-

a) Joint venture with Petrosaudi Holdings (Cayman) Ltd;

b) Investments in Segregated Portfolio Company (SPC) in the Cayman

Islands;

c) Investment in the property sector; and

d) Investment in the energy sector.

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5. OUTCOME OF DISCUSSION AND DISCOVERY
5.1 BACKGROUND OF EARLY ESTABLISHMENT OF 1MDB

5.1.1 Terengganu Investment Authority Berhad (TIA)

Terengganu Investment Authority Berhad (TIA) was incorporated on 27
February 2009 under the patronage of His Royal Highness Sultan of
Terengganu who supported the idea of its establishment as a state
sovereign wealth fund with an initial fund of RM11 billion. The funds will
be raised from the bond issued in the local and foreign financial market
with the Federal Government proposal to provide guarantees of RM5
billion against Terengganu future oil revenue. These funds are
expected to be obtained from an outstanding oil royalty revenue of RM6
billion and the issuance of Islamic Medium Term Notes (IMTN)
amounting to RM5 billion.

Issuance of Islamic Medium Term Notes (IMTN)

On 25 March 2009, a resolution made by TIA Board of Directors has

given the authority to Mr. Shahrol Azral Ibrahim Halmi (CEO of TIA) to
confirm the appointment of AmInvestment Bank Berhad (AmBank) as
lead arranger and/or lead manager and primary subscriber to the
proposed issuance of RM5 billion IMTN and to negotiate on the terms
of appointment of AmBank. He was then tasked to make
recommendations to TIA Board of Directors.

The first meeting of the Board of Directors of TIA on 15 April 2009 has
approved the proposal to issue sharia-compliant bond IMTN amounting
to RM5 billion for a term of 30 years to obtain funds for investment and
as working capital. TIAs Board of Directors also agreed that there was
no need to establish a Due Diligence Working Group and Due
Diligence Planning Memorandum as information on IMTN need not be
submitted to the Securities Commission before it being offered to
potential investors. It was because the bond is guaranteed by the
Government.

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The Terengganu Menteri Besar in a letter dated 13 May 2009 to the
Minister of Finance had stated the State Governments support for the
RM5 billion IMTN issued by the TIA with certain conditions.

On 15 May 2009, a programme agreement was signed between TIA

(issuer) and AmBank as the lead arranger, lead manager and facility
agent. On the same date, the Federal Government issued a
Government guarantee for the RM5 billion issuance of IMTN.

However, the act of signing the programme agreement and issuance of

Government guarantee without following the terms and plans of Menteri
Besar Incorporated Terengganu (MBI Terengganu) as shareholders
have caused discontent and protests from MBI Terengganu.

Therefore, in accordance with Article 94 of the Articles of Association,

the TIA Board of Directors has approved three resolutions dated 22
May 2009, which ordered the suspension of the IMTN issuance until
corporate governance structure and best practices are created,
including the establishment of the Advisory Board and the Investment
Panel of the company and appoint a Board of Directors representing all
special shareholders. TIA Board of Directors at that time were HRH
Tengku Rahimah Putri Almarhum Sultan Mahmud, Datuk Ismee Ismail
and Mr. Shahrol Azral.

Through TIA Board of Directors resolution dated 22 May 2009 it was

decided that Mr. Shahrol Azral was to take immediate action and
urgently informed the IMTN advisers and ensure that there are no
issuance of IMTN made. TIA Board also decided to suspend the
authority granted to Mr. Shahrol Azral or any of the other directors in
relation to the issuance of IMTN. However, the Chief Executive Officer
and TIA Company Secretary had entered into a Subscription
Agreement with AmBank on 25 May 2009, three days after the Board's
resolution which ordered the suspension of the issuance of IMTN and
any matters pertaining to the IMTN programme. The Chief Executive

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Officers actions, however, were contrary to the instructions of the
Board.

On 26 May 2009, an aqad agreement for the sale of assets by

AmIslamic Bank Berhad to TIA was signed by TIA Chief Executive
Officer. On the same date, the Murabahah Purchase Agreement of
RM4.396 billion and Murabaha Sales Agreement of RM13.625 billion
were also signed by the Chief Executive Officer.

Mr. Shahrol Azrals action as TIA Chief Executive Officer who

proceeded with IMTN related matters has led him to be discharged as a
company director as agreed in TIA shareholders resolution dated 27
May 2009, in line with Section 152A of the Companies Act 1965. This
action was also in accordance with Article 73 of the Memorandum and
Articles of Association which allow any director to be terminated from
the company through a written resolution. The action was supported by
MBI Terengganu in a letter dated 29 May 2009 to the Minister of
Finance. MBI Terengganu has raised the serious shortcomings and
reaffirm that they did not agree with the IMTN issuance methods which
was not in accordance with the terms and plans of MBI Terengganu.
Terengganu Menteri Besars representative in TIA Board of Directors,
HRH Tengku Rahimah Puteri also resigned as TIA Director on 27 May
2009. After the resignation, on the same date, TIA Board of Directors
has made a resolution signed by Datuk Ismee and Mr. Shahrol Azral to
continue the issuance of IMTN and to re-elect Mr.. Shahrol Azral as
Director.

Public Accounts Committee (PAC) found that Mr. Shahrol Azral has
violated the shareholders instruction not to proceed with issuance of
IMTN. Mr. Shahrol Azral also has committed an offence by signing the
agreement without any authority given by the Board of Directors.

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PAC was informed by Mr. Shahrol Azral that he did not follow orders to
stop the issuance of RM5 billion Islamic Medium Term Notes and did
not follow the instructions of the Board as he felt that the power actually
lies with the shareholders in accordance with Section 117 of the
Articles of TIA Berhad.

However, the PAC and NAD did not receive any document to prove
that Section 117 was already in the Articles of TIA Berhad at the time.

PAC also in its proceedings found that Mr. Shahrol Azral gave varying
reasons regarding the issuance of RM5 billion IMTN, namely:

i) To the Secretary General of Treasury, he said the bond issue

needed to proceed due to the agreement with AMBank on bought
deal basis that cannot be stopped. But in his statement to the
NAD and PAC, he gave the reason that 'the train has left the
station and the issuance of bonds cannot be stopped.

On 29 May 2009, TIA received a nett issuance of IMTN of RM4.385

billion from the full value of RM5 billion. This is because IMTN is issued
at a price of RM87.92 per RM100 nominal value, i.e at a discounted
rate of 12.08%. TIA Board of Directors during a meeting on 20 August
2009 was informed that the bonds were issued at a discounted rate
based on the recommendations by AmBank as the lead arranger to
ensure the IMTN get full subscription. In addition, the interest rate
charged was 5.75% per annum with an effective rate of return of 6.68%
per annum.

Checks carried out by NAD has found that the total cost of IMTN until
its maturity is RM13.625 billion comprises RM5 billion for the principal
(to be paid fully in 2039) and RM8.625 billion for the payment of
benefits to bondholders throughout the period of 30 years. A
transaction cost of RM11.25 million has been paid to AmBank as
arranger fee. In addition, the trustee fee and agency fee of RM7.14
million, also payable at the rate of RM238,000 per annum for 30 years.
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Terengganu MBI has also written a warning letter dated 29 May 2009
to AmBank alleging misconduct and non-conformity on the issuance of
IMTN.

The Cabinet was informed on 3 June 2009 that HRH the Sultan of
Terengganu has requested a report be made available on the
Unauthorized Issuance of IMTN by TIA and the Report of the Managing
Oil Royalty of the state of Terengganu as a Sovereign Wealth Fund
with the Best Corporate Governance Practice and Transparency.

During a meeting chaired by the Chief Secretary of Treasury on 30

June 2009, Mr. Shahrol Azral explained that a directive from
Terengganu State Government (a letter dated 27 May 2009 which
ordered the publication of IMTN be suspended), was only received after
the marketing process that began a week earlier, and the subscription
closing date was on 29 May 2009. Publication of IMTN had to be
continued as the directive given was too last minute and in order to
maintain TIAs credibility, if the issuance was to be postponed. During
NADs interview with Mr. Shahrol Azral in June 2015, the former Chief
Executive Officer admitted that IMTN bond issuance had to be
continued because the programme agreement signed on 15 May 2009
was a bought deal where AmBank as the lead arranger and primary
subscriber has received secondary subscriptions for the bonds.

However PAC found that the resolutions of the Board of Directors on 22

May 2009 has decided the suspension of the Board TIA and it was also
decided that Mr. Shahrol Azral was to take immediate action on urgent
basis to inform the advisory of IMTN and ensure that no IMTN were
published. TIA Board also decided to suspend the authority granted to
Mr. Shahrol Azral or any of the other directors in connection with ITMN.

Upon review made by NAD, it was found that during the Board meeting
on 10 October 2009, Mr. Shahrol Azral has requested that IMTN be
hastened on a request by TIA Special Adviser with a view to develop
Bidong Island in collaboration with Mubadala in 2009. The AmBank
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 representative (who was also present at the meeting) have also
confirmed that TIA advisor has requested the bond be expedited.
However, through a press release on 23 May 2009, Mubadala has
denied its involvement in Malaysia other than the project in Iskandar
Development Region in Johor.

The NAD also found that TIAs Special Advisers were appointed on 8
April 2009 and they were Dato Abdul Aziz bin Mohd Akhir and Mr. Low
Taek Jho.

5.1.2 Governance Structure and Organisation of 1MDB Group

Based on the Memorandum and Articles of Association (M&A) 1MDB,

the governance structure of 1MDB is divided into three stages, namely
the Advisory Board, the Board of Directors and Top Management. The
Advisory Board is responsible for providing guidance and advice as
well as business investment. Article 117 of the M&A has outlined a
number of decisions that require a written permission from the Prime
Minister which include the following:

a. Any changes to the companys M&A, whether in whole or in

part;

b. Any appointment and removal of any director (including the

Managing Director and Alternate Director) and Top
Management of the company; and

c. Any financial commitment (including investments), restructuring

or matters relating to guarantees issued by the Federal
Government of Malaysia for the company's interests, national
interests, national security or any policy of the Federal
Government of Malaysia. For this purpose, the determination of
the meaning of 'national interest', 'national security' and 'policy
of the Federal Government of Malaysia' shall be finalised by the
Federal Government of Malaysia.

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 The position of the Advisory Board, the Board of Directors and Top
Management of 1MDB as at 31 October 2015 as well as a list for the
Board of Directors from 2009 to 2014. The Tables are as follows:

TABLE 1
LIST OF ADVISORY BOARD IN 1MDB AS AT OCTOBER 2015

NAME POSITION
Dato Sri Mohd Najib Tun Abdul Razak Prime Minister and Minister of Finance
Malaysia (Chairman)
Sheikh Hamad bin Jassim Bin Jabr Al-Thani Former Prime Minister and Qatar Foreign
Minister (Special Advisor)
Tan Sri Mohd Sidek Hassan Chairman of Petronas
Tan Sri Dato Nor Mohamed Yakcop Deputy Chairman of Khazanah Nasional
Berhad
Tan Sri Dr. Ali Hamsa Chief Secretary
Tan Sri Dr. Mohd Irwan Serigar Abdullah Treasures Secretary General
Khaldoon Khalifa Al Mubarak Chairman of the Executive Affairs Authority
of Abu Dhabi; and the Chief Executive
Officer & Managing director, Mubadala
Development Company
Chang Zhenming Chairman and President, CITIC Group China
Source: 1MDB Website

TABLE 2
LIST OF THE BOARD OF DIRECTORS IN 1MDB AS AT OCTOBER 2015

NAME POSITION DATE OF APPOINTMENT

Tan Sri Dato Seri Che Lodin Chairman 20 October 2009
Wok Kamaruddin
Non-Executive Director 11 August 2009
Tan Sri Dato Paduka Ismee Non-Executive Director 23 March 2009*
Ismail
Datuk Shahrol Azral Ibrahim Non-Executive Director 23 March 2009*
Halmi
Tan Sri Dato Ong Gim Huat Non-Executive Director 12 January 2010
Ashvin Jethanand Valiram Non-Executive Director 2 February 2010
Arul Kanda Kandasamy President and Executive 5 January 2015
Director
Source: 1MDB Website
Note: (*) Appointed by TIA (TIA Is Known As 1MDB On 25 September 2009)

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 TABLE 3
LIST OF TOP MANAGEMENT IN 1MDB AS AT OCTOBER 2015

NAME POSITION
Arul Kanda Kandasamy President and Group Executive Director

Azmi Tahir Chief Financial Officer

Ivan Chen General Counsel

Vincent Koh Beng Huat Chief Investment Officer

Badrul Hisham Abdul Karim Executive Director of Business Development

Terence Geh Choh Heng Executive Director of Finance

TABLE 4
POSITION OF THE 1MDB DIRECTORS FROM 2009 TO 2014
NAME FINANCIAL YEAR
31.3.2010 31.3.2011 31.3.2012 31.3.2013 31.3.2014
Tan Sri Mohd Bakke Bin Salleh*
(appointed on 27.02.2009 and
11.08.2009 and resigned on
X X X X
07.04.2009)**
Tan Sri Azlan Bin Mohd Zainol*
(appointed on 11.08.2009 and X X X X
resigned on 23.03.2010)**
Christopher Lee Sian Teik*
(appointed on 27.02.08.2009 and X X X X
resigned on 23.03.2009)
Datuk Sharul Azral Bin Ibrahim
Halmi* (appointed on 11.08.2009)

Tan Sri Dato Paduka Ismee Bin
Haji Ismail* (appointed on
23.03.2009)
Tan Sri Dato Seri Che Lodin Bin
Wok Kamaruddin* (appointed on
11.08.2009)
Tan Sri Dato Ong Gim Huat
(appointed on 12.01.2010)

Ashvind Jethanand Valiram
(appointed on 02.02.2010)

Mohd Hazem Bin Abd. Rahman
(appointed on 15.03.2013 and X X X
resigned on 01.01.2015)
Source: 1MDB website
Note: (*) Appointed by TIA (TIA Is Known As 1MDB On 25 September 2009)
(**) Resigned and Reappointed

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5.2 EARLY INVESTMENT BY 1MDB

5.2.1 Investment in PetroSaudi International Ltd.

The joint venture project started with a letter by Prince of Turkey

dated 28 August 2009 to the Prime Minister of Malaysia in which
also attached a letter from Mr.. Tarek Obaid (CEO PetroSaudi
International Ltd.) dated 28 August 2009 to introduce PetroSaudi
International Ltd. The letter was then forwarded to the management
of 1MDB for further action.

Mr. Tarek Obaids letter contained proposals where 1MDB will be

shareholding 40% worth or USD1 billion in a joint venture between
1MDB and PetroSaudi International Ltd. PetroSaudi International
Ltd. will also contribute assets in the energy sector worth USD2
billion into the joint venture company. The letter also stated that
Petrosaudi International Ltd. has agreed to give a goodwill discount
valuation of its assets worth of USD1.5 billion.

The proposal stipulates holding ratio, cash distribution of USD1

billion, the value of assets and goodwill discounts of assets that are
yet to be valuated as stated in Mr.. Tarek Obaids letter shows that
this project has been planned in advance. However, checks by NAD
found no information about the letters from PetroSaudi International
Ltd. and Prince of Turkey being mentioned during the presentation to
the 1MDB Board of Directors during a special meeting to discuss the
investment. The Chairman of the Board of 1MDB had mentioned that
cash assets ratio to the joint venture company has yet to be finalised
during the Board of Directors meeting on 18 September 2009. If the
proposed joint venture was finalised and identified from an early
stage, 1MDB Board should be briefed in detail by the management
on the decision of the proposed joint venture, as well as the letters
from Prince of Turkey and from Mr. Tarek Obaid during the meeting
on 18 September 2009.

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5.2.1.1 1MDB Board of Directors Special Meeting on 18 September
2009

The joint venture project proposals under the Government of

Malaysia and the Kingdom of Saudi Arabia (prepared by Investment
Division officers, reviewed by the Executive Director of Business
Development and supported and approved by the 1MDB Chief
Executive Officer) has been submitted for consideration of the 1MDB
Board of Directors during its meeting on 18 September 2009. Three
main objectives of the joint venture project were to invest in Malaysia
and abroad; to support long-term economic development in
Malaysia; and to improve relations and cooperation between
Malaysia and Saudi Arabia.

At the special meeting, Mr. Casey Tang (1MDB Executive Director of

Business Development), in his briefing on the joint venture project to
the Board of Directors, had urged all parties to ensure that the joint
venture agreement was signed on the designated date, namely 28
September 2009. The date set was too short and this should not
happen because the investment decision was involving big figure,
while there was no specific project that required immediate
investment.

1MDB Board of Directors was informed that this was an arrangement

between the Government of Malaysia and Saudi Arabia (G2G). Mr.
Casey Tang also said that PetroSaudi International Ltd. was wholly-
owned by King Abdullah and the Saudi Government and has been
around since 2000. Mr. Caseys information was also agreed by
some of the members of the Board of Directors and former 1MDB
Board of Directors during NADs interview with them in June 2015.
However, NAD cannot confirm the actual status of the company
registration, whether it was owned by King Abdullah or the Saudi
Government. Check on the PetroSaudi International Ltd. website
found that the company was only established in 2005, privately
owned and its ownership had nothing to do with the Government of

15
Saudi Arabia. NAD also found out that Mr. Tarek Obaid was the sole
director to PetroSaudi International Ltd. based on the document,
Written Resolution of the Sole Director of the Company. Therefore,
the statement made by Mr. Casey Tang was found to be inaccurate.

On 18 September 2009 as well, an overseas company, namely

PetroSaudi Holdings (Cayman) Limited had registered a company
named 1MDB PetroSaudi Limited in the British Virgin Island (BVI).
The company was then used as a joint venture between 1MDB and
PetroSaudi Holdings (Cayman) Ltd. The proposed joint venture with
PetroSaudi International Ltd. was only communicated to the 1MDB
Board of Directors for the first time at the meeting on 18 September
2009. The registration of 1MDB PetroSaudi Ltd. (BVI) showed that
the 1MDB management had decided earlier to collaborate with
PetroSaudi International Ltd. and the 1MDB Board of Directors was
only informed later. No records show that the 1MDB Board of
Directors was informed if the special purpose vehicle, namely 1MDB
PetroSaudi Ltd. (BVI) has been registered or established.

The 1MDB Board of Directors during the meeting on 18 September

2009 has decided to appoint three directors, with two of them having
a professional qualification, as 1MDB representatives in the joint
venture. However, there was no evidence that the proposal has been
implemented.

The 1MDB Board of Directors has directed the management to

ensure that PetroSaudi International Ltd. contributes in the joint
venture by 50% in cash or at least USD1billion and the other 50% in
the form of assets to the joint venture company. However, the 1MDB
management did not carry out the instruction by the Board of
Directors, instead it implemented the recommendations by Mr. Tarek
Obaid in a letter dated 28 August 2009.

The Board of Directors also did not have detailed information about
PetroSaudi International Ltd. and one of the members of the Board
16
of Directors has been instructed to find more information and on the
profile of PetroSaudi International Ltd. The profile was not submitted
and was informed by the management that the information was
being obtained. However, based on NADs interview with 1MDB
Board of Directors, the profile was never presented to the Board of
Directors until the joint venture agreement was signed. It is unusual
for a joint venture agreement involving huge cash investments to be
conducted in haste.

On 18 September 2009, the Board of Directors of 1MDB had

requested the management to negotiate further with PetroSaudi
International Ltd. and solve some important things before finalising
the agreement as follows:

a. Negotiate with PetroSaudi International Ltd. to resolve the

issues raised by the 1MDB Board of Directors, to get better
terms of negotiation. These matters should be reported
back to the Board of Directors.

b. Appoint Dato' Mohd Bakke and Mr. Shahrol Azral as

corporate representatives in every meeting of the joint
venture company after 1MDB was registered as a
shareholder of the joint venture company. Further check by
NAD found that the appointment of Dato Mohd Bakke was
replaced by Mr. Casey Tang.

c. The common seal should be stamped on each document

related to the joint venture with PetroSaudi International Ltd.

According to Tan Sri Bakke Mohd Salleh in the proceedings of the

PAC, he said the Board of Directors has set four main principles in
the joint venture between 1MDB and PetroSaudi International Ltd,
namely:

i) The management was instructed to carry out second

independent assessment on the assets of PetroSaudi.
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 ii) The Board of Directors wanted due diligence to be carried
out on PetroSaudi to find out more about the company.

iii) Establish a Board of Directors in the joint venture company

where 1MDB has three representatives on the Board of
Directors and PetroSaudi also has three representatives.

iv) Two of the three representatives of 1MDB must have the

expertise and experience in the oil and gas industry.

5.2.1.2 Special Meeting of 1MDB Board of Directors on 26 September

2009

Special Meeting of 1MDB Board of Directors was held on 26

September 2009, two days before the joint venture project was
signed. During this meeting, the Board of Directors was still
discussing whether to proceed with the investment in the joint
venture.

However, the 1MDB Board of Directors has approved 1MDB

participation in the joint venture project with PetroSaudi International
Ltd. with the subscription of one (1) billion ordinary shares in 1MDB
PetroSaudi Ltd. subject to the following conditions:

a. Appoint an independent professional valuer to assess the

assets of the joint venture company;

b. Appoint three members representing 1MDB in the Board of

Directors of the joint venture company, including those with
experience in relevant sectors; and

c. As wind up option, one party offered the shares to other

shareholders at the fair market value or at the value agreed
by both the Governments that have interest in the
agreement.

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 A letter from a valuer, Edward L. Morse dated 20 September 2009
informed the 1MDB management that he will be appointed by 1MDB
and 1MDB PetroSaudi Ltd. to perform an independent valuation on
the hydrocarbon assets of PetroSaudi International Ltd. and its
subsidiaries. However, until the meeting on 26 September 2009,
1MDB Board of Directors was not informed about this.
It was found that the joint venture agreement stated that 1MDB was
entitled to appoint two directors in the composition of the Board of
Directors of the joint venture company. This shows that the condition
set by the 1MDB Board of Directors to appoint three members
representing 1MDB in the Board of Directors of the joint venture
company was not observed.

1MDB Board of Directors was also seen to approve the use of

common seal on all joint venture documents with PetroSaudi
International Ltd. This showed that the Board of Directors approved
the participation in the joint venture project with PetroSaudi
International Ltd. and not with other companies.

5.2.2 Joint Venture Between 1MDB and PetroSaudi (Cayman) Ltd. -

1MDB PetroSaudi Limited

On 28 September 2009, a joint venture agreement has been signed

between 1MDB, PetroSaudi Holdings (Cayman) Ltd. and 1MDB
PetroSaudi Ltd. in Kuala Lumpur. PetroSaudi Holdings (Cayman)
Ltd. and 1MDB PetroSaudi Ltd. represented by Mr. Tarek Obaid,
while 1MDB was represented by Mr. Shahrol Azral. The event was
witnessed by the Prime Minister and Prince of Turkey. The
objectives of the joint venture company as stated in the joint venture
agreement are:

a. "To seek, explore, enter into and participate in business and

economic opportunities within and outside of Malaysia; and

19
 b. To enhance, strengthen and promote the future prosperity
and economic development of Malaysia, to the extent that
achievement of the above-mentioned objectives would
maximise the profits of the Company."

According to the joint venture agreement, 1MDB will invest in cash

totalling USD1 billion (40% equity) while PetroSaudi Holdings
(Cayman) Ltd. contributes in the form of assets with value not less
than USD 1.5 billion (60% equity) in this joint venture company.

NADs check on the joint venture agreement found some issues and
contradictory information. The joint venture company, namely 1MDB
PetroSaudi Limited was registered on 18 September 2009 in the
British Virgin Island by PetroSaudi Holdings (Cayman) Limited.
Based on the search report of Cayman Island Registry of
Companies, it was found that PetroSaudi Holdings (Cayman) Limited
was also formed on 18 September 2009. This shows that the two
companies were established on the same date.

In the joint venture agreement there was a clause which stated that
1MDB PetroSaudi Ltd. (which was established on 18 September
2009) had received an advance loan totalling USD700 million on 25
September 2009 from its parent company, namely PetroSaudi
Holdings (Cayman) Ltd. The advance loan needs to be fully repaid
on or before 30 September 2009. The existence of advance loan of
USD700 million for the period of five days has raised questions.
Check by NAD found no minute or document to show that the 1MDB
Board of Directors was informed about the USD700 million advance
loan before the joint venture agreement was signed. Besides, in
NADs interview with the 1MDB Board of Directors (former and
current) in June 2015 found that the advance loan was never
presented or discussed by the management of 1MDB before the joint
venture project was finalised. A copy of the agreement for the
USD700 million loan between 1MDB PetroSaudi Limited and
PetroSaudi Holdings (Cayman) Limited, which was signed by Mr.
20
Tarek Obaid representing both companies, has been submitted by
the management of 1MDB but NAD could not confirm it with the
original document.

Although the draft of the joint venture agreement has been

discussed during the meeting on 18 September 2009, but that too
failed be submitted by 1MDB to NAD. NAD checks on the
documents submitted by Datuk Shahrol Azral to NAD on 5 June
2015 found that Mr. Brian Chia (Messrs. Wong & Partners - solicitors
and advocates) via e-mail dated 30 September 2009 had questioned
regarding the letter requesting repayment of the USD700 million
advance loan using the letterhead of PetroSaudi International Ltd.,
while the one giving the advance loan was PetroSaudi Holdings
(Cayman) Ltd. The e-mail was dated 30 September 2009, while the
transfer of money for the repayment was also done on the same
date.

The agreement dated 28 September 2009 also stipulated that the

one billion shares subscription by 1MDB in the joint venture
company totalling USD 1 billion must be paid in full before or on 30
September 2009. This shows that 1MDB was given a very short
period (two days) to make payments of USD1 billion to 1MDB
PetroSaudi Ltd. The 1MDB Board of Directors at its meeting on 26
September 2009 has approved the transfer of USD1 billion to the
bank account of the joint venture company for the share subscription
purpose in 1MDB PetroSaudi Ltd.

On 30 September 2009, Bank Negara Malaysia (BNM) had given

approval for transfer of funds to the joint ventures account in
J.P.Morgan SA and RBS Coutts Bank Ltd. (Geneva). Then on the
same date, an amount of USD300 million was transferred to account
7619400 at J.P.Morgan (Suisse) SA; 1MDB PetroSaudi Ltds bank.
However, the remaining USD700 million was transferred to account
11116073 at RBS Coutts Bank Ltd., owned by another company
which was not involved in the joint venture project.
21
 Based on the documents presented by Datuk Shahrol Azral on 5
June 2015 and his statement during the Public Accounts Committee
(PAC) meeting on 25 November 2015, the account was owned by
Good Star Limited, which was a subsidiary of the PetroSaudi Group
since 1 September 2009.

NAD also found that there was no approval given by 1MDB Board of
Directors to transfer the money into two separate accounts.

5.2.2.1 Assessment Report by Edward L. Morse dated 29 September

2009

Valuer Edward L. Morse, through its letter dated 20 September 2009

informed that the company was appointed by 1MDB and 1MDB
PetroSaudi Ltd. to carry out an independent valuation of
hydrocarbon assets of PetroSaudi International Ltd. and its
subsidiaries. The letter of appointment was signed by Mr. Shahrol
Azral on 29 September 2009, the same day the valuation report was
submitted by Edward L. Morse, which is the day after the joint
venture agreement was signed on 28 September 2009. Taking into
account the complexity of the assets that needed to be assessed,
Edward L. Morse managed to produce the valuation report within
eight days.

Assessment by Edward L. Morse Energy Advisory Services was

carried out on assets (oil exploration and production rights) of
PetroSaudi International Ltd., whereas the joint venture agreement
had clearly stated that the company that owned all the rights and
interest on the assets agreed for the joint venture project was
PetroSaudi International Cayman, which was a different company
than PetroSaudi International Ltd. The joint venture agreement also
stated that on the date of the agreement, PetroSaudi Holdings
(Cayman) Ltd. has transferred all published shares of PetroSaudi
International Cayman (which has all the rights and interest in the

22
assets with the estimated value of USD2.7 billion) to 1MDB
PetroSaudi Ltd. The report also cannot verify the assets owned by
PetroSaudi Turkmenistan 1 Limited (Jersey company) and Petro
Saudi Ltd. Inc. (Panama company). The actual ownership of the
assets involved in the joint venture project could not be verified
because no document submitted to the auditors of 1MDB as well as
NAD to prove the actual date of the assets being transferred from
PetroSaudi International Cayman to 1MDB PetroSaudi Ltd.

This report is related to the exploration and oil production rights in

various locations in Argentina and Turkmenistan. According to Article
1.1 on the Overview of Assets in the valuation report stated, that
valuer only checked the project economics without assessing the
geological resources, property rights including contractual rights to
the field. This shows that the oil production rights for Block 3 areas in
Turkmenistan and Argentina have yet to be confirmed. This is
because the area has been under long-running disputes between
various parties. The limited information is a constraint on the
valuation report.

In the report, it was explained that the block was originally owned by
Buried Hill Energy, a company that was registered in Panama
through a purchase agreement with the Government of
Turkmenistan. However, the current ownership of the rights over the
block was not mentioned. Therefore, the consent to receive the
assets as equity in this joint venture investment can be considered
as unrealistic and risky.

The report also stated many constraints, including PetroSaudi

International Ltd. was unable to provide a cash flow model that can
be used for comparison with assets in Turkmenistan, for not having
the ability to assess the evolving royalty and fiscal regimes and
check on the comparative value procedure. This shows that
PetroSaudi International Ltd. did not have the expertise to deal with
complex assets. While paragraph 4 of the valuation report also
23
 stated that the assets in Argentina was a contingent assets which
were not tradable and non reserves. However, it has been evaluated
based on the high and low estimation that indicate high risk on the
assets in Argentina. This shows that 1MDB has failed to evaluate
assumptions used by the valuer regarding production, petroleum
prices, discount rates and capital and operating expenses. The
valuation report only evaluated the rights to the assets and not the
value of the company that owned the assets. Therefore, the net
worth of the company was not stated as well. All these constraints
pose a risk to the accuracy of the valuation report.

In the meeting on 3 October 2009, 1MDB Board of Directors

expressed concerns about the reliability of the valuation report as it
has been prepared within a short period, as they were informed
before, that valuation report will take several months and can only be
ready by March 2010. A clause in the joint venture agreement, which
stipulated that 1MDB should appoint an independent valuer to
evaluate assets of PetroSaudi Holdings (Cayman) Ltd. and must
submit the report on or before 30 September 2009 was an
unreasonable stipulation. 1MDB Board of Directors also asked the
management to get the valuation report and arrange for clarification
by Edward L. Morse at the next meeting. That means the investment
decision was made before the assets valuation report was presented
to the Board of Directors to be studied or explained on the assets
owned by the collaborator.

5.2.2.2 1MDB Board of Directors Meeting on 3 October 2009

At this meeting, 1MDB Board of Directors expressed their

disappointment when their orders were ignored, and the funds
distributed to other parties without their knowledge. Observations
made by the Board of Directors were as follows:

a. The Board of Directors was not informed about the change

of plan to transfer an amount of USD700 million from 1MDB
24
 into an account which was not owned by the joint venture
company.

b. The Board was also not informed about the change of bank
account of the joint venture company from BSI-SA (Geneva)
to J.P.Morgan (Suisse) Geneva. This raised questions
because checks by NAD found that the approval to change
the bank account was made by a resolution dated 30
September 2009 (the same date when the fund transfer was
done), but interviews by NAD with some of the former Board
of Directors found that they were not aware of the existence
of this resolution, even though their signatures were on it.

c. The Board of Directors was also unclear about the status

ownership of the assets held by the joint venture company
and quality of the assets transferred to the joint venture
company including the inherent/potential risk associated with
the assets.

d. The Board of Directors also stated that investments of this

scale required thorough and detailed consideration, and
need to go through the due diligence process.

e. The Board of Directors was of the opinion that all actions

were done in a very short period and had compromised with
the main control and check and balance which were
important to protect the interests of 1MDB. The Board of
Directors was also surprised by the speed taken by Edward
L. Morse in preparing the valuation report.

f. The Board of Directors had given strict instructions to Chief

Executive Officer and management of 1MDB, not to deviate
from the instructions given and adhere to the agreed
procedure.

g. The Board of Directors was of the opinion that the

management had ignored the main thrust of the company

25
 which was to focus on attracting foreign investments into
Malaysia.

Accordingly, the 1MDB Board of Directors instructed the

management to take corrective measures as follows:

a. Determine whether the USD700 million from PetroSaudi

Holdings (Cayman) Ltd. can be refunded so that it can be
disbursed in accordance with the original plan;

b. Obtain written confirmation from JP Morgan on the approval

of the use of funds held in the joint account;

c. Obtain written confirmation that the assets injected by

PetroSaudi Holdings (Cayman) Ltd. were owned by the joint
venture company and get a copy of the valuation report by
Edward L. Morse and legal opinion for deliberation of the
Board of Directors;

d. Arrange a meeting with representative of the valuer Edward

L. Morse and legal adviser to brief the Board of Directors in
the next meeting;

e. Get a written confirmation on the quality of assets (including

the quality and shelf life of the oil wells, the political risk and
other potential risks related to the assets placed under the
joint venture company); and

f. The Board of Directors was still not satisfied and directed the
management to appoint independent valuers to revalue the
assets in the joint venture company.

Based on the evidence of documents and interviews with former

1MDB Board of Directors, NAD found that instructions from the
Board of Directors were not complied by the 1MDB management.

26
 The approval given by the Board of Directors was for the cooperation
with PetroSaudi International Ltd. and not with its subsidiary, namely
PetroSaudi Holdings (Cayman) Ltd.

It was noted that 1MDB management has repeatedly ignored the

specific instructions given by the Board of Directors. Among them
are as follows:

a. Signing the joint venture agreement on 28 September 2009

before taking action on matters required by the Board of
Directors. This had caused the CEO and management of
1MDB to be reprimanded and given stern warning at the
meeting of 1MDB Board of Directors dated 3 October 2009.

b. Did not carry out the second valuation on the joint venture
company's assets as directed by the Board of Directors on 3
October 2009.

Although the 1MDB Chief Executive Officer was found not complying
to the directives, guidelines and corporate governance, the 1MDB
Board of Directors still did not take any action against him.

5.2.2.3 1MDB Board of Directors Meeting on 10 October 2009

During this meeting, the 1MDB Board of Directors has raised the
need for the valuation of assets where the management was asked
to get 10 names of reputable valuers to be shortlisted and get the
approval of the Chairman of the Advisory Board. Therefore, the
management can discuss with PetroSaudi Holdings (Cayman) Ltd.
on the appointment of second valuer.

Furthermore, the 1MDB Board of Directors has directed the 1MDB

Chief Executive Officer to provide a comprehensive summary paper
to the Chairman of the Advisory Board which contains a chronology
of events related to the joint venture agreement, funding status and
dissatisfaction of 1MDB Board of Directors on the valuation report of
27
assets of PetroSaudi Holdings (Cayman) Ltd. However, during the
1MDB Board of Directors Meeting on 7 November 2009, Mr. Shahrol
Azral informed that the second valuation should not be made on the
assets of the joint venture company as the Chairman of the Advisory
Board did not agree with this proposal, but directed the 1MDB Board
of Directors to appoint a consulting company to assess ownership of
the joint venture company. However, checks by NAD found no
document to prove that the appointment of the consultant had been
made.

NAD checks found that the joint venture agreement has a clause
stipulating that all financial reports, accounts and operations must be
submitted to the shareholders on quarterly basis. However, the
document could not be submitted by 1MDB to be checked by NAD.
During the period of the joint venture project, the 1MDB Board of
Directors was not informed in where the fund has been invested by
the joint venture company although Mr. Shahrol Azral and Mr. Tang
Keng Chee (Casey Tang) were appointed as the representative of
1MDB in the joint venture company. NAD was not given any
documents as well, to prove the investment that has been made by
the joint venture company.

Nevertheless, although the 1MDB Board of Directors was not

satisfied with some actions taken by the 1MDB management, NAD
found no evidence to show that this matter has been referred in
writing to the Chairman of 1MDB Advisory Board. According to the
Chairman of 1MDB Board of Directors during the PAC meeting on 19
January 2016, 1MDB Board of Directors was not satisfied with the
way the management handled the matters related to the joint venture
project in general. However they agreed to hear further clarification
and confirmation from 1MDB management.

NAD analysis has concluded that the decision to make equity

investment in the joint venture company, namely 1MDB PetroSaudi
Limited was an act taken without strategic planning as it was
28
 executed within eight days, without detailed valuation, and before
solving first the issues raised by the Board of Directorst. The joint
venture agreement also contained clauses which did not safeguard
the interests of the company.

5.3 FINANCIAL STANDING OF 1MDB GROUP

5.3.1 2010-2014 Financial Standing by 1MDB

This information is presented by 1MDB to the PAC.

1Malaysia Development Berhad (1MDB)

FY2010 FY2011 FY2012 FY2013 FY2014

RM'mil RM'mil RM'mil RM'mil RM'mil

Debt Principal

- Edra - - - 9,684 15,375

- Real Estate - - - 800 2,271

- 1MDB Group (Exclude Edra & RE) 4,428 6,801 7,928 25,766 24,222

Consolidated 4,428 6,801 7,928 36,250 41,868

Debt Interest

- Edra - - - 643 781

- Real Estate - - - - 17

- 1MDB Group (Exclude Edra & RE) 248 333 462 972 1,601

Consolidated 248 333 462 1,616 2,399

Revenue

- Edra - - - 2,592 3,867

- Real Estate - - - - 392

- 1MDB Group (Exclude Edra & RE) - - - - -

Consolidated - - - 2,592 4,259

29
Net Profit/Profit for the Year

- Edra - - - (1,292) 105

- Real Estate - (23) (30) 2,714 893

- 1MDB Group (Exclude Edra & RE) 424 567 74 (644) (1,663)

Consolidated 424 544 44 778 (665)

Tax/(Tax Recoverable)

- Edra - - - 99 (4)

- Real Estate - - - - -

- 1MDB Group (Exclude Edra & RE) - - - - -

Consolidated - - - 99 (4)

Total Assets

- Edra - - - 17,427 24,844

- Real Estate - (20) 2,514 6,420 8,757

- 1MDB Group (Exclude Edra & RE) 4,955 8,163 7,020 20,814 17,808

Consolidated 4,955 8,143 9,534 44,661 51,409

Total Equity

- Edra - - - 3,923 4,281

- Real Estate - (22) (52) 4,782 5,691

- 1MDB Group (Exclude Edra & RE) 426 966 1,431 816 27

- Consolidated adjustments - - (221) (7,137) (7,557)

Consolidated 426 944 1,158 2,384 2,442

30
5.3.2 Status of the Assets of 1MDB

5.3.2.1 The Assets in Portfolio Investment and SPC

Based on the audit by NAD, the assets of 1MDB in portfolio

management and Segregated Portfolio Company (SPC) as of 31
Mar 2014 are as follows:

TABLE 5
Asset Category Value as of 31 Mar 2014 Remarks
(RM Million)
Available For Sale 7,708.74 Investment in Segregated
Investments Portfolio Company (SPC )
Available For Sale 5,176.22 Investment in Portfolio
Investments Management with a balance
of USD1,565.99 million
Available For Sale 503.91 Investment in unquoted debt
Investments securities
Total 13,388.87

5.3.2.2 The Assets in Real Estate Investment

Based on the audit by JAN, the assets in the real estate investment
by 1MDB as of 31 Mar 2014 are as follows:-

TABLE 6

Asset Category Value as of 31 Mar 2014

(RM Million)
Real Estate 7,080.99 Land of Tun Razak
Investment Exchange (RM 2,700
million)
Land of Sungai Besi Air
Force Base / Bandar
Malaysia (RM 4,294.97
million)
Inventory 1,109.86 Land of Air Hitam, Penang
Island
Total 8,190.85

31
 5.3.2.3 The Assets in Energy Sector Investment

Based on the audit by NAD, the assets in the energy sector

investment by 1MDB as of 31 Mar 2014 are as follows:-

TABLE 7
Asset Category Value as of 31 Mar 2014
(RM Million)
Intangible Assets 2,108.08 Goodwill on acquisition
Intangible Assets 6,451.15 Service Concession Agreement
Service Concession 3,295.58 Service Concession for the
Receivables power plant in Egypt and
Bangladesh
Real Estate, Plant and 5,898.69 Power Plant
Equipment (5,622.49 million)

Land and Building, Vehicle

(RM276.20 million)
Other Receivables, 324.54 Other Receivables and
Collaterals and Collaterals
Prepayments
Bank Balance and Cash 3,234.93 Edra Group only
Mortgage Receivables 1,231.36 Mortgage of the Operation of
Edra Group
Inventory 786.76 Power Plant
Investment in the Interest 257.82 Interest in the power plant in
of Joint Venture and Abu Dhabi and Pakistan
Associate Company
Trade Receivables 702.16 Receivables related to
electricity sales
Total 24,291.07

5.3.2.4 Other Assets Owned by 1MDB

Based on the audit by JAN, there are other different assets owned
by 1MDB as of 31 Mar 2014 as follows:-

32
 TABLE 8

Other Assets Value as of 31 Mar 2014

(RM Million)
Bank Balance and 610.44 Fixed Deposit, Bank
Cash Savings and Cash
Other Receivables, 4,881.90 Deposit paid to Aabar
Collaterals and Investments PJS
Prepayments (RM 4,468.16 million)
Real Estate, Plant and 6.16 Vehicle and Equipment
Equipment and Furniture
Tax Refund 39.56
Receivables
Other Investments 0.58
Total 5,538.44

The total value of the assets owned by 1MDB Group as of 31 Mar

2014 was RM51,409.43 million which included the investments in
energy related assets, the assets in portfolio investment and SPC,
the assets in real estate investments and other assets.

5.3.3 Loan Status of 1MDB Group

1MDB was set up to pioneer sustainable long-term economic development

and growth in Malaysia and had received RM1 million as equity injection from
the Government in 2009. To finance the investments, 1MDB generated fund
through loans, sukuk issuance and USD notes in and outside the country. As
of 31 Mar 2014, the loan balance of 1MDB Group was RM41.86 billion as
shown in the table below:

33
 TABLE 9
LOANS OF 1MDB GROUP AS OF 31 MAR 2014
Type of Loan Fair Value
Loans from Domestic 13,951.81
Market
Loans from International 19,762.03
Market
Inherited Loans 8,152.62
Total Loans 41,866.46
Source: Document and Financial Statement of 1MDB Group

The loans of 1MDB can be divided into the following:

i. Portfolio Loan
ii. Real Estate Loan
iii. Energy Sector Loan

In overall, the loans as of October 2015 are as follows:

34
 TABLE 10

DATE OF TYPE OF LOAN LOAN / PURPOSE OF LOAN LOAN NET AMOUNT DIFFERENCE ACTUAL USAGE REMARKS
AGREEMENT LOAN TENURE FINANCING AMOUNT RECEIVED SETTLED/UNSETTLED AS
RATE OF OCT 2015
(RM/USD (RM/USD (RM/USD (RM/USD Million)
Million) Million) Million)

(a) (b) (a)-(b)

May 2009 Islamic 2009- 5.75% General Investments and working RM 5,000 RM4,385 RM11.25 RM3,487.32 million Balance of RM 5 billion
1
Medium 2039 capital (Transaction (Equity in PSI)
Term Notes Cost) RM897.68 million
(Ambank) RM603.85 (Working Capital in
(Discount) 1MDB)

2009 Islamic On COF I + 0.5% Working capital and Shariah Principle RM37 RM37 - Working Capital Settled by using the
2
Revolving demand of Tawarruq Revolving Credit
Credit (Affin RM229.50 million. (No.
Bank) 25)

TM Revolving TM TM Working capital RM2 RM2 - Working Capital Settled

3
Credit

Sept 2010 Syndicated Sept 3.96% 1. RM600 million for indirect equity RM2,500 RM2,299.83 RM15.17 Investment of USD500 Settled by using the
4
Term Loan 2010-Sept investment into an European-based (Transaction million in the USD3 billion Notes
RM2.5 B 2013 operating PLC involved in energy Cost) Murabahah Notes in (No.14)
(Standard Sector the financial year 2011
Chartered) and for financing a part
2. Remaining balance for investments of the USD330 million
and working capital requirements in Murabahah Notes in
projects in energy, real estates, the financial year 2012.
hospitality and agriculture sectors. All
shall be located in Malaysia.

35
 Mar 2011 Syndicated Mar KLIBOR + General investments and working USD300 USD296.67 USD3.33 Repayment of the Settled by using the
5
Term Loan 2011- 1.3% capital (RM895.72) Transaction Principal Syndicated USD3 billion Notes. (No.
(Standard Sept Cost Term Loan RM2.50 14)
Chartered) 2013 billion

2011 Islamic 3.40% - Working Capital RM75 RM75 - Working capital Settled
6
Revolving 4.10%
Credit

June 2011 Syndicated June201 3.96% 1. RM600 million for indirect equity RM1,080 RM1,080 - Financing a part of the Settled by using the
7
Term Loan 1 Sept investment into an European-based USD330 million USD3 billion Notes (No.
RM2.50 B 2013 operating PLC involved in energy Murabahah Notes in 14)
(Additional sector the financial year 2012.
RM1.080
million) 2. Remaining balance for investments
(Standard and working capital requirements in
Chartered) projects in energy, real estates
hospitality and agriculture sectors. Al
shall be located in Malaysia.

August 2011 Term Loan August 10 + 100 General investments and general RM 2,000 RM 2,000 - RM184 million Loan amounted to RM2
8
(SRC) 2011 basic points working capital investment in the joint billion was later
July for the first venture with Aabar transferred to MKD on
2012 3 years. The Investment PJS 15.02.2012. Due to that,
fourth year RM1,549 million this loan was no longer
is based on investment ready for borne by 1MDB as of
the SKM sale 31.03.2012.
rate of 10
years + 70
basic points.

May 2012 Syndicated May COF + 2.0% 1. Acquisition of 100% of voting RM6,170 RM6,170.00 - RM6,000 million Refinanced with
9
Bridging Loan 2012 shares of Tanjong Energy Acquisition of TEHSB Syndicated Bridging Loan
(Maybank) Novem RM170 million RM5.5 billion (No. 18)
ber 2. Prefund the minimum required Finance Service Reserve
2013 balance for the Finance Reserve Account (FSRA)
Account

36
 May 2012 USD Notes May 5.99% RM2.5 billion (USD810.4 million) will USD1,750 USD1,560 USD192.50 USD785.67 million Balance of USD1.75
10
2012 be used to subscribe for newly issued (RM4,824.99) (RM579.89) acquisition of TEHSB billion
May ordinary shares in 1MDB Energy Transaction
2022 which in turn will be used to partially Cost USD576.94 million
fund the capital acquisition, the security deposit
repayment of debt and proposed USD194.89 million
acquisition of Tanjong Energy. The working
balance of net proceeds will be used capital/corporate
for general corporate purposes expenses
(which may include future
acquisitions).

Sept 2012 Term Loan Sept MGS + 0.5% Financing the resettlement cost of RM800 RM800 - RM457 Upfront Balance of RM800
11
PERKESO 2012 the military installation operated in payment to 1MDB million
Oct Sungai Besi Camp for the Bandar
2022 Malaysia development project RM212 million TRX
and/or other real estate investment. RM34 million BM

RM92 million
Operation Cost of
1MDB RE

RM5 million loan

interest

October USD Notes Oct 5.75% RM2.16 billion (approx USD692.36 USD1,750 USD1,640 USD110 USD709.86 million Balance of USD1.75
12
2012 2012 million) will be used to subscribe for (RM5,093.12) (RM311.76) acquisition of Genting billion
Oct newly issued Ordinary Share Capital Transaction
2022 (OSC) in 1MDB Energy (Langat) Sdn. Cost USD790.35 million
Bhd. which in turn will be used to security deposit
partially fund the capital acquisition. USD139.79 million
The balance of net proceeds will be working
used for general corporate purposes capital/corporate
(which may include future expenses
acquisitions)

37
 Nov 2012 Syndicated Nov 2012 COF + 2.0% (i) Part finance the acquisition of RM700 RM687.53 RM35.00 Repayment of deposits Balance of RM120
13
Bridging Feb 2016 Mastika Lagenda; Transaction to 1MDB. million
Loan (Affin Cost
Bank/Amba (ii) To reimburse the borrower on the Repaid a part of the
nk) acquisition of Mastika Lagenda in the principal payment
event the acquisition price has been through loan such as
fully settled; No.22&25

(iii)To prefund the Debt Service

Reserve Acount (DSRA); and

(iv)To settle upfront and agency fees

payable under the facility.

Mar 2013 USD Notes Mar 2013 4.40% The initial capital of the joint venture USD3,000 USD2,720 USD 280 USD1,007.04 million Balance of USD3 billion
14
Mar for Abu Dhabi Malaysia Investment (RM9,265.55) (RM8,434.25) (RM831.39) Upfront payment to
2023 Company Lt. (ADMIC) for the Tun 1MDB (to settle the
Razak Exhange (TRX) project. Syndicated Term Loan
2.5 billion (No.4), Term
Loan USD300 million
(No.5) and additional
Syndicated Term Loan
RM2.5 million
(additional RM1.08
million (No.7))

USD24.85 million
Upfront payment to
1MDB Energy Ltd.
USD1.50 million
Upfront payment to
Brazen Sky Ltd.

USD1,581.43 million
The Countrys
International
Investment

USD35 million
Donation to Yayasan
Rakyat 1Malaysia
(YR1M)

38
 Dec 2013 Term Loan Dec 2013 COF+1.75% Part finance the proposed acquisition RM600 RM600 - RM600 million Settled by using No.22
15
(Ambank) Apr of the entire share capital of Jimah acquisition of Jimah & 23
2015 COF+2.0% O&M Sdn. Bhd. And Jimah Teknik
Sdn. Bhd. respectively for aggregate
purchase consideration of RM1.225
billion.

Dec 2013 Term Loan Dec 2013 5.09% Financing a part of the construction RM550 RM550 - RM550 million Settled by using No. 17
16
(Ambank) Dec 2014 cost of the replacement facilities Upfront payment to
from Sungai Besi Air Base , Kuala 1MDB
Lumpur (PUKL) to the relocation site
and financing a part of the initial and
mobilization expenses related to the
infrastructure cost of TRX project.

Feb 2014 Sukuk LTH 0.35% Financing a part of the cost of the LTH LTH RM902 RM919 million Balance of RM2,400
17
Dec 2014 Murabahah relocation project and/or the need Transaction Upfront payment to million
(Ambank) Feb 2014 for work capital. RM500 (S1) RM304.99 (S1) Cost & 1MDB
Feb RM1,000 Discount
2021(S1) RM609.97 (S2) RM902 million
(S2) Transaction cost and
Feb 2014 KWAP
KWAP discount
Feb RM309.42 (S3)
2024 (S2) RM450 (S3) RM550 million
RM273.99 (S4) Repayment for the
KWAP RM450 (S4) Term Loan RM550
Dec 2014 million (No.16)
Dec RM29 million Interest
2021 (S3) on Term Loan from
Dec 2014 PERKESO & Term Loan
Dec RM550
2023 (

S4)

39
 May 2014 Syndicated Tranche 1 Tranche1 Refinancing a part of the Syndicated RM5,500 RM5,500 - RM5,500 million Settled the T2 payment
18
Bridging Bridging Loan RM6.17 billion Repayment of by using No.21
Loan May COF+2.5% Syndicated Bridging
(Maybank) 2014- Loan to Maybank Balance of T1 RM3,150
May 2024 Tranche2 million
RM6.17 billion (No. 9)
Tranche 2 COF+2.75%

May 2014
Nov
2014

May 2014 Term May 2014 LIBOR+3.25 Corporate usage USD250 TM TM USD250 million Settled by using No.20
19
Loan(Deutsc Feb % payment for
he Bank) 2015 terminating the option
to Aabar Ltd

Sept 2014 Term Loan Sept 2014 LIBOR+3.75 Cancelation of the option of USD975 TM TM USD250 million Settled by using No.24
20
(Deutsche Sept % AabarLtd. Repayment of principal and USD25 million
Bank) 2015 Term Loan USD250 from Debt Service
million (No. 19) Reserve Account
(DSRA)
USD725 million
payment for
terminating the option
to Aabar Ltd

Feb 2015 Term Loan Feb 2015 8.50% Full payment of Tranche 2 Powertek USD555.02 USD555.02 - USD555.02 Balance of USD555.02
21
(Marstan) Apr facility (RM2,000) (RM2,000) Repayment of million (RM2 billion)
2016 Syndicated Bridging
Loan Maybank RM5.50
billion Tranch 2
(No.18)

40
 Feb 2015 Standby Feb 2015 3.40% Corporate purposes and payment of RM950 RM950.07 RM0.07 RM115.51 million Balance of RM950
22
Credit Dec 2015 loan/interest. Repayment of principal million
(Federal USD and interest of the
Government Currency Term Loan RM700
) Exchange million (No.13)

RM160.27 million
Repayment of principal
and interest of the
Term Loan USD975
million

RM350 million
Repayment of a part of
the principal Term Loan
RM600 million (No.15)

RM238.26 million
Coupon payment

RM86.03 million
General corporate
expenses

Mar 2015 Islamic Term Mar 2015 COF-i+2.5% The need for general work capital USD150 TM TM USD0.75 million Balance of USD150
23
Loan (Exim June and energy sector of the 1MDB Payment of facilitation million
Bank) 2016 Group fee to Exim Bank

USD7.23 million FSRA

RM0.37 million Legal

and issuance fees

USD64.87 million
Repayment of the
principal loan of
Tadmax Resources

RM250 million
Repayment of a part of
the principal Term Loan
RM600 million (No.15)

41
 May 2015 Cash - - Release the obligations and liabilities USD1,000 USD1,000 . USD50 million Balance of USD1 billion
24
Payment among the 1MDB Group, IPIC and Payment to Yurus
IPIC Aabar. Private Equity Fund I,
L.P.

USD950 million
Repayment of a part of
the principal USD975
million (No.20)

August 2015 Revolving On COF+2.0% The need for work capital/or to be RM229.50 - - RM37 million Balance of RM229.50
25
Credit demand determined later. Repayment of Islamic million
Revolving Credit (No.2)

RM120 million
Repayment of a part of
the Term Loan RM700
million (No.13)

RM8 million escrow

account

RM64.50 million
upfront payment to
1MDB

Financial TM TM TM TM RM800 RM807.98 RM7.98 TM Difference between

26
Statement the list of loans given
31.3.2014 by 1MDB and the Cash
Flow Statement for the
year ended 31 Mar
2014.

42
5.3.4 Guarantee and Support from the Federal Government Before 2016

The Federal Governments guarantee was given in accordance with the

provision in the Constitution and Loan Guarantee Act (Incorporation) 1965.
Such guarantee is given to facilitate the Government company to obtain
financing and loans at a more competitive cost. Section 6 of the Loan
Guarantee Act (Incorporation) 1965 states that the Government company that
obtains the Government Guarantee needs to get approval from the Ministry of
Finance before it can obtain other loans. Section 7 states that through this
Government Guarantee, the Government is responsible for fulfilling its
obligation of the loan agreement, bond, promissory notes or other means
taken by the Government company if that company fails to fulfill its obligation.
The guarantee given under the Act needs the approval from the Cabinet.

5.3.4.1 The Federal Governments Guarantee to 1MDB

Since 2009, two Government guarantees have been given to 1MDB

for funding as follows:-

a. Islamic Medium Term Notes (IMTN) RM5 billion

i) On 1 April 2009, the Federal Government approved the
grant of a guarantee to TIA to borrow RM5 billion from the
domestic and international markets through IMTN for the
purpose of investment in accordance with the Loan
Guarantee Act (Incorporation) 1965 for a period of 30
years. The Government Guarantee given covers the
principal repayment and cost of loan. When the Federal
Government took over TIA and changed its name to
1MDB, the Federal Government also agreed to maintain
the guarantee given for the financing after the process to
take over TIA by MKD was completed on 31 July 2009.

ii) 15 May 2009, the Federal Government represented by the

Hon. Minister of Finance II signed the grant of a Federal
Governments Guarantee for IMTN amounted to RM5

43
 billion. The purposes of IMTN are for general investment
and work capital.

b. RM800 million Loan from PERKESO

i) On 11 November 2011, Cabinet agreed that the
Government would give a guarantee for the loan obtained
by 1MDB Real Estate Sdn. Bhd. (1MDB RE), a wholly-
owned subsidiary of 1MDB, up to RM800 million from the
market resources or domestic financial institution. The
purpose of having a loan tenure of up to 10 years is to
finance the cost of relocating the military installation
operated at the Sungai Besi Air Force Base, Kuala
Lumpur. The relocation was necessary to give way to the
Bandar Malaysia development project in that area.

ii) The Federal Government represented by the Minister of

Finance II signed a Federal Government Guarantee
amounted to RM800 million on 28 September 2012.

5.3.4.2 Government Guarantee in The Form of Letter of Support

The Government has granted the guarantee in the form of letter of

support. Through the issuance of letter of support and in the case of
a default, the Government is only responsible for fulfilling its
obligation after the company uses up its entire internal fund first for
repayment of its debt. Two Letters of Support were given to 1MDB
for financing as follows:

a. Issuance of the USD3 billion Notes

i) Goldman Sachs, which was appointed by the Abu
Dhabi Government as the arranger for the issuance
of the USD3 billion Notes in the form of private
placement had applied for a Letter of Support (LOS)
to be issued by MKD and IPIC for the purpose to
attract the interest of investors. That was because
44
 1MDB and Aabar (IPIC subsidiary) were not of
international standards. LOS has to be issued so
that the issuance of the USD3 billion Notes by the
special purpose vehicle (SPV) company, which was
1MDB BVICO would be fully patronized.

ii) 1MDB through the letter dated 15 January 2013 to

the Minister of Finance had applied to MKD to issue
a LOS for the purpose of a join venture investment
project worth USD6 billion by a ratio of 50:50 with
Aabar.

iii) The memo of the Ministry of Finance on 18 February

2013 stated that the purpose of the issuance of the
bonds was to finance the investment in real estate,
energy and other strategic sectors as work capital.

iv) On 13 Mar 2013, the Cabinet Meeting approved the

following:
The Federal Government through the Ministry
of Finance issued a LOS for the issuance of the
USD3 billion Notes by 1MDB BVICO.
The financial support would cover the principal
payment amounted to USD3 billion and cost of
loan.

v) On 8 Mar 2013, 1MDB set up the 1MDB Global

Investments Ltd. (1MDB GIL) at British Virgin Islands
for the purpose of issuing the USD3 billion Notes.

vi) On 14 Mar 2013, the Minister of Finance signed the

LOS and the Federal Government would be
responsible for providing the financial assistance to
1MDB GIL under the following situations:

45
 If 1MDB GIL is not able to repay the debt or
there is a shortfall in repayment, 1MDB has to
inject capital to ensure that 1MDB GIL is able
to repay its debt; and
If 1MDB, as the shareholder of 1MDB GIL fails
to provide the fund needed as mentioned
above, the Federal Government needs to take
over to come up with the fund.

vii) The audit by NAD found that the LOS for the
issuance of the USD3 billion Notes was for capital
injection for the joint venture company for it to carry
out its investments. However, there were no details
on the said projects or investments. The audit by
NAD on the USD Information Memorandum (Memo)
of 1MDB GIL found that on 19 Mar 2013, the net
receipt from the issuance of the USD Notes was
USD2.72 billion only. The memo stated the said
receipt would be used as either loan or investment in
Abu Dhabi Malaysia Investment Company Limited
(ADMIC), which was the joint venture company of
1MDB and Aabar.

viii) The financial statement of 1MDB Group for the year

as of 31 Mar 2014 stated that an amount of
USD1.56 billion from the net receipt of the issuance
of the USD Notes had been invested in the portfolio
management in BSI Lugano, Switzerland. The audit
by NAD found that 1MDB did not inform MKD
regarding the change in decision on the issuance of
the fund which was to be invested in the fund
investment up until the investment by ADMIC was
finalized according to Mr. Azmi during the Board of
Directors meeting of 1MDB on 18 Mar 2013.

46
USD150 Million Loan from EXIM Bank

The Cabinet agreed to issue a LOS to Timeline Zone Sdn

Bhd (TZSB), a wholly-owned subsidiary of 1MDB for a
loan amounted to USD150 million from EXIM Bank
Berhad on 13 March 2015. This loan was for financing the
general corporate purposes but not limited to the need for
work capital, future capital expenditure and equity infusion
of energy businesses in 1MDB Group.

Based on the notice of usage issued by TZSB dated 23

Mar 2015 to NAD, the directive of the usage of the loan
amounted to USD150 million was given to EXIM Bank as
follows:

i. A total of USD0.75 million was paid to EXIM Bank

for facilitation fee;
ii. A total of USD7.23 million was transferred into the
FSRA (cash collateral) account in EXIM Bank;
iii. A total of RM0.37 million for legal and issuance fee;
and
iv. The loan balance was used to meet the need for
work capital of 1MDB.

Standby Credit RM950 million by The Federal

Government

Standby Credit is a financial assistance granted by the

Federal Government in the form of short term loan and
drawdown when there is a need for it. The standby credit
given to 1MDB was as follows:

i) On 18 February 2015, 1MDB applied to the Federal

Government for a short-term loan amounted to RM3
billion for financial support in expanding the energy

47
 sector and real estate company. To support the role
of 1MDB in the implementation of the development
projects, the Federal Government on the same date
agreed to provide a short-term loan up to RM3 billion
to 1MDB for the purpose of financing the cash flow
for the development project of Tun Razak Exchange
(TRX) by 1MDB RE. However, on 25 February 2015,
the Cabinet has cancelled the decision to provide
funding amounting to RM3 billion to 1MDB and only
approved standby credit of up to RM950 million with
an interest rate of 3.40% per annum and is to be
repaid no later than 31 December 2015. This loan
was needed to finance cash flow for repayment of
the loan plus interest by 1MDB and its subsidiaries,
as well as the need of the company's corporate
expenses. The remaining funds required by 1MDB
will be obtained from other sources, particularly
through monetisation measures of 1MDB assets and
accelerate the implementation of TRX and Bandar
Malaysia projects.

ii) This loan was channeled into SPV, which is wholly

owned by 1MDB, namely Plenitude Mentari Sdn
Bhd. The terms and conditions for the loan set by
the Government are as follows:

1MDB as the parent company issuing Letter of

Comfort on the loan and, if default occurs,
1MDB must repay the loan on 31 December
2015;

Negative pledge on the sale of shares in KLFID

Sdn. Bhd. (a wholly owned company of 1MDB),
which is the land owner in TRX; and

48
 Provide a statement of cash flows and project
progress reports for each drawdown during the
term of the loan.

Loan disbursements were made in seven

stages to Plenitude Mentari Sdn. Bhd. as in the
following table:

TABLE 11

Date of Total
Stage
Disbursement (RM Million)
1 27 February 2015 115.51
2 27 February 2015 160.27
3 27 February 2015 24.29
4 06 March 2015 3.04
5 11 March 2015 243.71
6 No Information 53.18
7 07 April 2015 350.00
Total 950.00

5.3.4.3 Federal Governments Risk Disclosure

In overall, up to October 2015, the Federal Government's risk

disclosure in the event where 1MDB fails to repay the loan, is
estimated at RM20.31 billion, excluding interest. The details are as
follows:

TABLE 12
Principal Date of
Type of Type of %
Company Date (RM/ USD Maturity/
Assitance Loan Coupon/ Interest
Million) Termination
Government 31.11.2039
1MDB 15.5.09 IMTN 5,000.00 5.75% semi annually
Guarantee (30 year)

49
1MDB Real
Government Term Loan - 10.10.2022
Estate Sdn 28.9.12 800.00 4.04 per year
Guarantee SOCSO (10 year)
Bhd
1MDB Global
Investments USD Note
Letter of 12,912.00/ 09.03.2023
14.3.13 (Arranger- 4.40 semi annually
Ltd Support (USD 3.0) (10 year)
GoldmanSachs)

Timeline Zone Letter of Term Loan-Exim 645.60/ 23.6.16

18.3.15 COFi+2.50 per year
Sdn Bhd Support Bank Malaysia (USD0.15) (15 month)
Plenitude
Federal 31.12.15
Mentari Sdn Standby Credit 27.2.15 950.00 3.40
Government Loan (10 month)
Bhd

Analysis by NAD towards Government Guarantee, LOS and Standby

Credit of IMDB Group as at 31 October 2015 are as follows:

i) Government Guarantee RM5.8 billion

ii) Letter of Support RM13.56 billion
iii) Standby Credit RM 950 million

GUARANTEE AND ASSISTANCE FROM THE FEDERAL GOVERNMENT

TO 1MDB GROUP

50
5.3.5 Review of Financial Statement 2010-2014

According to Section 143 (1) of Companies Act 1965, the Annual General
Meeting (AGM) must be held each calendar year to table financial statements,
declare dividends as agreed by the directors appoint new directors and decide
the appointment of the company auditors. The company is also required to
present its first financial statements in the first AGM within 18 months at the
latest from the date of companys establishment and the financial statement of
the coming years must be presented within 15 months from the date of the
AGM.

Section 169 (1) of the Companies Act 1965 explains that the director is
required to present the profit and loss account at the AGM in each calendar
year no later than 18 months after the date the company is set up and
subsequently once in every calendar year and not more than 15 months since
the previous account is tabled.

However, the company can apply for permission from the Companies
Commission of Malaysia (CCM) to extend this period as stipulated under
section 143 (2) and Section 169 (2) of the Companies Act 1965.

The audited companys financial statements need to be tabled within six (6)
months after the end of the financial year and to be submitted to CCM within
one (1) month after the general meeting, as set out under Section 160 (1) of
the Companies Act 1965. Section 169 (4) Companies Act 1965 also states
that the profit and loss account and balance sheet of a company need to be
audited before they can be presented at the company's AGM.

Checks by NAD found that 1MDB has submitted audited financial statements
to CCM within the time stipulated, as outlined in Section 160 (1) of the
Companies Act 1965. However, 1MDB failed to present its financial
statements within six months after the financial year ended for 2010, 2012,
2013 and 2014, where the delay was between 36 days up to 181 days. 1MDB
also failed to comply with Section 143 (1) and Section 169 (1) of the
Companies Act 1965 for the financial year ended 31 March 2014 in which the
51
company failed to present its financial statements in its annual general
meeting (AGM) in the calendar year and failed to present the financial
statements within the period of 15 months from the date of the previous AGM.

However, 1MDB Financial Statements for the year ended 31 March 2015
have not been audited. On 24 July 2015, 1MDB has applied for an extension
of time to present its financial statements and CCM has approved the
extension until 31 March 2016 in a letter dated 21 August 2015. 1MDB
informed CCM that the financial statement has yet to be audited since to all
the financial information was in the authorities possession.

5.3.5.1 Financial Statement Review For The Period Ended 31 March

2010

Equity interest in the joint venture company which was acquired on

28 September 2009 has been disposed of on 31 March 2010. To
identify profit made on this disposal, 1MDB was to carry out an
assessment of the equity/ assets of the joint venture company on 31
March 2010. Since the documents cannot be submitted to the
company's auditors, which was Messrs. Ernst & Young (EY) and
differs in views on asset ownership, which led to the termination of
the service of Messrs. EY. However, Messrs. KPMG, which was
appointed as the new auditor has signed the auditors' report on the
financial statement ending 31 March 2010 with reference to the
following documents:-

a) Share Sale Agreement Letter dated 31 March 2010;

b) Position Paper dated 18 September 2009;
c) Joint Venture Agreement dated 28 September 2009;
d) Assessment Report by Edward L. Morse, Energy Advisor
Services dated 29 September 2009; and
e) Valuation Report by Messrs Deloitte & Touche Financial
Advisory Services Pte. Ltd. dated 1 October 2010.

52
 In addition, Messrs. KPMG did not authorise the payment of
investment cost of USD 1 billion that was made into the account of
the joint venture company by the decision of 1MDB Board of
Directors.

Review by NAD has found that the Murabahah Financing Agreement

was approved by 1MDB PetroSaudi Ltd. shareholders on 14 June
2010, although the 1MDB's financial statements on 31 March 2010
stated that the agreement was signed on 31 March 2010. Messrs.
KPMG confirmed that they were not given the shareholders
resolution of 1MDB PetroSaudi Ltd. dated 14 June 2010.

Changes in recognition of the date of the agreement from 14 June

2010 to 31 March 2010 has resulted 1MDB to overstating the profits
amounted to RM651.80 million in which the financial statement for
the period ended 31 March 2010, where a profit of RM651.80 million
was supposed to be recorded in the financial statement for the year
ended 31 March 2011. Without those profits, 1MDB supposed to
record a loss of RM227.19 million as the following table:-

TABLE 13

Details Total
RM000
a. Profit for the financial year ended on 31 March 2010 424,607
b. Profit on disposal of investments in joint venture company 651,800
c. Losses regardless of profit on disposal of investments in
(227,193)
joint venture company (C = A-B)

Report by Messrs. KPMG on 1MDB's financial statement and its

Group was released on 4 October 2010. However, Messrs. KPMG
did not raise the need to disclose in the notes the events to the
financial statements in the Events After The Balance Sheet Date in
respect of the additional investment in Murabahah Notes totaling
USD 500 million (RM1.57 billion) as at 14 September 2010.

53
5.3.5.2 Review of Financial Statement for the Year Ended 31 March
2011

1MDB has used RM2.50 billion funds from the Syndicated Term
Loan, with a maturity period of three (3) years to subscribe for
additional investment in Murabahah Notes with a longer maturity
period, which would mature in March 2015 and March 2021. This
practise is contrary to prudence concept. However, the loan has
been paid in the financial year ended 31 March 2014 through the
issuance of USD3 billion Notes for the ADMIC joint venture
development project.

Messrs. KPMG confirmed that based on the accounting standards,

the use of short term loans for the purpose of long-term investments
does not need to be disclosed in the notes to the financial
statements. It also does not indicate 1MDBs going concern problem.

5.3.5.3 Review Financial Statements For The Year Ended 31 March

2012.
1MDB Group has issued Note worth USD3.50 billion through two
notes with a nominal value of USD1.75 billion over 10 years each on
18 May 2012 and 17 October 2012. Both notes were worth USD1.75
billion was guaranteed by 1MDB and International Petroleum
Investment Company PJSC (IPIC) have been approved for issue by
the 1MDB Board of Directors resolution dated 30 April 2012 and 9
October 2012.

Review by NAD found a total of RM4.24 billion (USD1.367 billion)

out of USD3.50 billion Notes was paid to Aabar Investments PJS
Ltd. (Aabar Ltd.) as a security deposit on 22 May 2012 (USD576.94
million) and 19 October 2012 (USD790.35 million). The security
deposit payment was made without the approval of the 1MDB Board
of Directors. In addition, the financial statements for the year ended
31 March 2012 also did not disclose events after the date of the
54
financial statements as it was still in the process of IPO listing as
follows: -

a. IPIC guarantee on the USD1.75 billion notes issued on 17

October 2012.

b. Security deposit paid to Aabar Ltd. amounting to RM4.24

billion (USD1.367 billion);

c. Call Option for 10 years that gives the right to Aabar Ltd. to
acquire up to 49% of shares owned by 1MDB Energy Ltd. in
the 1MDB Energy Sdn Bhd with a maximum price of
RM1.225 billion;

d. Call Option for 10 years gives the right to Aabar Ltd. to

acquire up to 49% of shares owned by 1MDB Energy Langat
Ltd. in the 1MDB Energy (Langat) Sdn Bhd. with a maximum
price of RM862.40 million; and

e. In the Inter-guarantor Agreement signed between 1MDB and

IPIC dated 21 May 2012, 1MDB must ensure the Ministry of
Finance Inc. repay all principal and related costs that have
been advanced by IPIC if 1MDB fails to perform its
obligations as guarantor. NAD also could not confirm
whether Inter-guarantor Agreement was also provided for
the second issuance of USD1.75 billion Note on 17 October,
2012. In addition, conditions in the Inter-guarantor
Agreement are contrary to the letter of approval from the
Minister of Finance dated 26 March 2012 and 3 August 2012
stating that the issuance of both the USD Notes were
approved without a government guarantee.

Further checks has found matters mentioned above are not specified
in the 1MDB's Letter of Representation regarding the audit of
1MDB's financial statements for the year ended 31 March 2012 to
Messrs. KPMG dated 27 December 2012.

55
5.3.5.4 Review of Financial Statements For The Year Ended 31 March
2013.

In view of the 49% stake in PSOSL which was obtained on 1 June

2012 and subsequently disposed of on 12 September 2012 in which
the capital gains totaling USD95.37 million (RM316.22 million) was
acquired at the date of disposal. NAD did not have any documents to
support this capital gain. However, Messrs. Deloitte also could not
confirm this because PSOSL financial statements and the evaluation
report were not submitted to them.

Messrs. Deloitte was supposed to validate the basis for the profits
recorded. However, during an interview with Messrs. Deloitte, they
were of the opinion that confirmation was not needed because
1MDB had disposed of the shares before the end of the financial
year, i.e. on 31 March 2012 and that amount was below the
materiality level set.

According to paragraph 2.6 in the Murabahah Notes Financing

Agreement, the redemption can only be carried out on the following
conditions: -

a. To redeem the balance of Murabahah Notes in cash; or

b. To change the balance of Murabahah Notes into ordinary

shares in 1MDB PetroSaudi Ltd.

However, on 1 June 2012, 1MDB has changed the balance of

Murabahah Notes to 49% equity in PSOSL which was contrary to the
conditions above because PSOSL was not a subsidiary of 1MDB
Petrosaudi Ltd. There were no documents being submitted to show
that the above conditions have been amended by a supplementary
agreement or those terms that had been agreed to be changed.
According to the interviews with Messrs. Deloitte, additional
agreements were not submitted to them during the auditing.

56
 In addition, checks by NAD has found a total of RM4.24 billion
(USD1.367 billion) from the issuance of two Notes of USD1.75 billion
that was paid on 22 May 2012 and 19 October 2012 to Aabar Ltd as
a security deposit without specific approval of 1MDB Board of
Directors. However, Messrs. Deloitte, could not confirm whether any
approval was obtained from the Board of Directors to pay the
deposit.

5.3.5.5 Review of Financial Statement For The Year Ended on 31 March

2014.

On 1 September 2014, 1MDB Energy Holdings Ltd. has signed a

Facility Agreement for a short-term loan amounted to USD975
million, which was also arranged by Deutsche Bank AG Singapore.
Among the purposes of the loan were to refinance the existing loans
of Deutsche Bank AG amounted to USD250 million and finance the
acquisition and cancellation of the call option on the 1MDB Energy
Langat Sdn. Bhd. shares and Powertek Investment Holdings Sdn.
Bhd. shares given to Aabar Investments PJS Ltd.

The documents obtained by NAD show that the binding term sheet
was signed on 2 October 2014 between 1MDB Synergy Sdn. Bhd.
and Yurus Private Equity Fund I, L.P (Yurus) to acquire all the
interests of Yurus in solar projects under the Master Joint Venture
Agreement signed between 1MDB Synergy Sdn. Bhd. and Yurus on
11 April 2014, for a return of USD95 million.

However, review by NAD found the two matters were not being
disclosed as Events After The Balance Sheet Date in the notes to
the financial statements. Review by NAD has found the two matters
were also not stated in the 1MDB Representation Letter dated 5
November 2014 to Messrs. Deloitte in the 1MDB Group financial
audit statements for the year ended 31 March 2014.

57
Based on the comments by Messrs Deloitte to PAC which was
referring to the company's records, Deloitte did not make any
comments on the 1MDB accounts dated 31 March 2014. The
accounts have been audited in a way which is unqualified, as it is
"clean" and without any comment, without any qualification and
without any emphasis of matter.

KPMG has verified 1MDB's accounts for the financial year ended
31.03.2010, 31.03.2011 and 31.03.2012. While Deloitte has verified
1MDB's accounts for the financial year ended 31.03.2013 and
31.03.2014. All of these accounts have been audited in a way which
is unqualified as it is "clean" and without any comment, without any
qualification and without any emphasis of matter (apart from
31.03.2010).

Based on the company's records, justification was given for the

change of 1MDB's account auditors for the year ended 31.03.2013
(i.e. the year in which Messrs. KPMG was switched with Messrs.
Deloitte) but not for the year ended 31.03.2014.

In the field of accounting, although there are accounting standards,

to determine the accounting treatment for multiple transactions of a
company, there are still some areas where accounting standards
require interpretation either by the management and / or the
auditors. The case is so technical that it requires, among other
things, subjective judgment based on opinion, which may differ from
one side to the other.

At the time 1MDB's accounts for the financial year ended 31.03.2013
was being prepared, there was a difference of opinion on some
technical accounting issues between Messrs. KPMG and 1MDB
management, which caused delays in the preparation of the
accounts. Therefore, in order not to delay, 1MDB management
presented the same technical issues to Deloitte, where both sides
have reached an agreement on accounting treatment. Furthermore,
58
 Messrs Deloitte, the world's largest accounting firm, has
recommended a more comprehensive and thorough auditing method
than that of KPMG, where almost 15 audit partners from Malaysia
and other countries were would also be responsible for auditing the
company. The proposal by Deloitte was considered very attractive at
that time because 1MDB has purchased 15 new electric power
stations operating in 5 countries and required the expertise of
international auditors. Finally, KPMG was dropped and Deloitte took
over as the company's auditors.

The change in auditors done by 1MDB was from KPMG to Deloitte,

that was not from the "big four" to unknown small local auditors.

5.3.6 Appointment and Termination of Auditors

5.3.6.1 Messrs. Ernst & Young (EY)

Messrs. EY was the first auditor appointed on 25 March 2009 by TIA,

whose contract was subsequently terminated on 15 September 2010
before the 1MDB submitted the first financial statement for the period
ended 31 March 2010.

The checks conducted on the 2010 Audit Planning Memorandum

dated 26 March 2010 which was prepared by Messrs. EY found the
following:

a. To determine the fair value of the assets and liabilities of the

joint venture company at the date of acquisition, Messrs. EY
has requested to review the due diligence report prepared by
the management of 1MDB and the report regarding the
ownership status of PSI property in the joint venture
company. Messrs. EY also requested for financial statement
of the joint venture company on 30 September 2009 to carry
out an assessment of the fair value of the shares, assets,
59
 liabilities and contingent liabilities of the joint venture
company. This step is necessary to determine the goodwill
value at the time of the joint venture. Messrs. EY has
conducted a preliminary assessment and requested
additional information to assess the reasonableness of the
key assumptions to determine the expected value of the
assets of PSI.

b. During the 1MDB Board meeting on 5 April 2010 Messrs. EY

has raised the need to have this document.

This shows Messrs EY was not satisfied with the reports and
supporting documents submitted. This caused Messrs. EY to raise
various concerns and request the management to submit more
information. Messrs. EY did not find any documents related to the
status of actual ownership, value and risks associated with the
assets invested by the joint venture partners.

Messrs. EY has also raised the need to reaffirm the value of the
asset for the purpose of reviewing the process of the appropriate
accounting method to change the equity to Murabahah Notes in the
financial year ended 31 March 2010. However, on the same date,
1MDB has no sufficient documents to prove ownership of the assets
by the joint venture company.

This is supported by the statement during the meeting of the Board

of Directors on 4 October 2010 that 1MDB PetroSaudi Ltd. has not
yet prepared its financial statements and the Chief Executive Officer
has convinced 1MDB Board of Directors that this matter would be
discussed in the next Board meeting after receiving the financial
statements of the company. However, there was no evidence to
show that the discussion paper on the matter has been presented in
any meeting of 1MDB Board of Directors

60
 The stance of Messrs. EY has raised an unease situation to the
management of 1MDB, hence the shareholders and the Board of
Directors had decided to terminate the service of Messrs EY.

5.3.6.2 Messrs. KPMG

Messrs. KPMG was appointed on 15 September 2010 after the

termination of Messrs EY. However, on 31 December 2013, the
appointment of Messrs. KPMG has been terminated before 1MDB
submitted its financial statements for the year ended 31 March 2013.

Based on the minutes of the meeting of the 1MDB Board of Directors

on 11 November 2013, Messrs. KPMG has asked for the following
documents in order to verify the fair value of 1MDB Group
investment in Bridge Global SPC through Brazen Sky Ltd. (BSL) :-

a) Confirmation on the ownership of investments of Bridge

Global SPC through BSL by BSI Bank;

b) Documents related to legal due diligence to verify that Bridge

Global SPC has actually been legally established in
accordance with the law, and to determine its legal structure
for accounting purposes;

c) The views of the legal counsel regarding Bridge Global SPC

structure to determine the ownership of BSL for accounting
purposes;

d) The report on the net asset value (NAV) in Bridge Global

SPC on 31 March 2013 and supporting documents showing
how NAV was obtained; and

e) Financial Statements of Bridge Global SPC on 31 March

2013.

61
Based on the minutes of the meeting between 1MDB and Messrs.
KPMG on 29 November 2013, Mr. Hazem tried to convince Messrs
KPMG regarding the investments. However, Messrs. KPMG was not
satisfied because there was no evidence in writing.

During the meeting of the 1MDB Board of Directors on 9 December

2013, Mr. Hazem informed that Messrs. KPMG was not satisfied and
would hold a meeting to determine whether the information
submitted by the management of 1MDB was acceptable and
sufficient for the purpose of that audit or they would issue a
statement of reprimand. Messrs. KPMG decided to issue a
reprimand report.

Due to the differing opinion between 1MDB and Messrs KPMG,

1MDB through its letter dated 30 December 2013 stated that Messrs.
KPMG should obtained more information from the fund manager
concerned. However, on 31 December 2013, 1MDB shareholders
terminated Messrs. KPMGs contract and appointed Messrs. Deloitte
as the new 1MDB auditors.

Messrs. KPMG in a letter dated 6 January 2014 to 1MDB

management has pointed out that 1MDBs approach was only trying
to convince them verbally without submitting the necessary
documents. Among the key points raised in the letter are as follows:-

a) Messrs KPMG was unable to carry out the necessary audit

procedures to ensure the suitability of the classification and
to evaluate the hedge/hybrid fund investment through
Segregated Portfolio Company, Bridge Global Absolute
Return Fund SPC by BSL;

b) Although, Vistra Fund Services Asia Ltd. has made NAV

calculation, Messrs. KPMG was unable to ascertain whether
the evaluation was based on International Financial

62
 Reporting Standards (IFRS) and the Malaysian Financial
Reporting Standards (MFRS); and

c) BSL as the holder of the fund, has the right to receive the
unaudited financial statements of Bridge Global Absolute
Return Fund SPC but until that date, the statement has yet
been received.

In addition, several other factors stated in a letter dated 6 January

2014 also showed Messrs. KPMG was unable to validate the
assessment of SPC fund without being given the additional
information.

A very similar situation was also faced by Messrs. KPMG after two
years as 1MDBs auditors, when it had to assess the investment of
Murabahah Notes investment relating to Segregated Portfolio
Company. This situation was the second time within four years, the
auditors service was ended after the end of financial year due to
disagreements on investment valuation.

The termination of Messrs. KPMG as 1MDB auditors was made

through 1MDB Board of Directors Resolution dated 31 December
2013, which mentioned "Ordinary Resolution No.1 - Upon the mutual
agreement between the company and Messrs. KPMG, it is resolved
that Messrs KPMG be removed as Auditors of the Company with
immediate effect. "

5.3.6.3 Messrs. Deloitte

1MDB Board of Directors had appointed Messrs. Deloitte through a

resolution dated 31 December 2013 as the company's auditors after
terminating the service of Messrs. KPMG. The termination of
Messrs. KPMG and the appointment of Messrs. Deloitte has been
made according to the recommendation by the Risk Management

63
 and Audit Committee of 1MDB. Review by NAD up to 31 October
2015 found that Messrs. Deloitte is still the auditor for 1MDB.

Deloitte has validated their audit of the financial statement of 1MDB

2013 and 2014.

5.3.7 Failure to list Initial Public Offering (IPO) of Edra Global Energy Bhd.
(Edra)

The initial proposal for 1MDB listing in the Initial Public Offering (IPO) was
presented by Goldman Sachs during the Special Meeting of the Board of
Directors on 8 February 2012. The proposed IPO was one of the post-
acquisition strategic option after the acquisition of Tanjong Energy Holdings
Sdn. Bhd. (TEHSB). 1MDBs Chief Executive Officer, Mr. Shahrol Azral has
informed the 1MDB Board of Directors during a meeting on 2 March 2012,
that part of the cost to finance the acquisition of TEHSB can be settled with
the successf of IPO.

1MDB has taken a short-term loan through syndicated bridging loan from
Maybank Investment and RHB Bank Berhad amounting to RM6.17 billion
while the remaining of RM2.5 billion will be borne through the issuance of
USD Note totalling of USD1.75 billion that need to be settled.

During the 1MDB Board of Directors meeting on 15 October 2012, Mr. Vincent
Koh has informed the implementation of IPO was expected to be in the first
quarter of 2013 after the completion of the acquisition of Powertek and Kuala
Langat power stations. However, in the 1MDB Board of Directors meeting on
22 January 2013, Mr. Shahrol Azral has informed that implementation of IPO
was postponed until the end of 2013, after successfully acquiring and taking
over of another greenfield energy project in joint venture with Mitsui & Co. Ltd.
(3B Project). In addition, the postponement was made to avoid concurrent of
IPO listing with the Malakoff group. In the 1MDB Board of Directors Meeting
on 15 July 2013, Mr. Hazem informed that it is very important to acquire the
3B Project which will be implemented in joint venture with the Mitsui & Co. Ltd.

64
 to meet the IPO listing criteria. Given the results of the bidding will only be
known in January 2014, the IPO listing plan will be postponed once again.

Based on the Minutes of the 1MDB Board of Directors Meeting dated 19

August 2013, the Chairman of 1MDB has instructed the management to try to
consolidate and rationalise all the three IPP companies as a preparation for
1MDB energy listing that was planned for 2014. Among the steps taken
towards this instruction was by establishing 1MDB Energy Group Berhad
(Edra) that is responsible for coordinating the planned IPO listing activities.
This company later changed its name to Edra Global Energy Berhad (Edra)
after the approval by the Companies Commission of Malaysia (SSM) on 1
December 2014, which becomes the parent company of the energy sector
that acts as the sole management of all companies related to energy under
the 1MDB group.

TABLE 14
POSTPONEMENT OF IPO LISTING PLANS
IPO
1MDB Listing Reasons For The IPO Postponement
Board Of Plans
Directors
Meeting
15.10.2012 First Quarter of Based on the Minutes of the 1MDB Board of Directors
2013 Meeting dated 22 January 2013, IPO was postponed
because:

To add another acquisition of another greenfield

energy project in joint venture with the Mitsui & Co.
Ltd.
To avoid concurrent listing of IPO with the Malakoff
Group.
22.01.2013 End of 2013 Based on the Minutes of the 1MDB Board of Directors
Meeting dated 15 July 2014, IPO was postponed due
to the bidding result of the greenfield energy project in
joint venture with the Mitsui & Co. Ltd. that was only
known in January 2014.

65
15.07.2013 2014 Based on the Resolution of the 1MDB Board of
Directors dated 27 February 2015, IPO was postponed
because there was a significant development on
1MDB and Edra that required amendments on the IPO
Prospectus.

According to 1MDB, the listing of 1MDB was postponed due to political

reasons and the current market factors. Mr. Hazem, in the Board of Directors
meeting on 26 March 2014 has informed that, based on the initial assessment
of the investment bank, if the listing were successful, it could bring in revenue
of RM15 billion to RM25 billion. However, when the IPO application was
submitted to the Security Commission on November 2014, the IPO value that
was expected to be acquired was in between RM9.86 billion to RM11.30
billion. According to the feedback by 1MDB, the success of the listing depends
on external factors which are beyond the companys control. 1MDB has begun
planning and initiate preparatory works for IPO in 2013, before negative
statements and allegations made by the media and political parties in 2014
and 2015.

Impacts of the second postponement of IPO are as follow:

Loans made with Maybank of RM6.17 billion which matured in

November 2013 cannot be amortised and 1MDB has made an
application to extend the maturity for another 6 months that ended in
May 2014.
1MDB still failed to settle the loan on May 2014 and has refinanced
the loan after making repayment of RM670 million. The refinance
loan with Maybank currently stands at RM5.50 billion.
The NAD assumed the repayment of RM670 million loan was made
through a new loan taken in December 2013 by 1MDB Real Estate
Sdn. Bhd. from Ambank Berhad. This is because most of the loan
have been given to 1MDB as an advance and not used to finance
the Bandar Malaysia resettlement project (which was the real
purpose of the loan taken).

66
 1MDB loan is increasing and financing that was supposed to be
used for development project have been used partially to repay
the loan.
Borrowing costs incurred by the company was increasing and the
cost that needs to be borne to extend the loan was also an additional
cost.

6. 1MDB RATIONALISATION PLAN

Information based on the 1MDBs written report that was submitted to the
PAC on 17 March 2016 is as follow:

A. Long Term Assets Vs Short Term Needs

1. Consolidated Debt and IPIC Advance Payment Position as at 31
January 2016*

1MDB
1MDB Group
RM'mil RM'mil
Facility Jan'16
Loans and Borrowings Carrying Amount
1 Islamic Medium Term Notes RM5,000 mil 4,440 4,440
2 Term loan from Marstan Investment USD555 mil 2,000 2,000
3 PIH S/B's term loan RM6,170 mil - 2,889
4 1MDB Energy Ltd's USD notes USD1,750 mil - 6,998
1MDB Energy (Langat) Ltd's USD
5 notes USD1,750 mil - 7,236
1MDB Energy (Langat) S/B's term
6 loan RM700 mil - 119
7 1MDBRE term loan from SOCSO RM800 mil - 800
8 1MDB Global's USD notes USD3,000 mil - 12,082
9 Sukuk Murabahah Programme RM2,4000 mil - 1,626
10 Total Borrowing in Jimah Group Total - 4,863
11 Total Borrowing in PESB Group Total - 2,207
12 Term Loan from MOF RM950 mil - 950
13 Term Loan from EXIM Bank USD150 mil - 647
6,440 46,857

67
 IPIC Advance Payment : RM4,300 million
Total : RM46,857m + RM4,300m + RM51,157 million
* NOTE: Amounts above are per carrying amount in 1MDB financial statements.

Accordingly, figures are different from the ultimate principal repayment

amount.
* NOTE: MYR-USD ex-rate : 4.3

2. Finance Costs p.a.

RM2.4 billion (2014)

RM3.3 billion (2015)

3. Infrastructure Cost for Investment

TRX RM3 billion (2015-2018)

Bandar Malaysia RM2.7 billion (2013-
2017)

Mismatch of assets in cash flow compared to the needs of interest

on short-term services, infrastructure development and principal.

IPO in Edra Energy was not materialised in November 2014

because:

Negative publicity from political and media critics.

Market factor.

In November 2014, 1MDB and the Government of Malaysia have taken

an immediate action to overcome the mismatch and evaluation of the
going forward option.

B. Option Evaluation
By taking into account the following:
The ability for short-term loan repayment
The ability to match between the long-term loan for bond/Sukuk with
sustainable cash flows.
The needs of investment and ensuring the strategic projects like
Bandar Malaysia and TRX will be developed in line with the vision of
the Government of Malaysia.
68
 Pemilihan Option

New equity injection from Sale of assets
shareholders

New equity from third party

Additional loans

Exchange of assets-loans

Outcome
1) Ensures international tender process for the sale of assets are
transparent and at the maximum.
2) Promotes FDI.
3) Ensures the completion of strategic development projects.

C. Rationalisation Plan to Reduce Loan

All 1MDB loans and IPIC advance payments settled, exchanged and/or
matched through the implementation of rationalisation plan based on
current assumptions

1. IPIC loans to exchange of

USD4.5 billion value exchange
assets

Bi-lateral agreement for USD cash

Match & Reduce of Payment deposits and USD fund units
exchange.
USD3.5 billion of USD
Bonds
Bond is maintained in the Balance
Sheet but the cost of interest and
USD1.0 billion IPIC
principal based on assumptions by
Advance Payment
IPIC.

Binding term sheet signed in June 2015,

based on the completion term in June
2016.

69
2. Sales of RM9.83 billion Equity and
Edra Energy RM7.43 billion change of inherited
loans

Reduce of Payment of Elimination of 100% assets in Edra

RM14,195 billion Energy

RM7.43 billion inherited Repayment and loan change

loans (debt at operating
companies)
SPA was signed in November 2015,
RM6.76 billion of depending on the completion term in
acquisition loans March

* Unaudited figures based on confirmation

* USD-RM at 4.3 rate

3. Sales of equity Deferred Payments

Bandar Malaysia
Terms

Match & Reduction of Loan Elimination of 60% stake in BMSB

including retaining 40% ownership
GIL USD3.0 billion (either 1MDB or MOF Inc SPV)
Sukuk RM2.4 billion **
GIL loan is maintained in the 1MDB
Balance sheet but is matched with
future cash flow.

Sukuk loans of RM2.4 billion is at

Bandar Malaysia project level

The management of Bandar Malaysia

will be done independently and
separately by the company

SPA was signed in December 2015,

completion term is in August 2016.

70
 4. Sales of Land and Equity based on
Sales of Land Balance
Time Period

Match & Reduction of Loan Maintaining 100% ownership (either

1MDB or MOF Inc SPV)
RM5 billion of Sukuk
RM5 billion Sukuk maintained in 1MDB
RM800 million of SOCSO
Balance Sheet and repayment is
**
according to the time period.

TRX management is independent and

separate.

Air Itam land will be managed and

developed by JV shareholder.

Sale of Pulau Indah land.

* Unaudited Figures based on confirmation

* USD-RM at 4.3 rate
** Loan repayment of RM2.4 b Sukuk and RM800 m SOCSO at TRX and BM
project level.

D. EDRA Sales Revenue

EDRA SALE EQUITY PURCHASE PRICE
ADJUSTMENTS MYR

Aggregate value Per 31 March 2015 9,832,000,000.00

(less) Dividend Paid Apr 15-Mar-16 (585,264,073.40)

Total amount payable by CGN at Closing 23 Mar 2016 9,246,735,926.60

(less) Maybank Loan Repayment (2,975,559,169.10)

(less) Marstan Loan Repayment (2,200,000,000.00)

(less) EXIM Bank Loan Repayment (645,000,000.00)

(less) Govt. of Malaysia Loan Repayment (985,220,000.00)

(less) Fees and Transaction Costs (117,000,000.00)

Cash Balance from Edra Sale Proceeds 2,323,956,757.50

71
 E. Cash Flow Statement for 1MDB Rationalisation Plan
Cash flow statement prepared by 1MDB for a detailed Rationalisation
Plan is as follow:

CASH FLOW FOR 1MDB RATIONALISATION PLAN

CASH FLOWS 2016 2022 2023 2039 TOTAL

Edra Sale Cash Balance 2,320.00

Pulau Indah Sales Proceeds 300.00

Bandar Malaysia 10% Deposits 741.00

IPIC USD 1b Advance (Debt
Swap) 4,200.00
IPIC USD 3.5b Bond Interest
(Debt Swap)(2016-2022) 5,413.10
IPIC USD 3.5b Bond Principal
(Debt Swap)(2016-2022) 11,900.00
Bandar Malaysia 40% Stake
Future Value 6,543.97
Bandar Malaysia 60% Stake
Deffered Payment 4,537.00
Bandar Malaysia 60% Interest
(2016-2023) 2,041.65
Air Itam Land + JV GDV Profits
Share 1,950.00
TRX 100% Stake Future Value 12,286.10

Total Cash Inflows 7,561.00 17,313.10 15,072.62 12,286.10 52,232.82

LESS CASH OUTFLOWS

1MDB Repayment of TRX
Intercompany Loan 1,250.00

IPIC USD 1b Advance 4,200.00

1MDB Energy USD3.5b Bond
Interest (2016-2022) 5,413.10
1MDB Energy USD3.5b Bond
Principal (2022) 11,900.00
1MDB GIL USD3.0b Interest
(2016-2023) 3,643.20
1MDB GIL USD3.0b Principal
(2023) 10,200.00

Bandar Malaysia 40% Capital Call 208.00

RM 5b Sukuk Interest (2016-2039) 6,768.00
RM 5b SukukPrincipal (2039) 5,000.00
1MDB OPEX (2016-2039) 690.00

Total Cash Outflows 5,450.00 17,313.10 14,051.20 12,458.00 49,272.30

SURPLUS 2,960.52

72
Assumptions for Rationalisation Plan on 17 March 2016 are as follows:

TRX yearly value increased from 5% p.a. (2017-2039)

TRX land sales, equity sales and building sales for RM5 billion Sukuk
repayment
SOCSO loan of RM800 million will be at TRX as a repayment from TRX
project cash flows
As a conservative, it is assumed that the Rationalisation Plan has no dividend
payment from TRX 100% ownership.
Yearly evaluation of Bandar Malaysia will increase (2017-2023) at 5% rate
p.a. for 2017, 2018-2023 at 10% p.a.
40% stake of Bandar Malaysia will be transferred to GLC or GLIC by 2023.
The acceptance of transfer of 60% stake deferred payment and the return of
Air Itam Land JV will be used for repayment purposes of USD3.0b 1MDB-GIL
Bond.
RM2.4b of Bandar Malaysia Sukuk will be in Bandar Malaysia as a repayment
from project cash flow.
As a conservative, it is assumed that the Rationalisation Plan will have no
dividend payment from Bandar Malaysia 40% stake.
Injection of Air Itam land to JV, land development by JV partners.
Sales of Pulau Indah land.
2 x USD1.75 billion = USD3.5 billion bonds. Bond will be retained in the
Balance Sheet in which the interest and principal will be paid by IPC
according to the current Binding Term Sheet.
RM-USD Avg exchange rate p.a.: 2016: 4.3, 2017: 4.0, 2018: 3.8, 2019: 3.6,
2020-2022: 3.4.
Permanent loan in 1MDBs Balance sheet: RM5 billion Sukuk, USD3.0 billion
and 2 x USD1.75 billion bonds. Servicing of the debt will be from matching
cash flows.
Any shortages on the above assumptions will be borne from the profits.

73
7. CORPORATE GOVERNANCE AND INTERNAL CONTROL

A good corporate governance will be able to assist the company in improving

efficiency, transparency and accountability in achieving its objectives and
enabling the operation of the company to be managed properly. Among the
importance of establishing a good corporate governance and internal control
is to ensure the company is managed according to the laws and proper
business etiquettes. A good control element can strengthen the roles and
responsibilities of the Board of Directors in ensuring the companys
competitive advantage and effective risk management.

The Companies Act 1965 stated the responsibilities to be observed by the

company to ensure good governance and finance. In addition, the guidelines
issued by Putrajaya Committee on High Performance GLC through the Green
Book: Enhancing Board Effectiveness (Green Book) and Blue Book:
Intensifying Performance Management Practice (Blue Book) and Malaysian
Code on Corporate Governance 2012 (MCCG 2012) issued by the Securities
Commission has detailed basic principles and recommended actions related
to important items of good management and corporate governance.
Therefore, this guideline can be used as the best source of reference to
important matters in management and culture of business. Failure to follow
the principles of governance can expose the company to the risks of losses
and failure to achieve its goals and objectives.

1MDB is a government-owned company belonging to the Ministry of Finance

Incorporated (MOF Inc.). However, as an MOF Inc. company, 1MDB was
given more privileges and flexibility compared to other government-owned
companies under Ministry of Finance.

Among them are as follows:

a. No shareholders representative in the 1MDBs Board of Directors

b. Corporate tax exemption on all income of the company and some of
its subsidiaries for a period of 10 years starting from 23 November
2010.
c. Exemption of some of the Governments regulations in the
management of revenues, remuneration and bonus payment to all
members of Board of Directors and 1MDB management.
74
 d. Receive a few Governments guarantees and letter of supports and
standby credit to finance the operation of the company. For example,
receives a warranty period of 30 years for the issuance of the Islamic
Medium Term Notes (IMTN) with a nominal value of RM5 billion.

Therefore, the operations and investments of this company are not regulated
by MOF Inc.

7.1 THE IMPLEMENTATION OF 1MDB GROUP GOVERNANCE

Based on a review by NAD, it is found that in overall, the aspect related to

corporate governance and internal control of 1MDB are unsatisfactory. It is
found that part of the 1MDBs action and the decision by Board of Directors
were not consistent with the best practice of corporate governance as
described in the following paragraphs.

7.1.1 IMPORTANT INVESTMENT DECISIONS MADE ONLY THROUGH

WRITTEN RESOLUTIONS

The Green Book recommends Board of Directors to have meetings with an

average of six to eight times a year based on the needs of the company.
Members of the Board of Directors are to be responsible to ensure that the
corporate governance is established in managing the operation of the
company in efficient and organised way, including by having a regular meeting
to monitor the strategic achievement and financial performance in line with
key performance indicators (KPI). Through the Board of Directors meeting,
each of the members are able to give professional opinion, advice and
explanation and full access on specific matters in the meetings agenda.

Based on a review by NAD, it is found that the 1MDB Board of Directors has
had meetings more than the average number of meetings recommended by
the Green Book, with the number of meetings of 8 to 16 times per year for the
period of 2009 to August 2015. On the other hand, the analysis by NAD found
that the 1MDB Board of Directors has approved 425 written resolutions for the
same period.

75
 Even though Board of Directors meetings were held, NAD found that most of
the important decisions in view of investment were made through written
resolution such as making new investment, ending an investment or extending
the period of an investment involving investments between USD1 billion to
USD2.22 billion.

This shows constructive discussions between the Board of Directors and

detailed evaluation on an investment was not done before an important
decision was made. However, Chairman of the 1MDB Board of Directors
informed the Public Accounts Committee (PAC) on 19 January 2015 that
there were discussions made on investment before approval were given
through resolution.

7.2 INVESTMENT MADE WITHOUT COMPREHENSIVE STUDY

Section 132 of the Companies Act 1965 states that the Board of Directors
shall at all time exercise its powers to make the best decisions in the interest
of the company. Other than that, the Green Book also states that the Board of
Directors are responsible for managing risks by ensuring the management
perform all the necessary studies before an investment is finalised to reduce
the risk of failure and to protect the company.

Interview by NAD with the former 1MDB Chief Executive and several 1MDB
Board of Directors found that they believe the Investment Committee does not
need to be established as the number of 1MDB Board of Directors is small
and all investments made were discussed in the Board of Directors meetings
or through Board of Directors resolutions. The absence of the Investment
Committee had contributed to the investment decisions made without
thorough evaluation process or proper due diligence. In the four years since
the establishment of 1MDB in 2009 and 2012, 1MDB investment with initial
fund of RM5 billion IMTN has changed for four times from equity investment in
a joint venture with PetroSaudi Holdings (Cayman) Ltd., a subsidiary of
PetroSaudi International Ltd. down to portfolio funds of Cayman Islands.
Changes in investment decisions in a short period involving huge amount of
fund shows that the investment decisions were not made according to good
governance practice.
76
Analysis by NAD found that some considerations related to investment
decisions were made without thorough evaluation process. Among them are as
follows:

a) IMTN was issued in a short period of time because of the

recommendations made by TIA special advisor, which at that time
was to expedite the issuance of IMTN with the purpose to develop
Bidong Island in collaboration with Mubadala company in 2009.
Besides that, issuance of IMTN was made without taking action on
the matters raised by TIA Board of Directors first. The issuance of
IMTN with discount rate of 12.08%, resulting in every RM100
nominal value is equivalent to RM87.92 and generate net receipts of
RM4.385 billion compared to the nominal value of RM5 billion. In
addition, the profit rate for the investors is 5.75% per annum
(effective rate of 6.68% per year) for a period of 30 years.
b) The decision to invest in the joint venture with PetroSaudi was made
in eight days, where the Board of Directors was only informed on 18
September 2009 that the joint venture agreement will be ratified on
28 September 2009. 1MDB investment of USD1 billion in this joint
venture was made without due diligence process; no breakdown of
details regarding the described project in the proposal paper
prepared by the management; and no feasibility study was done on
investment projects that will be done. Aspects of the project that
were not studied in details before approval of investment include the
background of the joint venture partner, the overall cost of the project
and the term of investment that will be implemented. There are four
different companies registered under the PetroSaudi but the
proposal submitted for approval from the Board of Directors did not
state all of the important information. In addition, the joint venture
agreement contains several clauses that do not protect the interests
of 1MDB.
c) The decision to convert the equity in the joint venture company to
Murabahah Notes subscription was made without a detailed
discussion among the 1MDB Board of Directors and without
evaluating the credit capabilities of PetroSaudi International Ltd. as a

77
 corporate guarantor for the issuance of Murabahah Notes in 2010
and 2011 by 1MDB PetroSaudi Ltd. No justification for 1MDB to
make additional subscriptions of Murabahah Notes while the funds to
finance the investment were also obtained through loans from
financial institutions.
d) The change of Murabahah Notes to equity investment in the
PetroSaudi Oil Services Limited (PSOSL) was made without any due
diligence study to identify liabilities, the capability to generate fund
and previous financial performance. The consideration for the
investment did not take into account on the interest of 1MDB
because the management still continues with the investment
proposal in PSOSL despite being aware that PSOSL operates in the
waters of Venezuela which are under sanction by the United States
of America. Orders by the 1MDB Board of Directors to ensure
PSOSL get to prolong drilling contract in Venezuela was also not
performed by the management before the investment was done.
e) For investment in the Segregated Portfolio Company (SPC), 1MDB
took a high risk in deciding on an investment of USD 2.318 billion.
This investment was made through Bridge Global Absolute Return
Fund SPC (Bridge Global SPC), a one month company which has no
licence as a fund manager or no experience to manage large funds.
f) The acquisition of shares of the Tanjong Energy Holding Sdn. Bhd.
with the bidding price of RM10.60 billion on 8 February 2012 was
made without detailed consideration regarding the financing method,
the cost of loan and commitment that need to be borne by 1MDB for
the acquisition.
g) For the acquisition of shares of the Mastika Legenda Sdn. Bhd.
which was approved through a resolution dated 10 August 2012 with
a price of RM2.75 billion, it is found that the proposal paper prepared
by the 1MDB management did not have assumption management
which should be taken into account when deciding. Among them are
the basis and component of the cost acquisition
determiner/enterprise value up to RM2.75 billion; investment target
return and the ability to pay principal and cost of loan in the expected
term; detailed explanation regarding the surplus of cash receipts
78
 from the loan and issuance of USD1.75 billion notes compared to the
acquisition, and the implication of the 10-years call and swap
option offered to SPV Aabar (IPIC subsidiary) on IPO and the
financial performance of 1MDB as a whole.
h) For the solar project, the 1MDB Board of Directors in a meeting
dated 26 March 2014 has approved an unincorporated Master Joint
Venture Agreement with DuSable without detailed consideration on
the issue of technology restriction from another country, cost and
long-term benefits to be gained by 1MDB.
i) In addition, analysis by NAD found a few decisions related to
loan/financing for investments were made without any detailed plans.
The details are as follow:
i. The implications of guarantees given by IPIC on the
issuance of USD1.75 notes (the first) including call and swap
option and security deposit were made without any detailed
studies on the impact of it on IPO and financial position of
1MDB Group.
ii. The 1MDB Group has acquired 10 loans/short-term
financing of 15 to 48 months to finance the acquisition of
energy sector assets which would be done over a long-term.
This has caused 1MDB to take a new loan/financing to repay
the loan/short-term financing which has matured.
iii. The implementation of IPO was delayed due to acquisition of
new projects to increase the value of IPO without making
projections of the companys actual ability to repay the
principal and cost of loans in the near term and the
restrictions imposed by the financier.

7.3 THE ACTION OF THE MANAGEMENT WITHOUT APPROVAL BY THE

BOARD OF DIRECTORS

The management is responsible to implement all decisions made by the

Board of Directors to the best of its ability. Meanwhile, the Board of Directors
plays the role to monitor all actions implemented by the management.

79
However, NAD found that most of the actions by the management of 1MDB
were justified by general approval instead of specific approval by the 1MDB
Board of Directors for each investment. Analysis by NAD on all 1MDB
documents found that some actions by the management were made without
specific approval or detailed discussion with the 1MDB Board of Directors.
Among them are as follows:

7.3.1. The management of 1MDB did not inform the 1MDB Board of
Directors regarding the proposed joint venture letter from Mr. Tarek
Obaid dated 28 August 2009 and the terms proposed in regards to
the joint venture agreed between 1MDB and PetroSaudi
International Ltd. Among the proposed terms are the establishment
of the holding ratio, cash distribution of USD1 billion, the value of
assets, goodwill and profit expectations in the proposed joint
venture.

7.3.2. Clear explaination was not given to 1MDB Board of Directors about
the joint venture partner and the relation between the three
companies which are PetroSaudi International Ltd. (Saudi),
PetroSaudi Holdings (Cayman) Ltd., and PetroSaudi International
(Cayman). The 1MDB Board of Directors gave conditional approval
to the management of 1MDB to implement the joint venture with
PetroSaudi International Ltd. but the actual agreement was signed
with PetroSaudi Holdings (Cayman) Ltd., without informing the
1MDB Board of Directors regarding the change in partner. The
PetroSaudi Holdings (Cayman) Ltd. is a newly established company
by PetroSaudi International Ltd. for the joint venture purposes.

7.3.3. The establishment of 1MDB PetroSaudi Ltd. which later became

the joint venture company was registered in advance by PetroSaudi
Holdings (Cayman) Ltd. on 18 September 2009. It was eight days
before the conditional approval was obtained from the 1MDB Board
of Directors on 26 September 2009. The 1MDB Board of Directors
was not informed that the company (1MDB PetroSaudi Ltd.) was
established on 18 September 2009, the same day the proposal was

80
 presented to the Board of Directors. This shows that the
management of 1MDB had decided to go into a joint venture with
PetroSaudi International Ltd. earlier without informing the Board of
Directors.

7.3.4. The 1MDB Board of Directors was not informed of the clause in the
joint venture agreement stating that, the joint venture company
(1MDB PetroSaudi Ltd.) had to pay USD700 million loan taken from
its parent company, PetroSaudi Holdings (Cayman) Ltd. on or
before 30 September 2009, which was two days after the agreement
was signed. NADs interview with the former 1MDB Board of
Directors in June 2015 found that the loan in the form of an advance
was never presented or discussed by the 1MDB management before
the joint venture project was finalised.

7.3.5. The approval from 1MDB Board of Directors was not obtained to pay
USD700 million from the USD1 billion investment to be transferred
into an account belonging to another company to pay for the
advance loan. Correspondence emails between lawyers of the two
companies on 30 September 2009 had questioned about a letter
requesting payment of advance of USD700 million using the
letterhead of PetroSaudi International Ltd, whereas the one that
gave the advance was PetroSaudi Holdings (Cayman) Ltd.

7.3.6. The 1MDB Board of Directors was not informed about the
appointment of Edward L. Morse as a valuer to carry out an
independent valuation on the hydrocarbon assets of PetroSaudi
International Ltd. and its subsidiary although the 1MDB management
had begun negotiations regarding the terms of appointment of the
valuer. This was proven through the valuers terms of appointment
letter dated 20 September 2009. However the 1MDB Board of
Directors only directed that the appointment of an independent
professional valuer to value the assets of the joint venture company
81
 during a meeting on 26 September 2009 as one of the conditions for
the approval to continue with the joint venture project. The valuation
report by Edward L. Morse was released on 29 September 2009 and
the valuers terms of appointment letter was also signed
by Mr. Shahrol Azral on the same date, which was one day after the
signing of the joint venture agreement. The 1MDB management did
not inform the appointment of Edward L. Morse to 1MDB Board of
Directors during the meeting. Besides, taking into account the
complexity of the assets which were valued, the valuation report can
be provided within eight days from the date of the valuers terms of
appointment letter.

7.3.7. The approval from the 1MDB Board of Directors and shareholder to
convert Murabahah Notes to PSOSL equity was only signed on 20
June 2012 but Mr. Shahrol Azral had already signed five documents
related to the acquisition on 1 June 2012. It shows that the decision
to dispose Murabahah Notes and acquire a 49% equity stake in
PSOSL had been implemented earlier by Chief Executive Officer of
1MDB prior to the approval of the 1MDB Board of Directors.

7.3.8. The application for the suspension of payment of RM6.17 billion

syndicated bridging loan from Maybank Investment Bank Bhd. on the
loan for the acquisition of shares in Tanjong Energy Holdings Sdn.
Bhd. (TEHSB) was made on 22 November 2013 whereas the
approval from 1MDB Board of Directors was only obtained on 13
December 2013.

7.3.9. Credit enhancement (security deposit) totalled USD1.367 billion

(RM4.468 billion) for the issuance of two Notes of USD1.75 billion to
finance the acquisition of the energy sector of 1MDB Group was paid
to Aabar Ltd. on 22 May 2012 and 19 October 2012 without special
approval from the 1MDB Board of Directors.

7.3.10. Settlement Agreement for the termination of the option states that
refundable deposit of USD300 million must be paid to Aabar Ltd. on
30 September 2014 and the balance is due 45 days after the IPO
has been carried out. However, in November 2014, the management

82
 had informed the 1MDB Board of Directors that a total of USD993
million had been paid, which exceeds the amount specified in the
agreement without getting the approval of the 1MDB Board of
Directors.

7.3.11. Credit Enhancement Agreement and Settlement Agreement had

been signed with Aabar Ltd. But for now, the 1MDB has not yet put
forward any confirmation that the Aabar Ltd. company is a subsidiary
of IPIC or Aabar Investments PJS (Abu Dhabi).

7.3.12. 1MDB had submitted a Certificate of Incumbency issued by Offshore

Incorporations Limited to prove that Aabar Ltd is a subsidiary of IPIC.
Offshore Incorporations Limited Company which operated in Hong
Kong was an agent that provides company registration services in
BVI. NAD found that Aabar Ltd was not listed in the IPIC group
based on the financial statements of 2013 and 2014.

7.3.13. NAD was unable to confirm the payment of USD855 million, USD993
million and USD295 million as an option termination payment and/or
top up security deposit to Aabar Ltd. This was due to the incomplete
supporting documents submitted by 1MDB to NAD.

7.3.14 The management process and the redemption of investment

portfolio of SPC includes several situations in which the 1MDB Board
of Directors was not given accurate information or the management
was not transparent in providing information to the Board of
Directors. For example, the 1MDB management was not informed
that the proceeds of the redemption of investment portfolio of SPC
held by Brazen Sky Limited had been pledged to Deutsche Bank;
1MDB Board of Directors was not informed that the actual payment
of Aabar option was made by using the proceeds of the redemption
of investment portfolio of SPC; and the 1MDB Board of Directors
was only informed of the actual amount paid for the Aabar option
after the payment was made. Asset Sale Agreement which was
signed on 2 January 2015 in which Aabar Investments PJS Limited
agreed to buy the remaining investment portfolio of SPC amounted
to USD939.87 million from Brazen Sky Ltd. was also not presented

83
 for the approval by the 1MDB Board of Directors and shareholders. It
shows that the management had acted without the consent of the
1MDB Board of Directors, which required the balance of the
investment portfolio of SPC to be redeemed before the end of
December 2014 and the proceeds was to be brought back to
Malaysia.

7.3.15 NAD was not able to confirm the balance of investment portfolio of
SPC amounted to USD939.87 million because 1MDB did not submit
a complete financial document. However, 1MDB auditors had
confirmed the balance of the investment portfolio of SPC.

7.3.16 The decision of the collateral of the entire investment portfolio of

SPC amounted to USD2.318 billion to Deutsche Bank as a
guarantee on the loan amounted USD975 million was only been
informed by Mr. Azmi Tahir, Chief Financial Officer of 1MDB during
the meeting of 1MDB Board of Directors on 20 December 2014,
showed that the decision was made without the special approval
from the Board of Directors. 1MDB Board of Directors also believed
that to use the entire investment portfolio of SPC as collateral was
not reasonable as the loan amount was only USD975 million
compared to the amount of collateral of USD2.318 billion.

7.3.17 The actions of the management that contradict with the instruction
from the Board Of Directors/Shareholders are as follows:

84
 TABLE 15
ACTIONS OF THE MANAGEMENT THAT CONTRADICT
WITH THE INSTRUCTION FROM BOARD OF DIRECTORS/ SHAREHOLDERS

The Decision Of
Activity Board Of The Action Of The Management
Directors/Shareholders
The deferment of TIA Board of Directors IMTN issuance continues in which Mr.
IMTN issuance. resolution dated 22 May Shahrol Azral had signed the IMTN
2009 terminated and Subscription Agreement with AmBank on 25
suspended all affairs related May 2009 (three days after the suspension),
to the issuance of IMTN, and and signed the Aqad Agreement and the
suspended the powers of the Sale and Purchase Agreement on 26 May
Chief Executive Officer in 2009.
relation to IMTN.
The termination TIA shareholder resolution Datuk Ismee and Mr. Shahrol Azral as the
of Mr. Shahrol as dated 27 May 2009 signed TIA Board of Directors had called off the
director of TIA. by the Chief Minister of order from the shareholders through a
Terengganu had terminated resolution of the Board of Directors on the
Mr. Shahrol Azral as the same date, 27 May 2009.
company director.
Three directors 1MDB Board of Directors The joint venture agreement dated 28
were appointed meeting on 18 September September 2009 stated that 1MDB was
as 1MDB 2009 and 26 September entitled to appoint two directors in the
representatives 2009 decided to appoint composition of the Board of Directors of the
in the joint three directors where two of joint venture company. This shows that the
venture them must have professional 1MDB management did not comply with the
company, 1MDB qualifications or experience instructions of the Board of Directors to
PetroSaudi Ltd. in the relevant sector as appoint three representatives in the joint
1MDB representatives in a venture company.
joint venture company with
PetroSaudi.
The contribution The Board of Directors 1MDB management did not follow the
in the joint meeting on 18 September instructions of the Board of Directors but on
venture 2009 decided that the contrary had agreed with Tarek Obaids
company, 1MDB PetroSaudi is to contribute proposal as in his letter dated 28 August
PetroSaudi Ltd. 50% in cash form (or at least 2009, where PetroSaudis contribution was
USD1 billion) and another the in the form of 100% assets rather than
50% in assets form to the cash.
joint venture company.
A transfer of 1MDB Board of Directors at On 30 September 2009, a total of USD300
USD1 billion to a its meeting on 26 September million was transferred to account 7619400
bank account of 2009 had approved the in J.P.Morgan (Suisse) SA, the bank of
the joint venture transfer of USD1 billion to the 1MDB PetroSaudi Ltd. but the balance of
company. bank account of the joint USD700 million was transferred on the same
venture company for the date to account 11116073 at RBS Coutts
subscription of 1 billion Bank Ltd., owned by another company that
shares in 1MDB PetroSaudi was not involved in this joint venture project.
Ltd.

85
 The Decision Of
Activity Board Of The Action Of The Management
Directors/Shareholders
Opening a bank 1MDB Board of Directors The decision to change the bank account
account for the resolution dated 25 from the account of BSI SA, Geneva to JP
joint venture September 2009 approved Morgan (Suisse) Geneva made through a
company, 1MDB the opening of an account of resolution dated 30 September 2009.
PetroSaudi Ltd. BSI SA, Geneva. 1MDB Board of Directors questioned that
this matter has been done without their
knowledge in a meeting on 3 October 2009.
NADs interview with former 1MDB Board of
Directors found that they were not aware of
this resolution although their signatures were
on the document.
Status of the Instruction from 1MDB Board The joint venture agreement dated 28
asset ownership of Directors on 26 September September 2009 stated that the assets of the
of the joint 2009 was to appoint an joint venture company were the assets
venture independent professional transferred from PetroSaudi International
company, 1MDB valuer to value the assets of Cayman to 1MDB PetroSaudi Ltd.
PetroSaudi Ltd. the joint venture company. But the asset valuation report by Edward L.
Morse, dated 29 September 2009 was on
the assets owned by PetroSaudi
International Ltd.
These companies were different entities.
The valuation report also unable to confirm
the assets owned by Petro Saudi
Turkmenistan 1 Ltd. (Jersey company) and
Petro Saudi Ltd. Inc. (Panama company).
This raises the question of the assets
ownership of the joint venture company
1MDB PetroSaudi Ltd.
The second 1MDB Board of Directors Mr. Shahrol Azral informed that the
valuation of the meeting on 3 October 2009 Chairman of the Advisory Board disagreed
joint venture and on 10 October 2009 with this proposal and instructed the 1MDB
assets. directed the management to Board of Directors to appoint a consultant to
appoint a consultant / value the ownership of the joint venture
independent valuer to do a company. However, there were no
second valuation on the documents proving the second valuation or
assets of the joint venture appointment of consultant as ordered by the
company. 1MDB Board of Directors/ shareholders had
been implemented.

86
 The Decision Of
Activity Board Of The Action Of The Management
Directors/Shareholders
Murabahah 1MDB Board of Directors The Management Representation Letter
Financing Resolution No. 17/2011 issued by 1MDB on 4 October 2010, signed
Agreement showed that the effective by Mr. Shahrol Azral stated that Share Sale
between 1MDB date of the agreement was Agreement had been ratified on 31 March
and 1MDB on 14 June 2010. 2010.
PetroSaudi Ltd. 1MDB Board of Directors Copies of Murabahah Financing Agreement
Resolution No. 25A/2012 dated 31 March 2010.
stated that the Murabahah
Financing Agreement
dated as 14 June 2010.
Notice of Drawing dated 12
May 2011 issued by 1MDB
PetroSaudi Ltd. to 1MDB
signed by Mr. Tarek Obaid
showed the Murabahah
Financing Agreement
dated 14 June 2010.
1MDB PetroSaudi Ltd.
Shareholder resolution for
the shares held by 1MDB
also dated 14 June 2010.
Equity 1MDB Board of Directors No record of the presentation of all reports
acquisition of through a resolution dated 25 as required by the 1MDB Board of Directors
Mastika Lagenda July 2012 required the in the next meeting.
Sdn. Bhd. reports/results of asset
(MLSB) valuation, due diligence and
red flags provided by the
consultant to be presented in
the Board of Directors
Meeting.
Acquisition of 1MDB Board of Directors TEHSB share purchase agreement was
Tanjong Energy meeting on 8 February 2012 signed on 2 March 2012 without ensuring
Holdings Sdn. which approved the that the instruction of the 1MDB Board of
Bhd. (TEHSB). acquisition of TEHSB Directors on 8 February 2012 had been
required the 1MDB implemented.
management to provide
sensitivity analysis if the
value of assets abroad was
given 50% discount and to
provide a comparison of the
terms of the Power Purchase
Agreement of assets in
Malaysia and abroad.

87
 The Decision Of
Activity Board Of The Action Of The Management
Directors/Shareholders
To redeem the 1MDB Board of Directors in No serious action taken by the 1MDB
SPC fund almost every meeting since management for the period from May 2013
portfolio and to May 2013 to May 2015 had until August 2014 to implement the
be brought back directed the 1MDB instruction of 1MDB Board of Directors to
to Malaysia. management redeem the entire investment portfolio of the
to redeem the investment SPC.
portfolio in the SPC and to Money transfer from the proceeds of the
bring it back to Malaysia redemption of SPC portfolio from Brazen Sky
to 1MDB GIL did not comply with the
instructions of the 1MDB Board of Directors
in which the redemption proceeds of SPC
portfolio should be brought back to Malaysia.
That money transfers were also not
presented for the special approval from the
1MDB Board of Directors.
The actual During the Special Meeting Several facts and statements during the
status of the of the 1MDB Board of 1MDB Board of Directors meeting, press
fund portfolio in Directors on 12 January statements and the explanation to NAD in
SPC. 2015, Mr. Arul Kanda which brought up the issue on the
informed that the balance of redemption of the balance of SPC portfolio
SPC portfolio amounted amounted USD939.87 million.
USD939.87 million had been
redeemed and held in cash
form since 31 December
2014.
The use of The Government has agreed Until May 2015, the Government had fully
provisions by to bear a part of the transferred the provisions of RM1.117 billion.
the Government development cost for the However, a total of RM288 million had been
for the relocation totalling RM1.117 given in advance to 1MDB and was not fully
relocation of billion while 1MDB will bear utilised to finance the relocation of PUKL as
PUKL. RM1.60 billion according to the actual purpose of that provision given by
the Kuala Lumpur Air Force the Government.
Base Relocation Agreement
dated 15 June 2011.

88
 Activity The Decision Of
Board Of The Action Of The Management
Directors/Shareholders
The use of term 1MDB Board of Directors The 1MDB RE financial statement for
loan from resolution dated 3 January 2014 showed that a total of RM550
Ambank (M) December 2013 had million from the term loan had been
Berhad of agreed that 1MDB RE was deposited into the account of 1MDB RE on 7
RM550 million. given term loan from January 2014. However, on the same date,
Ambank (M) Berhad of the entire amount was transferred to 1MDB.
RM550 million with annual The loan was supposedly to be fully utilised
interest rate of 5.09%. for the relocation of PUKL for the Bandar
The purpose of this loan Malaysia and TRX project.
was to finance the cost of
construction of
replacement facilities from
PUKL to the relocation
sites, as well as some
initial expenses and the
mobilisation related to the
cost of infrastructure
projects of TRX.
USD3 billion 1MDB through its The USD3 billion Notes Issuance was not
Notes Issuance subsidiary, 1MDB Global transferred for the TRX development project,
for the TRX Investments Ltd. (1MDB but it was used for the following expenses:
development GIL) had issued USD3
project. billion Notes on 19 March
2013 with the letter of DETAILS USD MILLION
support from Ministry of Transfer to 1MDB 1,007.04
Finance.
Transfer to 1MDB 24.85
The Notes were issued for Energy Ltd.
the purpose of startup
Transfer to Brazen 1.50
capital for the investment in Sky Ltd.
Abu Dhabi Malaysia
Investment abroad 1,581.43
Investment Company Ltd.
(ADMIC), which was the Donation to Yayasan 35.00
joint venture company Rakyat 1Malaysia
between 1MDB and Aabar TOTAL 2,649.82
Investments PJS, as well
as for general corporate
purposes.
1MDB GIL financial
statement for 2014 stated
that ADMIC was the joint
venture company
established for the TRX
development project.

89
 Activity The Decision Of
Board Of The Action Of The Management
Directors/Shareholders
The details of 1MDB Board of Directors During the 1MDB Board of Directors meeting
the proposal and during the meeting on 20 on 23 February 2015, the Board has raised a
payment of December 2014 has asked question in regards to the payment of the
Aabar option. for a complete detail on the termination of Aabar option which was
payment of the termination of informed to the 1MDB Board of Directors
Aabar option to be presented after the payment has been made.
in the next meeting.
Annulment of 1MDB Board of Directors on Ivory Merge (1MDBs subsidiary) did not take
Tadmax Power 20 October 2014 agreed to action as decided by the 1MDB Board of
equity annul the equity acquisition Directors.
acquisition. of Tadmax Power following A total of RM34.33 million has been paid in 4
the due diligence report on stages to Tadmax Resources before the
the Pulau Indah land, valuation report of due diligence been
Selangor which found that presented to the 1MDB Board of Directors
the land was not suitable to on 20 October 2014.
build a coal power plant.
Acquisition of 1MDB Board of Directors on The sale and purchase agreement was
land at Kuala 24 March 2015 had approved signed on 27 August 2015 for the acquisition
Ketil, Kedah. the acquisition of 260 acres of the land with the return of RM65 million.
of land at Kuala Ketil, Kedah No documents showed the price difference
for the pilot development of of RM31.60 million for the land acquisition
50MW solar power plant with has been approved by the 1MDB Board of
the return of RM33.40 Directors.
million.

90
 JADUAL 16
SALAH NYATA MAKLUMAT ATAU MAKLUMAT YANG TIDAK TEPAT DIBERIKAN KEPADA
LEMBAGA PENGARAH 1MDB

INFORMATION GIVEN TO THE BOARD OF

REVIEW BY NAD
DIRECTORS
1MDB Board of Directors had been given the The information from Mr. Casey Tang has
picture that the joint venture project with been acknowledged by several members
PetroSaudi was a Government to Government and former members of the 1MDB Board of
(G2G) matters in a meeting on 18 September Directors during the interview between NAD
2009. with them in June 2015.
Mr. Casey Tang has informed the 1MDB Board The website of PetroSaudi International Ltd.
of Directors that PetroSaudi International Ltd. is showed that the company has only been
owned by King Abdullah and Saudi Arabia established in 2005, a private ownership
Government had been established since 2000. and no information related to the ownership
with the Saudi Arabia Government.

The letter from Mr. Tarek Obaid dated 28 August During the 1MDB Board of Directors
2009 to the Prime Minister includes the proposal Meeting on 18 September 2009, the
to fix the holding ratio, the cash distribution of Chairman of the Board of Directors stated
USD1 billion, assets value and goodwill in the that cash assets ratio to the joint venture
joint venture company. company was not yet finalised.
The management was supposed to provide
a detailed explanation to the 1MDB Board
of Directors in view of the proposal in Mr.
Tarek Obaids letter about this project
during a meeting on 18 September 2009.
In the joint venture agreement dated 28 4 different companies had been registered
September 2009, PetroSaudi Holdings using the name PetroSaudi which were:
(Cayman) Ltd. was referred as PSI whereas in
i. PetroSaudi International Ltd.
the Written Resolution of the Sole Director of the
established in Saudi Arabia.
Company signed by Mr. Tarek Obaid,
ii. PetroSaudi International established in
PetroSaudi Holdings (Cayman) Ltd. was referred
Cayman Islands.
as PSH.
iii. PetroSaudi Holdings (Cayman) Ltd.
The joint venture between 1MDB and
established in Cayman Islands.
PetroSaudi International Ltd. which was referred
iv. PetroSaudi International Ltd.
as PSI has been announced in the 1MDB press
established in Seychelles.
statement dated 30 September 2009.
The joint venture agreement dated 28
September 2009 was signed with
PetroSaudi Holdings (Cayman) Ltd. 1MDB
Board of Directors was not aware that PSI
in the joint venture agreement was referred
to PetroSaudi Holdings (Cayman) Ltd.
In most cases, the abbreviation of PSI was
always being referred as PetroSaudi
International Ltd. (Saudi Arabia). This
showed that the abbreviation of PSI used
in the joint venture agreement seems to
give the impression that PetroSaudi
Holdings (Cayman) Ltd. was the same
entity with PetroSaudi International Ltd.
(Saudi Arabia).

91
 INFORMATION GIVEN TO THE BOARD OF
REVIEW BY NAD
DIRECTORS
During the 1MDB Board of Directors meeting on 1MDB Board of Directors was not informed
24 July 2010, Mr. Shahrol Azral has informed on the terms given by the Chairman of the
that the Chairman of the Advisory Board had Advisory Board during the meeting
agreed to support the decision of the Board of between Mr. Shahrol Azral and the
Directors to invest in the GDF Suez SA Project. Chairman of the Advisory Board on 21 July
2010 that the management must conduct a
risk analysis in regards to the investment
including legal and financial due diligence.
During a meeting on 21 June 2012, 1MDB Board 1MDB Board of Directors was not informed
of Directors was informed the receipt from the on the actual usage on the receipt of Notes
Notes issuance of USD1.75 billion (the first) was issuance of USD1.75 billion (the first) to
used for the purpose of Tanjong acquisition, pay the arranger fee, commission to the
interest fee and consent fee to OCBC as the Goldman Sachs, security deposit and
payment term for Tranche 2 Syndicated Bridging Tanjong acquisition. The acquisition of
Loan. The balance after those usages was Tanjong was paid of a total of RM785.67
USD300 million. million instead of RM900 million as was
informed. A total of RM576.94 million had
been paid as a security deposit to Aabar
Ltd. The balance after all the transaction
was USD194.89 million.
During the 1MDB Board of Directors meeting on Several statements given out by the 1MDB
12 January 2015, Mr. Arul Kanda has informed management since 12 January 2015 till
that the cash balance of USD939.87 million had May 2015 shows that the information keeps
been redeemed and held in cash form since 31 changing according to the situations. It was
December 2014. reported that the balance of the SPC
During the meeting on 3 March 2015, Mr. Arul portfolio totalling USD939.87 million which
Kanda has informed 1MDB Board of Directors initially was said to have been redeemed in
that he had ordered Mr. Azmi to pay in full the cash but later reported it was still in unit
USD975 million loan to the Deutsche Bank by form.
using the proceeds from the SPC portfolio The latest update on 25 May 2015 was the
redemption. Mr. Azmi however informed that third time that the redemption of the
BSI Bank had rejected the instruction to use the balance of the SPC portfolio changed form.
proceeds of the investment this way until it
received a suitable indemnity from the Deutsche
Bank to release BSI Bank from any liability in
regards to the usage of funds this way.
During the 1MDB Board of Directors meeting on
24 March 2015, Mr. Arul Kanda had informed
that Mr. Azmi has explained that the full
redemption of the SPC investment portfolio had
happened in early January 2015 Aabar being
agreed to buy the balance of the portfolio totalled
USD939.87 million from Brazen Sky to ease the
redemption process of the investment portfolio
earlier than planned.
During the meeting on 23 April 2015, Mr. Azmi
has informed 1MDB Board of Directors that the
balance of USD939.87 which supposed to be
received from Aabar was still in the SPC fund
portfolio because Aabar has not confirmed when
the payment can be made.
The 1MDB Board of Directors in its meeting on
11 May 2015, was informed that the payment for
the acquisition of Brazen Sky by Aabar was not
yet received.
During a meeting on 25 May 2015, 1MDB Board
of Directors has been informed that negotiation
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 INFORMATION GIVEN TO THE BOARD OF
REVIEW BY NAD
DIRECTORS
was held for Aabar to take over a part of 1MDB
Group assets together with obligation of two
USD Notes of USD3.50 billion. Binding Term
Sheet and advance payment totalled USD1
billion will be finalised at the end of May 2015.

TABLE 17
MISREPRESENTATION OF INFORMATION OR INACCURATE INFORMATION PROVIDED TO
AUDITORS / USERS OF FINANCIAL STATEMENTS
INFORMATION GIVEN TO THE EXTERNAL
AUDITORS / USERS OF FINANCIAL REVIEW BY NAD
STATEMENTS
Messrs. KPMG was given a Share Sale Murabahah Financing Agreement was approved
Agreement dated 31 March 2010 which showed by 1MDB PetroSaudi Ltd. shareholders on 14
sales of all equity holdings of 1MDB in 1MDB June 2010 despite the fact that the financial
PetroSaudi Ltd. through the method of statements ended 31 March 2010 stated that the
subscribing Murabahah Notes issued by 1MDB agreement was signed on 31 March 2010.
PetroSaudi Ltd. However, Messrs. KPMG was
not provided with the shareholders resolution of
1MDB Petrosaudi Ltd. dated 14 June 2010 in
regards to the Murabahah Financing Agreement.
Messrs. KPMG was not given information related Important information was not disclosed in the
to the Call Option to Aabar Investments PJS Ltd. Events After The Balance Sheet Date in the
(Aabar Ltd.) which took place after the reporting financial statements of the 1MDB Group for the
period of financial statements in 2012. year ended 31 March 2012 as follows:
Call option granted to Aabar Ltd. through the
Option Agreement dated 18 May 2012 to
acquire 49% equity in the Powertek
Investment Holdings Sdn. Bhd. (PIHSB).
Call option granted to Aabar Ltd. through the
Option Agreement dated 17 October 2012 to
acquire 49% equity in the 1MDB Energy
(Langat) Sdn. Bhd.
Corporate guarantee given by IPIC to the
second issuance of USD1.75 billion Notes by
1MDB Energy (Langat) Ltd. (1MELL).
The 1MDB management has informed the NAD Termination payment of Aabar option did not
on 9 September 2015 that the physical payment occur through a bank account of Brazen Sky
was made through a bank account of Brazen Sky Ltd. Proceeds of the redemption of SPC fund
Ltd. at BSI Bank on behalf of the terminating portfolio totalling USD1.392 billion has been
company to Aabar because 1MDB did not have a deposited into a bank account of Brazen Sky
bank account abroad. Ltd. between 11 September 2014 to 24
November 2014.
At almost the same period (12 September to
8 December 2014), a total of USD1.417
billion was transferred to 1MDB Global
Investments Ltd. (1MDB GIL).

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8. SUMMARY AND RECOMMENDATIONS BY THE PUBLIC ACCOUNTS
COMMITTEE (PAC)

1MDB was established as a strategic development company wholly-owned by

the Government of Malaysia. Among other things, 1MDB is inspired to drive a
strategic development to promote foreign direct investment (FDI) into the
country.

At the beginning, 1MDB had implemented several projects through the

government to government (G-to-G), in which 1MDB had built relationships
with several companies from Middle East such as Saudi Arabia and United
Arab Emirates. After that, 1MDB had been involved in electrical power
generation and real estate fields, in which efforts had been made to bring in
foreign investors and FDI from the Middle East, through a memorandum of
understanding (MOU) and joint ventures.

After investigation, the Public Accounts Committee (PAC) has found that the
financing structure of capital and financial performance of 1MDB Group was
not satisfactory. 1MDB was relying on debt (bank loans, bonds and sukuk) as
the companys capital, in which most of the debt had been guaranteed by the
Government or provided with a letter of support from the Government. The
debt began at RM5 billion in 2009 and increased to RM42 billion, compared
with the assets of RM51 billion in the financial year ended 31.03.2014, in
which 1MDB spent RM2.4 billion for interest payment on debt. In January
2016, the debt of 1MDB has reached RM50 billion, compared with the assets
of RM53 billion, while 1MDB spent RM3.3 billion for interest payment on debt
between 1 April 2014 to 31 March 2015 (unaudited estimation). It was clear
that the level of debts and interest payments were too high compared with the
company's cash flow. Therefore, 1MDB was depending on refinancing for the
payment of matured debt and also take new debt for, among others, to pay
the interest of previous debts.

After five years of operation, 1MDB was facing problems of imbalance cash
flow in November 2014. The management and the Board of Directors at that
time was depending on the initial public offering (IPO) of a wholly-owned
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company by 1MDB, Edra Energy Berhad, to generate funds, which will be
used for the payment of debts and interests. But then, the IPO cannot be
implemented due to the internal and external factors of the company.
Consequently, the first loss of the company totalled RM665 million which was
announced in November 2014 had caused the confidence towards the
company to be eroded. Subsequently, 1MDB was unable to refinance the
RM2 billion debt that was almost mature at that time.

1MDBs business model was too dependent on loans and this put a huge
burden on the company and caused the company to be unsustainable
because it did not have sufficient income to finance the loans and its
operating costs.

PAC found that the Government had taken immediate action to fix the cash
flow problem of the company, which started in November 2014. In January
2015, the new top management has been brought in, after that the Minister of
Finance Incorporated [MOF Inc.] had given serious attention to solve the
problems of the company. A strategic research had been conducted and the
summary has been presented in February 2015. Subsequently, 1MDB and
MOF Inc. had presented the rationalisation plan to the Cabinet on 29 May
2015.

As a Government backed company, 1MDB should adopt the best practice of

governance. After studying the final report of the National Audit Department
and the proceedings of the PAC, the PAC found that the practices of 1MDB
management and Board of Directors led to weak governance. For example,
the management had, for several times, did not comply with the decisions and
instructions of the Board of Directors or had proceeded with certain actions
before receiving special approval from the Board of Directors. There were
several large investments and loans made without a detailed assessment
(including the impact on the cash flow of the company) and some major
decisions have been made through a written resolution, based on discussion
at the previous meeting. The Board of Directors was too dependent on and
often accepts the explanation from the management, without delving further
into the issues.
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The experiences faced by 1MDB had gained public and international attention
widely. This is a lesson to all GLCs in this country on the importance of the
practice of good governance and integrity. This experience is also relevant to
the government ministries, departments and agencies.

The PAC believes that:

1. 1MDB should adopt the good governance principles such as the

guidelines issued by the Putrajaya Committee on High Performance
GLC through the Green Book: Enhancing Board Effectiveness and
the Blue Book: Intensifying Performance Management Practices.

2. The use of excessive debt in the capital structure cannot be allowed

at all, especially when the cash flow of the company is not sufficient.

3. The Board of Directors failed to discharge their responsibilities and

safeguard the interests of the company and shareholders. No
appropriate action or proactive measures taken in scrutinizing the
activities of the management and the future cash flows of the
company. Close monitoring is needed by the Board of Directors,
including in questioning the purchase price of the asset and the cost
of debt.

4. The Advisory Board shall be abolished, together with the Article 117
in the memorandum and article of the company. Any reference to the
Prime Minister shall be changed to the Minister of Finance, in
accordance with provisions of other companies owned by MOF Inc.

5. Subsidiaries and assets owned by 1MDB Group (TRX, Bandar

Malaysia, Air Itam Land, Pulau Indah Land) shall be handed over to
MOF Inc. so that it can be monitored and managed closely and
carefully.

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Upon reviewing the Final Report of the National Audit Department and
explanation by 1MDB, PAC was of the opinion that there were limitations and
weaknesses in governance made by the 1MDB management and the Board
of Directors.

Specifically, PAC believes that the former Chief Executive Officer (CEO) of
1MDB, Datuk Shahrol Azral needs to take responsibility for those weaknesses
and blunders.

Therefore, the law enforcement agencies are required to carry out further
investigation on Datuk Shahrol Azral Ibrahim Halmi and others involved from
the management of 1MDB.

Disclaimer:
This report is a translated version of the original PAC report. The original copy is in
Bahasa Malaysia. The translated version is meant to assist the understanding of non-
Malay speaking readers on the matters at hand. The translators will not be held
responsible for the accurateness of the translation.

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