KUALA LUMPUR, Oct 10, 2015:

1Malaysia Development Bhd president Arul Kanda Kandasamy said his clarification over the redemption of fund units related to the national sovereign fund was made and recorded.

In a statement, Arul, who is also 1MDB’s executive director, also explained in the first meeting he attended, he had said — based on his understanding — the redemption of fund units happened in cash for an amount of US$940 million.

However, upon further investigation, Arul admitted there was a clear misunderstanding and later clarified it to the board and its shareholder, the Finance Ministry.

“This clarification is clearly recorded in subsequent board minutes and can be verified.”

Arul was responding to Sarawak Report’s publication of alleged documents related to 1MDB, namely minutes of a Jan 12, 2015 board meeting.

He also said that on Jan 13, he confirmed via a press statement that the remaining amount of US$1.11 billion had been redeemed, in full.

What was unfortunately not made clear. he lamented, was that the redemptions happened partly in cash and partly through the sale of fund units, with cash payment being deferred.

Arul said it was this important distinction which caused a misinterpretation of his statement, first during a Business Times interview on Feb 9, 2015 and subsequently by the Ministry of Finance, in a parliamentary answer on March 12, 2015.

“I have explained in detail the sequence of events to the National Audit Department and to 1MDB’s auditors, Deloitte, as part of their thorough and professional review of 1MDB’s past transactions. In addition, I have openly and publicly taken full responsibility in June 2015 for the misunderstanding on this matter. The buck stops with me.”

Arul went on to state that in his capacity as president, he answered to the 1MDB board and shareholder.

He added that his “strong track record” spoke for itself and his only professional agenda was to fix the challenges in 1MDB.

“There is no need for me to lie or cover-up what has happened in the past, as has been alleged by those who make sensationalist claims to drive their own political agenda. Accordingly, I look forward to being questioned in detail on this matter at the upcoming Public Accounts Committee hearings and for my answers to be a part of the public record, to conclusively put this matter to rest.”

In a related matter, 1MDB, in a statement slammed the Sarawak Report for publishing “selectively extracted materials” and unfounded allegations in their article today.

The article it said was a “clear attempt to manipulate readers with respect to events that have previously taken place”.

It went on to explain that the fund units, owned by 1MDB subsidiary Brazen Sky Limited, were originally valued at US$2.318 billion in September 2012, as the eventual outcome of various equity and murabaha loan investments totalling US$1.83 billion by 1MDB with PetroSaudi between 2009 and 2011.

Over the investment horizon, 1MDB, it said, received and reflected in its audited financial statements, cash returns of approximately US$81 million murabaha profit, and approximately US$263 million dividends from fund unit investments and, therefore, saw a total cash return of approximately US$346 million and a total gain over time of US$488 million (US$2.318 billion less US$1.83 billion).

It also noted that as of March 31, 2014, the fund units were valued at US$2.33 billion. It revealed that on Nov 5, 2014, at the time 1MDB’s financial statements for the year ended March 31, 2014, were published, an amount of approximately US$1.22 billion had been redeemed, in cash, with proceeds being substantially utilised for debt interest payment, working capital and payments to Aabar as refundable deposits for options termination.

The statement went on to state that a sum of approximately US$1.11 billion in fund units remained, which together with a dividend of approximately US$130 million, equates to the remainder sum of US$1.23 billion described in the notes to 1MDB’s accounts.

On Nov 14 and 24, 2014, approximately US$170 million of the US$1.11 billion fund units were redeemed, in cash, leaving a balance of approximately US$940 million in fund units.

“On Jan 2, 2015, i.e. prior to Arul Kanda joining 1MDB, a final redemption of approximately US$940 million was undertaken through a sale of fund units to Aabar, with cash payment being deferred,” it clarified.

It added that Aabar was separately a guarantor of the fund in which the units were invested but by mutual agreement, the redemption was via sale of fund units instead of calling on the guarantee.

This fund unit sale agreement was subsequently superceded via the Binding Term Sheet signed between 1MDB and IPIC, the “AA” rated parent of Aabar, on May 27, 2015, upon which a payment of US$1 billion was made by IPIC to 1MDB.

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