KUALA LUMPUR, Jan 6, 2016:

The following is a media statement by 1Malaysia Development Berhad (1MDB) regarding the equity sale of the Bandar Malaysia project:

1MDB notes that certain questions, queries and concerns have been raised by various parties over the recently announced sale of 60% equity in the Bandar Malaysia project to the consortium comprising Iskandar Waterfront Holdings (IWH) and China Railway Engineering Corporation (CREC) (“Consortium”).

We provide below a detailed explanation, which we trust will conclusively dispel the half-truths and misleading statements made by various irresponsible parties.

1. Bandar Malaysia Sale – Current Proposed Deal Structure

The Sg Besi land is currently owned by TRX City Sdn Bhd (formerly 1MDB Real Estate Sdn Bhd) and Bandar Malaysia Sdn Bhd. TRX City Sdn Bhd owns 4 (four) plots and Bandar Malaysia Sdn Bhd owns 12 (twelve) plots which collectively make up the acreage of the project. Both companies are ultimately owned 100% by 1MDB.

The current proposed deal structure, is for a New SPV 1 to be formed, that will directly purchase the land (or indirectly purchase, for example through a New SPV 2 or through purchase of equity in Bandar Malaysia Sdn Bhd). New SPV 1 will ultimately own all 16 plots of the Sg Besi land and develop the Bandar Malaysia project.

New SPV 1 will be owned 40% by 1MDB or Minister of Finance Incorporated (MoF Inc) and 60% by the IWH-CREC Consortium.

The Consortium shareholding is 40% CREC and and 60% IWH.

IWH shareholding is 40% Kumpulan Prasarana Rakyat Johor (KPRJ – Johor State Govt) and 60% Credence Resources (Tan Sri Dato’ Lim Kang Hoo).

So, given the above shareholdings of the various parties the ultimate New SPV1 ownership can be described in the following ways:

A. 40% 1MDB or MOF Inc (should the shares be transferred), 36% IWH and 24% CREC. The ultimate project ownership therefore is 76% Malaysian and 24% Chinese.

OR, in the alternative:

B. 40% 1MDB or MOF Inc (should the shares be transferred), 22% Credence Resources, 14% KPRJ and 24% CREC. The ultimate project ownership is therefore 54% Government and 46% private sector (Government: Federal 40% via 1MDB/MOF Inc and State 14% via KPRJ. Private sector: 22% Credence Resources and 24% CREC).

2. Difference in announced values RM7.41 billion (1MDB) vs RM5.3 billion (CREC)

In essence, 1MDB are selling land, which is what we own. However, there are two liabilities indirectly linked to the land i.e.:

A. Remainder costs to complete relocation of Pangkalan Udara KL (PUKL Relocation)

· The main relocation contract and development agreement was executed between 1MDB and the Government of Malaysia for a contract value of approximately RM2.7 billion. This cost includes, amongst others, new land acquisition costs, construction costs, fit out/equipment costs and relocation costs.

· 1MDB in turn, contracted to what was then named 1MDB Real Estate Sdn Bhd (now renamed TRX City Sdn Bhd) for certain construction aspects of the PUKL Relocation. TRX City Sdn Bhd in turn, then contracted Perbadanan Perwira Hartanah Malaysia (PPHM, which is a 100% subsidiary of Lembaga Tabung Angkatan Tentera) as a Turn Key contractor to deliver the construction aspects of the PUKL Relocation.

· PPHM has, in turn, appointed over 50 qualified Bumiputra contractors as sub-contractors to deliver various aspects of the construction. The remaining construction costs plus variation orders plus other costs of the PUKL Relocation are currently estimated at up to RM1.9 billion.

· It is important to highlight that PPHM as the Turn Key contractor and the over 50 Bumiputra subcontractors will continue to remain as the designated contractors and will continue to perform their roles exclusively, regardless of the final deal structure.

· These contractors have been approved by the relevant authorities and construction is supervised by relevant officials from the Ministry of Defence and Ministry of Home Affairs. As the construction will continue to be carried out by the current approved contractors, there is therefore no question of any impact on national security through the sale by 1MDB of its 60% interest in the Bandar Malaysia project.

B. The Bandar Malaysia Sukuk (Sukuk) – this debt is at Bandar Malaysia Sdn. Bhd. (Nominal Value RM2.4 billion at maturity, accrued value approximately RM1.63 billion at 31 December 2015)

3. Final Purchase Consideration Determination

To determine the final purchase consideration to be received by 1MDB, the starting point, as agreed in the Share Sale and Purchase Agreement (SSA) executed between 1MDB and the Consortium, is 100% of the land value = RM12.35 billion.

· For its 60% share, the Consortium has agreed to pay RM7.41 billion (Purchase Consideration), of which a 10% deposit of RM741 million is payable upon execution of the SSA.

· Whilst it is the intention of 1MDB and the Consortium to transfer the remainder PUKL Relocation construction costs and the Sukuk debt to the New SPV 1 (which will be owned 40% by 1MDB/MOF Inc and 60% by Consortium), the transfer will require:

a) determination and agreement between the parties of the final costs for the PUKL Relocation and the Sukuk and;

b) all relevant consents, including but not limited to, from the Government of Malaysia, the contractor (PPHM) and sukuk investors.

· Should 1MDB and the Consortium agree on the costs and manage to procure the consents, then the Consortium will pay its 60% share of the costs and the Purchase Consideration will be adjusted accordingly, i.e. RM12.35 billion Land Value less RM1.9 billion PUKL Relocation Costs less RM1.63 billion Sukuk Costs = RM8.8 billion of which 60% Consortium share is RM5.3 billion.

· However, if the costs cannot be agreed or the consents cannot be procured, then the Purchase Consideration of RM7.41 billion will be paid in full to 1MDB, who will still be responsible for the costs.

· In either scenario above, the Purchase Consideration of RM7.41 billion to 1MDB does not change, the only difference is whether 1MDB receives the amount in full, then pays for the costs OR whether the Consortium pays for its share of the costs and remits the balance of RM5.3 billion to 1MDB.

4. High Speed Rail Project

Whilst the Government of Malaysia has designated Bandar Malaysia as the terminus for the KL – Singapore High Speed Rail (HSR) project, the sale of equity in the Bandar Malaysia project is not in any way linked to the eventual award of the HSR project, nor has 1MDB or the Government of Malaysia made any representations or agreements to that effect. 1MDB and the Consortium both confirm that HSR is an entirely separate project, whose award will ultimately be determined jointly by the Governments of Malaysia and Singapore, per a separate process, that is and will not be linked or be contingent on, in any way, to the sale of 1MDB equity in the Bandar Malaysia project.

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