1mdb wants money to come back to malaysia but what kind of returns would the investments have...

7/23/2019 1MDB Wants Money to Come Back to Malaysia but What Kind of Returns Would the Investments Have Yielded_ -

1/13

8/23/2014 1MDB wants money to come back to Malaysia but what kind of returns would the investments have yielded? - Business News | The Star Online

http://www.thestar.com.my/Business/Business-News/2014/05/17/A-question-of-valuation-1MDB-wants-money-to-come-back-to-Malaysia-but/

NEWS BUSINESS SPORT TECH LIFESTYLE T

Business News Market Watch Market Events Investing SME Property News

Business News Home> Business> Business News

Search

Published: Saturday May 17, 2014 MYT 12:00:00 AM

Updated: Sunday May 18, 2014 MYT 4:52:09 PM

1MDB wants money to come

back to Malaysia but what kindofreturns wouldtheinvestments have yielded?

BY M. SHANMUGAM, GURMEETKAUR, AND WONG WEI-SHEN
http://www.thestar.com.my/Authors?q=%22M.+Shanmugam%22http://www.thestar.com.my/Authors?q=%22Gurmeet+Kaur%22http://www.thestar.com.my/Authors?q=%22Wong+Wei-Shen%22http://www.thestar.com.my/http://www.thestar.com.my/Businesshttp://www.thestar.com.my/Business/Business-Newshttp://www.thestar.com.my/Business/Marketwatchhttp://www.thestar.com.my/Business/Market-Eventshttp://www.thestar.com.my/Business/Investinghttp://www.thestar.com.my/http://www.thestar.com.my/http://www.thestar.com.my/http://www.thestar.com.my/http://www.thestar.com.my/Authors?q=%22Wong+Wei-Shen%22http://www.thestar.com.my/Authors?q=%22Gurmeet+Kaur%22http://www.thestar.com.my/Authors?q=%22M.+Shanmugam%22http://www.thestar.com.my/Search?adv=1http://www.thestar.com.my/Businesshttp://www.thestar.com.my/http://www.thestar.com.my/Business/Property-Newshttp://www.thestar.com.my/Business/SMEhttp://www.thestar.com.my/Business/Investinghttp://www.thestar.com.my/Business/Market-Eventshttp://www.thestar.com.my/Business/Marketwatchhttp://www.thestar.com.my/Business/Business-Newshttp://www.thestar.com.my/Travelhttp://www.thestar.com.my/Lifestylehttp://www.thestar.com.my/Techhttp://www.thestar.com.my/Sporthttp://www.thestar.com.my/Businesshttp://www.thestar.com.my/Newshttp://www.thestar.com.my/http://www.thestar.com.my/


2/13



Email Share 1 Facebook Tweet 6

UNDER pressure for keeping a large amount of money outside the country since

2010, the board of 1Malaysia Development Bhd (1MDB) has resolved to bring funds

back in the current financial year of operations.

Towards this end, it is learnt that the board of 1MDB, headed by Tan Sri Lodin Wok

Kamaruddin, has told the management that a sum of US$2.3bil (RM7.42bil) that is

kept in a private bank in Switzerland and managed by a company based in Hong

Kong has to be brought back for projects locally.

1MDB has to shore up its finances locally, as the property development and power-

generation businesses pick up pace locally.

The board has not been comfortable with the arrangement for some time now.

It wants to bring the money back, which is why the US$2.3bil in assets has been

classified as available for sale in the 2013 accounts, says a source.

However, the returns on the funds remain a nagging question because not much is

31
http://twitter.com/search?q=http%3A%2F%2Fwww.thestar.com.my%2FBusiness%2FBusiness-News%2F2014%2F05%2F17%2FA-question-of-valuation-1MDB-wants-money-to-come-back-to-Malaysia-buthttps://twitter.com/intent/tweet?original_referer=http%3A%2F%2Fwww.thestar.com.my%2FBusiness%2FBusiness-News%2F2014%2F05%2F17%2FA-question-of-valuation-1MDB-wants-money-to-come-back-to-Malaysia-but%2F&text=1MDB%20wants%20money%20to%20come%20back%20to%20Malaysia%20but%20what%20kind%20of%20returns%20would%20the%20investments%20have%20yielded%3F&tw_p=tweetbutton&url=http%3A%2F%2Fwww.thestar.com.my%2FBusiness%2FBusiness-News%2F2014%2F05%2F17%2FA-question-of-valuation-1MDB-wants-money-to-come-back-to-Malaysia-but


3/13



known about where the money has been invested.

According to reports, the funds are placed with a private bank in Switzerland, which

is the custodian of the money. It is managed by a firm in Hong Kong Bridge

Partners that has placed the money in six funds with exposure to the energy sector.

According to reports, the investments are mainly in unlisted companies.

It has also been reported that Bridge Partners has issued six interest-free promissory

notes with one-month expiries to a wholly owned subsidiary of 1MDB. This is to

facilitate the withdrawal of the funds within a months notice but without interest being

paid.

So far, there has not been any indication as to the value of the six funds or what the

assets that the funds have invested in are.

Our Sites Share More UPDATED EVERY 5MINUTES


4/13



Bridge Partners total funds under management or the kind of returns they generate

are also not available.

Questions to 1MDB on the details of the investments and the involvement of Bridge

Partners were not answered.

Why KPMG left

Deloitte signed off the accounts of 1MDB for the financial year ended March 31,

2013, which was controversial to begin with because there was a delay and a change

in the auditor. The accounts were completed after a six-month extension that the fund

had sought and obtained from the authorities.

Deloitte came into the picture to replace KPMG late last year. According to 1MDB,

KPMG could not complete the accounts and so was replaced. But in the accounting

Take Our Survey!

Do you support a moderate Malaysia?

Get Started
http://starpolldaddy.polldaddy.com/s/moderation-in-malaysia?pop=22


5/13



world, rarely does a firm leave a job half-done, especially when it involves a big client

like 1MDB.

Sources say that the primary reason why KPMG could not complete the accounts

was because it was not able to penetrate beyond Hong Kong to get an idea on the

value of the assets backing the US$2.3bil investment.

According to an accountant, auditors will normally walk away if they are unable to get

a full picture.

Its more the case in 1MDB, he says.


6/13




7/13



It is learnt that Deloitte had hit some roadblocks in Hong Kong but managed to

overcome it. Subsequently, it got a statement from a private bank in Switzerland to

verify that the money was there and was managed by Bridge Partners.

The private bank is the custodian of the US$2.3bil and was given the mandate from

an offshore company registered in Cayman Islands. The offshore company is wholly

owned by 1MDB. However, it remains unclear if Deloitte managed to get a peek into

the kind of assets backing the said US$2.3bil investment.

According to accounts, Deloitte has tagged a fair value of RM7.18bil on the assets

that are classified as held for sale. It is based on the net asset value of the fund

provided by an independent administrator.


8/13



Valuation issues

At the current exchange rate of RM3.23 to the US dollar, the RM7.18bil works out to

some US$2.22bil. This means that the value of the asset has not appreciated or

depreciated much since it was invested.

This raises the question on the kind of returns that 1MDB would get should the moneybe brought back in the next few months.

Would 1MDB see some returns on the investment above the principal amount? Or

would it get back the principal amount alone?

So far, the returns from investments in the fund are far from encouraging. On Sept

12, last year, 1MDB received US$133.4mil in cash dividends and a capital

distribution of US$65.4mil. The fund announced that the return was 5.76%.

The returns are marginally higher than the 5.75% coupon rate that 1MDB is paying

for its 30-year debt paper issued in 2009.

However, the return pales in comparison to what 1MDB was earning when the money

was advanced to PetroSaudi International Ltd (PSI) as an Islamic debt paper.

Between 2010 and 2012, 1MDB disbursed a total of US$2.03bil to PSI by subscribingto the debt papers issued by the company that is established in Saudi Arabia.

The returns on the debt papers were between 8.25% and 8.67%, which were much

higher than the returns that the fund is giving.

Not much is known about the mandate that Bridge Partners has over the funds and

the investment horizon.

The paltry returns could be due to several reasons beyond the control of the fund.

For one, the investments could probably require a longer gestation period before the

fund could give out better returns.

Another reason could be that the fund may not have fully invested yet to give the

desired returns.

Apart from the US$2.3bil, US$3bil was placed under the custody of an overseas


9/13



financial institution likely to be based in Switzerland in March 2013. It was a few

weeks before the books closed for the financial year.

There is no doubt that 1MDB will have to bring back the funds. As the projects in

Malaysia pick up pace, it cannot keep on issuing debt papers to support them.

The question now is on the returns that the funds have generated being placedoutside Malaysia, because not much is known about where and the kind of assets the

money was invested in.

Related Story:

Who is Bridge Partners?

Key personalities of 1MDB

TAGS / KEYWORDS:

Business, 1mdb valuation

Email Share 1 Facebook Tweet 631

0% 0% 10% 0% 90% 0%

Most Viewed Most Shared

1. Dont be fooled by the high trading

volume

2. Southeast Asian stocks: Indonesia falls,

Thai near 15-month high, Malaysia up
http://www.thestar.com.my/Business/Business-News/2014/08/23/Indonesia-falls-in-strong-week-Thai-index-near-15month-highhttp://www.thestar.com.my/Business/Business-News/2014/08/23/Dont-be-fooled-by-the-high-trading-volumehttp://www.thestar.com.my/Search?q=%221mdb+valuation%22&qkey=1mdb+valuationhttp://www.thestar.com.my/Search?q=%22Business%22&qkey=%7bC0E55D98-56BD-4E28-A322-C00A8730BC1B%7dhttp://www.thestar.com.my/Business/Business-News/2014/05/17/Key-personalities-of-1MDBhttp://www.thestar.com.my/Business/Business-News/2014/05/17/Who-is-Bridge-Partnershttp://twitter.com/search?q=http%3A%2F%2Fwww.thestar.com.my%2FBusiness%2FBusiness-News%2F2014%2F05%2F17%2FA-question-of-valuation-1MDB-wants-money-to-come-back-to-Malaysia-buthttps://twitter.com/intent/tweet?original_referer=http%3A%2F%2Fwww.thestar.com.my%2FBusiness%2FBusiness-News%2F2014%2F05%2F17%2FA-question-of-valuation-1MDB-wants-money-to-come-back-to-Malaysia-but%2F&text=1MDB%20wants%20money%20to%20come%20back%20to%20Malaysia%20but%20what%20kind%20of%20returns%20would%20the%20investments%20have%20yielded%3F&tw_p=tweetbutton&url=http%3A%2F%2Fwww.thestar.com.my%2FBusiness%2FBusiness-News%2F2014%2F05%2F17%2FA-question-of-valuation-1MDB-wants-money-to-come-back-to-Malaysia-but


10/13


http://www.thestar.com.my/Business/Business-News/2014/05/17/A-question-of-valuation-1MDB-wants-money-to-come-back-to-Malaysia-but/ 1

3. Another OPR hike: Too soon?

4. The impact of GST on property

5. Medic college shakeout

6. How will the GST affect rental income?

7. Build-then-sell in 2015?

8. Lessons from MRT Corp CEOs

surprising resignation

9. Halim alleges Nor Mohamed defamed him

in a book

10. Dr Yu: Im a long-term investor in HLCap

Latest News

Show More

Please wait.

Loading stories...

Draghi says ECB ready to adjust policy if

inflation drops further

HSBC is sued in US for US$250 million over

alleged role in 'death bonds'

Malaysian palm oil skids for third week past

five-year lows

Rocket Internet and Zalando to unveil listingplans in Sept

Dynegy cuts exposure to wholesale power with

deals worth US$6.25 billion
http://www.thestar.com.my/Business/Business-News/2014/08/23/Dynegy-cuts-exposure-to-wholesale-power-with-deals-worth-$6dot25-billionhttp://www.thestar.com.my/Business/Business-News/2014/08/23/Rocket-Internet-and-Zalando-to-unveil-listing-plans-in-Septhttp://www.thestar.com.my/Business/Business-News/2014/08/23/Palm-oil-skids-for-third-week-past-five-year-lowshttp://www.thestar.com.my/Business/Business-News/2014/08/23/HSBC-is-sued-in-US-for-US$250-million-over-alleged-role-in-death-bondshttp://www.thestar.com.my/Business/Business-News/2014/08/23/Draghi-says-ECB-ready-to-adjust-policy-if-inflation-drops-furtherhttp://www.thestar.com.my/Business/Business-News/2014/08/23/Dr-Yu-Im-a-longterm-investor-in-HLCaphttp://www.thestar.com.my/Business/Business-News/2014/08/23/Halim-alleges-Nor-Mohamed-defamed-him-in-a-bookhttp://www.thestar.com.my/Business/Business-News/2014/08/23/The-right-way-to-quit-Lessons-from-MRT-Corp-CEOs-surprising-resignationhttp://www.thestar.com.my/Business/Business-News/2014/08/23/Buildthensell-in-2015-Such-regulated-model-requires-strong-buy-in-from-financial-institutions-in-thehttp://www.thestar.com.my/Business/Business-News/2014/08/23/How-will-the-GST-affect-rental-incomehttp://www.thestar.com.my/Business/Business-News/2014/08/23/Medic-college-shakeout-Industry-needs-consolidation-as-many-smaller-schools-cannot-survive-on-theirhttp://www.thestar.com.my/Business/Business-News/2014/08/23/The-impact-of-GST-on-property-Investors-are-concerned-about-how-the-new-tax-system-will-affect-homehttp://www.thestar.com.my/Business/Business-News/2014/08/23/Another-OPR-hike-Too-soon-Given-the-current-economic-challenges-and-a-closer-look-at-onground-sentim


11/13



Selangor MB crisis Malaysia Cup

MH17 crash Packaged Food 101

Missing MH370

Trending Now:

Interest rates to

go up?

Second digital

autopsy facility in

Bradford

Topics

Videos

Nation Business World Sport

More Latest Stories

Tokyo-bound MAS flight turns back to KLIA

50min after departure

Muktadil brothers behind Sabah kidnappings,

say police

PKR congress: Ceremony for MH17 victims

excessive, claims party leader

PKR congress: Terengganu PAS making us

weep, says delegate

MH17: Remains of two Malaysian victims to

arrive tomorrow
http://www.thestar.com.my/News/Nation/2014/08/23/MH17-Remains-to-arrive-on-Sundayhttp://www.thestar.com.my/News/Nation/2014/08/23/PKR-Congress-Terengganu-PAS-PKR-delegatehttp://www.thestar.com.my/News/Nation/2014/08/23/PKR-Congress-Ceremony-for-MH17-victimshttp://www.thestar.com.my/News/Nation/2014/08/23/Muktadil-brothers-behind-kidnappingshttp://www.thestar.com.my/News/Nation/2014/08/23/MAS-flight-turns-back-to-KLhttp://www.thestar.com.my/News/Latesthttp://www.thestar.com.my/Home/Videoshttp://www.thestar.com.my/Videos/2014/06/11/digitalautopsyfacilityhttp://www.thestar.com.my/Videos/2014/06/20/Trending-Now_140620http://www.thestar.com.my/Topics/2014/03/08/Missing-MH370http://www.thestar.com.my/Topics/2014/06/23/Packaged-Food-101http://www.thestar.com.my/Topics/2014/07/19/MH17-crashhttp://www.thestar.com.my/Topics/2014/08/11/Malaysia-Cuphttp://www.thestar.com.my/Topics/Specials/2014/08/11/Selangor-MB-crisis


12/13

8/23/2014 1MDB wants moneyto come back to Malaysia but what kind of returns would the investments have yielded? - Business News | The Star Online


Latest Jobs < >

Contract Executive

Contract Manager

Cook

Senior General Manager / General Manag...

Kitchen Assistant

(Choose a field)

SITE MAP

Home

New s

Business

Sport

Tech

Lifestyle

Travel

Opinion

SUBSCRIPTIONS

The Star new spaper

Other Publications

RSS Feeds

OTHER EDITIONS

ePaper

Mobile

SMS Serv ices

MAGAZINES

Kuntum

SH Business Monthly

Flavours

COMPANY INFO

About Us

Contact Us

Job Opportunities

Investor Relations

FAQs

ADVERTISING

View Our Rate Card

POLICIES

Privacy Statement

Terms of Use

OUR SITES

myStarjob.com

Star Motoring

StarProperty.my

Propw all

iBilik

R.AGE

mStar

Red Tomato

Leaderonomics

Sw itchUp.TV

Search

SEARCH THE STAR ONLINE

SUBSCRIBE TO OUR NEWSLETTER

Enter email

Subscribe

CONNECT WITH US

Powered by Content Partner Our Radio Stations
http://www.my.ntt.com/en/index.htmlhttp://www.asianewsnet.net/http://www.red.fm/http://www.suriafm.com.my/http://www.988.com.my/http://www.capitalfm.com.my/http://www.my.ntt.com/en/index.htmlhttp://www.asianewsnet.net/http://www.capitalfm.com.my/http://www.988.com.my/http://www.suriafm.com.my/http://www.red.fm/http://www.asianewsnet.net/http://www.my.ntt.com/en/index.htmlhttp://www.thestar.com.my/ContactUshttp://thestar.com.my/rss/http://plus.google.com/u/0/104877243837974157122/postshttp://twitter.com/staronlinehttp://www.facebook.com/TheStarOnlinehttp://switchup.tv/http://www.leaderonomics.com/http://www.redtomato.com.my/http://www.mstar.com.my/http://rage.com.my/http://www.ibilik.my/http://www.propwall.my/http://www.starproperty.my/http://star-motoring.com/http://mystarjob.com/http://www.thestar.com.my/Termshttp://www.thestar.com.my/Privacyhttp://advertising.thestar.com.my/http://www.thestar.com.my/FAQshttp://starpublications.my/http://careers.thestar.com.my/http://www.thestar.com.my/ContactUshttp://www.thestar.com.my/AboutUshttp://emag.flavours.my/https://newsstand.thestar.com.my/product-detail/?id=534a003912a6bhttps://www.ekuntum.com.my/http://thestar.com.my/sms-services/http://thestar.com.my/apps/http://mystar.newspaperdirect.com/epaper/viewer.aspxhttp://thestar.com.my/rss/https://bookstore.thestar.com.my/https://newsstand.thestar.com.my/product-detail/?id=534e56dd89441http://www.thestar.com.my/Opinionhttp://www.thestar.com.my/Travelhttp://www.thestar.com.my/Lifestylehttp://www.thestar.com.my/Techhttp://www.thestar.com.my/Sporthttp://www.thestar.com.my/Businesshttp://www.thestar.com.my/Newshttp://www.thestar.com.my/http://mystarjob.com/http://mystarjob.com/job/default.aspx?pid=65456http://mystarjob.com/job/default.aspx?pid=65623http://mystarjob.com/job/default.aspx?pid=65458http://mystarjob.com/job/default.aspx?pid=65624http://mystarjob.com/job/default.aspx?pid=65625


13/13


Copyright 1995-2014 Star Publications (M) Bhd (Co No 10894-D)
http://www.capitalfm.com.my/http://www.988.com.my/http://www.suriafm.com.my/http://www.red.fm/http://www.asianewsnet.net/http://www.my.ntt.com/en/index.html

1mdb wants money to come back to malaysia but what kind of returns would the investments have...

Documents