24. CONTINGENT LIABILITIES (continued) The relevant mortgages were created in favour of FZDS in November 2023 in connection with the Sponsor Group obtaining certain rescue funds of RMB220,000,000 (S$41,008,000), and ECW is not privy to, and did not consent to, such arrangements. The Relevant Mortgages are generally 3rd, 4th or 5th ranking and therefore have no priority over the existing 1st ranking and 2nd ranking mortgages in respect of the Group’s existing facilities (Note 18). The Manager has taken immediate steps to investigate the circumstances surrounding the imposition of these unauthorised mortgages. Based on the results of the investigation, the unauthorised mortgages arise primarily from the unauthorised use of the respective China subsidiaries’ company seal, legal representative seal, finance stamp and/or contract stamp (collectively, the “Relevant Seals and Stamps”) and the title deeds of the properties as the Sponsor had by-passed the Group’s control procedures for use of the Relevant Seals and Stamps and title deeds. Legal counsel has been engaged to challenge the validity of these mortgages and to seek their removal. More information can be obtained from ECW’s various announcements on SGXNet between January and April 2025. As mentioned in previous announcements, the case application made by the Group to the relevant court in the People’s Republic of China (“PRC Court”) to initiate lawsuits (“Mortgage Revocation Lawsuits”) to revoke the outstanding relevant mortgage over FZDS has been accepted by the PRC court and parties have attended a pre-trial conference for the exchange of evidence. As at 31 December 2024, the maximum liability to the Group arising from the relevant mortgages is estimated at RMB268,610,000 (S$50,069,000). This has been disclosed as a contingent liability and not recognised as a liability on the statement of financial position as based on legal analysis obtained, the Manager is of the view that there is a good chance that the Relevant Mortgages are legally invalid, and the Group does not have any obligations towards the mortgagees. Refer to Note 32(c) for updates after reporting date. Stage 1, 2 and 3 properties of Bei Gang (“Bei Gang”) are grouped under a common single legal entity in China and share one common stamp and seal. There were agreements signed between Stage 1 and stage 2 and 3 back in 2016 to segregate the rights and obligation of Stage 1 from the remaining of Bei Gang. However, this does not completely prevent any legal obligation by Stage 1. As informed by the Sponsor, there are some ongoing litigations related to Stage 2 and 3 properties of Bei Gang, ECW is not able to quantify the potential associated liabilities. The Group remains committed to ensuring that all its assets are free from unauthorised encumbrances and is taking all necessary steps to resolve this matter promptly. 25. CAPITAL COMMITMENTS Capital expenditures relating to additions to investment properties contracted for at the reporting date but not recognised in the financial statements amounted to S$274,000 (2023: S$24,000). 26. FINANCIAL RISK MANAGEMENT Financial risk factors The Group’s activities expose it to market risk (including currency risk and interest rate risk), credit risk, liquidity risk and capital risk. The Group’s overall risk management strategy seeks to minimise any adverse effects from the unpredictability of financial markets on the Group’s financial performance. The Group uses financial instruments such as currency options and forwards, interest rate swaps and borrowings denominated in the respective entities’ functional currency to manage certain financial risk exposures. Risk management is carried out under policies approved by the Board of Directors of the Manager. The Manager provides written principles for overall risk management as well as written policies covering specific areas, such as interest rate risk, credit risk and liquidity risk. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and Group’s activities. EC WORLD REIT 112 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024
RkJQdWJsaXNoZXIy NTkwNzg=