EC World REIT: Update on Legal Proceedings Regarding Unauthorised Mortgages

Key Points from the Latest Update

• Legal Proceedings Update: EC World Asset Management Pte. Ltd., manager of EC World Real Estate Investment Trust (“ECW REIT”), has provided a significant update regarding ongoing legal proceedings in the People’s Republic of China (PRC) over the imposition of unauthorised mortgages on ECW’s assets.
• Court Judgements: The People’s Court of Fuyang District, Hangzhou City, previously dismissed ECW group’s applications for orders on invalidity and revocation of mortgage contracts over Fuzhou E-Commerce (FZDS) in favour of two Fuyang Financial Institutions. This decision was upheld by the Hangzhou Intermediate People’s Court on 29 January 2026, which dismissed the ECW group’s appeal applications (the “January 2026 Judgments”).
• Financial Impact: The contingent liabilities of RMB 268.6 million arising from these mortgages have already been recognised in ECW’s financial statements. No further adjustments are necessary at this time.
• Potential for Further Legal Action: Based on recommendations from PRC legal counsel, ECW REIT’s Manager intends to apply for re-trial of both the April 2025 and January 2026 Judgments. However, investors should note that this application for re-trial is not an appeal and the outcome remains uncertain.
• Ongoing Litigation: One of the Fuyang Financial Institutions, Hangzhou Fuyang Futoufa Zhenfu Equity Investment LLP (“Fuyang Futoufa”), has initiated two separate lawsuits in the Hangzhou Intermediate Court against three of ECW’s subsidiaries. Both lawsuits were heard on 28 January 2026 and are pending further court processes.

Key Details and Developments

• Background: The unauthorised mortgages were imposed over several ECW assets: Fuzhou E-Commerce, Fuheng Warehouse, and Hengde Logistics. According to the latest disclosures, the unauthorised mortgages over Fuheng Warehouse and Hengde Logistics have been discharged. The only remaining outstanding unauthorised mortgage is over Fuzhou E-Commerce.
• Entities Involved: The Fuyang Financial Institutions are Hangzhou Fuyang Futoufa Zhenfu Equity Investment LLP and Zhejiang Fuyue Finance Lease Co., Ltd. These entities are linked to the Fuyang Government in the PRC.
• Management’s Caution: The Board of Directors has advised unitholders and investors to exercise caution when dealing in ECW units, given the ongoing legal uncertainties and potential financial implications.
• Future Announcements: The Manager will continue to update unitholders on SGXNET should any material developments arise, in line with its obligations under the SGX Listing Manual.

Potential Impact on Shareholders and Share Price

• Contingent Liabilities: While the contingent liabilities of RMB 268.6 million have already been recognised, any adverse outcomes from ongoing or future litigation—including possible enforcement actions or further claims—could have a material impact on ECW’s financial position and, consequently, its share value.
• Legal Uncertainties: The intention to seek a re-trial introduces ongoing uncertainty. Although this step is recommended by PRC counsel, the process is not an appeal and its likelihood of success is unclear.
• Market Sensitivity: The judicial outcomes and any subsequent material financial effects could be price sensitive, especially if ECW is required to make additional provisions, or if enforcement of the mortgage over Fuzhou E-Commerce results in asset disposals or operational disruptions.

Cautionary Statement to Unitholders and Investors

Unitholders and potential investors are strongly advised to exercise caution when dealing in ECW REIT units. Given the ongoing legal proceedings, uncertainties remain regarding the final outcome and its effect on ECW’s financials and distribution payouts. It is recommended that investors consult their financial or legal advisers if in doubt about any actions to take.

Disclaimer

This article is for informational purposes only and does not constitute an offer, invitation, or recommendation to acquire, purchase, or subscribe for EC World REIT units. The value of the units and the income derived from them may fall as well as rise. Past performance is not indicative of future results. The future outcome of legal proceedings is uncertain and could materially differ from current expectations. Investors should seek professional advice before making any investment decisions.

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