General Announcement::Entering into Settlement Agreement - Achwell Property Sdn Bhd and Capital City Property Sdn Bhd

CAPITAL WORLD LIMITED

(Incorporated in the Cayman Islands)

(Company Registration No.: CT-276295)

ENTERING INTO SETTLEMENT AGREEMENT BETWEEN ACHWELL PROPERTY SDN BHD ("APSB"), A WHOLLY-OWNED SUBSIDIARY OF GADANG HOLDINGS BERHAD ("GADANG"), AND CAPITAL CITY PROPERTY SDN BHD (JUDICIAL MANAGER) ("CCPSB"), A WHOLLY- OWNED SUBSIDIARY OF THE COMPANY (THE "PROPOSED VARIATION")

Reference is made to the Company's announcements on 1 April 2019 and circular dated 15 May 2019 in relation to the conditional settlement agreement, put option agreement and call option agreement entered into between the Parties on 29 March 2019 to vary the terms of the JVAs (collectively, the "First Settlement Agreement") and approved by Shareholders at an extraordinary general meeting held on 31 May 2019. Unless otherwise defined, all capitalised terms used in this announcement shall bear the same meaning in the aforementioned announcements.

1. BACKGROUND

The board of directors (the "Board" or the "Directors") of Capital World Limited ("CWL", the "Company", and together with its subsidiaries, the "Group") refers to the joint venture agreement entered into between APSB and CCPSB (collectively, the "Parties") on 26 December 2013 ("Joint Venture Agreement") and the various supplemental agreements to vary, among others, certain components of the Project are hereinafter collectively referred to as the "JVAs").

CCPSB and APSB had originally entered into the JVAs to, among other things, unlock the value of an en-bloc development land which was made up of 84 parcels of land located along Jalan Tampoi (adjacent to Damansara Aliff), Tampoi, Johor Bahru, Johor Darul Takzim which were subsequently amalgamated and registered under a single title held under Geran 544822, Lot

48975, Bandar Johor Bahru, District of Johor Bahru, Johor Darul Takzim ("Development Land" or "Said Land") through the development and construction of an integrated development project comprising a retail podium , three (3) tower blocks of office suites and two (2) tower blocks of hotel suites ("Project"), with an estimated gross development value of RM1.80 billion.

Pursuant to the JVAs, CCPSB is responsible for the overall development, construction, funding (including the securing of financing) and completion of the Project. However, the property market in Malaysia has experienced a slowdown in the last few years, especially in Johor, has affected the progress of the Project, with only the retail podium being completed as at the date of this Announcement. The completion of the construction works for the hotel suites tower block, serviced suites tower block and serviced apartments tower blocks have been delayed beyond the Project completion date of 25 February 2020.

On 13 February 2020 that the Company has filed to apply to the High Court of the Republic of

Singapore (the "Singapore Court") to propose a Scheme of Arrangement for the purposes of implementing and facilitating the restructuring of the debt obligations and liabilities (the "Sanction Application").

On 17 February 2020, that the Company has commenced a court-supervised process to organise their liabilities by filing application in the Singapore Court for a moratorium pursuant to Section

211B(1) of the Companies Act (Cap. 50) (the "Singapore Companies Act") (the "Application").

Due to the weak sentiment of property market in Johor, CCPSB had not been able to sell the retail units and hence it faced difficulty in generating sufficient cashflow to pay its liabilities. CCPSB had on 14 February 2020 filed an application in the High Court of Malaya, Kuala Lumpur

("Malaysia High Court") for an order to place itself under judicial management ("JM Proceedings"). Pursuant to an order of the Judicial Commissioner of the Malaysia High Court dated 13 March 2020 ("JM Order"), CCPSB was placed under judicial management and a judicial manager ("Judicial Manager" or "JM") was appointed to manage the affairs, business and property of CCPSB during the period of the JM Order.

APSB had then on 22 May 2020 filed an application to the Malaysia High Court to, inter alia, intervene in the JM Proceedings and set aside the JM Order. While the Malaysia High Court allowed the said intervener application, the application to set aside the JM Order was dismissed by the Malaysia High Court on 23 April 2021]. Later on, the Judicial Manager had on 7 August 2020 filed an application for, among others, an extension of the JM Order which was then allowed by the Malaysia High Court. On 10 September 2020, APSB had then filed appeals against the High Court's dismissal of the application to set aside the JM Order and the Malaysia High Court's decision to allow the extension of the JM Order (collectively, the "APSB's Appeals").

JM informed APSB that CCPSB is unable to complete the construction of the Project within the targeted completed date due to poor market conditions. On 15 May 2020, APSB issued a Notice of Default (the "Notice") to CCPSB. JM informed APSB that the JM has been appointed as a proactive measure to undertake an orderly restructuring of CCPSB's obligations with its creditors and APSB as its joint venture partner. With the lapse of the First Settlement Agreement, JM initiated discussions with APSB and negotiated the Final Settlement Agreement with APSB.

1. RATIONALE FOR AND BENEFITS OF ENTERING INTO SETTLEMENT AGREEMENT
   The Board is of the view that the entry into the Final Settlement Agreement by the JM is in the best interests of the Company and the Group for the following reasons:
2. 1. 1. Upon signing of the Final Settlement Agreement with CCPSB, the APSB Appeals has been withdrawn at the Court of Appeal on 24 June 2021 and this led to the sanction of the Sanction Application and extension of the moratorium by the Singapore Court.
   2. Pursuant to the Final Settlement Agreement, the settlement of the RM40 million is scheduled over the period of 4 years, which will give time for
   3. 1. Malaysia's economy and property market to recover from the Covid 19 pandemic and provide a more conducive market for CCPSB to sell the retail units to generate cashflow or to raise funding or to get financing to repay; and
      2. the Group to focus on implementing the Scheme of Arrangement to restructure the debts and liabilities to improve the financial position of the Group; and
   4. APSB will allow CCPSB to charge the Development Land as security for credit facilities if required.
   5. The reduction in APSB Entitlement Sum is expected to led to improvements in Net Tangible Assets per Share and Loss Per Share of the Group.
   6. As illustrated in the comparison table below, the Board is of the view that the Final Settlement Agreement is more favourable to the Company compared to the previously approved First Settlement Agreement.
3. THE KEY TERMS OF THE SETTLEMENT AGREEMENT
   The Board wishes to announce that the Judicial Manager of CCPSB, had on 28 July 2021 entered into a conditional Settlement Agreement with APSB which sets out the terms and conditions governing the payment of the Final Settlement Sum and other matters ("Final Settlement Agreement" or "FSA").
   Under the JVAs, CCPSB had agreed to pay APSB a total value equivalent to 16.7% of the final gross development value of the Project, and up to a maximum sum of RM323,999,999 as APSB's entitlement from the Project ("APSB Entitlement Sum").
   The Company had received shareholder's approval for the First Settlement Agreement at an extraordinary general meeting held on 31 May 2019. On 1 April 2020, the Company had announced that due to the then negative business environment, as the conditions precedent had not been fulfilled by 28 March 2020, the First Settlement Agreement, together with the Call Option and Put Option, have lapsed. The lapse of the First Settlement Agreement has resulted in the

Joint Venture Agreement reverting to status quo and the terms of the Joint Venture Agreement between APSB and CCPSB has not and is not completed as envisaged. *Please refer to paragraph 2.7 of the circular dated 15 May 2019 for a comparison of the key revised terms of the then proposed variation.

After months of numerous discussions and negotiations between APSB and the JM, on 22 May 2021, CCPSB and APSB entered into a binding term sheet whereby both Parties had agreed for, among others, CCPSB to settle and pay RM40 million ("Final Settlement Sum") and in addition to approximately RM150 million paid to-date to APSB, totalling RM190 million shall be the full and final settlement of APSB's entitlement from the Project ("APSB Final Entitlement Sum") and all other rights, interests and/or benefits that APSB may have under the Project, the Development Land and the JVAs and/or against CCPSB.

A comparison of the key terms contained in the First Settlement Agreement and the Final Settlement Agreement are summarised as below.

No.	Key terms	As set out in the *First	As sets out in the Final Settlement Agreement
		Settlement Agreement

1. APSB Entitlement Sum

The APSB Entitlement Sum will be adjusted from

a maximum of RM323,999,999 to a fixed sum of RM 250 million of

which approximately RM150 million has already been paid.

There is a disparity between the expected APSB Entitlement Sum (which was expected to be around RM300.60 million, with a maximum sum of RM323,999,999) at the time the Joint Venture Agreement was entered into, and the Revised Entitlement Sum (which is RM250 million). CCPSB and APSB have therefore agreed to enter into Call Option Agreement and Put

Option Agreement which would enable APSB to realise an additional RM62 million in cash from the disposal of the Identified Retail Units, therefore bringing APSB's total entitlement to RM312 million upon the exercise of either the Put Option or the Call Option (each an "Option" or collectively, the "Options").

The APSB Final Entitlement Sum will be adjusted from RM250 million to RM190 million comprising RM150 million which has already been paid and RM40 million to be paid.

This marked a reduction of approximately RM60 million according to the First Settlement Agreement and a reduction of RM122 million under the Options and at the end of the Option Period.

No.	Key terms	As set out in the *First	As sets out in the Final Settlement Agreement
		Settlement Agreement

Details of the Call Option Agreement and Put Option Agreement can be found in paragraph 2.7.3 of the Company's Circular dated 15 May 2019.

2. Encumbrance/

APSB

agrees

to transfer

APSB agrees to transfer the legal and beneficial

transfer of the

the

legal and beneficial

ownership of the Development Land to CCPSB

Development

ownership

of

the

upon the full payment of the Settlement Sum of

RM 40 million in the manner as set out in the

Land

Development

Land

to

Final Settlement Agreement.

CCPSB

in

exchange

for

the

settlement

of

the

In this regard, the following shall take place on

estimated

RM100.21

the Settlement Date:

million

("Outstanding

Entitlement Sum") in the

(i)

the Memorandum of Transfer ("MoT")

of

manner as set out in the

the Development Land in favour of CCPSB,

First

Settlement

the original title to the Development Land,

Agreement.

the separate documents of title/strata titles

to the individual units of the Project (as the

One

of

the

conditions

case may be) and all the relevant documents

precedent

of

the

First

required for the transfer of the Development

Settlement Agreement to

Land from APSB to CCPSB shall be

be fulfilled within six (6)

released to CCPSB or its appointed

months from the date of

solicitors, to enable CCPSB to effect the

the Settlement Agreement

transfer of the Development Land and/or the

individual units of the Project to CCPSB;

or such other date as shall

be mutually agreed upon

(ii)

APSB shall

release

any

Collateral

Unit(s)

was for CCPSB to obtain a

remaining from the Debenture and return the

grant

of

credit

facilities

beneficial

ownership

of

such

Collateral

from a reputable financial

Unit(s) to CCPSB;

institution for a loan sum

of not

less than

RM50

(iii) CCPSB shall have, at its own costs and

million

(the

"Loan"),

and

expenses,

caused

the

release

of

any

which

part

of

the

Loan

undertaking

given

by

APSB

to

any

end-

granted

shall

be

directly

financier and/or third party in its capacity as

disbursed to APSB on the

the registered

owner

of

the

Development

first

drawdown

(the

Land and/or

the

individual

units

of

the

"Covenanted

Sum")

as

Project pursuant

to

the tripartite SPAs

follows:-

executed by CCPSB, APSB and the

For a Loan amount equal

individual

purchasers and/or

otherwise for

sale of any units within the Project;

to or less than RM100

million,

the

Covenanted

(iv)

APSB shall

not

file

afresh

the

APSB's

Sum

shall

be

RM20

Appeals which were withdrawn on 24 June

million;

2021; and

For a Loan amount of

more than RM100 million

(v)

APSB shall ensure that the

Development

but equal to or less than

Land is free from any encumbrance subject

RM150

million,

the

to the terms of the FSA.

Covenanted Sum shall be

RM30 million; and

Upon registration of the MoT of the Development

) For

a

Loan amount of

Land in favour of CCPSB by the relevant

more than RM150 million,

authority, APSB and CCPSB shall revoke the

the Covenanted Sum shall

Power of Attorney for the Remaining Blocks and

be RM35 million;

the costs and expenses in connection with the

No.	Key terms	As set out in the *First	As sets out in the Final Settlement Agreement
		Settlement Agreement

APSB shall only release

the original issue document of title of the

Said Land to the appointed solicitors of the Financier for the sole purpose of transferring the Said Land to CCPSB and the creation of a charge in favour of the Financier on the Said Land, subject always to the following:

(a) the	Conditions
Precedent	being
fulfilled;

1. execution of all the SPAs of the Identified Retail Units by the Parties;
2. APSB receiving a letter of undertaking from the Financier to pay the Covenanted Sum to APSB upon first drawdown of the
   loan granted to
   CCPSB;
3. APSB receiving a letter of disclaimer from the Financier confirming that there is no redemption sum
   payable for the Identified Retail Units and that the Financier has no claim and/or
   interest in the Identified Retail Units and that they will exclude the Identified Retail Units from any foreclosure proceedings pursuant to the Financier's charge of the Said Land;
4. APSB receiving evidence that the relevant letters of disclaimer have been
   issued by the Financier to all the
   respective end purchasers for the units already sold under the Revised

said revocation shall be borne by CCPSB. The stamp duty and registration fees in connection with the MoT of the Development Land to CCPSB shall also be borne by CCPSB.

Notwithstanding that the registration of the MoT of the Development Land can only be transferred to CCPSB after the Settlement Date, CCPSB shall be liable to pay all outgoings for the Development Land including quit rent, assessment (if any), maintenance costs and charges for the sewage treatment plant situated therein and all other rates and charges in relation to the Development Land and the buildings erected thereon from the date of the FSA.