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A N N U A L R E P O R T 2 0 1 7
POSITIONING FOR
GROWTH
01 About Mercatus Co-operative Limited
02 Historical Milestones
03 Business Strategy
04 Chairman’s Message
06 Highlights of the Year
08 Financial Highlights
09 Operational Review
10 Social Impact
12 Board of Directors
14 Key Management
15 Property Profile
21 Financial Statements
CONTENTS
ABOUT MERCATUS
CO-OPERATIVE LIMITEDMercatus Co-operative Limited
(Mercatus) is the real estate subsidiary of
NTUC Enterprise Co-operative Limited.
Mercatus’ vision is to own and manage
a portfolio of commercial properties to
provide NTUC social enterprises with
access to commercial space and generate
sustainable, long-term returns for the
Labour Movement.
Mercatus was registered under the
Co-operative Societies Act on 31 May
2011. Mercatus’ portfolio comprises
5 strategically located retail and office
properties and 37 strata-titled assets
in Housing Development Board (HDB)
estates and shopping malls with a
combined valuation of $5.2 billion as at
31 December 2017.
Mercatus’ portfolio consists of:
• AMK Hub, a conveniently located
shopping mall in the heart of Ang Mo
Kio town centre;
• Jurong Point, the largest suburban
mall in Singapore;
• NEX, the biggest mall in the
north-east region of Singapore;
• Thomson Plaza, a retail mall located
in Upper Thomson with a rich
community heritage;
• 37 strata-titled assets in HDB estates
and shopping malls island-wide; and
• One Marina Boulevard, a premium
Grade A office building located in
Singapore’s Central Business District.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 1
HISTORICAL
MILESTONES
July 2012:
Acquired 50%
interest in NEX
– a joint venture
company
holding
December 2017:
Acquired a strata lot at Thomson Plaza
June 2017:
Completed acquisition of Jurong Point
January 2017:
Acquired strata properties in HDB estates
and shopping malls
January 2018:
Completed acquisition of 69.6% of NTUC
Choice Homes from NTUC Enterprise and
NTUC FairPrice
November 2011:
Acquired first property – AMK Hub
May 2011:
Registered in Singapore under the
Co-operative Societies Act
July 2016 :
Acquired One Marina
Boulevard
July 2016:
Acquired strata ownership
in Thomson Plaza
2017
2018
2016
2012
2011
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 20172
BUSINESS
STRATEGY
Mercatus will continue to seek to invest in, develop and manage a diversified,
well-located portfolio of commercial real estate in Singapore. As part of its
growth and diversification strategy, Mercatus will explore overseas opportunities
and various platforms to raise capital.
STRATEGIES
Active Asset Management
• Value creation through asset enhancement initiatives to improve the relevance and attractiveness
of malls to tenants and shoppers.
• Proactive approach to leasing and tenant management to maximise occupancy and achieving stable
rental returns.
• Optimise and constantly refresh tenant mix for both retail and office portfolio.
Strong Parentage
• A subsidiary of NTUC Enterprise, which is a diversified holding co-operative with businesses that
include retail, food, education services for children and adults, healthcare, senior care, and the
insurance.
• Opportunities to leverage on the expertise, scale of operations and robust network of relationships
of its related entities.
Proactive and Prudent Capital Management
• Adopt and maintain optimal capital structure with appropriate gearing levels.
• Maintain flexibility in respect of funding for future capital expenditures and acquisitions.
Strategically Located Quality Assets
• Quality shopping malls in suburban areas and office building in the downtown core of Singapore.
• Strategically located in areas with a good catchment of high-density residential population.
• Good connectivity via convenient access to major transport infrastructure.01
03
04
02
COMPETITIVE STRENGTHS
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 3
Dear Members
On behalf of the Board of Directors, I am pleased to present
Mercatus’ Annual Report for the year ended 31 December
2017.
Growth of Mercatus
2017 was a difficult year for the retail industry given the
slower growth in household income in Singapore, increasing
competition from e-commerce as well as the growing
trend of residents traveling overseas to shop. In spite of
these challenges, Mercatus performed commendably and
continued to grow with sound financial management and
operational excellence.
In terms of growth of its portfolio, 2017 was a significant
milestone in Mercatus brief history. In addition to
consolidating the property assets of NTUC FairPrice (FP)
across various locations in Singapore, Mercatus completed
its largest acquisition to date with the purchase of Jurong
Point. By the end of 2017, Mercatus’ assets had grown to
$5.0 billion, up from $1.8 billion in 2016.
Mercatus also completed a share swap with its shareholders,
NTUC Enterprise (NE) and FP, for their shares in NTUC Choice
Homes (NCH) on 2 January 2018. With the completion of
the share swap, Mercatus became a majority shareholder of
NCH with 69.6% shareholdings.
The consolidation of assets from the NTUC group of social
enterprises under Mercatus highlights the importance of
Mercatus’ role as the real estate arm of the Group, and
positions Mercatus as an important financial resource
for the Group, and for preservation of the Group’s capital
through real estate.
As a result of the expansion of Mercatus’ portfolio of assets in
2017, Mercatus’ total revenue increased to $205.9 million, up
from $82.1 million in 2016, with a net surplus of $82.1 million
before contributions, up from $7.9 million in 2016.
In respect of the financial year ended 31 December 2017, the Board of Directors has proposed the issuance of 33 bonus
shares for every 1000 shares held, amounting to a total of $50.8 million, in lieu of dividends. This is subject to approval by
members at the Annual General Meeting.
Building capabilities
2017 also saw Mercatus strengthening its capabilities in capital management and asset management.
In the area of capital management, Mercatus successfully established a $1.0 billion multi-currency Medium Term Note (MTN)
programme with SGX on 9 June 2017. This MTN programme will provide Mercatus access to the debt capital markets beyond
the traditional borrowings from banks.
On 26 July 2017, Mercatus successfully launched its maiden bond issuance of $200.0 million 7-year notes at 2.8% per
annum to tap a wider investor-base. Investors’ response was positive, with the issue heavily over-subscribed, demonstrating
investors’ confidence in Mercatus’ credit standing. Investors’ confidence in Mercatus’ performance and credibility was further
underscored with a successful launch of its second bond issuance on 19 January 2018 of $150.0 million 10-year notes at
3.1% per annum.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 20174
CHAIRMAN'S
MESSAGE
In the area of asset and property management, Mercatus
demonstrated its commitment to excellence, innovation and
productivity.
A case in point is One Marina Boulevard (OMB). By enhancing
the lobby areas, optimising prime spaces to accommodate
a wider range of retailers, and improving accessibility,
Mercatus has enabled OMB to compete more effectively in
the Grade A office market in the Marina Bay area.
Overall, the occupancy rate at Mercatus’ properties is
healthy at above 99%, with steady shopper traffic per month.
Mercatus will continue to partner tenants to boost their
sales as well as create greater customer value.
Looking Ahead
The economic climate in 2018 looks more stable, with the
Ministry of Trade and Industry projecting that the economy
would expand slightly in the mid-range of 1.5% to 3.5%.
Stronger economic fundamentals could better support the
retail sector, although structural mismatch in the labour
market would continue to mean more cautious spending by
consumers.
While e-commerce continues to change the way we shop,
we firmly believe that brick-and-mortar retail is well and
alive. Traditional store formats may be on the decline, but
innovative stores that offer greater shopping experiences
will continue to attract shoppers. Shoppers’ expectation of
a mall has also shifted today. They increasingly view it as a
destination for entertainment and new experiences.
The future is bright for shopping malls which find innovative
ways to meet the needs of their shoppers. Data will provide a
rich source of insights to help us determine the best course of
action. Evolution of the retail landscape will take many forms,
be it in terms of a new retail format, new service experience
or new in-store technologies. However, the winning formula
will be one that is based on customer-centricity and creating
a more personalised in-mall experience. In response to
these trends, Mercatus will innovate, digitise and adapt our
business to better engage with our shoppers and tenants,
and to reap productivity gains. In 2018, Mercatus will be
introducing a new digital loyalty programme. Shoppers can
spend their time at our malls more meaningfully by accessing
other digital services in the mall through their smartphones,
such as for e-vouchers, promotional gifts redemption, in-mall
wayfinding and automatic enrolment in lucky draws.
Through the use of Internet-of-Things (IoT) technology,
Mercatus will also convert our shopping malls into smart
buildings progressively from 2018 onwards. The vast
amount of data made available will then improve manpower
productivity, reduce equipment downtime and achieve
energy savings.
To ensure that our malls remain relevant, we have started
incorporating the use of design thinking, a human-centered
approach to business, to bring forth new concepts, services
and spatial design that will better engage our shoppers and
make their time with us a far more enjoyable one.
Mercatus is committed to constantly innovate to improve
its business offerings, as well as enhance its operational
excellence to stay competitive. I am heartened to note that
the management and team are moving in the right direction.
Appreciation
On behalf of the Board, I wish to extend my gratitude to
members for your support. I would also like to express our
deep appreciation to the management and staff for their hard
work and dedication. I am also grateful to my fellow directors
for their counsel and guidance in steering Mercatus forward.
Together, we can expect Mercatus to continue to grow
steadily.
MS MAY NG
CHAIRMAN
CHAIRMAN'S
MESSAGE
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 5
HIGHLIGHTS
OF THE YEAR
EXPANDING ASSETS UNDER MANAGEMENT
CONSOLIDATION OF RETAIL STRATA ASSETS FROM FP
ON 1 JANUARY 2017
• The acquisition comprises 37 strata-titled assets within
shopping malls and HDB sites located in major housing
estates across Singapore.
• An aggregate net lettable area of approximately
370,000sf was acquired with the strata spaces leased
mainly to FP to support their retail operations.
ACQUISITION OF JURONG POINT IN JUNE 2017
• Jurong Point is Singapore’s largest suburban mall.
Strategically located within one of the largest residential
areas in Singapore, the acquisition expanded Mercatus’
shopping mall footprint to the western part of Singapore.
The acquisition further enhanced the tenant and income
diversification of Mercatus arising from an enlarged
portfolio and tenant base.
ACQUISITION OF MAJORITY STAKE IN NCH FROM
SHAREHOLDERS
• Completed share swaps with its shareholders NE and FP
for their shares in NCH in January 2018.
• The move supports NE’s plan to consolidate its real
estate business in Mercatus. Mercatus is now a majority
shareholder of NCH with a 69.6% shareholding.
• NCH is a co-operative established with the objective
of building and delivering affordable quality homes in
Singapore. The last development was completed in 2014.
ACTIVE CAPITAL MANAGEMENT
ESTABLISHMENT OF $1.0 BILLION MTN PROGRAMME
• Successfully established and listed its $1.0 billion
multi-currency MTN programme with SGX on 9 June
2017.
• The MTN programme diversifies Mercatus’ sources of
funding and allows Mercatus to secure borrowings of
longer tenures.
SUCCESSFUL ISSUANCE OF BONDS
• Launched its maiden bond issuance on 26 July 2017,
raising $200.0 million, 7-year notes at 2.8% per annum.
• The issue received an order of almost $530.0 million
from 37 accounts (2.6 times subscribed), demonstrating
the investors’ confidence in Mercatus’ performance and
credit standing.
• A second bond issuance of $150.0 million 10-year
notes at 3.1% per annum was successfully launched on
19 January 2018.
One Marina Boulevard
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 20176
HIGHLIGHTS
OF THE YEAR
INITIATIVES TO BETTER SERVE CUSTOMERS
AND TENANTS
ASSET ENHANCEMENT INITIATIVES AT OMB
• Completed rejuvenation works which improves
accessibility, enhances lobby areas and optimises prime
space for a wider range of retailers.
PARTNERSHIP WITH “LAST MILE DELIVERY” LOGISTICS
PLAYERS TO ENHANCE CUSTOMERS EXPERIENCE
• Jurong Point introduced a multi-brand parcel
self-collection facility ‘Self-Collect @ JP’ in collaboration
with Ninja Van, Singapore Post’s POPStation and
Ta-Q-Bin.
• One of the first in Singapore, the initiative enables
shoppers to collect their online purchases at automated
parcel lockers anytime at a location that is well connected
to main transportation nodes.
• Jurong Point also introduced parcel collection over the
counter with Ezbuy joining the service provider list in
January 2018. This service has been well received by
shoppers.
PROVIDING E-TAILERS A SPACE IN THE MALL
• Introduced ‘Swing By’ at Thomson Plaza, a
co-retailing space to provide e-tailers a shot at retailing
in an offline environment. Mercatus’ sales ambassadors
oversee retail operations and shoppers may meet brand
owners in person, engage in DIY handicrafts and attend
product customisation workshops.
• The co-retail space leverages technologies such as smart
POS system integrated with data analytics, Wi-Fi analytics
for shopper profiling and store heat-mapping enabled by
video analytics.
Jurong Point
‘Swing By’ at Thomson Plaza
Self-Collect @ JP
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 7
FINANCIAL
HIGHLIGHTS
Contribution by gross revenue2
(for the month of December 2017)
41%
18%
19%
4%9%9%
56.0% LEVERAGE RATIO1
5.1xINTEREST COVERAGE RATIO
3.1 yearsAVERAGE TERM TO MATURITY
2.0% p.a.AVERAGE COST OF DEBT
$205.9M GROSS REVENUE
$82.1M NET SURPLUS BEFORE
CONTRIBUTIONS
Notes:
(1) Includes Mercatus’ proportionate share of its joint venture borrowings.
(2) Reflects 50% share of NEX’s valuation and gross revenue. NEX’s financial results are accounted for as “share of results of joint venture” in the
Group’s financial statements.
Contribution by valuation2
(as at 31 December 2017)
41%
15%
17%
4%10%13%
AMK Hub
Jurong Point AMK Hub NEX
Retail Strata
Assets
Thomson
Plaza
One Marina
Boulevard
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 20178
OPERATIONAL
REVIEW
TOP 10 TENANTS CONTRIBUTION: (For the month of December 2017)
LEASE EXPIRY PROFILE
99.7%OCCUPANCY
156.4MSHOPPER TRAFFIC
42.2%OF GROUP NLA
26.1%OF GROSS RENT
1.6%
2022andafter
2018
23.7%
2020
15.6%
2021
34.6%
2019
24.5%
Food & Beverage16.9%
25.9%
15.3%10.9%
12.5%7.6%
10.6%20.4%
10.4%9.3%
7.7%8.1%
4.1%3.7%
2.8%0.8%
2.6%9.7%
2.5%4.2%
2.3%4.5%
1.7%1.3%
1.6%2.6%
Gross Revenue (%) NLA (%)
Beauty & Health
Fashion & Accessories / Kid’s Apparel / Shoes & Bags
Supermarket / Hypermarket
Sundry & Services
Electricals including Information Technology and
Telecommunication
Gifts & Souvenirs / Toys & Hobbies /
Books & Stationery / Sporting Goods
Jewellery & Watches
Others
Department Store
Leisure & Entertainment
Houseware and Furnishing
Education
TRADE CATEGORIES
TOP 10 TENANTS:
• NTUC Fairprice Co-operative Ltd • Isetan (Singapore) Limited
• Microsoft Operations Pte Ltd • Cold Storage Singapore (1983) Pte Ltd
• Allen & Gledhill LLP • NTUC Club
• R E & S Enterprises Pte Ltd • NTUC Foodfare Co-operative Ltd
• Workforce Singapore Agency • BHG (Singapore) Pte. Ltd.
Jurong Point AMK Hub NEX
Retail Strata
Assets
Thomson
Plaza
One Marina
Boulevard
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 9
SOCIAL
IMPACT
Mercatus’ retail malls, with healthy shopper traffic, are good platforms to support
social, health and environmental causes. During the year, Mercatus supported
numerous events for non-profit, community and charitable organisations. Mercatus
continues to be committed to creating a positive social impact through our support
of the NTUC-U Care Fund.
‘Mall Watch’ crime
prevention road show
@ AMK Hub
‘Jolly Jamobree’
Christmas carnival
@ AMK Hub• 500 low-income
families were treated
to free carnival rides. • Raised over $10,000 for
NTUC-U Care Fund.
Donation to NTUC-U
Care Fund (established
to better the welfare
of low-income union
members and their
families).
‘Play for Care Charity
Ball Pit’ @ Jurong Point• Funds raised for
NTUC-U Care Fund.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201710
SOCIAL
IMPACT
‘NEX Donation Drive’ in
partnership with
The Salvation Army
Health Promotion
Board’s (HPB) weekly
piloxing session
@ AMK Hub
People Association’s
‘Embracing Parenthood
Celebrations’
programme
@ Jurong Point
‘Adopt a Minions
Plush’ @ NEX• Funds raised donated
to Make-A-Wish
Foundation.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 11
MS MAY NGCHAIRMAN
Ms Ng is the CEO of Pan-United Corporation Ltd. She is also a Director of NTUC Enterprise
Co-operative Limited. Ms Ng was conferred the Meritorious Service award in 2014 by the
NTUC for her continuous support, dedication and significant contribution to the Labour
Movement.
MR WONG HENG TEWDIRECTOR
Mr Wong is currently an Advisory Director in Temasek Holdings. He is also a board member
in Heliconia Capital Management and Azalea Asset Management. Mr Wong was conferred
the Friend of Labour Award in 2014 by the NTUC for his continuous support, dedication and
significant contribution to the Labour Movement.
MR WILLY SHEEDIRECTOR
Mr Shee is the Senior Adviser of CBRE Pte Ltd. He is also a Director of Bund Center Investments
Ltd, Keppel Land Ltd and Ascendas Hospitality Trust.
MR SOONG HEE SANGDIRECTOR
Mr Soong is currently an Independent Non-Executive Director of Keppel-KBS US REIT
Management Pte Ltd. Prior to this, Mr Soong was with GIC Real Estate for 9 years and his
last appointment was Managing Director, GIC Real Estate, London. Prior to that, he was
with CapitaLand for 9 years where he held appointments as Country Director and Managing
Director, London; Deputy CEO of CapitaLand Commercial, CEO of CapitaLand and CEO
(New Markets) of CapitaLand Residential.
MR NG ENG KIONGDIRECTOR
Mr Ng is the Senior Director of Squire Mech Pte Ltd. He is also the Honorary Advisor of the
Singapore Green Building Council. He has been recognized as a BCA Certified Construction
Productivity Professional (Honorary).
BOARD OF
DIRECTORS
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201712
AUDIT & RISK
COMMITTEEMr Wong Heng Tew (Chairman)
Mr Ng Eng Kiong
Mr Yeo Chun Fing
(with effect from 1 June 2017)
INVESTMENT
COMMITTEEMs May Ng (Chairman)
Mr Lim Kok Guan
Mr Soong Hee Sang
ESTABLISHMENT
COMMITTEEMs May Ng (Chairman)
Mr Willy Shee
Ms Adeline Sum
CUSTOMERS
EXPERIENCE
COMMITTEE (set up on 7 November 2017)
Mr Willy Shee (Chairman)
Mr Lim Kok Guan
Ms Adeline Sum
MR YEO CHUN FINGDIRECTOR
Mr Yeo is the Assistant Secretary for Financial Affairs in the National Trades Union Congress
(NTUC), General Secretary of the Amalgamated Union of Public Employees (AUPE), Chairman
of AUPE Credit Co-operative Limited and Second Deputy Chairman of Singapore National
Co-operative Federation (SNCF). Mr Yeo was conferred the Friends of MCCY Award in 2017
by the Ministry for Culture, Community and Youth (MCCY) in recognition and appreciation
of his contributions to the development of the co-operative movement.
MR TAN KIAN HUAYDIRECTOR
Mr Tan has over 40 years of experience in the building and construction industry, including
serving as the Managing Director of Obayashi Singapore Pte. Ltd. from 1989 to 2004. He is
currently a fellow and was a former 2nd Vice President of the Society of Project Managers.
MR LIM KOK GUANDIRECTOR
Mr Lim is the Managing Director/Head of Integrated Infrastructure and Support of NTUC
Fairprice Co-operative Limited. He is also a Director of NTUC Choice Homes Co-operative
Limited and a number of Mercatus subsidiaries.
MS ADELINE SUMDIRECTOR
Ms Sum is the Deputy CEO of NTUC Enterprise Co-operative Limited and the Managing
Director of NTUC Fairprice Co-operative Limited. She also holds directorships in
ComfortDelgro Corporation Limited and NTUC Health Co-operative Limited.
BOARD OF
DIRECTORS
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 13
MR DAVID POHCHIEF EXECUTIVE OFFICER
Mr Poh was appointed as CEO of Mercatus in 2017. Prior to the appointment, Mr Poh
served on the Mercatus Board and played a key role in the setup of Mercatus in 2011.
Under his leadership, Mercatus acquired 50% ownership in NEX in 2012, consolidated
FP retail properties and OMB in 2016, and made the landmark acquisition of Jurong Point in
2017. Mr Poh also holds the appointment as the Deputy CEO and CFO in Singapore Labour
Foundation.
MS LOKE HUEY TENGCHIEF FINANCIAL OFFICER
Ms Loke has over 18 years of experience in business development, investment, capital
markets, corporate finance and accounting. Before Mercatus, Ms Loke was the CFO of
Mapletree Commercial Trust Management. She had served in different roles within the
Mapletree Group since she joined in May 2004 and was responsible for the public listing of
2 other Mapletree REITs. Prior to Mapletree, Ms Loke was with the PSA Corporation and was
involved in international business development.
MR RAYMOND TANCHIEF OPERATING OFFICER
Prior to joining Mercatus, Mr Tan was Director, Asset Management in ARA Asset Management
Limited, where he was responsible for the retail portfolio of ARA in the region. He was the
Executive Director and Co-founder of Synergistic Real Estate Management & Network Pte Ltd,
a retail development consulting firm for 10 years before he joined ARA.
KEY
MANAGEMENT
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201714
PROPERTY PROFILE
AMK HUB
AMK Hub is a conveniently located shopping mall in the heart
of the Ang Mo Kio housing estate. Located at the intersection
of Ang Mo Kio Avenue 3 and Ang Mo Kio Avenue 8, the mall
enjoys prominent frontage, offering high visibility to passing
traffic and shoppers.
AMK Hub celebrated its 10th Anniversary in 2017 and gave
away exciting gifts to shoppers in return for their support
of the mall. For example, 10 lucky shoppers walked away
with $35,000 worth of gold bars during the Chinese New
Year promotion programme. As part of the 10th anniversary
celebration, AMK Hub also organised a live auction event
where shoppers walked away with prizes such as massage
chairs and television sets.
AMK Hub continues to actively support numerous charity
drives and meaningful events for non-profit, community and
charitable organisations. During the Christmas season, AMK
Hub presented ‘A Jolly Jamboree’ for the second time running
and pledged $2 with every purchase of the carnival passes.
Over $10,000 was raised for the NTUC-U Care Fund. AMK Hub
also provided a platform for events including:
• Thye Hua Kwan Moral Society (THK) – Claw game machines
for shoppers to win stuffed toys. Money raised from the
machines will go towards services such as THK’s free meal
centres and free clinics.
• Singapore Heritage Festival 2017 by National Heritage Board
– ‘Tales from Our Shores’ interactive exhibition.
• Info-communications Media Development Authority of
Singapore (IMDA) – A mobile digital truck awareness to
educate shoppers on the transition to digital TV before
analog TV signals are turned-off at end 2017.
• Ang Mo Kio Police South – ‘Mall Watch’ crime prevention
roadshow.
• SAFRA – ‘We Salute Our NSmen’, interactive digital campaign
for shoppers to post salute images on Facebook & Instagram.
$793.0M APPRAISED VALUE
100%OWNERSHIP
$61.9MFY2017 TOTAL REVENUE
320,000 SFNET LETTABLE AREA
(APPROXIMATE)
99 YEARS
COMMENCING FROM
24 AUGUST 2004
LEASE TENURE
100% OCCUPANCY RATE
520,000 SF GROSS FLOOR AREA
(APPROXIMATE)
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 15
PROPERTY PROFILE
JURONG POINT
Jurong Point is strategically located within one of the largest residential areas in Singapore, serving more than 270,000 households in HDB flats and private properties. It is directly connected to Boon Lay MRT station as well as a bus interchange within the mall.
Jurong Point is well positioned to attract shopper traffic from the nearby Jurong Lakeside District, as well as the student and education population from Nanyang Technological University and other schools in the catchment.
In 2017, several new initiatives were introduced in Jurong Point to enhance shoppers’ experience. The first of its kind in Singapore, Jurong Point unveiled ‘Self-Collect @ JP’, a multi-brand parcel self-collection facility. Shoppers now enjoy the flexibility of collecting their online purchases from more than one (last-mile) delivery service providers at a single location and in close proximity to Boon Lay MRT and Bus Interchange.
In 2017, several new concepts and retailers were introduced in Jurong Point. These include Ilahui, a fast fashion leisure retail chain which offers consumers the concept of Korean inspired living – delivering a wide variety of good quality products for value prices.
Jurong Point revamped its Japanese Street – ‘Shokutsu Ten’, carving out a new alley offering Ginzushi (for sashimi and chirashi don), Tenfuku Tendon Specialty (for Japanese tendon), Idaten Udon (for udon dishes), Ichiban Bento (for bento sets) and Wadori (for yakitori).
Malaysia Boleh, a food outlet selling Malaysia street food, was also rejuvenated, doubling its previous space to 14,000sf. It seats 600 diners, offering everything from Penang-style fried carrot cake to kway teow kia from Johor Bahru.
Jurong Point was re-certified Green Mark Gold in recognition of its efforts in environmental sustainability.
$2,149.5MAPPRAISED VALUE
100%OWNERSHIP
(OF STRATA SPACE
OWNED)
$69.3MTOTAL REVENUE
(FROM DATE OF
ACQUISITION
30 JUNE 2017)
720,000 SFNET LETTABLE AREA
(APPROXIMATE)
99 YEARS FROM
30 NOVEMBER 1993 (JP1)
AND 20 JUNE 2006 (JP2)
LEASE TENURE
99.6%OCCUPANCY RATE
1,100,000 SFGROSS FLOOR AREA
(APPROXIMATE)
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201716
PROPERTY PROFILE
NEX
NEX, one of the largest mall in the north-east region of
Singapore, is situated at the junction of Serangoon Central
and Serangoon Road, and is surrounded by public and private
housing estates. It is approximately 10 km from the city centre
and is connected to the Bus interchange and underground
Serangoon MRT.
NEX continues to bring in large scale and attractive activities
to provide shoppers with interesting experiences. During
the June school holiday, NEX launched the Spider-Man:
Homecoming campaign with an in-mall experience from
1 June 2017 to 9 July 2017. Children dressed up in Spider-Man
costumes and participated in Spider-Man themed games,
such as pitting their web-slinging skills at the game zone.
Adult-sized Spider-Man mascots made special appearances
from 23 June 2017 to 26 June 2017, where families snapped
up limited passes per session to get up close with their
favourite Marvel web-slinging crusader. Families also picked
up memorabilia and merchandises at the retail area.
Currently, NEX boasts renowned international tenants such as
Pedro and Bake Cheese Tart, with new brands Martgo Tokio,
Bike31 and Grand Castella Cake that came on board in 2017.
Like Jurong Point, NEX was re-certified Green Mark Gold in
recognition of its efforts in environmental sustainability.
$893.5M (50%) APPRAISED VALUE
50%OWNERSHIP
$62.2M (50%)FY2017 TOTAL REVENUE
630,000 SFNET LETTABLE AREA
(APPROXIMATE)
99 YEARS
COMMENCING FROM
26 JUNE 2008
LEASE TENURE
99.8%OCCUPANCY RATE
940,000 SF (100%)GROSS FLOOR AREA
(APPROXIMATE)
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 17
PROPERTY PROFILE
THOMSON PLAZA
Thomson Plaza is a strata-titled suburban mall with a rich
community heritage located along Upper Thomson Road. It will
be connected to Upper Thomson MRT station when Thomson-
East Coast Line becomes operational in 2020. Mercatus owns
45% of the total retails space in the mall and actively manages
the tenant mix within its area.
Thomson Plaza had noteworthy additions to its tenant mix
during the year. Tenants such as Wine Connection, W Tea
House, Song Kee Fishball Noodles House, Rickson’s Kitchen and
Li Ho! enhanced the food and beverage selection in the mall.
In January 2018, Thomson Plaza launched ‘Swing By’, a
co-retailing space which allows e-tailers to showcase their
products and interact with shoppers.
On 11 December 2017, Mercatus acquired a strata lot located
at Thomson Plaza, bringing Peach Garden Restaurant and
Home-Fix The D.I.Y store into its portfolio. This is in line
with our strategy to continue investing in, developing and
managing a diversified portfolio of commercial real estate in
Singapore.
100%OWNERSHIP
(OF STRATA SPACE
OWNED)
$207.0MAPPRAISED VALUE
110,000 SFNET LETTABLE AREA
(APPROXIMATE)
$11.7MFY2017 TOTAL REVENUE
99 YEARS COMMENCING FROM
15 OCTOBER 1976
LEASE TENURE
97.8% OCCUPANCY RATE
140,000 SF GROSS FLOOR AREA
(APPROXIMATE)
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201718
PROPERTY PROFILE
RETAIL STRATA ASSETS
The portfolio of strata assets comprise a mixture of strata-titled
units within shopping malls and HDB sites in various locations
across Singapore. There is a total of 37 strata-titled units
with net lettable area ranging from approximately 1,000sf to
38,000sf. These strata spaces are leased mainly to FP for their
retail operations.
The acquisition of strata assets in January 2017 is in tandem
with NE’s aim to create a greater social impact to do good by
providing access to the social enterprises to meet pressing
social needs in areas like cost of living, health and ageing, and
ensuring a good start for every child.
$499.9MAPPRAISED VALUE
100%OWNERSHIP
(OF STRATA SPACE
OWNED)
390,000 SFGROSS FLOOR AREA
(APPROXIMATE)
99.4%OCCUPANCY RATE
CORONATION PLAZA:
FREEHOLD; OTHERS:
30-99 YEARS
LEASE TENURE
$32.0MFY2017 TOTAL REVENUE
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 19
PROPERTY PROFILE
ONE MARINA BOULEVARD
One Marina Boulevard (OMB), a premium Grade A office, is
located at the intersection of Marina Boulevard and Collyer
Quay, and it is within the Central Business District (CBD) of
Singapore.
OMB embarked on asset enhancement initiatives in 2016
which involved the upgrading of the lift lobbies, lift interiors,
renovation of the main lobby, basement area, toilets, and
improvement to the traffic flow at the drop-off area. The
initiatives were completed in late 2017. As part of the asset
enhancement initiative, OMB introduced self-help kiosks for
visitors to register themselves when they visit offices in OMB.
An alfresco dining concept was also introduced at its main
lobby for people to unwind after a hectic day at work.
$650.0MAPPRAISED VALUE
100%OWNERSHIP
$30.8MFY2017 TOTAL REVENUE
430,000 SFNET LETTABLE AREA
(APPROXIMATE)
99 YEARS
COMMENCING
FROM 7 JANUARY 2002
LEASE TENURE
100%OCCUPANCY RATE
520,000 SFGROSS FLOOR AREA
(APPROXIMATE)
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201720
22 Directors’ Statement
24 Independent Auditors’ Report
29 Statement of Financial Position
30 Consolidated Statement of Comprehensive Income
31 Statement of Changes in Equity
33 Consolidated Statement of Cash Flows
34 Notes to the Financial Statements
FINANCIAL STATEMENTS
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 21
DIRECTORS’
STATEMENTYEAR ENDED 31 DECEMBER 2017
The Directors present this annual report to the members together with the audited financial statements of the Co-operative for
the financial year ended 31 December 2017.
(a) the financial statements set out on pages 29 to 72 are drawn up in accordance with the provisions of the Co-operative
Societies Act, Chapter 62 (the “Act”) and Singapore Financial Reporting Standards, so as to give a true and fair view of
the financial position of the Group and of the Co-operative as at 31 December 2017, and of the financial performance,
changes in equity and cash flows of the Group and of the results and changes in equity of the Co-operative for the year
ended 31 December 2017;
(b) at the date of this statement, there are reasonable grounds to believe that the Co-operative will be able to pay its debts
as and when they fall due; and
(c) the receipt, expenditure and investment of monies, acquisition and disposal of assets made by the Co-operative during the
year ended 31 December 2017 have been made in accordance with the By-Laws of the Co-operative and the provisions
of the Act.
The Board of Directors has, on the date of this statement, authorised these financial statements for issue.
(a) Directors
The Directors of the Co-operative in office at the date of this statement are as follows:
May Ng Bee Bee Chairman
Wong Heng Tew Director
Willy Shee Ping Yah Director
Ng Eng Kiong Director
Soong Hee Sang Director
Tan Kian Huay Director
Yeo Chun Fing Director
Lim Kok Guan Director
Adeline Sum Wai Fun Director
(b) Arrangements to enable Directors to acquire shares or debentures
Neither at the end of nor at any time during the financial year was the Co-operative a party to any arrangement whose
object is to enable the Directors of the Co-operative to acquire benefits by means of the acquisition of shares in or
debentures of the Co-operative or any other body corporate.
(c) Directors’ interests in shares or debentures
According to the register of shareholdings kept by the Co-operative, no Director who held office at the end of the financial
year had interests in shares of the Co-operative, or of related corporations, either at the beginning of the financial year
or at the end of the financial year.
(d) Share options
There were no share options granted by the Co-operative during the financial year.
There were no shares issued during the financial year by virtue of the exercise of options to take up unissued shares of
the Co-operative.
There were no unissued shares of the Co-operative under options as at the end of the financial year.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201722
DIRECTORS’
STATEMENTYEAR ENDED 31 DECEMBER 2017
(e) Auditors
The auditors, KPMG LLP, have indicated their willingness to accept re-appointment.
On behalf of the Board of Directors
May Ng Bee Bee
Director
Wong Heng Tew
Director
Singapore
3 April 2018
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 23
INDEPENDENT
AUDITORS’ REPORTMEMBERS OF THE CO-OPERATIVEMERCATUS CO-OPERATIVE LIMITED
Report on the financial statements
Opinion
We have audited the financial statements of Mercatus Co-operative Limited (‘the Co-operative’) and its subsidiaries (‘the Group’),
which comprise the consolidated statement of financial position of the Group and the statement of financial position of the
Co-operative as at 31 December 2017, the consolidated statement of comprehensive income, consolidated statement of changes
in equity and consolidated statement of cash flows of the Group and statement of comprehensive income and statement of
changes in equity of the Co-operative for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies, as set out on pages 29 to 72.
In our opinion, the accompanying consolidated financial statements of the Group and the statement of financial position,
statement of comprehensive income and statement of changes in equity of the Co-operative are properly drawn up in accordance
with the provisions of the Co-operative Societies Act, Chapter 62 (‘the Act’) and Financial Reporting Standards in Singapore
(‘FRSs’) so as to give a true and fair view of the state of affairs of the Group and the Co-operative as at 31 December 2017 and of
the results, changes in equity and cash flows of the Group and of the results and changes in equity of the Co-operative for the
year ended on that date.
Basis for opinion
We conducted our audit in accordance with Singapore Standards on Auditing (‘SSAs’). Our responsibilities under those standards
are further described in the ‘Auditors’ responsibilities for the audit of the financial statements’ section of our report. We are
independent of the Group in accordance with the Accounting and Corporate Regulatory Authority Code of Professional Conduct
and Ethics for Public Accountants and Accounting Entities (‘ACRA Code’) together with the ethical requirements that are relevant
to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201724
INDEPENDENT
AUDITORS’ REPORTMEMBERS OF THE CO-OPERATIVE
MERCATUS CO-OPERATIVE LIMITED
Impairment assessment of investment properties ($3,970 million as at 31 December 2017) (Refer to Note 5 to the financial
statements)
The key audit matter How the matter was addressed in our audit
The Group owns a portfolio of investment properties
comprising retail and office units, constituting 80% of the
total assets as at 31 December 2017. These properties are
carried at cost and are subject to an annual review to assess
whether or not they may be impaired.
The Group engages external valuers to appraise the valuations
of these properties, and uses such valuation reports to
determine whether the properties are at risk of being impaired
i.e. an indication of impairment is noted when the external
valuation of the property is lower than the property’s carrying
amount.
The properties at risk of being impaired are then subject
to a detailed impairment review whereby their recoverable
amounts are estimated.
The Group uses a combination of internal and external
valuations in estimating the recoverable amount of its
properties, which is determined to be the higher of the fair
value less costs to sell and value-in-use of these properties.
The fair values of the properties are determined based on the
independent professional valuations undertaken, whereas
the value-in-use estimate of the properties are derived from
discounted cash flow forecasts prepared by management.
The estimation of the recoverable amount of the properties
involves the determination of valuation methodologies,
and the use of estimates and assumptions. Changes to the
estimates and assumptions may have a significant impact to
the recoverable amounts.
Where independent professional valuers are engaged to
appraise the valuations of the Group’s properties, we have
assessed the appropriateness of the valuation methodologies
and accompanying assumptions used by the valuers, taking
into consideration available industry data and prevailing
market conditions.
For properties with indicators of impairment noted, we
evaluated the methodologies and assumptions applied
in the estimation of the properties’ recoverable amount.
These include comparing the key assumptions supporting
management’s value-in-use calculations, particularly the
forecasted cash flows, discount rates, terminal growth rates,
and average revenue growth to available market data.
Findings:
We found that the methodologies used by the external valuers
were consistent with market practices and the assumptions
applied were comparable to market data. The key assumptions
supporting management’s value-in-use calculations were also
in line with the historical trends achieved on the properties,
the Group’s plans for the properties and available market data.
Other information
Management is responsible for the other information contained in the annual report. Other information is defined as all information
in the annual report other than the financial statements and our auditors’ report thereon.
We have obtained all other information prior to the date of this auditors’ report.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 25
INDEPENDENT
AUDITORS’ REPORTMEMBERS OF THE CO-OPERATIVEMERCATUS CO-OPERATIVE LIMITED
Responsibilities of management and directors for the financial statements
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the
provisions of the Act and FRSs, and for such internal controls as management determines is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management
either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The directors’ responsibilities include overseeing the Group’s financial reporting process.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout
the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal controls.
• Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201726
INDEPENDENT
AUDITORS’ REPORTMEMBERS OF THE CO-OPERATIVE
MERCATUS CO-OPERATIVE LIMITED
Auditors’ responsibilities for the audit of the financial statements (Continued)
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal controls that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence,
and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of
the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’
report unless the law or regulations preclude public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
Opinion
In our opinion:
(a) the accounting and other records of those subsidiary corporations incorporated in Singapore of which we are the auditors
have been properly kept in accordance with the Singapore Companies Act, Chapter 50;
(b) the receipt, expenditure and investment of moneys and the acquisition and disposal of assets by the Co-operative during
the year are, in all material respects, in accordance with the By-laws of the Co-operative and the provisions of the Act;
and
(c) proper accounting and other records have been kept by the Co-operative.
Basis for opinion
We conducted our audit in accordance with SSAs. Our responsibilities under those standards are further described in the ‘Auditors’
responsibilities for the compliance audit’ section of our report. We are independent of the Group in accordance with the ACRA
Code together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we
have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on management’s compliance.
Management’s responsibility for compliance with legal and regulatory requirements
Management is responsible for ensuring that the receipt, expenditure, investment of moneys and the acquisition and disposal
of assets, are in accordance with the By-laws of the Co-operative and the provisions of the Act. This responsibility includes
implementing accounting and internal controls as management determines are necessary to enable compliance with the By-laws
of the Co-operative and the provisions of the Act.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 27
INDEPENDENT
AUDITORS’ REPORTMEMBERS OF THE CO-OPERATIVEMERCATUS CO-OPERATIVE LIMITED
Auditors’ responsibility for the compliance audit
Our responsibility is to express an opinion on management’s compliance based on our audit of the financial statements. We
planned and performed the compliance audit to obtain reasonable assurance about whether the receipt, expenditure, investment
of moneys and the acquisition and disposal of assets, are in accordance with the By-laws of the Co-operative and the provisions
of the Act.
Our compliance audit includes obtaining an understanding of the internal control relevant to the receipt, expenditure, investment
of moneys and the acquisition and disposal of assets; and assessing the risks of material misstatement of the financial statements
from non-compliance, if any, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls.
Because of the inherent limitations in any accounting and internal control system, non-compliances may nevertheless occur and
not be detected.
The engagement partner on the audit resulting in this independent auditors’ report is Yeo Lik Khim.
KPMG LLP
Public Accountants and
Chartered Accountants
Singapore
3 April 2018
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201728
STATEMENT OFFINANCIAL POSITION
AS AT 31 DECEMBER 2017
Note Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Non-current assets
Property, plant and equipment 4 3,543 7,079 419 2,155
Investment properties 5 3,970,316 1,321,498 – 563,951
Investment in subsidiaries 6 – – 692,933 111,643
Investment in an associate 7 2,234 – – –
Investment in a joint venture 8 362,912 376,186 – –
Other investments 9 260,000 – – –
4,599,005 1,704,763 693,352 677,749
Current assets
Other investments 9 195,000 – – –
Trade and other receivables 10 16,925 3,364 3,919,268 1,020,971
Prepayments 285 46 10 32
Cash and cash equivalents 11 156,941 95,799 68,747 61,337
369,151 99,209 3,988,025 1,082,340
Total assets 4,968,156 1,803,972 4,681,377 1,760,089
Non-current liabilities
Rental deposits 31,107 14,174 – 8,471
Loans and borrowings 13 2,333,000 350,000 2,158,000 350,000
Trade and other payables,
including derivatives 14 1,287 639 38 436
2,365,394 364,813 2,158,038 358,907
Current liabilities
Rental deposits 19,573 3,043 – 2,214
Shareholders’ loans 12 – 448,313 – 448,313
Loans and borrowings 13 175,000 113,875 – 113,875
Trade and other payables 14 50,000 43,372 390,993 40,332
244,573 608,603 390,993 604,734
Total liabilities 2,609,967 973,416 2,549,031 963,641
Net assets 2,358,189 830,556 2,132,346 796,448
Equity
Membership shares 15 1,713,857 640,393 1,713,857 640,393
Accumulated profits/(losses) 52,429 4,978 53,388 (21,918)
Other reserves 16 390,218 185,185 365,101 177,973
Equity attributable to members of
the Co-operative 2,156,504 830,556 2,132,346 796,448
Non-controlling interest 201,685 – – –
Total equity 2,358,189 830,556 2,132,346 796,448
The accompanying notes form an integral part of these financial statements.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 29
YEAR ENDED 31 DECEMBER 2017
CONSOLIDATED STATEMENT OFCOMPREHENSIVE INCOME
Note Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Revenue 17 193,473 77,146 222 56,739
Other income 18 12,415 4,909 16,848 4,012
Depreciation expenses (48,282) (16,666) (229) (9,223)
Property tax (16,699) (6,758) (33) (6,064)
Other expenses 19 (46,374) (26,375) (9,813) (19,584)
Finance income 20 420 185 107,784 16,535
Finance costs 20 (32,063) (44,055) (22,665) (44,055)
Share of results of joint venture 8 19,226 19,568 – –
Profit/(loss) before tax
and contributions 82,116 7,954 92,114 (1,640)
Income tax expense 21 (2) (6) – –
Profit/(loss) before contributions 82,114 7,948 92,114 (1,640)
Contributions to:
– Central Co-operative Fund 22 (50) – (25) –
– Singapore Labour Foundation 22 (19,648) – (18,323) –
Profit/(loss) for the year 62,416 7,948 73,766 (1,640)
Profit/(loss) attributable to:
Members of the Co-operative 62,416 7,948 73,766 (1,640)
Non-controlling interests – – – –
62,416 7,948 73,766 (1,640)
Profit/(loss) for the year 62,416 7,948 73,766 (1,640)
Other comprehensive income
Item that is or may be reclassified
subsequently to profit or loss:
Effective portion of changes in
fair value of cashflow hedge (38) – (38) –
Total comprehensive income for
the year 62,378 7,948 73,728 (1,640)
Total comprehensive income
attributable to:
Members of the Co-operative 62,378 7,948 73,728 (1,640)
Non-controlling interests – – – –
Total comprehensive income for
the year 62,378 7,948 73,728 (1,640)
The accompanying notes form an integral part of these financial statements.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201730
STATEMENT OF
CHANGES IN EQUITYYEAR ENDED 31 DECEMBER 2017
No
te
Me
mb
ers
hip
sha
res
Acc
um
ula
ted
pro
fits
/
(lo
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s)
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me
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rese
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rve
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g
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To
tal
$’0
00
$’0
00
$’0
00
$’0
00
$’0
00
$’0
00
$’0
00
Gro
up
At
1 J
anu
ary
20
16
49
,81
35
,78
2–
––
–5
5,5
95
To
tal
com
pre
he
nsi
ve
in
com
e f
or
the
ye
ar
Pro
fit
for
the
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ar–
7,9
48
––
––
7,9
48
Tra
nsa
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ns
wit
h m
em
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gn
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d
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ect
ly i
n e
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ns
to m
em
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ance
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es
15
59
0,5
80
––
––
–5
90
,58
0
Ch
ang
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in s
har
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old
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6–
–1
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,43
3–
––
17
6,4
33
Tra
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16
–(8
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To
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tra
nsa
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ns
wit
h m
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8,7
52
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76
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At
31
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,39
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,97
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,75
2–
–8
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6
At
1 J
anu
ary
20
17
64
0,3
93
4,9
78
17
6,4
33
8,7
52
––
83
0,5
56
To
tal
com
pre
he
nsi
ve
in
com
e f
or
the
ye
ar
Pro
fit
for
the
ye
ar–
62
,41
6–
––
–6
2,4
16
Oth
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com
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ve
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e
Eff
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ive
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rtio
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air
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f
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––
––
(38
)–
(38
)
To
tal
oth
er
com
pre
he
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ve
in
com
e–
––
–(3
8)
–(3
8)
To
tal
com
pre
he
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ve
in
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e f
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the
ye
ar
–6
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(38
)–
62
,37
8
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rs
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15
1,0
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4–
––
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1,0
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4
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in s
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–1
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–2
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)–
14
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ns
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be
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,07
3,4
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1,4
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5
At
31
De
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The
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tes
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an
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l pa
rt o
f th
ese
fin
an
cia
l sta
tem
ents
.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 31
STATEMENT OF
CHANGES IN EQUITYYEAR ENDED 31 DECEMBER 2017
No
te
Me
mb
ers
hip
sha
res
Acc
um
ula
ted
pro
fits
/
(lo
sse
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MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201732
CONSOLIDATED STATEMENT OF
CASH FLOWSYEAR ENDED 31 DECEMBER 2017
Note Group
2017 2016
$’000 $’000
Cash flows from operating activities
Profit before tax and contributions 82,116 7,954
Adjustments for:
Depreciation of property, plant and equipment 4 1,063 674
Depreciation of investment property 5 47,219 15,992
Property, plant and equipment written off – 468
Share of results of joint venture (19,226) (19,568)
Interest income (420) (185)
Interest expense 32,063 44,055
Operating cash flows before changes in working capital 142,815 49,390
Changes in working capital:
Trade and other receivables and prepayments (9,375) (289)
Trade and other payables 9,298 6,059
Cash generated from operating activities 142,738 55,160
Income tax paid (2) (6)
Net cash flows from operating activities 142,736 55,154
Cash flows from investing activities
Purchase of property, plant and equipment (1,290) (4,433)
Proceeds from disposal of property, plant and equipment 3 101
Interest received 420 195
Dividend received 32,500 35,000
Acquisition of subsidiaries, net of cash acquired 6 5,238 6,529
Purchase of investment property (2,254,240) –
Net cash flows (used in)/from investing activities (2,217,369) 37,392
Cash flows from financing activities
Interest paid (22,225) (43,599)
Proceeds from loans and borrowings 2,158,000 –
Net cash flows from/(used in) financing activities 2,135,775 (43,599)
Net increase in cash and cash equivalents 61,142 48,947
Cash and cash equivalents at beginning of the year 95,799 46,852
Cash and cash equivalents as at end of the year 11 156,941 95,799
Significant non-cash transactions:
During the year, the Group acquired several investment properties and subsidiary from the shareholders of the Co-operative
with no cash involved.
The accompanying notes form an integral part of these financial statements.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 33
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
These notes form an integral part of the financial statements.
The financial statements were authorised for issue by the Board of Directors on 3 April 2018.
1 Domicile and activities
Mercatus Co-operative Limited (the “Co-operative”) is incorporated in Singapore and constituted under the Co-operative
Societies Act (Chapter 62). The address of the Co-operative’s registered office is No. 1 Marina Boulevard, #15-04 One
Marina Boulevard, Singapore 018989.
The Co-operative is a subsidiary of NTUC Enterprise Co-operative Limited (“NE”), which is also the holding co-operative.
The principal activity of the Co-operative is that of a property owner. The principal activities of the subsidiaries are set
out in Note 6 to the financial statements.
The financial statements of the Group as at and for the year ended 31 December 2017 comprise the Co-operative and its
subsidiaries (together referred to as the “Group” and individually as “Group entities”) and the Group’s interests in a joint
venture and an associate.
2 Basis of preparation
2.1 Statement of compliance
The financial statements have been prepared in accordance with the provisions of the Co-operative Societies Act,
Chapter 62 (the “Act”) and Singapore Financial Reporting Standards (“FRSs”).
2.2 Basis of measurement
The financial statements have been prepared on the historical cost basis except as otherwise described below.
2.3 Functional and presentation currency
Items included in the financial statements of the Group are measured using the currency that best reflects the
economic substance of the underlying transactions, events and conditions relevant to that entity (the “functional
currency”).
These financial statements are presented in Singapore Dollars, which is the Co-operative’s functional currency. All
financial information presented in Singapore Dollars has been rounded to the nearest thousand, unless otherwise
stated.
2.4 Significant accounting estimates and judgements
The preparation of the financial statements in conformity with FRSs requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in any future periods affected.
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material
adjustment within the next financial year is described in Note 5 – Impairment assessment of investment properties.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201734
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
3 Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these financial statements
and have been applied consistently by the Group entities.
3.1 Basis of consolidation
(i) Business combinations
Business combinations are accounted for using the acquisition method in accordance with FRS 103 Business
Combination as at the acquisition date, which is the date on which control is transferred to the Group.
The Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
• if the business combination is achieved in stages, the fair value of the pre-existing equity interest
in the acquiree,
over the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities
assumed. Any goodwill that arises is tested annually for impairment.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing
relationships. Such amounts are generally recognised in profit or loss.
Any contingent consideration payable is recognised at fair value at the acquisition date and included in the
consideration transferred. If the contingent consideration that meets the definition of a financial instrument
is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, other
contingent consideration is remeasured at fair value at each reporting date and subsequent changes to
the fair value of the contingent consideration are recognised in profit or loss.
Non-controlling interests (“NCI”) that are present ownership interests and entitle their holders to a
proportionate share of the acquiree’s net assets in the event of liquidation are measured either at fair
value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s
identifiable net assets, at the acquisition date. The measurement basis taken is elected on a transaction-
by-transaction basis. All other non-controlling interests are measured at acquisition-date fair value, unless
another measurement basis is required by FRSs.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that
the Group incurs in connection with a business combination are expensed as incurred.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as
transactions with owners in their capacity as owners and therefore no adjustments are made to goodwill
and no gain or loss is recognised in profit or loss. Adjustments to NCI arising from transactions that do
not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 35
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
3 Significant accounting policies (Continued)
3.1 Basis of consolidation (Continued)
(i) Business combinations (Continued)
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases.
The accounting policies of subsidiaries have been changed where necessary to align them with the policies
adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to
the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.
(ii) Investments in associate and joint venture
Associate is an entity in which of the Group has significant influence, but not control or joint control, over
the financial and operating policies of the entity. Significant influence is presumed to exist when Group
holds between 20% and 50% of the voting power of another entity. A joint venture is an arrangement in
which the Group has joint control, whereby the Group has rights to the net assets of the arrangement,
rather than rights to its assets and obligations for its liabilities.
Investment in an associate and a joint venture (also referred to as “equity accounted investee”) are
accounted for using the equity method and are recognised initially at cost, which includes transaction
costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of
the profit or loss and other comprehensive income of the equity-accounted investees, after adjustments
to align the accounting policies with those of the Group, from the date that significant influence or joint
control commences until the date that significant influence or joint control ceases.
When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount
of the interest, including any long-term investments, is reduced to zero, and the recognition of further
losses is discontinued except to the extent that the Group has an obligation or has made payments on
behalf of the investee.
(iii) Loss of control
Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any
non-controlling interests and the other components of equity related to the subsidiary. Any surplus or
deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the
previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently,
it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending
on the level of influence retained.
(iv) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising
from transactions with equity-accounted investees are eliminated against the investment to the extent of
the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains,
but only to the extent that there is no evidence of impairment.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201736
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
3 Significant accounting policies (Continued)
3.1 Basis of consolidation (Continued)
(v) Accounting for subsidiaries, associate and joint venture by the Co-operative
Investments in subsidiaries, associate and joint venture are stated in the Co-operative’s statement of
financial position at cost less any accumulated impairment losses.
3.2 Property, plant and equipment
(i) Recognition and measurement
Construction work-in-progress are stated at cost less any accumulated impairment losses. Other items
of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset and includes the cost of
dismantling and removing the items and restoring the site on which they are located. Purchased software
that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted
for as separate items (major components) of property, plant and equipment.
(ii) Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual
assets are assessed and if a component has a useful life that is different from the remainder of that asset,
that component is depreciated separately.
Depreciation is recognised as an expense in profit or loss on a straight-line basis over the estimated useful
lives of each component of an item of property, plant and equipment, unless it is included in the carrying
amount of another asset.
No depreciation is charged for construction work-in-progress. Depreciation on other property, plant and
equipment is recognised from the date that the property, plant and equipment are installed and are ready
for use, or in respect of internally constructed assets from the date that the asset is completed and ready
for use.
The estimated useful lives for the current and comparative years are as follows:
Furniture, fittings and equipment 3 to 8 years
Building improvement 3 to 10 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted
if appropriate.
(iii) Subsequent costs
The cost of replacing a component of an item of property, plant and equipment is recognised in the
carrying amount of the item if it is probable that the future economic benefits embodied within the
component will flow to the Group, and its cost can be measured reliably. The costs of the day-to-day
servicing of property, plant and equipment are recognised in profit or loss as incurred.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 37
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
3 Significant accounting policies (Continued)
3.2 Property, plant and equipment (Continued)
(iv) Disposals
The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment, and is recognised net
within other income or other expenses in profit or loss on the date of disposal.
3.3 Investment properties
Investment properties are held either to earn rental income or capital appreciation or both, but not for sale in the
ordinary course of business, use in the production or supply of goods or services, or for administrative purposes.
Investment properties are stated at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the investment properties. The cost
of self-constructed investment properties includes the cost of materials and direct labour, and any other costs
directly attributable to bringing the investment properties to a working condition for their intended use and
capitalised borrowing costs.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives at each
component of investment properties.
The estimated useful lives for the current and comparative years are as follows:
Leasehold land over remaining period of the lease of 99 years
Leasehold buildings and premises 50 years
Freehold buildings and premises 50 years
Investment properties are subject to renovations or improvements at regular intervals. The cost of major
renovations and improvements is capitalised and the carrying amounts of the replaced components are recognised
in profit or loss. The cost of maintenance, repairs and minor improvements is recognised in profit or loss as incurred.
On disposal of an investment property, the difference between the disposal proceeds and the carrying amount
is recognised in profit or loss.
3.4 Financial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated. All other
financial assets are recognised initially on the trade date at which the Group becomes a party to the contractual
provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially
all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial
assets that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when,
and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to
realise the asset and settle the liability simultaneously.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201738
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
3 Significant accounting policies (Continued)
3.4 Financial assets (Continued)
The Group classifies non-derivative financial assets into the following categories: held-to-maturity financial assets
and loans and receivables.
Held-to-maturity financial assets
If the Group has the positive intent and ability to hold debt securities to maturity, then such financial assets are
classified as held-to-maturity. Held-to-maturity financial assets are initially measured at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets are measured at
amortised cost using the effective interest method, less any impairment losses.
Held-to-maturity financial assets comprise debt securities.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent
to initial recognition, loans and receivables are measured at amortised cost using the effective interest method,
less any impairment losses.
Loans and receivables comprise trade and other receivables and cash and cash equivalents.
Cash and cash equivalents comprise cash on hand, bank balances and fixed deposits that are readily convertible
to a known amount of cash and are subject to an in significant risk of changes in their fair value.
3.5 Impairment of financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine
whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence
indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event has a
negative effect on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency
by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or
issuers in the group, economic conditions that correlate with defaults or the disappearance of an active market
for a security.
Loans and receivables and held-to-maturity investment securities
The Group considers evidence of impairment for loans and receivables and held-to-maturity investment securities
at both a specific asset and collective level. All individually significant loans and receivables and held-to-maturity
financial assets are assessed for specific impairment. All individually significant receivables and held-to-maturity
financial assets found not to be specifically impaired are then collectively assessed for any impairment that has
been incurred but not yet identified. Loans and receivables and held-to-maturity financial assets that are not
individually significant are collectively assessed for impairment by grouping together loans and receivables and
held-to-maturity financial assets with similar risk characteristics.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 39
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
3 Significant accounting policies (Continued)
3.5 Impairment of financial assets (Continued)
Loans and receivables and held-to-maturity investment securities (Continued)
In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of
recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic
and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical
trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows, discounted at the asset’s
original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against
loans and receivables or held-to-maturity financial assets. Interest on the impaired asset continues to be recognised.
When the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are
written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised, then the previously recognised impairment loss is
reversed through profit or loss.
3.6 Impairment of non-financial assets
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount
is estimated. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating
unit (“CGU”) exceeds its estimated recoverable amount.
Calculation of recoverable amount
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset
or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together
into the smallest group of assets that generates cash inflows from continuing use that are largely independent of
the cash inflows of other assets or CGUs.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated
to reduce the carrying amounts of the assets in the CGU (group of CGUs) on a pro rata basis.
Reversals of impairment
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the
loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates
used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201740
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
3 Significant accounting policies (Continued)
3.7 Financial liabilities
Financial liabilities are recognised initially on the trade date, which is the date that the Group becomes a party to
the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when,
and only when, the Group currently has a legally enforceable right to offset the amounts and intends either to
settle them on a net basis or to realise the asset and settle the liability simultaneously.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial
liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortised cost using the effective interest method.
Other financial liabilities comprise shareholders’ loans, loans and borrowings, and trade and other payables.
3.8 Derivative financial instruments, including hedge accounting
The Group holds derivative financial instruments to hedge its interest rate risk exposures. Embedded derivatives
are separated from the host contract and accounted for separately if the economic characteristics and risks of the
host contract and the embedded derivative are not closely related, a separate instrument with the same terms as
the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured
at fair value through profit or loss.
On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship
between the hedging instrument and the hedged item, including the risk management objectives and strategy
in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess
the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the
hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be ‘highly
effective’ in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to
the hedged risk, and whether the actual results of each hedge are within a range of 80% – 125%. For a cash flow
hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure
to variations in cash flows that could ultimately affect reported profit or loss.
Derivatives are initially measured at fair value; any attributable transaction costs are recognised in profit or loss
as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are
accounted for as described below.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable
to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that
could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other
comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the
fair value of the derivative is recognised immediately in profit or loss.
When the hedged item is a non-financial asset, the amount accumulated in equity is retained in other
comprehensive income and reclassified to profit or loss in the same period or periods during which the
non-financial item affects profit or loss. In other cases as well, the amount accumulated in equity is reclassified to
profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no longer
meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked,
then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur,
then the balance in equity is reclassified to profit or loss.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 41
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
3 Significant accounting policies (Continued)
3.9 Employee benefits
(i) Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.
Obligations for contributions to defined contribution pension plans are recognised as an employee benefit
expense in profit or loss in the periods during which services are rendered by employees.
(ii) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as
the related service is provided.
3.10 Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle
the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting year, taking into account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a
third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and
the amount of the receivable can be measured reliably.
3.11 Membership shares
Membership shares are classified as equity. Incremental costs directly attributable to the issue of membership
shares are recognised as a deduction from equity.
3.12 Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and
the revenue can be reliably measured, regardless of when the payment is made. Revenue is measured at the fair
value of consideration received or receivable, taking into account contractually defined terms of payment and
excluding taxes or duty.
(i) Rental income
Rental income arising from operating leases on investment properties is accounted for on a straight-line
basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a
reduction of rental income over the lease term on a straight-line basis.
(ii) Car park income
Car park income is recognised in profit or loss on an accrual basis.
(iii) Other income
Other income consists of recovery from tenants and management fee income recognised in profit or loss
on an accrual basis.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201742
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
3 Significant accounting policies (Continued)
3.13 Lease payments
When the entities within the Group are lessors of an operating lease
Assets subject to operating leases are included in investment properties and are stated at cost less accumulated
depreciation and accumulated impairment losses. Rental income (net of any incentives given to lessees) is
recognised on a straight-line basis over the lease term.
When the entities within the Group are lessees of an operating lease
Where the Group has the use of assets under operating leases, payments made under the leases are recognised in
profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit
or loss as an integral part of the total lease.
3.14 Finance income and finance costs
Finance income comprises interest income and dividend income. Interest income is recognised as it accrues in
profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that
the Group’s right to receive payment is established.
Finance costs comprise interest expense on borrowings. Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective
interest method.
3.15 Tax
Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss
except to the extent that it relates to a business combination, or items recognised directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the financial year, using
tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of
previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected
to be paid or received that reflects uncertainty related to income taxes, if any.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss; and
• temporary differences related to investments in subsidiaries and joint ventures to the extent that the Group
is able to control the timing of the reversal of the temporary difference and it is probable that they will
not reverse in the foreseeable future.
The measurement of deferred taxes reflects the tax consequences that would follow the manner in which the
Group expects, at the end of the reporting year, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 43
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
3 Significant accounting policies (Continued)
3.15 Tax (Continued)
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities
will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred
tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that
the related tax benefit will be realised.
In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain
tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax
liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations
of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series
of judgements about future events. New information may become available that causes the Group to change its
judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense
in the year that such a determination is made.
4 Property, plant and equipment
Furniture,
fittings and
equipment
Building
improvement
Construction
in progress Total
$’000 $’000 $’000 $’000
Group
Cost
At 1 January 2016 2,494 1,795 577 4,866
Additions 642 805 4,648 6,095
Disposals/written-off (185) – (468) (653)
At 31 December 2016 2,951 2,600 4,757 10,308
Additions 1,487 176 184 1,847
Disposals/written-off (5) – – (5)
Reclassification to investment properties
(see note 5) – – (4,317) (4,317)
Transfer 440 – (440) –
At 31 December 2017 4,873 2,776 184 7,833
Accumulated depreciation
At 1 January 2016 2,024 615 – 2,639
Depreciation for the year 328 346 – 674
Disposals/written-off (84) – – (84)
At 31 December 2016 2,268 961 – 3,229
Depreciation for the year 617 446 – 1,063
Disposals/written-off (2) – – (2)
At 31 December 2017 2,883 1,407 – 4,290
Carrying amounts
At 1 January 2016 470 1,180 577 2,227
At 31 December 2016 683 1,639 4,757 7,079
At 31 December 2017 1,990 1,369 184 3,543
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201744
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
4 Property, plant and equipment (Continued)
Furniture, fittings and equipment
Building improvement
Construction in progress Total
$’000 $’000 $’000 $’000
Co-operativeCostAt 1 January 2016 2,494 1,795 577 4,866Additions 371 307 331 1,009Disposals (185) – (468) (653)
At 31 December 2016 2,680 2,102 440 5,222Additions 60 – – 60Transfer 440 – (440) –Disposals (2,446) (2,102) – (4,548)
At 31 December 2017 734 – – 734
Accumulated depreciationAt 1 January 2016 2,024 615 – 2,639Depreciation for the year 301 211 – 512Disposals (84) – – (84)
At 31 December 2016 2,241 826 – 3,067Depreciation for the year 229 – – 229Disposals (2,155) (826) – (2,981)
At 31 December 2017 315 – – 315
Carrying amountsAt 1 January 2016 470 1,180 577 2,227
At 31 December 2016 439 1,276 440 2,155
At 31 December 2017 419 – – 419
5 Investment properties
Leaseholdland
Leasehold buildings and
premises
Freehold buildings
and premises Total$’000 $’000 $’000 $’000
GroupCostAt 1 January 2016 424,000 184,594 – 608,594Addition 298,184 466,644 – 764,828
At 31 December 2016 722,184 651,238 – 1,373,422Addition 1,952,448 719,972 19,300 2,691,720Reclassification from property,
plant and equipment (see note 4) – 4,317 – 4,317
At 31 December 2017 2,674,632 1,375,527 19,300 4,069,459
Accumulated depreciationAt 1 January 2016 19,058 16,874 – 35,932Depreciation for the year 6,383 9,609 – 15,992
At 31 December 2016 25,441 26,483 – 51,924Depreciation for the year 20,141 26,692 386 47,219
At 31 December 2017 45,582 53,175 386 99,143
Carrying amountsAt 1 January 2016 404,942 167,720 – 572,662
At 31 December 2016 696,743 624,755 – 1,321,498
At 31 December 2017 2,629,050 1,322,352 18,914 3,970,316
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 45
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
5 Investment properties (Continued)
Leaseholdland
Leasehold buildings and
premises
Freehold buildings
and premises Total
$’000 $’000 $’000 $’000
Co-operative
Cost
At 1 January 2016 and 31 December 2016 424,000 184,594 – 608,594
Disposals (424,000) (184,594) – (608,594)
At 31 December 2017 – – – –
Accumulated depreciation
At 1 January 2016 19,058 16,874 – 35,932
Depreciation for the year 4,620 4,091 – 8,711
At 31 December 2016 23,678 20,965 – 44,643
Disposals (23,678) (20,965) – (44,643)
At 31 December 2017 – – – –
Carrying amounts
At 1 January 2016 404,942 167,720 – 572,662
At 31 December 2016 400,322 163,629 – 563,951
At 31 December 2017 – – – –
Investment properties comprise a number of commercial properties that are leased to related parties and external
customers (collectively, the “lease”). Each of the leases contains an initial non-cancellable period of between 1 to 5 years.
Subsequent renewals are negotiated with the lessee. During the year, contingent rent of $4.4 million (2016: $2.1 million)
was charged and recognised as rental income in profit or loss.
Additions to investment properties for the Group during the financial year related to acquisition of certain investment
properties from external parties as well as from a shareholder of the Co-operative.
The following amounts relating to the investment properties are recognised in the statement of comprehensive income:
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Rental income 184,893 71,751 222 51,960
Operating expenses 54,777 22,824 – 16,036
Security
At 31 December 2017, investment properties of the Group with a carrying amount of $555 million (2016: $564 million)
are pledged as security to secure bank loans (see note 13).
Determination of fair value
The Group adopts the cost model to measure the investment properties, and discloses their fair values. External and
independent valuation companies, having appropriate recognised professional qualifications and recent experience in
the locations and category of properties being valued, value the Group’s investment properties.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201746
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
5 Investment properties (Continued)
Determination of fair value (Continued)
The fair values of investment properties for the Group and Co-operative as at 31 December 2017 are $4,299 million and
$Nil (2016: $1,566 million and $766 million) respectively. The valuations are carried out by Jones Lang LaSalle Property
Consultants Pte Ltd and Savills Valuation and Professional Services (S) Pte Ltd (2016: Colliers International Consultancy
& Valuation (Singapore) Pte Ltd, Knight Frank Pte Ltd and DTZ Debenham Tie Leung (SEA) Pte Ltd), which are firms of
independent professional valuers.
The fair values are based on open market values, being the estimated amount for which a property could be exchanged on
the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing
wherein the parties had each acted knowledgeably, prudently and without compulsion.
In determining the fair value, the valuers have used valuation techniques which involve certain estimates. The key
assumptions used to determine the fair value of investment properties include market corroborated capitalisation yield,
terminal yield, discount rate and average growth rate.
The valuers have considered valuation techniques including the direct comparison method, the capitalisation approach,
and the discounted cash flow approach in arriving at the open market value as at the reporting date. The direct comparison
method involves the analysis of comparable sales of similar properties and adjusting the sales prices to that reflective of
the investment properties. The capitalisation approach capitalises an income stream into a present value using revenue
multipliers or single-year capitalisation rates. The discounted cash flow approach involves the estimation and the projection
of an income stream over a period and discounting the income stream with an approximate rate of return.
Fair value hierarchy (refer to Note 24 for the Group’s framework on fair value measurement)
Investment properties carried at cost but for which fair values are disclosed:
Level 1 Level 2 Level 3 Total
$’000 $’000 $’000 $’000
Group
31 December 2017
Investment properties – – 3,970,316 3,970,316
31 December 2016
Investment properties – – 1,321,498 1,321,498
Co-operative
31 December 2017
Investment properties – – – –
31 December 2016
Investment properties – – 563,951 563,951
During the financial year, there is no transfer of financial assets between Level 1 and 2 and in and out of Level 3 of the
fair value hierarchy.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 47
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
5 Investment properties (Continued)
Level 3 fair values
The following table shows the valuation techniques used in measuring Level 3 fair values.
Group and Co-operative
2017 and 2016 Valuation technique
Investment properties Direct comparison approach
Discounted cash flows
Income capitalisation approach
Impairment assessment
Management performed an annual review of the carrying amounts of investment properties for indicators of impairment.
In 2017, an indicator of impairment was noted for one (2016: nil) of the Group’s investment properties. The recoverable
amount of the investment property (determined to be the higher of fair value less costs to sell and value-in-use) was
estimated using the value-in-use approach and was derived from discounted cash flow forecasts prepared by management.
The recoverable amount of the investment property was determined to be higher than its carrying amount and no
impairment of the property was required.
6 Investment in subsidiaries
Co-operative
2017 2016
$’000 $’000
Unquoted equities, at cost
Beginning of financial year 111,643 1,000
Additions 581,290 110,643
End of the financial year 692,933 111,643
During the financial year ended 31 December 2017:
(a) The Co-operative incorporated a subsidiary, Mercatus Zeta Co-operative Limited for a consideration of $10,000.
(b) The Co-operative incorporated a subsidiary, Mercatus Epsilon Co-operative Limited (“Mercatus Epsilon”), for a
consideration of $10,000. Subsequently, the Group through its subsidiary, Mercatus Epsilon, entered into sale and
purchase agreements with external parties to acquire certain investment properties for an aggregate consideration
of $2,199 million. Contemporaneously, the Co-operative acquired additional shares in Mercatus Epsilon at an
aggregate consideration of $216 million and granted $1,960 million of shareholder loan to Mercatus Epsilon.
(c) The Co-operative entered into a sale and purchase agreement with its subsidiary, Mercatus Alpha Co-operative
Limited (“Mercatus Alpha”), to sell its investment property for a consideration of $565 million. The consideration
was satisfied by way of the Co-operative acquiring additional shares in Mercatus Alpha of $57 million, and granting
a shareholder loan of $508 million to Mercatus Alpha.
(d) The Group, through its subsidiary, Mercatus Beta Co-operative Limited (“Mercatus Beta”), acquired an investment
property from a third party for a consideration of $28 million. Contemporaneously, the Co-operative acquired
additional shares in Mercatus Beta for $3 million and granted $25 million of shareholder loan to Mercatus Beta.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201748
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
6 Investment in subsidiaries (Continued)
(e) The Group, through its subsidiary, Mercatus Gamma Co-operative Limited (“Mercatus Gamma”), acquired
certain investment properties from its shareholder for a consideration of $439 million. Contemporaneously,
the Co-operative acquired additional shares in Mercatus Gamma for $44 million and granted $395 million of
shareholder loan to Mercatus Gamma.
(f) The Co-operative acquired a subsidiary, NTUC Choice Homes Co-operative Limited (“NCH”) from NE at a
consideration of $262 million. The consideration was satisfied by issuance of 174 million shares to NE. The following
table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.
$’000
Investment in an associate 2,234
Other investments 455,000
Trade and other receivables 4,425
Cash and bank balances 5,238
Trade and other payables (1,868)
465,029
For the financial year ended 31 December 2017, NCH’s contribution of revenue and profit was immaterial to the
Group.
In 2016, the Co-operative acquired a subsidiary, Mercatus Delta Co-operative Limited (“Mercatus Delta”) from
its holding co-operative, NE, at a consideration of $554 million. At the date of acquisition, 1 July 2016, Mercatus
Delta carried an investment property at fair value of $551 million. The following table summarises the recognised
amounts of assets acquired and liabilities assumed at the date of acquisition.
$’000
Cash and bank balances 6,529
Trade receivables and prepayments 1,124
Investment property 497,920
Trade payables and rental deposits (7,111)
Shareholder’s loan (464,310)
34,152
For the six months ended 31 December 2016, Mercatus Delta contributed revenue and profit of $13 million and
$4 million to the Group’s results respectively. If the acquisition, including novation of shareholders’ loan, had
occurred on 1 January 2016, management estimated that consolidated revenue and consolidated profit for the
year ended 31 December 2016 would have been $90 million and $11 million respectively.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 49
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
6 Investment in subsidiaries (Continued)
Details of the Co-operative’s subsidiaries are as follow:
Name
Place of
incorporation
and business Principal activities
Effective equity
interest
2017 2016
% %
Subsidiaries of the Co-operative
Mercatus Holdings Pte. Ltd.
(f.k.a. Mercatus Retail Holdings Pte. Ltd.)(1)
Singapore Investment holding 100 100
Mercatus Alpha Co-operative Limited(1) Singapore Property owner 100 50
Mercatus Beta Co-operative Limited(1) Singapore Property owner 100 100
Mercatus Delta Co-operative Limited
(f.k.a. Proventus Co-operative Limited)(1)
Singapore Property owner 100 100
Mercatus Gamma Co-operative Limited(1) Singapore Property owner 100 100
Mercatus Epsilon Co-operative Limited(1) Singapore Property owner 100 –
Mercatus Zeta Co-operative Limited(2) Singapore Dormant 50 –
NTUC Choice Homes Co-operative Limited(1) Singapore Property development
and investment
holding
56.9 –
Subsidiary of Mercatus Beta Co-operative Limited
Thomson Plaza Pte. Ltd.(2) Singapore Dormant 100 –
Subsidiaries of Mercatus Holdings Pte. Ltd.
ASPF II (Mauritius) Limited(3) Mauritius Dormant 100 100
Mercatus Uno Pte. Ltd.
(f.k.a. Mercatus Retail Investments Pte. Ltd.)(2)
Singapore Dormant 100 100
Mercatus Dos Pte. Ltd.
(f.k.a. Mercatus Retail Development Pte. Ltd.)(2)
Singapore Dormant 100 100
Subsidiary of Mercatus Epsilon Co-operative Limited
SMCP Pte. Ltd.(1) Singapore Carpark management
and operation
services
100 –
Subsidiary of NTUC Choice Homes Co-operative Limited
ChoiceHomes Investments Pte. Ltd.(1) Singapore Investment holding
and management
and maintenance of
properties
100 –
Subsidiaries of ChoiceHomes Investments Pte. Ltd.
Punggol Field EC Pte. Ltd.(1) Singapore Property development 60 –
Pasir Ris EC Pte. Ltd.(1) Singapore Property development 60 –
(1) Audited by KPMG LLP, Singapore
(2) Not required to be audited under the laws of country of incorporation
(3) Audited by Deloitte & Touche LLP, Mauritius
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201750
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
6 Investment in subsidiaries (Continued)
Non-controlling interests
The following subsidiaries have non-controlling interests (NCI) that are material to the Group.
Name
Country of
incorporation
Ownership interests
held by NCI
2017 2016
% %
NTUC Choice Homes Co-operative Limited Singapore 43.1 –
Punggol Field EC Pte. Ltd. Singapore 40 –
Pasir Ris EC Pte. Ltd. Singapore 40 –
The following summarised financial information for the above subsidiaries are prepared in accordance with FRS and the
Group’s accounting policies.
NTUC Choice
Homes
Co-operative
Limited
Punggol Field
EC Pte. Ltd.
Pasir Ris EC
Pte. Ltd. Total
$’000 $’000 $’000 $’000
Non-current assets 262,234 – – 262,234
Current assets 204,663 739 1,110 206,512
Current liabilities (4,025) (414) (202) (4,641)
Net assets 462,872 325 908 464,105
Net assets attributable to NCI 199,498 130 363 199,991
Dividend reserves attributable to NCI 1,694 – – 1,694
Total attributable to NCI 201,192 130 363 201,685
7 Investment in an associate
Group
2017 2016
$’000 $’000
Unquoted equity shares, at cost 2,234 –
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 51
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
7 Investment in an associate (Continued)
Associate of NTUC Choice Homes Co-operative Limited (NCH)(1)
Name
Place of
incorporation
and business Principal activities
Effective equity
interest
2017 2016
% %
One Marina Property Services Pte Ltd(2) Singapore Provision of facility
management,
project management,
leasing services and
accounting services
20 –
Subsidiary of One Marina Property Services Pte Ltd
One Marina Integrated Solutions Pte Ltd(2)(3) Singapore Business and
management
consultancy services
100 –
(1) Refer to Note 6 for details on acquisition of subsidiary, NCH, on 31 December 2017
(2) Audited by KPMG LLP, Singapore
(3) The Company is currently in the process of liquidation
The associate is immaterial to the Group and is equity accounted for. The summarised financial information of the associate,
not adjusted for the percentage of ownership held by the Group, is as follows:
2017
$’000
Combined Assets and Liabilities
Total assets 15,700
Total liabilities 4,528
Combined Results
Revenue 18,455
Expenses (17,297)
Profit for the year 1,158
8 Investment in a joint venture
Group
2017 2016
$’000 $’000
Investment, at cost 457,492 457,492
Share of post-acquisition results 97,920 78,694
Dividend received (132,500) (100,000)
Capital reduction (60,000) (60,000)
362,912 376,186
The Group has 50% (2016: 50%) interest in the ownership and voting rights in a joint venture, Gold Ridge Pte Ltd, that
is held through a subsidiary. This joint venture is incorporated in Singapore and is a strategic venture in retail property
investment. The Group jointly controls the venture with partners under a contractual agreement which requires unanimous
consent for all major decisions over the relevant activities.
The Group’s commitments in respect of its interest in Gold Ridge Pte Ltd are disclosed in note 23.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201752
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
8 Investment in a joint venture (Continued)
The following summarises the financial information of Gold Ridge Pte Ltd based on its financial statements prepared in
accordance with FRS, and the Group’s accounting policies.
Gold Ridge Pte Ltd
2017 2016
$’000 $’000
Revenue 124,419 121,321
Profit from continuing operations/Other comprehensive income for the year 38,452 39,136
Total comprehensive income for the year 38,452 39,136
Profit from continuing operation include:
– Interest income 193 175
– Depreciation and amortisation (21,484) (21,484)
– Interest expense (19,876) (14,590)
– Income tax expense (12,793) (12,955)
Non-current assets 1,534,269 1,551,277
Current assets 53,947 57,736
Non-current liabilities (839,324) (834,484)
Current liabilities (23,068) (22,158)
Net assets 725,824 752,371
Net assets include:
– Cash and cash equivalents 51,355 55,915
– Non-current financial liabilities (excluding deferred tax liabilities) (829,432) (823,475)
Group’s interest in net assets of joint venture at beginning of the year 376,186 391,618
Dividends received during the year (32,500) (35,000)
Share of total comprehensive income 19,226 19,568
Carrying amount of interest in joint venture at end of the year 362,912 376,186
9 Other investments
Group
2017 2016
$’000 $’000
Non-current
Held-to-maturity investments 260,000 –
Current
Held-to-maturity investments 195,000 –
455,000 –
Included in the held-to-maturity investments are unquoted bonds issued by the holding co-operative, NE. The terms and
conditions of the outstanding held-to-maturity investments are as follows:
Nominal interest rate (%)
Interest
payments
Year of
maturity
Group
2017 2016
$’000 $’000
(i) 1.73% Annually 2019 260,000 –
(ii) 1.91% Annually 2018 100,000 –
(iii) 1.77% Annually 2018 75,000 –
(iv) 2.13% Annually 2018 20,000 –
455,000 –
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 53
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
10 Trade and other receivables
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Trade receivables 1,619 2,241 – 337
Other receivables 15,306 1,123 6,790 796
Loans to subsidiaries – – 3,870,479 1,006,411
Amounts due from subsidiaries – – 41,999 13,427
Total trade and other receivables 16,925 3,364 3,919,268 1,020,971
Loans to subsidiaries are unsecured, repayable on demand and comprise the following:
(a) $325 million; with the weighted average interest of 2.66% (2016: 2.66%) per annum during the year; and
(b) $3,545 million; with the interest calculated based on (i) 6.5% of the shareholders’ loan amount or (ii) 95% of the
net distributable surplus of each financial year, whichever amount is lower.
The trade receivables consist of mainly rental receivables from tenants of the investment properties. These receivables
are non-interest bearing and are generally due upon billing. They are recognised at their original invoice amounts which
represent their fair values on initial recognition.
Amounts due from subsidiaries are non-trade related, unsecured, non-interest bearing and repayable on demand.
11 Cash and cash equivalents
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Cash on hand 2 2 2 2
Cash at bank 104,931 70,471 36,737 36,009
Fixed deposits 52,008 25,326 32,008 25,326
Cash and cash equivalents 156,941 95,799 68,747 61,337
Cash at banks earns interest at floating rates based on daily bank deposit rates. Fixed deposits of the Group placed with
financial institutions have a maturity period of 31 to 90 days (2016: 31 days) from the reporting date and interest rate at
0.6% to 1.0% (2016: 0.15%) per annum.
12 Shareholders’ loans
Group and Co-operative
2017 2016
$’000 $’000
Current
Shareholders’ loans from:
– NTUC Enterprise Co-operative Limited (“NE”) – 283,613
– NTUC Fairprice Co-operative Limited – 164,700
– 448,313
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201754
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
12 Shareholders’ loans (Continued)
The shareholders’ loans were unsecured and repayable on demand. The interest was calculated based on (i) 6.5% of the
shareholders’ loan amount or (ii) 95% of the net distributable surplus of each financial year, whichever amount is lower.
The shareholders’ loans were converted to membership shares of the Co-operative on 1 January 2017.
13 Loans and borrowings
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Non-current
Secured bank loans 175,000 350,000 – 350,000
Unsecured bank loans 1,958,000 – 1,958,000 –
Unsecured fixed rate notes 200,000 – 200,000 –
2,333,000 350,000 2,158,000 350,000
Current
Secured loans 175,000 113,875 – 113,875
Terms and conditions of outstanding loans and borrowings are as follows:
2017 2016
Nominal
interest rate
Year of
maturity
Face
value
Carrying
amount
Face
value
Carrying
amount
% $’000 $’000 $’000 $’000
Group
Unsecured bank loans SOR(1)+Margin 2019-2022 1,378,000 1,378,000 – –
Unsecured bank loans COF(2)+Margin 2019 130,000 130,000 – –
Unsecured bank loans 2.38% – 2.64% 2021-2022 450,000 450,000 – –
Secured loans 2.18% – 5% 2017-2019 350,000 350,000 463,875 463,875
Unsecured fixed rate notes 2.80% 2024 200,000 200,000 – –
2,508,000 2,508,000 463,875 463,875
Co-operative
Unsecured bank loans SOR(1)+Margin 2019-2022 1,378,000 1,378,000 – –
Unsecured bank loans COF(2)+Margin 2019 130,000 130,000 – –
Unsecured bank loans 2.38% – 2.64% 2021-2022 450,000 450,000 – –
Secured loans 2.18% – 5% 2017-2019 – – 463,875 463,875
Unsecured fixed rate notes 2.80% 2024 200,000 200,000 – –
2,158,000 2,158,000 463,875 463,875
(1) Swap Offer Rate
(2) Bank’s cost of funds
Security
The secured bank loans are secured over investment properties with carrying amounts of $555 million (see note 5).
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 55
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
13 Loans and borrowings (Continued)
Unsecured fixed rate notes
On 26 July 2017, the Co-operative issued $200 million notes at 2.8% fixed coupon rate under the $1,000 million
Multicurrency Medium Term Note Programme (“MTN”). The $200 million notes matures in 2024 and interest is repayable
semi-annually from the date of issue.
Interest rate swap
The Group entered into an interest rate swap with a counter party to provide fixed rate funding for unsecured bank loans.
Details of the interest swap are set out in note 24.
Reconciliation of movements of liabilities to cash flows arising from financing activities
Loans and
borrowings
$’000
Balance as at 1 January 2017 463,875
Changes from financing cash flows
Proceeds from loans and borrowings 2,158,000
Total changes from financing cash flows 2,158,000
Conversion of term loan to membership shares (113,875)
Balance as at 31 December 2017 2,508,000
14 Trade and other payables, including derivatives
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Refundable deposits 2,165 854 1 474
Advance rental billings 1,967 777 – 534
Interest accrual on shareholders’ loans – 29,140 – 29,140
Interest payable on loans and borrowings 9,399 4,042 5,357 4,042
Amount due to a subsidiary – – 364,653 –
Accrued expenses 11,969 5,436 2,285 2,882
Other payables 6,051 3,762 349 3,696
Derivative financial liability 38 – 38 –
Contribution payable to
– Central Co-operative Fund 50 – 25 –
– Singapore Labour Foundation 19,648 – 18,323 –
51,287 44,011 391,031 40,768
Trade and other payables
Current 50,000 43,372 390,993 40,332
Non-current 1,287 639 38 436
51,287 44,011 391,031 40,768
Interest accrual on shareholders’ loans
The interest accrual arises on shareholders’ loans, are unsecured and repayable on demand in cash.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201756
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
15 Membership shares
Group and Co-operative
2017 2016
No. of shares
(‘000) $’000
No. of shares
(‘000) $’000
Issued and fully paid membership shares,
at par value of $1 each:
In issue at 1 January 640,393 640,393 49,813 49,813
Issued during the year 1,073,464 1,073,464 590,580 590,580
At 1 January and 31 December 1,713,857 1,713,857 640,393 640,393
Rights of member
(a) The membership shares relate to shares held by members where redemption of share is subject to approval of
the Board of Directors.
(b) All members are entitled to redeem their shares at the par value or the net asset value of the Co-operative based
on the latest audited financial position as at the date of redemption, whichever is lower.
(c) The shares do not carry any rights to fixed income.
(d) In accordance with Section 4.5 of the Co-operative’s By-Laws, every member shall, unless otherwise disqualified
under the Act or the By-Laws, have the right to:
(i) avail himself of all services of the Co-operative;
(ii) nominate candidates for election or to be co-opted to office, subject to the provisions of the Act and the
By-Laws;
(iii) be represented by delegates, subject to the provisions of the Act and the By-Laws;
(iv) participate and vote at General Meetings; and
(v) enjoy all other rights, privileges and benefits as prescribed by the By-Laws.
(e) Members are entitled to receive dividends as and when declared by the Co-operative.
(f) In the event of the winding up of the Co-operative, the assets shall be applied first to the cost of liquidation, then
to the discharge of the liabilities of the Co-operative, then to the payment of the share capital or subscription
capital, and then, provided that the By-laws of the Co-operative permit, to the payment of a dividend or patronage
refund at a rate not exceeding that laid down in the Rules or in the By-Laws.
(g) Any monies remaining after the application of the funds to the purposes specified in the above paragraph
(Section 88 of Co-operative Societies Act) and any sums unclaimed after two years under Section 89(2) of the
Act (which relates to claims of creditors), shall not be divided among the members but shall be carried to the
Co-operative Societies Liquidation Account kept by the Registrar of the Co-operative Societies.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 57
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
15 Membership shares (Continued)
Rights of member (Continued)
(h) A sum carried to the Co-operative Societies Liquidation Account shall be kept in this Account for at least two years.
Out of the Co-operative Societies Liquidation Account such sums may be transferred to the Central Co-operative
Fund, or applied generally for the furtherance of co-operative principles in such manner, as the Minister may
determine from time to time.
During the year, the Co-operative issued 1,073 million membership shares, at par value of $1 each, as consideration for
the acquisition of investment properties and a subsidiary, as well as arising from conversion of shareholders’ and term
loans to membership shares.
Capital risk management policies and objectives
The Co-operative manages its capital to ensure that it will be able to continue as going concern and invests in quality
assets at a fair rate of return and largely capital protected. The Co-operative makes adjustments to its capital structure,
taking into account changes in economic conditions. To maintain or adjust the capital structure, the Co-operative may
adjust the dividend payment to shareholders and return capital to shareholders.
The Group and the Co-operative’s overall strategy remains unchanged during the year.
16 Other reserves
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Capital reserve 366,539 176,433 365,139 176,433
Asset replacement reserve 23,717 8,752 – 1,540
Hedging reserve (38) – (38) –
390,218 185,185 365,101 177,973
Capital reserve
Capital reserve emerged from the:
(i) acquisition of investments properties in relation to the property restructuring exercise during the financial year
ended 31 December 2017;
(ii) acquisition of subsidiary under common control during the year ended 31 December 2017.
Asset replacement reserve
In 2016, the asset replacement reserve was established to meet the replacement and renewal expenses for building, plant
and equipment owned and managed by the Group.
Group Co-operative
2017 2017
$’000 $’000
Balance as at 1 January 8,752 1,540
Transfer from/(to) accumulated profits/(losses) 14,965 (1,540)
Balance as at 31 December 23,717 –
Available for use 23,717 –
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201758
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
16 Other reserves (Continued)
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments
used in cash flow hedges pending subsequent recognition in profit or loss as the hedged cash flows or items affect profit
or loss.
17 Revenue
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Rental income from investment properties 184,893 71,751 222 51,960
Carpark income 3,469 2,982 – 2,469
Advertising and promotion income 5,111 2,413 – 2,310
193,473 77,146 222 56,739
18 Other income
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Management fee income 3,162 461 13,323 555
Recovery of staff costs – – 3,396 –
Leasing commission fee income – – – 172
Others 9,253 4,448 129 3,285
12,415 4,909 16,848 4,012
19 Other expenses
Included in other expenses are as follows:
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Utilities 8,208 5,988 – 4,391
Marketing expenses 3,059 1,747 – 1,657
Administrative expenses 6,300 4,948 4,042 4,177
Staff costs 11,836 6,064 2,384 6,064
Included in staff costs:
– Defined contribution plans 1,086 975 213 975
Key management personnel
– Employee benefits 1,770 1,055 1,770 1,055
Direct operating expenses arising from rental generating investment properties, including repairs and maintenance, that
are included in other operating expenses amount to $16 million (2016: $7 million).
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 59
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
20 Finance income and Finance costs
Finance income
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Interest income:
– Fixed deposits and bank balances 349 166 60 165
– Interest income on shareholder’s loans – – 107,723 16,355
– Others 71 19 1 15
420 185 107,784 16,535
Finance costs
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Interest expense:
– Term loan from a shareholder – 5,694 – 5,694
– Shareholders’ loan – 29,140 – 29,140
– Bank loans 29,624 9,221 20,226 9,221
– Medium Term Notes 2,439 – 2,439 –
32,063 44,055 22,665 44,055
21 Income tax expense
Group
2017 2016
$’000 $’000
Current tax
Under provision in respect of previous year 2 6
Reconciliation of effective tax rate
Profit before tax and contributions 82,116 7,954
Share of results of joint venture (19,226) (19,568)
62,890 (11,614)
Tax calculated using Singapore tax rate of 17% 10,691 (1,974)
Exempt income* (10,732) 1,874
Non-deductible expenses 41 100
Under provision in respect of previous year 2 6
2 6
* The income of any co-operative society registered under the Co-operative Societies Act, Chapter 62 is exempted from income tax under
Section 13 (1)(f)(ii) of the Singapore Income Tax Act, Chapter 134.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201760
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
22 Contributions to Central Co-operative Fund and Singapore Labour Foundation
In accordance with Section 71(2)(a) of the Act, the Co-operative and the co-operatives in the Group are required
to contribute 5% of the first $0.5 million of its surplus resulting from the operations during the year to the Central
Co-operative Fund.
In accordance with Section 71(2)(b) of the Act, the Co-operative and the co-operatives in the Group may opt to contribute
20% of the surplus (excluding capital gains arising from the disposal of any office premises and shares) in excess of
$0.5 million from the operations of the co-operatives to either Central Co-operative Fund or to the Singapore Labour
Foundation (“SLF”).
23 Commitments
As at the reporting date, the following are the outstanding commitments which have not been provided in the financial
statements:
(i) Capital commitment
Capital expenditure contracted at the end of the reporting period but not recognised in the financial statements
relate to purchase of certain property, plant and equipment of the Group amounting to $2 million (2016: $27
million).
(ii) Operating lease commitments
(a) Leases as lessee
The Group and the Co-operative lease its office under a lease agreement which is non-cancellable. Future
minimum lease payments with initial or remaining terms of two years are as follows:
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Within one year 285 236 243 236
Between one and five years 42 239 – 239
327 475 243 475
(b) Leases as lessor
The Group and the Co-operative lease out investment properties in Singapore under operating leases.
Future minimum lease payments under non-cancellable leases receivable are as follows:
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Within one year 210,304 80,166 – 39,850
Between one and five years 312,885 113,903 – 21,853
More than five years 153,545 153,639 – –
676,734 347,708 – 61,703
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 61
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
23 Commitments (Continued)
(ii) Operating lease commitments (Continued)
(b) Leases as lessor (Continued)
Share of joint venture’s operating lease commitments in relation to investment property is as follows:
Group
2017 2016
$’000 $’000
Within one year 53,527 49,760
Between one and five years 55,006 74,776
More than five years – 7,079
108,533 131,615
24 Financial risk management
Overview
The Group has exposure to the following risks from its activities:
• credit risk;
• liquidity risk; and
• interest rate risk.
This note presents information about the Group’s exposure to each of the above risks, and the Group’s objectives, policies
and processes for measuring and managing the risk.
Risk management framework
The Group’s overall risk management strategy seeks to minimise adverse effects from the volatility of financial markets
on the Group’s financial performance.
The Board of Directors of the Co-operative are responsible for setting the objectives and underlying principles of financial
risk management for the Group. The management then establishes the detailed policies such as authority levels, oversight
responsibilities, risk identification and measurement, and exposure limits, in accordance with the objectives and underlying
principles approved by the Board of Directors.
There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and
measures the risk.
(i) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from the Group’s loans and receivables. The Group has a
credit policy in place which establishes credit limits for tenants and monitor their balances on an ongoing basis.
Credit evaluation are performed on all tenants requiring credit over a certain amount.
The carrying amounts of trade and other receivables and cash and cash equivalents represent the Group’s and
the Co-operative’s maximum exposure to credit risk. Cash and cash equivalents are placed in banks and financial
institutions which are regulated.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201762
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
24 Financial risk management (Continued)
Risk management framework (Continued)
(i) Credit risk (Continued)
The Group and the Co-operative have no significant concentration of credit risk, except for the loan to a subsidiary
payable to the Co-operative.
The ageing analysis of the trade and other receivables, excluding prepayments and advances, at the reporting
date is as follows:
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Not past due 15,486 1,071 3,919,268 1,020,485
Past due 0 – 30 days 1,269 1,039 – 118
Past due 31 – 120 days 170 1,254 – 368
16,925 3,364 3,919,268 1,020,971
Impairment losses
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of
trade and other receivables. Based on historical default rates, the Group believes that no impairment allowance is
necessary in respect of trade receivables due to the good payment records with the Group.
(ii) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due,
under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Group’s reputation.
The following are the contractual maturities of financial liabilities, including estimated interest payments and
excluding the impact of netting agreements:
Carrying
amount
Contractual
cash flows
Cash flows
Within 1 year 1 to 5 years
$’000 $’000 $’000 $’000
Group
2017
Non-derivative financial liabilities
Trade and other payables* 99,962 (99,962) (67,606) (32,356)
Loans and borrowings# 2,508,038 (2,738,903) (226,875) (2,512,028)
2,608,000 (2,838,865) (294,481) (2,544,384)
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 63
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
24 Financial risk management (Continued)
Risk management framework (Continued)
(ii) Liquidity risk (Continued)
Carrying
amount
Contractual
cash flows
Cash flows
Within 1 year 1 to 5 years
$’000 $’000 $’000 $’000
Group
2016
Non-derivative financial liabilities
Trade and other payables* 60,451 (60,451) (45,638) (14,813)
Shareholders’ loans 448,313 (477,453) (477,453) –
Loans and borrowings 463,875 (483,554) (123,273) (360,281)
972,639 (1,021,458) (646,364) (375,094)
Co-operative
2017
Non-derivative financial liabilities
Trade and other payables* 390,993 (390,993) (390,993) –
Loans and borrowings# 2,158,038 (2,383,098) (46,453) (2,336,645)
2,549,031 (2,774,091) (437,446) (2,336,645)
2016
Non-derivative financial liabilities
Trade and other payables* 50,919 (50,919) (42,012) (8,907)
Shareholders’ loans 448,313 (477,453) (477,453) –
Loans and borrowings 463,875 (483,554) (123,273) (360,281)
963,107 (1,011,926) (642,738) (369,188)
* Excludes advance rental billings and interest rate swap
# The contractual cashflows are net of the impact of interest rate swap
Market risk – Cash flow and interest rate risks
Market risk is the risk that changes in market prices will affect the Group’s profit or loss, or the value of its holdings
of financial instruments. The objective of market risk management is to manage and control market risk exposures
within acceptable parameters.
Interest rate risk
The Group seeks to maintain an efficient and optimal interest cost structure using a mix of fixed and variable rate
instruments. The Group’s exposure to cashflow interest rate risks arises mainly from variable-rate bank borrowings.
The Group manages these cashflow interest rate risks using floating-to-fixed interest rate swaps.
Where used, interest rate derivatives are classified as cash flow hedge and stated at fair value within the Group’s
statement of financial position.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201764
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
24 Financial risk management (Continued)
Risk management framework (Continued)
(ii) Liquidity risk (Continued)
Interest rate risk (Continued)
At the reporting date, the profile of the variable interest-bearing financial instruments is as follows:
Note Group Co-operative
Carrying amount Carrying amount
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Variable rate instruments
Cash at bank 11 104,931 70,471 36,737 36,009
Loans and borrowings^ 13 (1,458,000) – (1,458,000) –
(1,353,069) 70,471 (1,421,263) 36,009
^# Excludes the $50 million term loan which is hedged by the interest rate swap
Cash flow hedge
During the financial year, the Group has hedged its exposure to changes in interest rates of its variable rate
borrowings by entering into an interest rate swap with notional contract amount of $50 million (2016: nil) whereby
it receives variable rates equal to the Singapore swap offer rate on the notional amount and pays fixed interest
rate of 1.55% (2016: nil) per annum. The hedge will be in place for a 3 year tenure to year 2020.
Cash flow sensitivity analysis
The Group’s borrowings at variable rates on which effective hedges have not been entered into are denominated
in Singapore Dollars. If the Singapore Dollar interest rates increase/decrease by 0.5% with other variables held
constant, the profit/(loss) before tax and contributions will increase/(decrease) by the amounts as follows.
Profit/(Loss) before tax and contributions
2017 2016
Increase by Decrease by Increase by Decrease by
0.5% 0.5% 0.5% 0.5%
$’000 $’000 $’000 $’000
Group
Variable rate instruments (6,765) 6,765 352 (352)
Co-operative
Variable rate instruments (7,106) 7,106 (180) 180
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 65
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
24 Financial risk management (Continued)
Risk management framework (Continued)
(iii) Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both
financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or
disclosure purposes based on the following methods. When applicable, further information about the assumptions
made in determining fair values is disclosed in the notes specific to that asset or liability.
Unquoted debt securities
The Group establishes fair value of unquoted debt securities by using other valuation techniques. Subsequent
to initial recognition, the fair value of held-to-maturity investments is determined for disclosure purposes only.
Loans and borrowings
Fair values are calculated based on discounted expected future principal and interest cash flows at the market
rate of interest at the reporting date.
Other financial assets and liabilities
The carrying amounts of financial assets and liabilities with maturity of less than one year (including trade and
other receivables, cash and cash equivalents, rental deposits, trade and other payables and shareholders’ loans)
are assumed to approximate their fair values because of the short period to maturity. All other financial assets and
liabilities are discounted to determine their fair values.
(iv) Fair value hierarchy
The table below analyses fair value measurements for financial assets and financial liabilities, by the levels in the
fair value hierarchy based on the inputs to valuation techniques. The different levels are defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201766
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
24 Financial risk management (Continued)
Risk management framework (Continued)
(iv) Fair value hierarchy (Continued)
Assets and liabilities not carried at fair value but for which fair values are disclosed
Level 1 Level 2 Level 3 Total
$’000 $’000 $’000 $’000
Group
31 December 2017
Held-to-maturity investments – – 455,000 455,000
Loans and borrowings – – (2,508,000) (2,508,000)
31 December 2016
Loans and borrowings – – (463,875) (463,875)
Co-operative
31 December 2017
Loans and borrowings – – (2,158,000) (2,158,000)
31 December 2016
Loans and borrowings – – (463,875) (463,875)
During the financial year, there is no transfer of financial assets between Level 1 and 2 and in and out of Level 3
of the fair value hierarchy.
Level 3 fair values
The following table shows the valuation techniques used in measuring Level 3 fair values.
Type
Fair value
Valuation technique$’000
Group
2017
Loans and borrowings 2,483,060 Discounted cash flows
Held-to-maturity investments 463,162 Discounted cash flows
2016
Loans and borrowings 461,901 Discounted cash flows
Co-operative
2017
Loans and borrowings 2,144,310 Discounted cash flows
2016
Loans and borrowings 461,901 Discounted cash flows
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 67
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
24 Financial risk management (Continued)
Risk management framework (Continued)
(iv) Fair value hierarchy (Continued)
Accounting classifications and fair values
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of
financial position, are as follows:
Loans and
receivables
Fair value-
hedging
instruments
Other
financial
liabilities Total Fair value
$’000 $’000 $’000 $’000 $’000
Group
2017
Financial assets
Trade and other receivables 16,925 – – 16,925 16,925
Cash and cash equivalents 156,941 – – 156,941 156,941
Held-to-maturity investments 455,000 – – 455,000 463,162
628,866 – – 628,866 637,028
Financial liabilities
Trade and other payables* – – 99,962 99,962 99,962
Interest rate swaps used for hedging – 38 – 38 38
Loans and borrowings – – 2,508,000 2,508,000 2,483,060
– 38 2,607,962 2,608,000 2,583,060
2016
Financial assets
Trade and other receivables 3,364 – – 3,364 3,364
Cash and cash equivalents 95,799 – – 95,799 95,799
99,163 – – 99,163 99,163
Financial liabilities
Trade and other payables* – – 60,451 60,451 60,451
Shareholders’ loans – – 448,313 448,313 448,313
Loans and borrowings – – 463,875 463,875 461,901
– – 972,639 972,639 970,665
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201768
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
24 Financial risk management (Continued)
Risk management framework (Continued)
(iv) Fair value hierarchy (Continued)
Accounting classifications and fair values (Continued)
Fair values versus carrying amounts (Continued)
Loans and
receivables
Fair value-
hedging
instruments
Other
financial
liabilities Total Fair value
$’000 $’000 $’000 $’000 $’000
Co-operative
2017
Financial assets
Trade and other receivables 3,919,268 – – 3,919,268 3,919,268
Cash and cash equivalents 68,747 – – 68,747 68,747
3,988,015 – – 3,988,015 3,988,015
Financial liabilities
Trade and other payables* – – 390,993 390,993 390,993
Interest rate swaps used for hedging – 38 – 38 38
Loans and borrowings – – 2,158,000 2,158,000 2,182,187
– 38 2,548,993 2,549,031 2,573,218
2016
Financial assets
Trade and other receivables – 1,020,971 – 1,020,971 1,020,971
Cash and cash equivalents – 61,337 – 61,337 61,337
– 1,082,308 – 1,082,308 1,082,308
Financial liabilities
Trade and other payables* – – 50,919 50,919 50,919
Shareholders’ loans – – 448,313 448,313 448,313
Loans and borrowings – – 463,875 463,875 461,901
– – 963,107 963,107 961,133
* Excludes advance rental billings, interest rate swap and includes rental deposits
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 69
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
25 Related party transactions
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence
over the other party in making financial and operating decisions.
Related party transactions
In addition to the transactions disclosed elsewhere in the financial statements, the following significant related party
transactions were incurred based on terms as agreed between the parties during the financial year:
Group Co-operative
2017 2016 2017 2016
$’000 $’000 $’000 $’000
Rental, advertising and promotion income
from related entities included in revenue 47,045 14,802 12 9,707
Management fee income from related
entities included in other income 159 461 16,754 461
Rental and affiliation expenses to related
entities included in administrative expenses (260) (182) (258) (180)
Management fees and group wide
programme fee paid to related entities
included in other operating expenses (2,172) (1,587) (1,533) (1,165)
26 Subsequent events
On 2 January 2018, the Co-operative acquired a further 12.7% interest in its subsidiary, NTUC Choice Homes Co-operative
Limited (“NCH”) from its shareholder, NTUC Fairprice Co-operative Limited (“FP”), at a consideration of $59 million. The
consideration was satisfied by way of an issuance of 39 million shares in the Co-operative to FP.
On 19 January 2018, the Co-operative issued $150 million notes at 3.1% fixed coupon rate under its existing $1,000
million Multicurrency Medium Term Note Programme (“MTN”). The $150 million notes will mature in 2028 and interest is
repayable semi-annually on the date of issue. The proceeds from the notes were used to part repay a fixed rate bank loan
of $100 million and revolving credit facility of $50 million on 26 January 2018 and 29 January 2018 respectively.
On 26 January 2018, a fixed rate bank loan of $175 million was part repaid from the MTN proceeds of $100 million and
the remaining balances was repaid through internal resources.
27 New standards and interpretations not yet effective
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2017
and earlier application is permitted; however, the Group has not early applied the following new or amended standards
in preparing these statements.
The following standards are expected to have a material impact on the Group’s financial statements in the period of
initial application.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201770
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
27 New standards and interpretations not yet effective (Continued)
Applicable to 2018 financial statements
FRS 109 Financial instruments
FRS 109 replaces most of the existing guidance in FRS 39 Financial Instruments: Recognition and Measurement. It includes
revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for
calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the
guidance on recognition and derecognition of financial instruments from FRS 39.
FRS 109 is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. Retrospective
application is generally required, except for hedge accounting. For hedge accounting, the requirements are generally
applied prospectively, with some limited exceptions. Restatement of comparative information is not mandatory. If
comparative information is not restated, the cumulative effect is recorded in opening equity as at 1 January 2018.
The revised guidance on the classification and measurement of financial instruments, a new expected credit loss model
for calculating impairment on financial assets of FRS 109 that would have an impact on the Co-operative, with effect from
annual periods beginning on or after 1 January 2018, are as described below.
Classification and measurement – The Group does not expect a significant change to the measurement basis arising
from adopting the new classification and measurement model under FRS 109. Loans and receivables that are currently
accounted for at amortised cost will continue to be accounted for using amortised cost model under FRS 109. Debt
instruments currently classified as held-to-maturity and measured at amortised cost which meet the conditions for
classification at amortised cost under FRS 109. New hedge accounting requirements are applied prospectively. All hedging
relationships designated under FRS 39 Financial Instruments: Recognition and Measurement at 31 December 2017 that meet
the criteria for hedge accounting under FRS 109 at 1 January 2018 will be regarded as continuing hedging relationships.
Impairment – The Group plans to apply the simplified approach and record lifetime expected impairment losses on all
trade receivables and cash at bank. The Group does not expect significant financial impact on adoption of FRS 109 and
impairment losses are likely to be insignificant. The Group is currently finalising the testing of its expected credit loss
model and the quantum of the final transition adjustments may be different upon finalisation.
Applicable to financial statements for the year 2019 and after
The following new FRS, amendments to and interpretations of FRS are effective for annual periods beginning after 1
January 2018:
• FRS 116 Leases
FRS 116 Leases
FRS 116 eliminates the lessee’s classification of leases as either operating leases or finance leases and introduces a single
lessee accounting model. Applying the new model, a lessee is required to recognise right-of-use (ROU) assets and lease
liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017 71
NOTES TO THE
FINANCIAL STATEMENTSYEAR ENDED 31 DECEMBER 2017
27 New standards and interpretations not yet effective (Continued)
Applicable to financial statements for the year 2019 and after (Continued)
FRS 116 Leases (Continued)
FRS 116 substantially carries forward the lessor accounting requirements in FRS 17 Leases. Accordingly, a lessor continues
to classify its leases as operating leases or finance leases, and to account for these two types of leases using the FRS 17
operating lease and finance lease accounting models respectively. However, FRS 116 requires more extensive disclosures
to be provided by a lessor.
When effective, FRS 116 replaces existing lease accounting guidance, including FRS 17, INT FRS 104 Determining whether
an Arrangement contains a Lease, INT FRS 15 Operating Leases – Incentives, and INT FRS 27 Evaluating the Substance of
Transactions Involving the Legal Form of a Lease.
FRS 116 is effective for annual periods beginning on or after 1 January 2019, with early adoption permitted if FRS 115 is
also applied.
The Group has performed a preliminary high-level assessment of the new standard on its existing operating lease
arrangements as a lessee (refer to Note 23). Based on the preliminary assessment, the Group does not expect significant
financial impact on the adoption of FRS 116.
MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 201772
MERCATUS CO-OPERATIVE LIMITED
No. 1 Marina Boulevard
#15-07/08 One Marina Boulevard
Singapore 018989
T: +65 6213 8001
F: +65 6438 4506
www.mercatus.com.sg
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