POSITIONING FOR - Mercatus

 
POSITIONING FOR - Mercatus
ANNUAL REPORT 2017

-

       POSITIONING FOR
       G ROWTH
POSITIONING FOR - Mercatus
CONTENTS
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
POSITIONING FOR - Mercatus
ABOUT MERCATUS
CO-OPERATIVE LIMITED
Mercatus       Co-operative       Limited     Mercatus’ portfolio consists of:
(Mercatus) is the real estate subsidiary of   •   AMK Hub, a conveniently located
NTUC Enterprise Co-operative Limited.             shopping mall in the heart of Ang Mo
Mercatus’ vision is to own and manage             Kio town centre;
a portfolio of commercial properties to       •   Jurong Point, the largest suburban
provide NTUC social enterprises with              mall in Singapore;
access to commercial space and generate
                                              •   NEX, the biggest mall in the
sustainable, long-term returns for the            north-east region of Singapore;
Labour Movement.
                                              •   Thomson Plaza, a retail mall located
                                                  in Upper Thomson with a rich
Mercatus was registered under the
                                                  community heritage;
Co-operative Societies Act on 31 May
2011. Mercatus’ portfolio comprises           •   37 strata-titled assets in HDB estates
                                                  and shopping malls island-wide; and
5 strategically located retail and office
properties and 37 strata-titled assets        •   One Marina Boulevard, a premium
in Housing Development Board (HDB)                Grade A office building located in
                                                  Singapore’s Central Business District.
estates and shopping malls with a
combined valuation of $5.2 billion as at
31 December 2017.

                                MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017           1
POSITIONING FOR - Mercatus
HISTORICAL
    MILESTONES

                                     January 2018:
                                     Completed acquisition of 69.6% of NTUC
                                     Choice Homes from NTUC Enterprise and
                                     NTUC FairPrice
                                                                                          2018

                                     December 2017:
                                     Acquired a strata lot at Thomson Plaza

                                     June 2017:
                                     Completed acquisition of Jurong Point              2017
                                     January 2017:
                                     Acquired strata properties in HDB estates
                                     and shopping malls

                                     July 2016 :
                                     Acquired One Marina
                                     Boulevard
                                                                                 2016
                                     July 2016:
                                     Acquired strata ownership
                                     in Thomson Plaza

                                     July 2012:
                                     Acquired 50%
                                     interest in NEX
                                     – a joint venture   2012
                                     company
                                     holding

                                                                  November 2011:
                                                Acquired first property – AMK Hub
                   2011                                                May 2011:
                                                Registered in Singapore under the
                                                        Co-operative Societies Act

2   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
POSITIONING FOR - Mercatus
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

          Strategically Located Quality Assets

 01       • 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.

 02       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.

COMPETITIVE STRENGTHS

          Active Asset Management
          • Value creation through asset enhancement initiatives to improve the relevance and attractiveness

 03
              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

 04           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.

                                                                  MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017    3
POSITIONING FOR - Mercatus
CHAIRMAN'S
    MESSAGE
                                                                     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.

4   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
POSITIONING FOR - Mercatus
CHAIRMAN'S
                                                                                            MESSAGE
In the area of asset and property management, Mercatus             Through the use of Internet-of-Things (IoT) technology,
demonstrated its commitment to excellence, innovation and          Mercatus will also convert our shopping malls into smart
productivity.                                                      buildings progressively from 2018 onwards. The vast
                                                                   amount of data made available will then improve manpower
A case in point is One Marina Boulevard (OMB). By enhancing
                                                                   productivity, reduce equipment downtime and achieve
the lobby areas, optimising prime spaces to accommodate
                                                                   energy savings.
a wider range of retailers, and improving accessibility,
Mercatus has enabled OMB to compete more effectively in            To ensure that our malls remain relevant, we have started
the Grade A office market in the Marina Bay area.                  incorporating the use of design thinking, a human-centered
                                                                   approach to business, to bring forth new concepts, services
Overall, the occupancy rate at Mercatus’ properties is
                                                                   and spatial design that will better engage our shoppers and
healthy at above 99%, with steady shopper traffic per month.
                                                                   make their time with us a far more enjoyable one.
Mercatus will continue to partner tenants to boost their
sales as well as create greater customer value.                    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
Looking Ahead
                                                                   the management and team are moving in the right direction.
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%.            Appreciation
Stronger economic fundamentals could better support the            On behalf of the Board, I wish to extend my gratitude to
retail sector, although structural mismatch in the labour          members for your support. I would also like to express our
market would continue to mean more cautious spending by            deep appreciation to the management and staff for their hard
consumers.                                                         work and dedication. I am also grateful to my fellow directors
                                                                   for their counsel and guidance in steering Mercatus forward.
While e-commerce continues to change the way we shop,
we firmly believe that brick-and-mortar retail is well and         Together, we can expect Mercatus to continue to grow
alive. Traditional store formats may be on the decline, but        steadily.
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      MS MAY NG
ways to meet the needs of their shoppers. Data will provide a      CHAIRMAN
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.

                                                                  MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017                  5
POSITIONING FOR - Mercatus
HIGHLIGHTS
    OF THE YEAR

                                       One Marina Boulevard

    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.

                                                                    ACTIVE CAPITAL MANAGEMENT
    ACQUISITION OF JURONG POINT IN JUNE 2017
                                                                    ESTABLISHMENT OF $1.0 BILLION MTN PROGRAMME
    • Jurong Point is Singapore’s largest suburban mall.
                                                                    • Successfully established and listed its $1.0 billion
      Strategically located within one of the largest residential
                                                                       multi-currency MTN programme with SGX on 9 June
      areas in Singapore, the acquisition expanded Mercatus’
                                                                       2017.
      shopping mall footprint to the western part of Singapore.
      The acquisition further enhanced the tenant and income        •   The MTN programme diversifies Mercatus’ sources of
      diversification of Mercatus arising from an enlarged              funding and allows Mercatus to secure borrowings of
      portfolio and tenant base.                                        longer tenures.

                                                                    SUCCESSFUL ISSUANCE OF BONDS
    ACQUISITION OF MAJORITY STAKE IN NCH FROM
                                                                    • Launched its maiden bond issuance on 26 July 2017,
    SHAREHOLDERS
                                                                      raising $200.0 million, 7-year notes at 2.8% per annum.
    • Completed share swaps with its shareholders NE and FP
      for their shares in NCH in January 2018.                      •   The issue received an order of almost $530.0 million
                                                                        from 37 accounts (2.6 times subscribed), demonstrating
    •   The move supports NE’s plan to consolidate its real
                                                                        the investors’ confidence in Mercatus’ performance and
        estate business in Mercatus. Mercatus is now a majority
                                                                        credit standing.
        shareholder of NCH with a 69.6% shareholding.
                                                                    •   A second bond issuance of $150.0 million 10-year
    •   NCH is a co-operative established with the objective
                                                                        notes at 3.1% per annum was successfully launched on
        of building and delivering affordable quality homes in
                                                                        19 January 2018.
        Singapore. The last development was completed in 2014.

6   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
POSITIONING FOR - Mercatus
HIGHLIGHTS
                                                                                            OF THE YEAR

                                                                                                               Self-Collect @ JP

                                               Jurong Point

INITIATIVES TO BETTER SERVE CUSTOMERS                                                             ‘Swing By’ at Thomson Plaza
AND TENANTS
ASSET ENHANCEMENT INITIATIVES AT OMB                                PROVIDING E-TAILERS A SPACE IN THE MALL
• Completed rejuvenation works which improves                       • Introduced ‘Swing By’ at Thomson Plaza, a
  accessibility, enhances lobby areas and optimises prime             co-retailing space to provide e-tailers a shot at retailing
  space for a wider range of retailers.                               in an offline environment. Mercatus’ sales ambassadors
                                                                      oversee retail operations and shoppers may meet brand
PARTNERSHIP WITH “LAST MILE DELIVERY” LOGISTICS                       owners in person, engage in DIY handicrafts and attend
PLAYERS TO ENHANCE CUSTOMERS EXPERIENCE                               product customisation workshops.
• Jurong Point introduced a multi-brand parcel
                                                                    •   The co-retail space leverages technologies such as smart
   self-collection facility ‘Self-Collect @ JP’ in collaboration
                                                                        POS system integrated with data analytics, Wi-Fi analytics
   with Ninja Van, Singapore Post’s POPStation and
                                                                        for shopper profiling and store heat-mapping enabled by
   Ta-Q-Bin.
                                                                        video analytics.
•   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.

                                                                   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017                  7
POSITIONING FOR - Mercatus
FINANCIAL
    HIGHLIGHTS

                                                                                                                                                   AMK Hub

    56.0%                  1
                                                          $205.9 M                                          $82.1 M
                                                                                                            NET SURPLUS BEFORE
    LEVERAGE RATIO                                        GROSS REVENUE
                                                                                                            CONTRIBUTIONS

    5.1x
    INTEREST COVERAGE RATIO

                                                                                 15%                                                   18%

    3.1 years                                                    41%
                                                                                      17%
                                                                                                                      41%
                                                                                                                                             19%
    AVERAGE TERM TO MATURITY

                                                                      13%      10% 4%                                       9%      9%     4%
    2.0% p.a.
    AVERAGE COST OF DEBT
                                                             Contribution by valuation2                        Contribution by gross revenue2
                                                             (as at 31 December 2017)                        (for the month of December 2017)

                                                                            Jurong Point         AMK Hub               NEX

                                                                            Thomson              Retail Strata         One Marina
                                                                            Plaza                Assets                Boulevard

    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.

8   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
OPERATIONAL
                                                                                                    REVIEW
                                                     TOP 10 TENANTS CONTRIBUTION:
                                                         (For the month of December 2017)

99.7%
OCCUPANCY
                                            26.1%
                                            OF GROSS RENT
                                                                                                 42.2%
                                                                                                 OF GROUP NLA

156.4M
SHOPPER TRAFFIC
                                            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.

         LEASE EXPIRY PROFILE                                                     TRADE CATEGORIES
                                                                                Food & Beverage                                                           25.9%
                                                                                                                                          16.9%

            34.6%                                                                                                                     15.3%
                                                                                 Beauty & Health                           10.9%

                                                                     Fashion & Accessories / Kid’s                                12.5%
                                                                          Apparel / Shoes & Bags                    7.6%

                                                                                                                           10.6%
                                                                     Supermarket / Hypermarket                                                    20.4%
 24.5%
                      23.7%
                                                                                                                       10.4%
                                                                               Sundry & Services                      9.3%

                                                                             Electricals including                  7.7%
                                                                                                                     8.1%
                                                                     Information Technology and
                                                                             Telecommunication
                                    15.6%
                                                                               Gifts & Souvenirs /           4.1%
                                                                                 Toys & Hobbies /           3.7%
                                                                             Books & Stationery /
                                                                                   Sporting Goods
                                                                                                             2.8%
                                                                            Jewellery & Watches             0.8%

                                                                                           Others       2.6%
                                                                                                                           9.7%

                                                1.6%                                                    2.5%
                                                                               Department Store             4.2%

                                                                                                      2.3%
 2018       2019       2020         2021         2022                    Leisure & Entertainment             4.5%

                                                 and
                                                                                                     1.7%
                                                 after                Houseware and Furnishing       1.3%

                                                                                                      1.6%
  Jurong Point      AMK Hub             NEX                                            Education       2.6%

  Thomson           Retail Strata       One Marina
  Plaza             Assets              Boulevard                                        Gross Revenue (%)            NLA (%)

                                                                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.

                                               Donation to NTUC-U
                                              Care Fund (established
                                               to better the welfare
                                               of low-income union
                                                members and their
                                                     families).

                                                                            ‘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.

                                                                         ‘Mall Watch’ crime
                                                                       prevention road show
                                    ‘Play for Care Charity
                                                                            @ AMK Hub
                                    Ball Pit’ @ Jurong Point
                                      • Funds raised for
                                     NTUC-U Care Fund.

10   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
SOCIAL
                                                                   IMPACT

                     People Association’s                             ‘Adopt a Minions
                   ‘Embracing Parenthood                                 Plush’ @ NEX
                                                                   • Funds raised donated
                        Celebrations’
                        programme                                      to Make-A-Wish
                       @ Jurong Point                                    Foundation.

 Health Promotion
Board’s (HPB) weekly
  piloxing session
    @ AMK Hub

                                                              ‘NEX Donation Drive’ in
                                                                 partnership with
                                                                The Salvation Army

                                   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017         11
BOARD OF
     DIRECTORS

                             MS MAY NG
                             CHAIRMAN

                             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 TEW
                             DIRECTOR

                             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 SHEE
                             DIRECTOR

                             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 SANG
                             DIRECTOR

                             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 KIONG
                             DIRECTOR

                             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).

12   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
BOARD OF
                                                                                               DIRECTORS

                                 MR YEO CHUN FING
                                 DIRECTOR

                                 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 HUAY
                                 DIRECTOR

                                 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 GUAN
                                 DIRECTOR

                                 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 SUM
                                 DIRECTOR

                                 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.

AUDIT & RISK                     INVESTMENT                      ESTABLISHMENT                    CUSTOMERS
COMMITTEE                        COMMITTEE                       COMMITTEE                        EXPERIENCE
Mr Wong Heng Tew (Chairman)      Ms May Ng (Chairman)            Ms May Ng (Chairman)             COMMITTEE
Mr Ng Eng Kiong                  Mr Lim Kok Guan                 Mr Willy Shee                   (set up on 7 November 2017)
Mr Yeo Chun Fing                 Mr Soong Hee Sang               Ms Adeline Sum                  Mr Willy Shee (Chairman)
(with effect from 1 June 2017)                                                                   Mr Lim Kok Guan
                                                                                                 Ms Adeline Sum

                                                               MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017                  13
KEY
     MANAGEMENT
                             MR DAVID POH
                             CHIEF 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 TENG
                             CHIEF 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 TAN
                             CHIEF 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.

14   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
PROPERTY PROFILE
AMK HUB

$793.0M                         100   %                           320,000         SF               $61.9M
APPRAISED VALUE                 OWNERSHIP                         NET LETTABLE AREA                FY2017 TOTAL REVENUE
                                                                  (APPROXIMATE)

99  YEARS
COMMENCING FROM
                                100   %                           520,000          SF
                                OCCUPANCY RATE                    GROSS FLOOR AREA
24 AUGUST 2004                                                    (APPROXIMATE)
LEASE TENURE

AMK Hub is a conveniently located shopping mall in the heart      and pledged $2 with every purchase of the carnival passes.
of the Ang Mo Kio housing estate. Located at the intersection     Over $10,000 was raised for the NTUC-U Care Fund. AMK Hub
of Ang Mo Kio Avenue 3 and Ang Mo Kio Avenue 8, the mall          also provided a platform for events including:
enjoys prominent frontage, offering high visibility to passing
                                                                  • Thye Hua Kwan Moral Society (THK) – Claw game machines
traffic and shoppers.
                                                                    for shoppers to win stuffed toys. Money raised from the
AMK Hub celebrated its 10th Anniversary in 2017 and gave            machines will go towards services such as THK’s free meal
away exciting gifts to shoppers in return for their support         centres and free clinics.
of the mall. For example, 10 lucky shoppers walked away           • Singapore Heritage Festival 2017 by National Heritage Board
with $35,000 worth of gold bars during the Chinese New              – ‘Tales from Our Shores’ interactive exhibition.
Year promotion programme. As part of the 10th anniversary         • Info-communications Media Development Authority of
celebration, AMK Hub also organised a live auction event            Singapore (IMDA) – A mobile digital truck awareness to
where shoppers walked away with prizes such as massage              educate shoppers on the transition to digital TV before
chairs and television sets.                                         analog TV signals are turned-off at end 2017.
AMK Hub continues to actively support numerous charity            • Ang Mo Kio Police South – ‘Mall Watch’ crime prevention
drives and meaningful events for non-profit, community and          roadshow.
charitable organisations. During the Christmas season, AMK        • SAFRA – ‘We Salute Our NSmen’, interactive digital campaign
Hub presented ‘A Jolly Jamboree’ for the second time running        for shoppers to post salute images on Facebook & Instagram.

                                                                 MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017                 15
PROPERTY PROFILE
                                                                                         JURONG POINT

     $2,149.5M                        100   %                          720,000           SF              $69.3M
     APPRAISED VALUE                  OWNERSHIP                        NET LETTABLE AREA                 TOTAL REVENUE
                                      (OF STRATA SPACE                 (APPROXIMATE)                     (FROM DATE OF
                                      OWNED)                                                             ACQUISITION
                                                                                                         30 JUNE 2017)

     99    YEARS FROM
     30 NOVEMBER 1993 (JP1)
                                      99.6   %                         1,100,000        SF
                                      OCCUPANCY RATE                   GROSS FLOOR AREA
     AND 20 JUNE 2006 (JP2)                                            (APPROXIMATE)
     LEASE TENURE

     Jurong Point is strategically located within one of the largest   In 2017, several new concepts and retailers were introduced in
     residential areas in Singapore, serving more than 270,000         Jurong Point. These include Ilahui, a fast fashion leisure retail
     households in HDB flats and private properties. It is directly    chain which offers consumers the concept of Korean inspired
     connected to Boon Lay MRT station as well as a bus interchange    living – delivering a wide variety of good quality products for
     within the mall.                                                  value prices.
     Jurong Point is well positioned to attract shopper traffic from   Jurong Point revamped its Japanese Street – ‘Shokutsu Ten’,
     the nearby Jurong Lakeside District, as well as the student and   carving out a new alley offering Ginzushi (for sashimi and
     education population from Nanyang Technological University        chirashi don), Tenfuku Tendon Specialty (for Japanese tendon),
     and other schools in the catchment.                               Idaten Udon (for udon dishes), Ichiban Bento (for bento sets)
                                                                       and Wadori (for yakitori).
     In 2017, several new initiatives were introduced in Jurong
     Point to enhance shoppers’ experience. The first of its kind      Malaysia Boleh, a food outlet selling Malaysia street food, was
     in Singapore, Jurong Point unveiled ‘Self-Collect @ JP’, a        also rejuvenated, doubling its previous space to 14,000sf. It
     multi-brand parcel self-collection facility. Shoppers now enjoy   seats 600 diners, offering everything from Penang-style fried
     the flexibility of collecting their online purchases from more    carrot cake to kway teow kia from Johor Bahru.
     than one (last-mile) delivery service providers at a single
     location and in close proximity to Boon Lay MRT and Bus           Jurong Point was re-certified Green Mark Gold in recognition
     Interchange.                                                      of its efforts in environmental sustainability.

16   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
PROPERTY PROFILE
NEX

$893.5M                          50  %                             630,000           SF            $62.2M
(50%)                            OWNERSHIP                         NET LETTABLE AREA               (50%)
APPRAISED VALUE                                                    (APPROXIMATE)                   FY2017 TOTAL REVENUE

99  YEARS                        99.8   %                          940,000 SF
COMMENCING FROM                  OCCUPANCY RATE                    (100%)
26 JUNE 2008                                                       GROSS FLOOR AREA
LEASE TENURE                                                       (APPROXIMATE)

NEX, one of the largest mall in the north-east region of           such as pitting their web-slinging skills at the game zone.
Singapore, is situated at the junction of Serangoon Central        Adult-sized Spider-Man mascots made special appearances
and Serangoon Road, and is surrounded by public and private        from 23 June 2017 to 26 June 2017, where families snapped
housing estates. It is approximately 10 km from the city centre    up limited passes per session to get up close with their
and is connected to the Bus interchange and underground            favourite Marvel web-slinging crusader. Families also picked
Serangoon MRT.                                                     up memorabilia and merchandises at the retail area.

NEX continues to bring in large scale and attractive activities    Currently, NEX boasts renowned international tenants such as
to provide shoppers with interesting experiences. During           Pedro and Bake Cheese Tart, with new brands Martgo Tokio,
the June school holiday, NEX launched the Spider-Man:              Bike31 and Grand Castella Cake that came on board in 2017.
Homecoming campaign with an in-mall experience from
1 June 2017 to 9 July 2017. Children dressed up in Spider-Man      Like Jurong Point, NEX was re-certified Green Mark Gold in
costumes and participated in Spider-Man themed games,              recognition of its efforts in environmental sustainability.

                                                                  MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017                17
PROPERTY PROFILE
                                                                                   THOMSON PLAZA

     $207.0M                         100   %                           110,000           SF           $11.7M
     APPRAISED VALUE                 OWNERSHIP                         NET LETTABLE AREA              FY2017 TOTAL REVENUE
                                     (OF STRATA SPACE                  (APPROXIMATE)
                                     OWNED)

     99  YEARS
     COMMENCING FROM
                                     97.8   %
                                     OCCUPANCY RATE
                                                                       140,000
                                                                       GROSS FLOOR AREA
                                                                                        SF
     15 OCTOBER 1976                                                   (APPROXIMATE)
     LEASE TENURE

     Thomson Plaza is a strata-titled suburban mall with a rich        In January 2018, Thomson Plaza launched ‘Swing By’, a
     community heritage located along Upper Thomson Road. It will      co-retailing space which allows e-tailers to showcase their
     be connected to Upper Thomson MRT station when Thomson-           products and interact with shoppers.
     East Coast Line becomes operational in 2020. Mercatus owns
     45% of the total retails space in the mall and actively manages   On 11 December 2017, Mercatus acquired a strata lot located
     the tenant mix within its area.                                   at Thomson Plaza, bringing Peach Garden Restaurant and
                                                                       Home-Fix The D.I.Y store into its portfolio. This is in line
     Thomson Plaza had noteworthy additions to its tenant mix          with our strategy to continue investing in, developing and
     during the year. Tenants such as Wine Connection, W Tea           managing a diversified portfolio of commercial real estate in
     House, Song Kee Fishball Noodles House, Rickson’s Kitchen and     Singapore.
     Li Ho! enhanced the food and beverage selection in the mall.

18   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
PROPERTY PROFILE
RETAIL STRATA ASSETS

$499.9M                            100   %                            99.4   %
APPRAISED VALUE                    OWNERSHIP                          OCCUPANCY RATE
                                   (OF STRATA SPACE
                                   OWNED)

CORONATION PLAZA:
FREEHOLD; OTHERS:                  390,000          SF                $32.0M
                                   GROSS FLOOR AREA                   FY2017 TOTAL REVENUE
30-99
LEASE TENURE
             YEARS                 (APPROXIMATE)

The portfolio of strata assets comprise a mixture of strata-titled    The acquisition of strata assets in January 2017 is in tandem
units within shopping malls and HDB sites in various locations        with NE’s aim to create a greater social impact to do good by
across Singapore. There is a total of 37 strata-titled units          providing access to the social enterprises to meet pressing
with net lettable area ranging from approximately 1,000sf to          social needs in areas like cost of living, health and ageing, and
38,000sf. These strata spaces are leased mainly to FP for their       ensuring a good start for every child.
retail operations.

                                                                     MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017                     19
PROPERTY PROFILE
                    ONE MARINA BOULEVARD

     $650.0M                           100   %
                                       OWNERSHIP
                                                                         430,000           SF             $30.8M
     APPRAISED VALUE                                                     NET LETTABLE AREA                FY2017 TOTAL REVENUE
                                                                         (APPROXIMATE)

     99  YEARS
     COMMENCING
                                       100   %                           520,000
                                                                         GROSS FLOOR AREA
                                                                                          SF
                                       OCCUPANCY RATE
     FROM 7 JANUARY 2002                                                 (APPROXIMATE)
     LEASE TENURE

     One Marina Boulevard (OMB), a premium Grade A office, is            renovation of the main lobby, basement area, toilets, and
     located at the intersection of Marina Boulevard and Collyer         improvement to the traffic flow at the drop-off area. The
     Quay, and it is within the Central Business District (CBD) of       initiatives were completed in late 2017. As part of the asset
     Singapore.                                                          enhancement initiative, OMB introduced self-help kiosks for
                                                                         visitors to register themselves when they visit offices in OMB.
     OMB embarked on asset enhancement initiatives in 2016               An alfresco dining concept was also introduced at its main
     which involved the upgrading of the lift lobbies, lift interiors,   lobby for people to unwind after a hectic day at work.

20   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
FINANCIAL STATEMENTS
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

                                               MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017   21
DIRECTORS’
     STATEMENT
     YEAR 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.

22   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
DIRECTORS’
                                                                                            STATEMENT
                                                                                            YEAR 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’ REPORT
     MEMBERS OF THE CO-OPERATIVE
     MERCATUS 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.

24   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
INDEPENDENT
                                                                               AUDITORS’ REPORT
                                                                                              MEMBERS 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               Where independent professional valuers are engaged to
 comprising retail and office units, constituting 80% of the       appraise the valuations of the Group’s properties, we have
 total assets as at 31 December 2017. These properties are         assessed the appropriateness of the valuation methodologies
 carried at cost and are subject to an annual review to assess     and accompanying assumptions used by the valuers, taking
 whether or not they may be impaired.                              into consideration available industry data and prevailing
                                                                   market conditions.
 The Group engages external valuers to appraise the valuations
 of these properties, and uses such valuation reports to           For properties with indicators of impairment noted, we
 determine whether the properties are at risk of being impaired    evaluated the methodologies and assumptions applied
 i.e. an indication of impairment is noted when the external       in the estimation of the properties’ recoverable amount.
 valuation of the property is lower than the property’s carrying   These include comparing the key assumptions supporting
 amount.                                                           management’s value-in-use calculations, particularly the
                                                                   forecasted cash flows, discount rates, terminal growth rates,
 The properties at risk of being impaired are then subject         and average revenue growth to available market data.
 to a detailed impairment review whereby their recoverable
 amounts are estimated.                                            Findings:

 The Group uses a combination of internal and external             We found that the methodologies used by the external valuers
 valuations in estimating the recoverable amount of its            were consistent with market practices and the assumptions
 properties, which is determined to be the higher of the fair      applied were comparable to market data. The key assumptions
 value less costs to sell and value-in-use of these properties.    supporting management’s value-in-use calculations were also
 The fair values of the properties are determined based on the     in line with the historical trends achieved on the properties,
 independent professional valuations undertaken, whereas           the Group’s plans for the properties and available market data.
 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.

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’ REPORT
     MEMBERS OF THE CO-OPERATIVE
     MERCATUS 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.

26   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
INDEPENDENT
                                                                                   AUDITORS’ REPORT
                                                                                              MEMBERS 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’ REPORT
     MEMBERS OF THE CO-OPERATIVE
     MERCATUS 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

28   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
STATEMENT OF
                                                                          FINANCIAL 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
CONSOLIDATED STATEMENT OF
     COMPREHENSIVE INCOME
     YEAR ENDED 31 DECEMBER 2017

                                                    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.

30   MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
Accumulated                            Asset                        Non-
                                                                                                            Membership         profits/           Capital        replacement       Hedging    controlling
                                                                                                   Note       shares           (losses)           reserve          reserve         reserve     interest       Total
                                                                                                              $’000             $’000              $’000            $’000           $’000       $’000         $’000
                                                   Group
                                                   At 1 January 2016                                              49,813            5,782                 –                 –            –            –        55,595
                                                   Total comprehensive income for the year
                                                   Profit for the year                                                 –            7,948                 –                 –            –            –         7,948
                                                   Transactions with members, recognised
                                                      directly in equity
                                                   Contributions by and distributions
                                                      to members
                                                   Issuance of shares                               15           590,580                –                –                 –             –            –       590,580
                                                   Changes in shareholdings                         16                 –                –          176,433                 –             –            –       176,433
                                                   Transfers                                        16                 –           (8,752)               –             8,752             –            –             –
                                                   Total transactions with members                               590,580           (8,752)         176,433             8,752             –            –       767,013
                                                   At 31 December 2016                                           640,393            4,978          176,433             8,752             –            –       830,556

                                                   At 1 January 2017                                             640,393            4,978          176,433             8,752             –            –       830,556
                                                   Total comprehensive income for the year
                                                   Profit for the year                                                 –           62,416                 –                 –            –            –        62,416
                                                   Other comprehensive income
                                                   Effective portion of changes in fair value of
                                                      cashflow hedge                                                   –                –                 –                 –          (38)           –            (38)
                                                   Total other comprehensive income                                    –                –                 –                 –          (38)           –            (38)
                                                   Total comprehensive income for the year                             –           62,416                 –                 –          (38)           –        62,378
                                                   Transactions with members, recognised
                                                      directly in equity
                                                   Contributions by and distributions
                                                      to members
                                                   Issuance of shares                               15         1,073,464                –                –                 –             –            –      1,073,464
                                                   Changes in shareholdings                         16                 –                –          190,106                 –             –      201,685        391,791
                                                   Transfers                                        16                 –          (14,965)               –            14,965             –            –              –
                                                   Total transactions with members                             1,073,464          (14,965)         190,106            14,965             –      201,685      1,465,255
                                                   At 31 December 2017                                       1,713,857           52,429           366,539            23,717            (38)    201,685      2,358,189

                                                                                                     The accompanying notes form an integral part of these financial statements.
                                                                                                                                                                                                                          YEAR ENDED 31 DECEMBER 2017
                                                                                                                                                                                                                                                        CHANGES IN EQUITY
                                                                                                                                                                                                                                                           STATEMENT OF

MERCATUS CO-OPERATIVE LIMITED ANNUAL REPORT 2017
31
You can also read
NEXT SLIDES ... Cancel