A NNUAL REPORT 2018
P OSITIONING FOR GROWTH C ONTENTS
1.0 INTRODUCTION 1
A bout Mercatus Co-Operative Limited 1 Historical Milestones 2
2.0 GROUP HIGHLIGHTS 3
Business Strategy 3 Chairman’s Statement 4 Highlights of the Year 6 Financial Highlights 8 Operational Review 9 Social Impact 10
3.0 KEY PEOPLE 12
B oard of Directors 1 2 Key Management 14
4.0 PROPERTY PROFILE 16
P roperty Profile 1 6
5.0 FINANCIAL STATEMENTS 19
F inancial Statements 1 9 A BOUT MERCATUS C O-OPERATIVE LIMITED
Mercatus Co-operative Limited 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’ current portfolio comprises 5 strategically located retail and office properties, and 37 strata assets in Housing Development Board estates and shopping malls with a combined valuation of $5.3 billion as at 31 December 2018.
AMK Hub, Jurong Point, NEX, the biggest Thomson Plaza, 37 retail strata One Marina a conveniently the largest mall in the a retail mall assets in HDB Boulevard, a located shopping regional North-East located in Upper estates and premium Grade mall in the heart shopping mall in region of Thomson with a shopping malls A office building of Ang Mo Kio the west of Singapore. rich community island-wide. located in town centre. Singapore. heritage. Singapore’s Central Business District.
1 Mercatus Co-operative Limited | Annual Report 2018 1.0 INTRODUCTI ON H ISTORICAL MILESTONES
2 018
January 2018: Completed acquisition of 69.6% 2 016 of NTUC Choice Homes from NTUC July 2016: Enterprise and NTUC Acquired One FairPrice 2 011 Marina Boulevard
May 2011: July 2016: Registered in Singapore Acquired strata under the Co-operative ownership in Societies Act Thomson Plaza
November 2011: Acquired first property – AMK Hub
March 2019: Appointed as investment January 2017: manager of NTUC Acquired strata Income real estate properties in HDB portfolio estates and shopping malls 2 019
June 2017: Completed acquisition July 2012: of Jurong Point Acquired 50% interest in NEX December 2017: Acquired a strata lot 2 012 at Thomson Plaza
2 017
2 Mercatus C o-operative Limited | Annual R eport 2018 1.0 INTRODUCTI ON B USINESS S TRATEGY
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.
1 REAL ESTATE INVESTMENT MANAGEMENT Focus on strategically located high quality assets with good connectivity - shopping malls in high density suburban areas and office buildings in the downtown core of Singapore. Develop strategic partnerships to diversify income sources and expand footprint both in Singapore as well as developed markets gateway cities.
2 CAPITAL MANAGEMENT
Employ a proactive and prudent capital management framework. Maintain flexibility in respect of funding for future capital expenditures and acquisitions. Establish platform to manage capital from investors.
3 ASSET AND PROPERTY MANAGEMENT
Value creation through asset enhancement initiatives to improve the relevance and attractiveness of malls to tenants and shoppers. Adopt proactive approach to leasing and tenant management to maximize occupancy and achieving stable rental returns. Optimise and constantly refresh tenant mix for both retail and office portfolio.
3 Mercatus Co-operative Limited | Annual Report 2018 2.0 GROUP HIGHLIGHTS C HAIRMAN’S S TATEMENT
MS. MAY NG Chairman, Mercatus Co-operative Limited
Dear Members, On behalf of the Board of Directors, I am pleased to present Mercatus’ Annual Report for the year ended 31 December 2018.
R ESILIENT PORTFOLIO
Macro-economic uncertainties, increased disruptions to the retail sector and structural changes in the labour market made 2018 a very challenging year for many businesses in Singapore. Despite these tough operating conditions, Mercatus’ real estate portfolio proved resilient and continued to deliver positive returns, backed by asset enhancements, operational excellence and sound financial management.
In 2018, Mercatus’ total revenue increased to $268.4 million, up from $205.9 million in 2017, with a net surplus before contribution of $88.6 million, up from $82.1 million in 2017. In respect of the financial year ended 31 December 2018, the Board of Directors has proposed the issuance of 30 bonus shares per 1000 shares held, amounting to a total of $53.3 million, up from $50.8 million the year before.
V ALUE CREATION THROUGH ACTIVE ASSET MANAGEMENT
Since its establishment in 2011, Mercatus has strived to create products and services that provide value to our customers. Following the completion of the enhancements to One Marina Boulevard, we commenced the rejuvenation and renovation works at AMK Hub in March last year. These asset enhancement works were fully completed in January 2019.
I am pleased to mention that the mall now offers 21 new food and beverage outlets, including the popular Malaysia Boleh. The mall also houses a refreshed NTUC FairPrice hypermart that features an integrated Unity store-in-store concept offering close to 5,600 beauty, health and wellness products, in addition to pharmacist counselling and telemedicine consultation services. The enhancement works added new vibrancy to the community and created a more contemporary and elegant lifestyle experience for shoppers. Thomson Plaza will be next in the pipeline to undergo asset enhancements in 2019.
Overall, the committed occupancy of the assets in the portfolio remained strong at 99.4%, with steady shopper traffic flow. Mercatus will continue to optimise and refresh the tenant mix for its retail portfolio.
4 Mercatus Co-operative Limited | Annual Report 2018 2.0 GROUP HIGHLIGHTS C HAIRMAN’S S TATEMENT
COMMITMENT TO OPERATIONAL EXCELLENCE & SUSTAINABILITY
In our bid to build a more sustainable operating environment, we implemented several green initiatives in 2018. One of which was a waste management project where the Rotary Drum Refuse Storage System (J-DRUM) was introduced at AMK Hub, Jurong Point and NEX. J-DRUM is an advanced system that has prominent characteristics of refuse compaction, refuse volume reduction, labour saving and space saving. AMK Hub also experimented with the ecoDigester system which biologically recycles solid food waste materials into clear reusable water.
During the year, several bulk procurement exercises were conducted for maintenance services, resulting in commendable savings for the organisation. Mercatus is also committed to a green and performance based procurement policy. Mercatus will continue its efforts in optimising operational efficiencies and furthering sustainable management.
E XPANDING ITS CAPABILITIES
Mercatus launched a digital loyalty programme, M Privileges, in May 2018. An improved version of the M Malls app is under way, where our shoppers can access vast digital services in the mall, such as digital mall vouchers, promotional gift redemptions, cashless payments and enrolment in lucky draws.
In March 2019, Mercatus took a significant step to broaden its business as it took on the investment management role for the real estate portfolio of NTUC Income, a related entity. This move expands Mercatus’ assets under management by $3.5 billion to $8.8 billion and adds a dedicated investment team to the organisation’s capabilities.
L OOKING AHEAD The Singapore economy grew by 3.2% in 2018, with the Ministry of Trade and Industry projecting that the economic growth in 2019 would moderate to slightly below the mid-range of 1.5% to 3.5%. 2019 is expected to be a challenging year for the retail industry as increased uncertainties and downside risks in the global economy may fuel a slowdown in the local economy, driving more cautious spending by consumers.
E-commerce will increase its hold on the consumers’ wallet but brick-and-mortar retail is well and alive in providing the offline shopping experience and a place for social interactions. We firmly believe that the winning formula will be one that is based on putting customers first and constantly delighting shoppers with new experiences and unique innovations.
A PPRECIATION
On behalf of the Board, I wish to extend my sincere gratitude to our members, shoppers, tenants, staff and business associates for their steadfast support of Mercatus. I would also like to express my deep appreciation to the management for their hard work and dedication in delivering high standards of service to our tenants and operational excellence.
I am very grateful to my fellow directors for their counsel and guidance in steering Mercatus forward. I look forward to seeing continued growth for Mercatus.
5 Mercatus Co-operative Limited | Annual Report 2018 2.0 GROUP HIGHLIGHTS H IGHLIGHTS OF THE YEAR
Growth in Assets Under Management Appointed as the investment manager of NTUC Income real estate portfolio increasing total asset under management to $8.8 billion.
Active Capital Management Mercatus launched its second bond issuance of $150.0 million 10-year notes at 3.1% per annum on 19 January 2018 followed by a third bond issuance of $100.0 million 6-year notes at 3.28% per annum on 24 January 2019. Both issuances were oversubscribed reflecting investors’ confidence on Mercatus’ performance and credit standing. Income Building @ Raffles
Consumers and Tenants at The Forefront of Our Initiatives Asset Enhancement Initiatives at AMK Hub The completed rejuvenation works at AMK Hub had improved the accessibility and enhanced shoppers’ experience. This initiative also optimised space for a wider range of food & beverages concepts and event venues. Home Fix, DIY Workshop at Thomson Plaza Leveraging on our core strength, Thomson Plaza focused on new initiatives such as workshops. Home Fix Workshop was hosted in 2018 to promote the practice of DIY home improvements among consumers. Such initiative promotes art and empowers the consumer with the knowledge and concept of “do it yourself”. AMK Hub
Crafting Shopper Experiences and Interest Market on Wheels Event organised at AMK Hub During the year, AMK Hub brought Market on Wheels, a concept which was only available in central Singapore, to its premises. The event which took place from 3 August to 9 September 2018 brought the community together to spend meaningful time while shopping and dining. In conjunction with the nation's birthday, AMK Hub localised the concept of Market on Wheels to a "Singapulah" version by featuring locally popular food concepts such as Cereal Citizen and AbraCowDaBra. The event also included live outdoor performances by local artistes.
AMK Hub
6 Mercatus Co-operative Limited | Annual Report 2018 2.0 GROUP HIGHLIGHTS TaiGai and Go-Ang Pratunam Chicken Rice opened their first outlet in Singapore at NEX, Serangoon TaiGai is the original creator behind the “Fruity Milky Kiss”, fruit-blended milk cheese crowns. Established in Shenzhen, TaiGai is a popular tea speciality brand in China with over 60 stores across the country. Jurong Point Jurong Point Go-Ang Pratunam Chicken Rice was established in 1960 as a food stall Contributing to Sustainability specializing in Hainanese chicken rice in the Pratunam district of Bangkok and quickly Smart Toilet System and Bigbelly bins at gained popularity among locals. In 2018, the Jurong Point popular eatery was awarded a prestigious Jurong Point implemented smart toilet Michelin Bib Gourmand Award in the system and Bigbelly trash bins in October inaugural Bangkok edition of Michelin Guide. 2018. The initiative improves productivity while maintains high levels of customer satisfaction. The smart toilet system can track bathroom usage, occupancy and stock Celebrating Occasions levels of restroom amenities to improve the as One, providing Experiences washroom experience. The smart trash bin has a capacity of 600 liters which is 7 times and Excitement effective capacity of ordinary bin and it A Pokémon themed Christmas in AMK Hub, reduces garbage collection from 12 times to Jurong Point and Thomson Plaza 2 times per day. The implementation of both systems provide more efficient deployment In 2018, three of the malls within the of resources which resulted in improved Mercatus portfolio – AMK Hub, Jurong Point productivity. and Thomson Plaza came together to host a Pokémon themed Christmas in the Grease Interceptor - Trapzilla System heartlands. A globally popular game with Jurong Point installed Trapzilla Compact, a highly recognised characters, Pokémon super-capacity grease interceptor which resonates with our shoppers across collects and separate free-floating grease different age groups. Together with and oils contained in kitchen drain water The Pokémon Company, Mercatus was the flows. Trapzilla holds up to 250% more first to present the new Eevee and Pikachu grease retention capacity than conventional dance in Singapore on top of an exciting line grease traps. up of activities. The 41-day Christmas celebration drew great interest and crowd with dance performances, meet-and-greets, Rotary Drum Refuse Storage System exclusive premiums for redemption and (J-DRUM) curated workshops for engagement. AMK Hub, Jurong Point and NEX installed J-DRUM, an advanced system to store and compact refuse generated from the building hygienically and safely.
AMK Hub Jurong Point
7 Mercatus Co-operative Limited | Annual Report 2018 2.0 GROUP HIGHLIGHTS F INANCIAL H IGHLIGHTS
$268.4M $88.6M 5 3.6% TOTAL REVENUE NET SURPLUS BEFORE LEVERAGE RATIO 1 CONTRIBUTIONS
Jurong Point 15% 17% AMK Hub
41% 42% NEX 18% 19% Thomson Plaza
Retail Strata Assets 4% 4% 12% 10% 9% 9% One Marina Boulevard
Contribution by valuation 2 Contribution by total revenue 2 (as at 31 December 2018) (FY2018)
Notes: (1) Includes Mercatus’ proportionate share of its joint venture borrowings (2) Reflects 50% share of NEX’s valuation and total 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 2018 2.0 GROUP HIGHLIGHTS O PERATIONAL R EVIEW T OP 10 TENANTS CONTRIBUTION
(FOR THE MONTH OF DECEMBER 2018)
26.8% 43.0% GROSS RENT GROUP NLA 99.4% COMMITTED OCCUPANCY RATE NTUC Fairprice Co-operative Ltd Isetan (Singapore) Limited AS AT 31 DEC 2018 Microsoft Operations Pte Ltd Cold Storage Singapore (1983) Pte Ltd Allen & Gledhill LLP NTUC Foodfare Co-operative Ltd R E & S Enterprises Pte Ltd NTUC Club 154.7M Workforce Singapore Agency BHG (Singapore) Pte. Ltd. SHOPPER TRAFFIC
L EASE EXPIRY PROFILE
Jurong Point 2019 38.7% AMK Hub
NEX 2020 27.0% Thomson Plaza
Retail Strata Assets
2021 28.0% One Marina Boulevard
2022 & after 6.3%
R ETAIL TRADE CATEGORIES
Food & Beverage 1.7 Beauty & Health 0.3 1.6 2.6 2.3 1.9 3.2 2.8 Supermarket/Hypermarket 3.0 4.9 21.2 29.7 Fashion & Accessories/ 4.5 5.1 Kid’s Apparel/Shoes & Bags
0.9 5.0 Sundry & Services 4.5 Electricals including Information Technology & Telecommunication 8.1 5.2 9.9 Gifts & Souvenirs/Toys & Hobbies/ Books & Stationery/Sporting Goods
4.7 Jewellery & Watches Department Store 14.4 12.8 8.5 Leisure & Entertainment 27.7 Education 13.6 Houseware and Furnishings Gross Rent (%) NLA (%) Others
9 Mercatus Co-operative Limited | Annual Report 2018 2.0 GROUP HIGHLIGHTS S OCIAL IMPACT
Playing an Active Role in Community Support and Engagement
Mercatus' retail malls are conveniently located in the heartlands and enjoy healthy shopper traffic, which are well positioned to support social causes. This is in line with the role of retail malls being the curator and platform to provide meaningful engagements and create social impact. During the year, Mercatus supported numerous events for non-profit, community and charitable organisations. As part of supporting the wider Labour Movement in creating social impact, Mercatus continues to support NTUC U-Care Fund with a donation of $400,000.
AMK Hub: Adoption Drive March 2018 The first adoption drive of Catopia in collaboration with the Cat Welfare Society. The objective of the drive is to promote animal welfare and prevent animal cruelty.
NEX: Salvation Army Donation Drive April 2018 Over 4,500 pre-loved clothes collected with the purpose of recycling pre-loved clothing while helping those in need.
10 Mercatus Co-operative Limited | Annual Report 2018 2.0 GROUP HIGHLIGHTS AMK Hub: Venue Sponsorship for Thye Hua Kwan Moral Society June 2018 Thye Hua Kwan Moral Society launched “The Paddy Project - where every grain matters” where we recruited the youth volunteers to help distribute rice sacks door-to-door, through a roving concept truck.
The objective of this campaign is to help the needy in Singapore – the residents and elderly living mainly in one-room flats by distributing sacks of rice to them and to empower the youths and through this meaningful campaign, we want to relay a message that besides donating money to do charities, they could also give their time by volunteering.
NEX: Venue Sponsorship for Charity Organisations NEX supported numerous charity organisations for their donation drives to raise funds for the community. The charity organisations include - Thye Hwa Guan, Fostering Boys Town, Kidney Dialysis Foundation, World Vision, Singapore Heart Foundation and Lions Befrienders.
Jurong Point: Venue Sponsorship for Charity Organisations Jurong Point supported numerous charity organisations for their donation drives to raise funds for the community. The charity organisations include - AIN Society, REACH, Lion Befrienders Service Association and Lions Home for the Elders.
11 Mercatus Co-operative Limited | Annual Report 2018 2.0 GROUP HIGHLIGHTS B OARD 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 NTUC for her continuous support, dedication and MR SOONG HEE SANG significant contribution to the Labour Movement. 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 MR WONG HENG TEW Director, London; Deputy CEO of CapitaLand Director Commercial and CEO (New Markets) of CapitaLand Residential. Mr Wong is currently an Advisory Director in Temasek International Advisors. 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 NTUC for his continuous support, dedication and significant contribution to the Labour Movement.
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 recognised as a BCA Certified Construction Productivity Professional (Honorary). MR WILLY SHEE Director Mr Shee is the Senior Advisor of CBRE Pte Ltd. He is also a Director of Bund Center Investments Ltd, Keppel Land Ltd, Sinarmas Land Ltd and Ascendas Hospitality Trust.
12 Mercatus Co-operative Limited | Annual Report 2018 3.0 KEY P EOPL E B OARD OF DIRECTORS
MR YEO CHUN FING Director Mr Yeo has more than 30 years’ experience in the Labour Movement including serving as the Assistant Secretary for Financial Affairs in NTUC. He is currently Advisor to MR LIM KOK GUAN the Amalgamated Union of Public Director Employees (AUPE), Chairman of AUPE Mr Lim is the Managing Director/Head of Credit Co-operative Limited and Second Integrated Infrastructure and Support of Deputy Chairman of Singapore National NTUC FairPrice Co-operative Limited. He Co-operative Federation (SNCF). has a concurrent role in Kopitiam Investment Pte Ltd (“Kopitiam”) as Deputy Chief Executive Officer. He is also a Director of Kopitiam‘s group of companies, NTUC Choice Homes Co-operative Limited and a number of Mercatus subsidiaries.
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 MS ADELINE SUM Director of Obayashi Singapore Pte. Ltd. from 1989 to 2004. He is currently a fellow and was a Ms Sum is the Chief Executive Officer of former 2nd Vice President of the Society of Singapore Labour Foundation and Deputy Project Managers. CEO of NTUC Enterprise Co-operative Limited. She also holds directorships in ComfortDelgro Corporation Limited and NTUC Health Co-operative Limited.
AUDIT & RISK COMMITTEE ESTABLISHMENT COMMITTEE Wong Heng Tew (Chairman) May Ng (Chairman) Ng Eng Kiong Adeline Sum Yeo Chun Fing Willy Shee
INVESTMENT COMMITTEE CUSTOMER EXPERIENCE May Ng (Chairman) COMMITTEE Lim Kok Guan Willy Shee (Chairman) Soong Hee Sang Lim Kok Guan Adeline Sum (with effect from 2 Jan 2019)
13 Mercatus Co-operative Limited | Annual Report 2018 3.0 KEY P EOPL E K EY M ANAGEMENT
MR DAVID POH Chief Executive Officer Mr Poh is appointed as Chief Executive Officer of Mercatus in 2017. He leads the senior leadership team in Mercatus to achieve its long term and MS LOKE HUEY TENG sustainable growth objectives. Prior to the Managing Director, Finance & Strategic Development / Chief Financial Officer appointment, Mr Poh served on the Mercatus Board and played a key role in the setup of Ms Loke is the Managing Director, Finance & Strategic Mercatus since 2011, including the consolidation Development and the Chief Financial Officer. She has of various properties within the Labour Movement responsibility for the strategic planning, managing and and the landmark acquisition of Jurong Point in running of core corporate functions, including financial 2017. Mr Poh also holds the appointment as the reporting, treasury, risk management, legal and Deputy CEO and CFO in Singapore Labour compliance. Ms Loke has over 20 years of experience in Foundation and sits on several boards including business development, investment, capital markets, Mercatus and SLF. corporate finance and accounting. Before Mercatus, Huey Teng was the Chief Financial Officer 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, Huey Teng was with the PSA Corporation and was involved in international business development. MS TAN SER JOO Managing Director, Commercial Ms Tan is the Managing Director, Commercial. She oversees the group asset strategy and has responsibility in the growth and performance of the retail and office portfolio. Ms Tan has over 25 years of real estate experience including property investment, asset management, property MR RAJAT MITTAL development, property management, leasing, Managing Director, Digital & Technology marketing and property taxation and valuation. Mr Mittal is the Managing Director, Digital & Technology. Having worked in Singapore and China, Ms Tan has He is responsible in leading the organisation’s held various senior positions including CEO of APM technological development and digital strategy. Mr Property Management Pte Ltd, Executive director Mittal has 18 years of experience in delivering digital and Head of Investment & Asset Management of outcomes for organisations, across advanced markets the trustee-manager of Perennial China Retail and fast growing economies, including his previous role Trust and the Senior Vice President, Investment & as the Digital Transformation Director with Cisco Asset Management of Perennial Real Estate Pte Systems. In the eight years with Cisco, he has worked Ltd. Prior to that, she was the Head of Investment with government bodies, infrastructure operators, and & Asset Management and Senior Vice President of real estate companies in developing models and CapitaMalls Asia Limited and the Investment solutions for smart buildings, smart cities, Manager of CapitaMall Trust Management Limited. Internet-of-Things and industry ecosystem. Prior to Cisco Systems, Rajat led the business transformation and business development in Wipro Consulting for 11 years.
14 Mercatus Co-operative Limited | Annual Report 2018 3.0 KEY P EOPL E K EY M ANAGEMENT
MR TEO YUNG FUNG Managing Director, Investment Mr Teo is the Managing Director, Investment. He is responsible in overseeing the investment function and managing the performance and growth of the investment portfolio. Mr Teo has more than 20 years of investment experience and was with NTUC Income in the last ten years overseeing the private equity and real estate investment portfolios. He led the respective investment teams in executing and managing various investment strategies, including setting up NTUC Income’s overseas real estate investment fund program and evaluating new alternative investment asset classes. Prior to joining NTUC Income, he was with Temasek Holdings with responsibilities in private equity fund investments. He also spent ten years in Rothschild Group raising MS ELLINA CHIA Director, Asset Management and managing various private equity investment funds. Yung Fung started his career with KPMG Ms Chia is the Director, Asset Management. providing audit, corporate finance and advisory She is responsible for retail asset services. He is a CFA charterholder. performance and oversees the portfolio marketing and portfolio leasing functions. Ms Chia has accumulated 22 years of real estate experience, in lease administration, investment and asset management. Prior to joining Mercatus, Ellina was the Vice President of Asset Management with CapitaLand where she was responsible for MS SYNNETTE NG overall asset performance and notably Director, Human Resources developed the One-North Star Vista project. Ms Ng is the Director, Human Resources. She is During her tenure with CapitaLand, she held responsible for human capital management and various positions including planning and leadership development for the workforce. Ms Ng reporting of REIT and non-REIT Singapore has over 15 years of HR experience in talent assets. She was also seconded to Lendlease management, change leadership, organisation Japan for 18 months to work on the effectiveness, leadership development, and acquisition of non-performing loans. workforce engagement. Prior to Mercatus, Ms Ng was on the Asia Pacific leadership team of Diageo Global Travel Retail and led the HR strategies for both Asia commercial teams and global functions. In FedEx Express, she was the business partner to Singapore, Malaysia, and Indonesia markets. She has also held the position of the Asia Pacific Senior Industrial Psychologist in FedEx Express where she was responsible for the development and delivery of organisational development outcomes.
15 Mercatus Co-operative Limited | Annual Report 2018 3.0 KEY P EOPL E P ROPERTY PROFILE
LEASE TOTAL APPRAISED NO. OF NLA (SF) TENURE OWNERSHIP REVENUE VALUE (M) TENANTS (YEARS) FY2018 (M)
99 AMK HUB 310,000 (FROM $822.0 100% 210 $56.8 24 AUGUST 2004)
94 (JP1 - FROM 16 FEBRUARY 1998) JURONG 100% 720,000 $2,149.5 (OF STRATA 393 $138.1 POINT SPACE OWNED) 99 (JP2 - FROM 21 JUNE 2006)
99 NEX 630,000 (FROM $948.0 50% 337 $62.6 26 JUNE 2008 ) (50%)
THOMSON 99 100% 110,000 (FROM $207.0 (OF STRATA 75 $12.4 PLAZA 15 OCTOBER 1976) SPACE OWNED)
RANGE FROM RETAIL 30-99 100% MORE THAN STRATA 380,000 $511.2 (OF STRATA 37 $30.1 ASSETS EXCEPT CORONATION SPACE OWNED) TENANTS PLAZA (FREEHOLD)
ONE 99 MARINA 430,000 (FROM $650.0 100% 15 $31.0 BOULEVARD 1 JULY 2002)
16 Mercatus Co-operative Limited | Annual Report 2018 4.0 P ROPERTY P ROFILE P ROPERTY PROFILE
A MK HUB
AMK Hub is a suburban shopping mall located in Ang Mo Kio, within the North-East Region of Singapore, at the intersection of Ang Mo Kio Ave 3 and 8, connected to Ang Mo Kio Bus Interchange and linked to Ang Mo Kio MRT station via an underpass.
J URONG POINT
Jurong Point Shopping Centre is the largest regional shopping mall in the west of Singapore. It is directly connected to Boon Lay MRT station and the bus interchange.
N EX
Nex is the largest mall in North-East region of Singapore. It is connected to Serangoon MRT interchange of North East and Circle lines, and Serangoon Bus Interchange.
17 Mercatus Co-operative Limited | Annual Report 2018 4.0 P ROPERTY P ROFILE P ROPERTY PROFILE
T HOMSON PLAZA
Thomson Plaza is a suburban shopping mall located at Upper Thomson Road. It will be connected to Upper Thomson MRT station when Thomson – East Coast line becomes operational in 2020.
R ETAIL STRATA ASSETS
The portfolio of strata assets comprises a mixture of retail strata units within shopping malls and HDB sites in various locations across Singapore. There is a total of 37 retail strata assets units.
O NE MARINA BOULEVARD
One Marina Boulevard, a premium Grade A office in the Central Business District of Singapore. It is located at the intersection of Marina Boulevard and Collyer Quay. It has a direct link to Raffles Place MRT station at East West line and Downtown MRT station at Downtown line via an air-conditioned underground mall/linkway.
18 Mercatus Co-operative Limited | Annual Report 2018 4.0 P ROPERTY P ROFILE F INANCIAL STATEMENTS
5.0 FINANCIAL STATEMENTS 19
Directors’ Statement 19
Independent Auditors’ Report 21
Statements of Financial Position 27
Statements of Comprehensive Income 28
Consolidated Statement of Changes In Equity 29
Statement of Changes In Equity 31
Consolidated Statement of Cash Flows 33
Notes to the Financial Statements 35 D IRECTORS’
S TATEMENT
7KH 'LUHFWRUV SUHVHQW WKLV DQQXDO UHSRUW WR WKH PHPEHUV WRJHWKHU ZLWK WKH DXGLWHG ȴQDQFLDO VWDWHPHQWV RI WKH &RRSHUDWLYHIRUWKHȴQDQFLDO\HDUHQGHG'HFHPEHU D WKH ȴQDQFLDO VWDWHPHQWV VHW RXW RQ SDJHV WR DUH GUDZQ XS LQ DFFRUGDQFH ZLWK WKH SURYLVLRQV RI WKH &RRSHUDWLYH6RFLHWLHV$FW&KDSWHU WKHȊ$FWȋ DQG6LQJDSRUH)LQDQFLDO5HSRUWLQJ6WDQGDUGVVRDVWRJLYHDWUXH DQGIDLUYLHZRIWKHȴQDQFLDOSRVLWLRQRIWKH*URXSDQGRIWKH&RRSHUDWLYHDVDW'HFHPEHUDQGRIWKH ȴQDQFLDOSHUIRUPDQFHFKDQJHVLQHTXLW\DQGFDVKȵRZVRIWKH*URXSDQGRIWKHUHVXOWVDQGFKDQJHVLQHTXLW\RI WKH&RRSHUDWLYHIRUWKH\HDUHQGHG'HFHPEHU E DWWKHGDWHRIWKLVVWDWHPHQWWKHUHDUHUHDVRQDEOHJURXQGVWREHOLHYHWKDWWKH&RRSHUDWLYHZLOOEHDEOHWRSD\LWV GHEWVDVDQGZKHQWKH\IDOOGXH DQG F WKHUHFHLSWH[SHQGLWXUHDQGLQYHVWPHQWRIPRQLHVDFTXLVLWLRQDQGGLVSRVDORIDVVHWVPDGHE\WKH&RRSHUDWLYH GXULQJWKH\HDUHQGHG'HFHPEHUKDYHEHHQPDGHLQDFFRUGDQFHZLWKWKH%\/DZVRIWKH&RRSHUDWLYHDQG WKHSURYLVLRQVRIWKH$FW 7KH%RDUGRI'LUHFWRUVKDVRQWKHGDWHRIWKLVVWDWHPHQWDXWKRULVHGWKHVHȴQDQFLDOVWDWHPHQWVIRULVVXH (a) Directors 7KH'LUHFWRUVRIWKH&RRSHUDWLYHLQRɝFHDWWKHGDWHRIWKLVVWDWHPHQWDUHDVIROORZV May Ng Bee Bee &KDLUPDQ :RQJ+HQJ7HZ Director :LOO\6KHH3LQJ (b) Arrangements to enable Directors to acquire shares or debentures 1HLWKHUDWWKHHQGRIQRUDWDQ\WLPHGXULQJWKHȴQDQFLDO\HDUZDVWKH&RRSHUDWLYHDSDUW\WRDQ\DUUDQJHPHQW ZKRVHREMHFWLVWRHQDEOHWKH'LUHFWRUVRIWKH&RRSHUDWLYHWRDFTXLUHEHQHȴWVE\PHDQVRIWKHDFTXLVLWLRQRI VKDUHVLQRUGHEHQWXUHVRIWKH&RRSHUDWLYHRUDQ\RWKHUERG\FRUSRUDWH (c) Directors’ interests in shares or debentures $FFRUGLQJWRWKHUHJLVWHURIVKDUHKROGLQJVNHSWE\WKH&RRSHUDWLYHQR'LUHFWRUZKRKHOGRɝFHDWWKHHQGRIWKH ȴQDQFLDO\HDUKDGLQWHUHVWVLQVKDUHVRIWKH&RRSHUDWLYHRURIUHODWHGFRUSRUDWLRQVHLWKHUDWWKHEHJLQQLQJRIWKH ȴQDQFLDO\HDURUDWWKHHQGRIWKHȴQDQFLDO\HDU 19 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS D IRECTORS’ S TATEMENT Year ended 31 December 2018 (d) Share options 7KHUHZHUHQRVKDUHRSWLRQVJUDQWHGE\WKH&RRSHUDWLYHGXULQJWKHȴQDQFLDO\HDU 7KHUHZHUHQRVKDUHVLVVXHGGXULQJWKHȴQDQFLDO\HDUE\YLUWXHRIWKHH[HUFLVHRIRSWLRQVWRWDNHXSXQLVVXHG shares of the Co-operative. 7KHUHZHUHQRXQLVVXHGVKDUHVRIWKH&RRSHUDWLYHXQGHURSWLRQVDVDWWKHHQGRIWKHȴQDQFLDO\HDU (e) Auditors The auditors, KPMG LLP, have indicated their willingness to accept re-appointment. On behalf of the Board of Directors May Ng Bee Bee Chairman Wong Heng Tew Director Singapore 5 April 2019 20 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS I NDEPENDENT A UDITORS’ REPORT YHDUHQGHG'HFHPEHU Independent auditors’ report Members of the Co-operative Mercatus Co-operative Limited 5HSRUWRQWKHDXGLWRIWKHȴQDQFLDOVWDWHPHQWV Opinion :H KDYH DXGLWHG WKH ȴQDQFLDO VWDWHPHQWV RI 0HUFDWXV &RRSHUDWLYH /LPLWHG ȆWKH &RRSHUDWLYHȇ DQG LWV VXEVLGLDULHV ȆWKH*URXSȇ ZKLFKFRPSULVHWKHFRQVROLGDWHGVWDWHPHQWRIȴQDQFLDOSRVLWLRQRIWKH*URXSDQGWKHVWDWHPHQWRIȴQDQFLDO SRVLWLRQRIWKH&RRSHUDWLYHDVDW'HFHPEHUWKHFRQVROLGDWHGVWDWHPHQWRIFRPSUHKHQVLYHLQFRPHFRQVROLGDWHG VWDWHPHQWRIFKDQJHVLQHTXLW\DQGFRQVROLGDWHGVWDWHPHQWRIFDVKȵRZVRIWKH*URXSDQGVWDWHPHQWRIFRPSUHKHQVLYH LQFRPH DQG VWDWHPHQW RI FKDQJHV LQ HTXLW\ RI WKH &RRSHUDWLYH IRU WKH \HDU WKHQ HQGHG DQG QRWHV WR WKH ȴQDQFLDO VWDWHPHQWVLQFOXGLQJDVXPPDU\RIVLJQLȴFDQWDFFRXQWLQJSROLFLHVDVVHWRXWRQSDJHV WR ΖQRXURSLQLRQWKHDFFRPSDQ\LQJFRQVROLGDWHGȴQDQFLDOVWDWHPHQWVRIWKH*URXSDQGWKHVWDWHPHQWRIȴQDQFLDOSRVLWLRQ VWDWHPHQWRIFRPSUHKHQVLYHLQFRPHDQGVWDWHPHQWRIFKDQJHVLQHTXLW\RIWKH&RRSHUDWLYHDUHSURSHUO\GUDZQXSLQ DFFRUGDQFHZLWKWKHSURYLVLRQVRIWKH&RRSHUDWLYH6RFLHWLHV$FW&KDSWHU ȆWKH$FWȇ DQG)LQDQFLDO5HSRUWLQJ6WDQGDUGV LQ6LQJDSRUH Ȇ)56Vȇ VRDVWRJLYHDWUXHDQGIDLUYLHZRIWKHVWDWHRIDDLUVRIWKH*URXSDQGWKH&RRSHUDWLYHDVDW 'HFHPEHUDQGRIWKHUHVXOWVFKDQJHVLQHTXLW\DQGFDVKȵRZVRIWKH*URXSDQGRIWKHUHVXOWVDQGFKDQJHVLQ HTXLW\RIWKH&RRSHUDWLYHIRUWKH\HDUHQGHGRQWKDWGDWH Basis for opinion :HFRQGXFWHGRXUDXGLWLQDFFRUGDQFHZLWK6LQJDSRUH6WDQGDUGVRQ$XGLWLQJ Ȇ66$Vȇ 2XUUHVSRQVLELOLWLHVXQGHUWKRVH VWDQGDUGVDUHIXUWKHUGHVFULEHGLQWKHȆ$XGLWRUVȇUHVSRQVLELOLWLHVIRUWKHDXGLWRIWKHȴQDQFLDOVWDWHPHQWVȇVHFWLRQRIRXU UHSRUW:HDUHLQGHSHQGHQWRIWKH*URXSLQDFFRUGDQFHZLWKWKH$FFRXQWLQJDQG&RUSRUDWH5HJXODWRU\$XWKRULW\Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities Ȇ$&5$ &RGHȇ WRJHWKHU ZLWK WKH HWKLFDO UHTXLUHPHQWVWKDWDUHUHOHYDQWWRRXUDXGLWRIWKHȴQDQFLDOVWDWHPHQWVLQ6LQJDSRUHDQGZHKDYHIXOȴOOHGRXURWKHUHWKLFDO UHVSRQVLELOLWLHVLQDFFRUGDQFHZLWKWKHVHUHTXLUHPHQWVDQGWKH$&5$&RGH:HEHOLHYHWKDWWKHDXGLWHYLGHQFHZHKDYH REWDLQHGLVVXɝFLHQWDQGDSSURSULDWHWRSURYLGHDEDVLVIRURXURSLQLRQ Key audit matters .H\DXGLWPDWWHUVDUHWKRVHPDWWHUVWKDWLQRXUSURIHVVLRQDOMXGJHPHQWZHUHRIPRVWVLJQLȴFDQFHLQRXUDXGLWRIWKH ȴQDQFLDOVWDWHPHQWVRIWKHFXUUHQWSHULRG7KHVHPDWWHUVZHUHDGGUHVVHGLQWKHFRQWH[WRIRXUDXGLWRIWKHȴQDQFLDO VWDWHPHQWVDVDZKROHDQGLQIRUPLQJRXURSLQLRQWKHUHRQDQGZHGRQRWSURYLGHDVHSDUDWHRSLQLRQRQWKHVHPDWWHUV 21 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS I NDEPENDENT A UDITORS’ REPORT Year ended 31 December 2018 Impairment assessment of investment properties ($3,889 million as at 31 December 2018) 5HIHUWR1RWHWRWKHȴQDQFLDOVWDWHPHQWV 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 FRPSULVLQJUHWDLODQGRɝFHXQLWVFRQVWLWXWLQJRI WRDSSUDLVHWKHYDOXDWLRQVRIWKH*URXSȇVSURSHUWLHV the total assets as at 31 December 2018. These we have assessed the appropriateness of the properties are carried at cost less accumulated valuation methodologies and accompanying GHSUHFLDWLRQDQGLPSDLUPHQWORVVDQGDUHVXEMHFWWR DVVXPSWLRQV XVHG E\ WKH YDOXHUV WDNLQJ LQWR an annual review to assess whether or not they may consideration available industry data and prevailing be impaired. market conditions. The Group engages external valuers to appraise the )RU SURSHUWLHV ZLWK LQGLFDWRUV RI LPSDLUPHQW QRWHG YDOXDWLRQVRIWKHVHSURSHUWLHVDQGXVHVVXFKYDOXDWLRQ we evaluated the methodologies and assumptions reports to determine whether the properties are at risk applied in the estimation of the properties’ of being impaired i.e. an indication of impairment is recoverable amount. These include comparing the key noted when the external valuation of the property is assumptions supporting management’s value-in-use lower than the property’s carrying amount. FDOFXODWLRQV SDUWLFXODUO\ WKH IRUHFDVWHG FDVK ȵRZV GLVFRXQW UDWHV WHUPLQDO JURZWK UDWHV DQG DYHUDJH 7KH SURSHUWLHV DW ULVN DUH WKHQ VXEMHFW WR D GHWDLOHG revenue growth to available market data. 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 valuations in estimating the recoverable amount of its valuers were consistent with market practices and the SURSHUWLHVZKLFKLVGHWHUPLQHGWREHWKHKLJKHURIWKH assumptions applied were comparable to market fair value less costs to sell and value-in-use of these data. The key assumptions supporting management’s properties. The fair values of the properties are value-in-use calculations were also in line with the determined based on the independent professional KLVWRULFDO WUHQGV DFKLHYHG RQ WKH SURSHUWLHV WKH valuations undertaken using the direct comparison Group’s plans for the properties and available PHWKRGFDSLWDOLVDWLRQDSSURDFKDQGGLVFRXQWHGFDVK market data. ȵRZDSSURDFKZKHUHDVWKHYDOXHLQXVHHVWLPDWHVRI WKHSURSHUWLHVDUHGHULYHGIURPGLVFRXQWHGFDVKȵRZ forecasts prepared by management. The estimation of the recoverable amount of the properties involves the determination of valuation PHWKRGRORJLHV DQG WKH XVH RI HVWLPDWHV DQG assumptions. Changes to the estimates and DVVXPSWLRQV PD\ KDYH D VLJQLȴFDQW LPSDFW WR WKH recoverable amounts. 22 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS I NDEPENDENT A UDITORS’ REPORT Year ended 31 December 2018 Other information 0DQDJHPHQWLVUHVSRQVLEOHIRUWKHRWKHULQIRUPDWLRQFRQWDLQHGLQWKHDQQXDOUHSRUW2WKHULQIRUPDWLRQLVGHȴQHGDVDOO LQIRUPDWLRQLQWKHDQQXDOUHSRUWRWKHUWKDQWKHȴQDQFLDOVWDWHPHQWVDQGRXUDXGLWRUVȇUHSRUWWKHUHRQ :HKDYHREWDLQHGDOORWKHULQIRUPDWLRQSULRUWRWKHGDWHRIWKLVDXGLWRUVȇUHSRUW 2XU RSLQLRQ RQ WKH ȴQDQFLDO VWDWHPHQWV GRHV QRW FRYHU WKH RWKHU LQIRUPDWLRQ DQG ZH GR QRW H[SUHVV DQ\ IRUP RI assurance conclusion thereon. ΖQFRQQHFWLRQZLWKRXUDXGLWRIWKHȴQDQFLDOVWDWHPHQWVRXUUHVSRQVLELOLW\LVWRUHDGWKHRWKHULQIRUPDWLRQDQGLQGRLQJ VR FRQVLGHU ZKHWKHU WKH RWKHU LQIRUPDWLRQ LV PDWHULDOO\ LQFRQVLVWHQW ZLWK WKH ȴQDQFLDO VWDWHPHQWV RU RXU NQRZOHGJH REWDLQHGLQWKHDXGLWRURWKHUZLVHDSSHDUVWREHPDWHULDOO\PLVVWDWHGΖIEDVHGRQWKHZRUNZHKDYHSHUIRUPHGZH FRQFOXGHWKDWWKHUHLVDPDWHULDOPLVVWDWHPHQWRIWKLVRWKHULQIRUPDWLRQZHDUHUHTXLUHGWRUHSRUWWKDWIDFW:HKDYH nothing to report in this regard. 5HVSRQVLELOLWLHVRIPDQDJHPHQWDQGGLUHFWRUVIRUWKHȴQDQFLDOVWDWHPHQWV 0DQDJHPHQWLVUHVSRQVLEOHIRUWKHSUHSDUDWLRQRIȴQDQFLDOVWDWHPHQWVWKDWJLYHDWUXHDQGIDLUYLHZLQDFFRUGDQFHZLWK WKHSURYLVLRQVRIWKH$FWDQG)56VDQGIRUVXFKLQWHUQDOFRQWUROVDVPDQDJHPHQWGHWHUPLQHVLVQHFHVVDU\WRHQDEOHWKH SUHSDUDWLRQRIȴQDQFLDOVWDWHPHQWVWKDWDUHIUHHIURPPDWHULDOPLVVWDWHPHQWZKHWKHUGXHWRIUDXGRUHUURU ΖQSUHSDULQJWKHȴQDQFLDOVWDWHPHQWVPDQDJHPHQWLVUHVSRQVLEOHIRUDVVHVVLQJWKH*URXSȇVDELOLW\WRFRQWLQXHDVDJRLQJ FRQFHUQ GLVFORVLQJ DV DSSOLFDEOH PDWWHUV UHODWHG WR JRLQJ FRQFHUQ DQG XVLQJ WKH JRLQJ FRQFHUQ EDVLV RI DFFRXQWLQJXQOHVVPDQDJHPHQWHLWKHULQWHQGVWROLTXLGDWHWKH*URXSRUWRFHDVHRSHUDWLRQVRUKDVQRUHDOLVWLFDOWHUQDWLYH but to do so. 7KHGLUHFWRUVȇUHVSRQVLELOLWLHVLQFOXGHRYHUVHHLQJWKH*URXSȇVȴQDQFLDOUHSRUWLQJSURFHVV $XGLWRUVȇUHVSRQVLELOLWLHVIRUWKHDXGLWRIWKHȴQDQFLDOVWDWHPHQWV 2XU REMHFWLYHV DUH WR REWDLQ UHDVRQDEOH DVVXUDQFH DERXW ZKHWKHU WKH ȴQDQFLDO VWDWHPHQWV DV D ZKROH DUH IUHH IURP PDWHULDO PLVVWDWHPHQW ZKHWKHU GXH WR IUDXG RU HUURU DQG WR LVVXH DQ DXGLWRUVȇ UHSRUW WKDW LQFOXGHV RXU RSLQLRQ 5HDVRQDEOHDVVXUDQFHLVDKLJKOHYHORIDVVXUDQFHEXWLVQRWDJXDUDQWHHWKDWDQDXGLWFRQGXFWHGLQDFFRUGDQFHZLWK66$V ZLOODOZD\VGHWHFWDPDWHULDOPLVVWDWHPHQWZKHQLWH[LVWV0LVVWDWHPHQWVFDQDULVHIURPIUDXGRUHUURUDQGDUHFRQVLGHUHG PDWHULDOLILQGLYLGXDOO\RULQWKHDJJUHJDWHWKH\FRXOGUHDVRQDEO\EHH[SHFWHGWRLQȵXHQFHWKHHFRQRPLFGHFLVLRQVRI XVHUVWDNHQRQWKHEDVLVRIWKHVHȴQDQFLDOVWDWHPHQWV 23 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS I NDEPENDENT A UDITORS’ REPORT YHDUHQGHG'HFHPEHU $VSDUWRIDQDXGLWLQDFFRUGDQFHZLWK66$VZHH[HUFLVHSURIHVVLRQDOMXGJHPHQWDQGPDLQWDLQSURIHVVLRQDOVFHSWLFLVP WKURXJKRXWWKHDXGLW:HDOVR ΖGHQWLI\DQGDVVHVVWKHULVNVRIPDWHULDOPLVVWDWHPHQWRIWKHȴQDQFLDOVWDWHPHQWVZKHWKHUGXHWRIUDXGRUHUURU GHVLJQDQGSHUIRUPDXGLWSURFHGXUHVUHVSRQVLYHWRWKRVHULVNVDQGREWDLQDXGLWHYLGHQFHWKDWLVVXɝFLHQWDQG DSSURSULDWHWRSURYLGHDEDVLVIRURXURSLQLRQ7KHULVNRIQRWGHWHFWLQJDPDWHULDOPLVVWDWHPHQWUHVXOWLQJIURP IUDXGLVKLJKHUWKDQIRURQHUHVXOWLQJIURPHUURUDVIUDXGPD\LQYROYHFROOXVLRQIRUJHU\LQWHQWLRQDORPLVVLRQV PLVUHSUHVHQWDWLRQVRUWKHRYHUULGHRILQWHUQDOFRQWUROV 2EWDLQDQXQGHUVWDQGLQJRILQWHUQDOFRQWUROVUHOHYDQWWRWKHDXGLWLQRUGHUWRGHVLJQDXGLWSURFHGXUHVWKDWDUH DSSURSULDWHLQWKHFLUFXPVWDQFHVEXWQRWIRUWKHSXUSRVHRIH[SUHVVLQJDQRSLQLRQRQWKHHHFWLYHQHVVRIWKH *URXSȇVLQWHUQDOFRQWUROV (YDOXDWHWKHDSSURSULDWHQHVVRIDFFRXQWLQJSROLFLHVXVHGDQGWKHUHDVRQDEOHQHVVRIDFFRXQWLQJHVWLPDWHVDQG UHODWHGGLVFORVXUHVPDGHE\PDQDJHPHQW &RQFOXGHRQWKHDSSURSULDWHQHVVRIPDQDJHPHQWȇVXVHRIWKHJRLQJFRQFHUQEDVLVRIDFFRXQWLQJDQGEDVHGRQWKH DXGLW HYLGHQFH REWDLQHG ZKHWKHU D PDWHULDO XQFHUWDLQW\ H[LVWV UHODWHG WR HYHQWV RU FRQGLWLRQV WKDW PD\ FDVW VLJQLȴFDQWGRXEWRQWKH*URXSȇVDELOLW\WRFRQWLQXHDVDJRLQJFRQFHUQΖIZHFRQFOXGHWKDWDPDWHULDOXQFHUWDLQW\ H[LVWV ZH DUH UHTXLUHG WR GUDZ DWWHQWLRQ LQ RXU DXGLWRUVȇ UHSRUW WR WKH UHODWHG GLVFORVXUHV LQ WKH ȴQDQFLDO VWDWHPHQWVRULIVXFKGLVFORVXUHVDUHLQDGHTXDWHWRPRGLI\RXURSLQLRQ2XUFRQFOXVLRQVDUHEDVHGRQWKHDXGLW HYLGHQFH REWDLQHG XS WR WKH GDWH RI RXU DXGLWRUVȇ UHSRUW +RZHYHU IXWXUH HYHQWV RU FRQGLWLRQV PD\ FDXVH WKH *URXSWRFHDVHWRFRQWLQXHDVDJRLQJFRQFHUQ (YDOXDWHWKHRYHUDOOSUHVHQWDWLRQVWUXFWXUHDQGFRQWHQWRIWKHȴQDQFLDOVWDWHPHQWVLQFOXGLQJWKHGLVFORVXUHVDQG ZKHWKHU WKH ȴQDQFLDO VWDWHPHQWV UHSUHVHQW WKH XQGHUO\LQJ WUDQVDFWLRQV DQG HYHQWV LQ D PDQQHU WKDW DFKLHYHV IDLUSUHVHQWDWLRQ 2EWDLQ VXɝFLHQW DSSURSULDWH DXGLW HYLGHQFH UHJDUGLQJ WKH ȴQDQFLDO LQIRUPDWLRQ RI WKH HQWLWLHV RU EXVLQHVV DFWLYLWLHVZLWKLQWKH*URXSWRH[SUHVVDQRSLQLRQRQWKHFRQVROLGDWHGȴQDQFLDOVWDWHPHQWV:HDUHUHVSRQVLEOHIRU WKH GLUHFWLRQ VXSHUYLVLRQ DQG SHUIRUPDQFH RI WKH JURXS DXGLW :H UHPDLQ VROHO\ UHVSRQVLEOH IRU RXU DXGLWRSLQLRQ :H FRPPXQLFDWH ZLWK WKH GLUHFWRUV UHJDUGLQJ DPRQJ RWKHU PDWWHUV WKH SODQQHG VFRSH DQG WLPLQJ RI WKH DXGLW DQG VLJQLȴFDQWDXGLWȴQGLQJVLQFOXGLQJDQ\VLJQLȴFDQWGHȴFLHQFLHVLQLQWHUQDOFRQWUROVWKDWZHLGHQWLI\GXULQJRXUDXGLW :H DOVR SURYLGH WKH GLUHFWRUV ZLWK D VWDWHPHQW WKDW ZH KDYH FRPSOLHG ZLWK UHOHYDQW HWKLFDO UHTXLUHPHQWV UHJDUGLQJ LQGHSHQGHQFHDQGFRPPXQLFDWHZLWKWKHPDOOUHODWLRQVKLSVDQGRWKHUPDWWHUVWKDWPD\UHDVRQDEO\EHWKRXJKWWREHDURQ RXULQGHSHQGHQFHDQGZKHUHDSSOLFDEOHUHODWHGVDIHJXDUGV 24 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS I NDEPENDENT A UDITORS’ REPORT Year ended 31 December 2018 )URPWKHPDWWHUVFRPPXQLFDWHGZLWKWKHGLUHFWRUVZHGHWHUPLQHWKRVHPDWWHUVWKDWZHUHRIPRVWVLJQLȴFDQFHLQWKH DXGLWRIWKHȴQDQFLDOVWDWHPHQWVRIWKHFXUUHQWSHULRGDQGDUHWKHUHIRUHWKHNH\DXGLWPDWWHUV:HGHVFULEHWKHVHPDWWHUV 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 FRQVHTXHQFHVRIGRLQJVRZRXOGUHDVRQDEO\EHH[SHFWHGWRRXWZHLJKWKHSXEOLFLQWHUHVWEHQHȴWVRIVXFKFRPPXQLFDWLRQ 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 :HFRQGXFWHGRXUDXGLWLQDFFRUGDQFHZLWK66$V2XUUHVSRQVLELOLWLHVXQGHUWKRVHVWDQGDUGVDUHIXUWKHUGHVFULEHGLQWKH ‘Auditors’ responsibilities for the compliance audit’VHFWLRQRIRXUUHSRUW:HDUHLQGHSHQGHQWRIWKH*URXSLQDFFRUGDQFH ZLWKWKH$&5$&RGHWRJHWKHUZLWKWKHHWKLFDOUHTXLUHPHQWVWKDWDUHUHOHYDQWWRRXUDXGLWRIWKHȴQDQFLDOVWDWHPHQWVLQ 6LQJDSRUHDQGZHKDYHIXOȴOOHGRXURWKHUHWKLFDOUHVSRQVLELOLWLHVLQDFFRUGDQFHZLWKWKHVHUHTXLUHPHQWVDQGWKH$&5$ &RGH:HEHOLHYHWKDWWKHDXGLWHYLGHQFHZHKDYHREWDLQHGLVVXɝFLHQWDQGDSSURSULDWHWRSURYLGHDEDVLVIRURXURSLQLRQ 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. 25 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS I NDEPENDENT A UDITORS’ REPORT Year ended 31 December 2018 Auditors’ responsibility for the compliance audit 2XUUHVSRQVLELOLW\LVWRH[SUHVVDQRSLQLRQRQPDQDJHPHQWȇVFRPSOLDQFHEDVHGRQRXUDXGLWRIWKHȴQDQFLDOVWDWHPHQWV 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 DQGWKHSURYLVLRQVRIWKH$FW 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 ȴQDQFLDOVWDWHPHQWVIURPQRQFRPSOLDQFHLIDQ\EXWQRWIRUWKHSXUSRVHRIH[SUHVVLQJDQRSLQLRQRQWKHHHFWLYHQHVVRI WKH HQWLW\ȇV LQWHUQDO FRQWUROV %HFDXVH RI WKH LQKHUHQW OLPLWDWLRQV LQ DQ\ DFFRXQWLQJ DQG LQWHUQDO FRQWURO V\VWHP QRQFRPSOLDQFHVPD\QHYHUWKHOHVVRFFXUDQGQRWEHGHWHFWHG 7KHHQJDJHPHQWSDUWQHURQWKHDXGLWUHVXOWLQJLQWKLVLQGHSHQGHQWDXGLWRUVȇUHSRUWLV/R0XQ:DL KPMG LLP Public Accountants and Chartered Accountants Singapore 5 April 2019 26 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS S TATEMENTS OF F INANCIAL POSITION Year ended 31 December 2018 Group Co-operative Note 2018 2017 2018 2017 $’000 $’000 $’000 $’000 Non-current assets Property, plant and equipment 4 3,108 3,543 338 419 Investment properties 5 3,889,020 3,970,316 – – Investment in subsidiaries 6 – – 751,554 692,933 Investment in an associate 7 – 2,234 – – Investment in a joint venture 8 353,836 362,912 – – Other investments 9 195,000 260,000 – – 4,440,964 4,599,005 751,892 693,352 Current assets Other investments 9 260,000 195,000 – – Trade and other receivables 10 13,424 17,210 3,862,822 3,919,278 Cash and cash equivalents 11 216,484 156,941 170,960 68,747 489,908 369,151 4,033,782 3,988,025 Assets held for sale 12 47,491 – – – 537,399 369,151 4,033,782 3,988,025 Total assets 4,978,363 4,968,156 4,785,674 4,681,377 Non-current liabilities Rental deposits 38,210 31,107 – – Loans and borrowings 13 1,974,844 2,333,000 1,974,844 2,158,000 Trade and other payables, 14 3,327 1,287 1,875 38 including derivatives 2,016,381 2,365,394 1,976,719 2,158,038 Current liabilities Rental deposits 14,807 19,573 – – Loans and borrowings 13 454,970 175,000 279,970 – Trade and other payables 14 65,135 50,000 280,891 390,993 534,912 244,573 560,861 390,993 Total liabilities 2,551,293 2,609,967 2,537,580 2,549,031 Net assets 2,427,070 2,358,189 2,248,094 2,132,346 Equity Membership shares 15 1,803,627 1,713,857 1,803,627 1,713,857 $FFXPXODWHGSURȴWV 81,613 52,429 61,521 53,388 Other reserves 16 398,268 390,218 382,946 365,101 Equity attributable to members 2,283,508 2,156,504 2,248,094 2,132,346 of the Co-operative Non-controlling interests 6 143,562 201,685 – – Total equity 2,427,070 2,358,189 2,248,094 2,132,346 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKHVHȴQDQFLDOVWDWHPHQWV 27 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS S 7$7(0(1762) C 2035(+(16Ζ9(Ζ1&20( Year ended 31 December 2018 *URXS &RRSHUDWLYH 1RWH 2018 2017 2018 2017 $’000 $’000 $’000 $’000 Revenue 17 255,238 193,473 – 222 Other income 18 13,176 12,415 27,697 16,848 Depreciation expense (63,688) (48,282) (253) (229) Property tax (22,434) (16,699) – (33) 6WDFRVWV (19,878) (11,606) (6,097) (2,384) Maintenance fee expense (13,865) (7,438) – – Other expenses (27,022) (27,330) (5,028) (7,429) Finance income 20 9,821 420 113,446 107,784 Finance costs 20 (61,880) (32,063) (56,037) (22,665) Share of results of joint venture 19,024 19,226 – – Share of results of associate 104 – – – 3URȴWEHIRUHWD[DQGFRQWULEXWLRQV 19 88,596 82,116 73,728 92,114 Tax expense 21 (9) (2) – – 3URȴWEHIRUHFRQWULEXWLRQV 88,587 82,114 73,728 92,114 Contributions to: - Central Co-operative Fund 22 (115) (50) (25) (25) - Singapore Labour Foundation 22 (16,060) (19,648) (14,739) (18,323) 3URȴWIRUWKH\HDU 72,412 62,416 58,964 73,766 2WKHUFRPSUHKHQVLYHLQFRPH ΖWHPWKDWDUHRUPD\EHUHFODVVLȴHG VXEVHTXHQWO\WRSURȴWRUORVV (HFWLYHSRUWLRQRIFKDQJHVLQIDLU YDOXHRIFDVKȵRZKHGJH (1,837) (38) (1,837) (38) 7RWDOFRPSUHKHQVLYHLQFRPHIRU WKH\HDU 70,575 62,378 57,127 73,728 3URȴWDWWULEXWDEOHWR Members of the Co-operative 71,177 62,416 58,964 73,766 Non-controlling interests 1,235 – – – 72,412 62,416 58,964 73,766 7RWDOFRPSUHKHQVLYHLQFRPH DWWULEXWDEOHWR Members of the Co-operative 69,340 62,378 57,127 73,728 Non-controlling interests 6 1,235 – – – 7RWDOFRPSUHKHQVLYHLQFRPHIRU WKH\HDU 70,575 62,378 57,127 73,728 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKHVHȴQDQFLDOVWDWHPHQWV 28 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS C ONSOLIDATED STATEMENT O F CHANGES IN EQUITY YHDUHQGHG'HFHPEHU – (38) (38) 62,416 62,378 $’000 Total equity 830,556 562,188 562,188 465,030 438,037 1,465,255 2,358,189 – – – – – – – – – Non- $’000 201,685 201,685 201,685 interests controlling – (38) (38) 62,416 62,378 $’000 Total 830,556 562,188 562,188 263,345 438,037 1,263,570 2,156,504 – – – – – – – – (38) (38) (38) (38) $’000 reserve Hedging – – – – – – – 8,752 $’000 Asset 14,965 14,965 14,965 23,717 reserve replacement – – – – – – – $’000 89,346 reserve Capital 176,433 100,760 190,106 366,539 – – – – – 4,978 $’000 SURȴWV 62,416 62,416 52,429 (14,965) (14,965) (14,965) Accumulated – – – – – Attributable to members of the Co-operative $’000 640,393 562,188 562,188 173,999 337,277 shares 1,073,464 1,713,857 Membership 15 16 15 15 Note 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKHVHȴQDQFLDO VWDWHPHQWV Total comprehensive income for the year 3URȴWIRUWKH\HDU Other comprehensive income (HFWLYHSRUWLRQRIFKDQJHVLQIDLUYDOXHRIFDVKȵRZKHGJH Total other comprehensive income Total comprehensive income for the year Transactions with members, recognised directly in equity Contributions by and distributions to members &DSLWDOLVDWLRQRIORDQVIURPVKDUHKROGHUV Transfers Total contributions by and distributions to members Change in ownership interest subsidiaries $FTXLVLWLRQRIVXEVLGLDU\ZLWKQRQFRQWUROOLQJLQWHUHVWV Other transaction $FTXLVLWLRQRILQYHVWPHQWSURSHUWLHV Total transactions with members At 31 December 2017 At 1 January 2017 Group 29 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS C ONSOLIDATED STATEMENT O F CHANGES IN EQUITY (CONTINUED) YHDUHQGHG'HFHPEHU – – – – (1,837) (1,837) (1,694) (1,694) (1,694) 72,412 70,575 $’000 Total equity 2,358,189 2,427,070 – – – (501) 1,235 1,235 1,193 Non- (1,694) $’000 (58,857) (58,857) (59,358) 201,685 143,562 interests controlling – – (1,837) (1,837) (1,193) (1,193) 71,177 69,340 58,857 57,664 58,857 $’000 Total 2,156,504 2,283,508 – – – – – – – – – $’000 2,734 2,734 2,734 2,734 reserve Dividend – – – – – – – – (38) $’000 (1,837) (1,837) (1,837) (1,875) reserve Hedging – – – – – – – – $’000 Asset 23,717 10,952 reserve (12,765) (12,765) (12,765 ) replacement – – – – – – – – $’000 19,918 19,918 19,918 Capital reserve 366,539 386,457 – – – – – 8,838 $’000 SURȴWV 52,429 71,177 71,177 81,613 (50,831) (41,993) (41,993) Attributable to members of the Co-operative Accumulated – – – – – – 50,831 50,831 38,939 89,770 38,939 $’000 shares 1,713,857 1,803,627 Membership 15 16 15 Note 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKHVHȴQDQFLDO VWDWHPHQWV in control Total comprehensive income for the year 3URȴWIRUWKH\HDU Other comprehensive income (HFWLYHSRUWLRQRIFKDQJHVLQIDLUYDOXHRIFDVKȵRZKHGJH Total other comprehensive income Total comprehensive income for the year Transactions with members, recognised directly in equity Contributions by and distributions to members Issuance of bonus shares Transfers 'LYLGHQGVSDLG Total contributions by and distributions to members Change in ownership interest subsidiaries $FTXLVLWLRQRIQRQFRQWUROOLQJLQWHUHVWVZLWKRXWDFKDQJH Total change in ownership interest subsidiaries Total transactions with members At 31 December 2018 At 1 January 2018 Group 30 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS S TATEMENT OF C HANGES IN EQUITY YHDUHQGHG'HFHPEHU – (38) (38) 73,766 73,728 $’000 Total 796,448 562,188 562,188 261,945 438,037 equity 1,262,170 2,132,346 – – – – – – – – (38) (38) (38) (38) $’000 reserve Hedging – – – – – – – – $’000 1,540 Asset (1,540) (1,540) (1,540) reserve replacement – – – – – – – $’000 87,946 reserve Capital 100,760 188,706 365,139 176,433 – – – – – 1,540 1,540 1,540 $’000 73,766 73,766 53,388 SURȴWV (21,918) Accumulated – – – – – $’000 640,393 562,188 562,188 173,999 337,277 shares ,073,464 1 1,713,857 Membership 5 1 16 15 15 Note 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKHVHȴQDQFLDO VWDWHPHQWV Total comprehensive income for the year 3URȴWIRUWKH\HDU Other comprehensive income (HFWLYHSRUWLRQRIFKDQJHVLQIDLUYDOXHRIFDVKȵRZKHGJH Total other comprehensive income Total comprehensive income for the year Transactions with members, recognised directly in equity Contributions by and distributions to members &DSLWDOLVDWLRQRIORDQVIURPVKDUHKROGHUV Transfers Total contributions by and distributions to members Change in ownership interest subsidiaries $FTXLVLWLRQRIVXEVLGLDU\ZLWKQRQFRQWUROOLQJLQWHUHVWV Other transaction $FTXLVLWLRQRILQYHVWPHQWSURSHUWLHV Total transactions with members At 31 December 2017 At 1 January 2017 Co-operative 31 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS S TATEMENT OF C HANGES IN EQUITY (CONTINUED) YHDUHQGHG'HFHPEHU – – (1,837) (1,837) 58,964 57,127 58,621 58,621 58,621 $’000 Total equity 2,132,346 2,248,094 – – – – – – (38) $’000 (1,837) (1,837) (1,837) (1,875) reserve Hedging – – – – – – – – – – – $’000 Asset reserve replacement – – – – – – $’000 19,682 19,682 19,682 Capital 384,821 365,139 reserve – – – – $’000 53,388 58,964 58,964 61,521 SURȴWV (50,831) (50,831) (50,831) Accumulated – – – – 50,831 50,831 38,939 38,939 89,770 $’000 shares 1,713,857 1,803,627 Membership 15 15 Note 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKHVHȴQDQFLDO VWDWHPHQWV in control Total comprehensive income for the year 3URȴWIRUWKH\HDU Other comprehensive income (HFWLYHSRUWLRQRIFKDQJHVLQIDLUYDOXHRIFDVKȵRZKHGJH Total other comprehensive income Total comprehensive income for the year Transactions with members, recognised directly in equity Contributions by and distributions to members Issuance of bonus shares Total contributions by and distributions to members Change in ownership interest subsidiaries $FTXLVLWLRQRIQRQFRQWUROOLQJLQWHUHVWVZLWKRXWDFKDQJH Total change in ownership interest subsidiaries Total transactions with members At 31 December 2018 At 1 January 2018 Co-operative 32 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS C ONSOLIDATED STATEMENT O F CASH FLOWS YHDUHQGHG'HFHPEHU Group Note 2018 2017 $’000 $’000 &DVKȵRZVIURPRSHUDWLQJDFWLYLWLHV 3URȴWEHIRUHWD[DQGFRQWULEXWLRQV 88,596 82,116 $GMXVWPHQWVIRU 'HSUHFLDWLRQRISURSHUW\SODQWDQGHTXLSPHQW 4 1,077 1,063 Depreciation of investment property 5 62,611 47,219 /RVVRQGLVSRVDORILQYHVWPHQWLQDQDVVRFLDWH 2 – 6KDUHRIUHVXOWVRIMRLQWYHQWXUH (19,024) (19,226) 6KDUHRIUHVXOWVRIDVVRFLDWH (104) – Finance income (9,821) (420) Finance costs 61,880 32,063 2SHUDWLQJFDVKȵRZVEHIRUHFKDQJHVLQZRUNLQJFDSLWDO 185,217 142,815 &KDQJHVLQZRUNLQJFDSLWDO 7UDGHDQGRWKHUUHFHLYDEOHV 637 (9,375) 7UDGHDQGRWKHUSD\DEOHVDQGUHQWDOGHSRVLWV (9,210) 14,655 &DVKJHQHUDWHGIURPRSHUDWLQJDFWLYLWLHV 176,644 148,095 7D[SDLG (9) (2) 1HWFDVKȵRZVIURPRSHUDWLQJDFWLYLWLHV 176,635 148,093 &DVKȵRZVIURPLQYHVWLQJDFWLYLWLHV 3XUFKDVHRISURSHUW\SODQWDQGHTXLSPHQW (937) (1,290) 3URFHHGVIURPGLVSRVDORISURSHUW\SODQWDQGHTXLSPHQW – 3 *UDQWUHFHLYHGIRUSURSHUW\SODQWDQGHTXLSPHQW 286 – ΖQWHUHVWUHFHLYHG 9,343 420 'LYLGHQGUHFHLYHGIURPMRLQWYHQWXUH 28,100 32,500 'LYLGHQGUHFHLYHGIURPDVVRFLDWH 40 – 'LYLGHQGSDLGWRQRQFRQWUROOLQJLQWHUHVWV (1,694) – $FTXLVLWLRQRIVXEVLGLDULHVQHWRIFDVKDFTXLUHG 6 – 5,238 3URFHHGVIURPGLVSRVDORILQYHVWPHQWLQDQDVVRFLDWH 1,749 – 3XUFKDVHRILQYHVWPHQWSURSHUWLHV (17,780) (2,254,240) 1HWFDVKȵRZVIURP XVHGLQ LQYHVWLQJDFWLYLWLHV 19,107 (2,217,369) &DVKȵRZVIURPȴQDQFLQJDFWLYLWLHV ΖQWHUHVWSDLG (61,199) (27,582) 3URFHHGVIURPORDQVDQGERUURZLQJV 150,000 2,158,000 5HSD\PHQWVRIORDQVDQGERUURZLQJV (225,000) – 1HWFDVKȵRZV XVHGLQ IURPȴQDQFLQJDFWLYLWLHV (136,199) 2,130,418 1HWLQFUHDVHLQFDVKDQGFDVKHTXLYDOHQWV 59,543 61,142 &DVKDQGFDVKHTXLYDOHQWVDWEHJLQQLQJRIWKH\HDU 156,941 95,799 &DVKDQGFDVKHTXLYDOHQWVDVDWHQGRIWKH\HDU 11 216,484 156,941 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKHVHȴQDQFLDOVWDWHPHQWV 33 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS & 2162/Ζ'$7('67$7(0(17 O )&$6+)/2:6 &217Ζ18(' Year ended 31 December 2018 6LJQLȴFDQWQRQFDVKWUDQVDFWLRQV ΖQWKHUHZHUHWKHIROORZLQJVLJQLȴFDQWQRQFDVKWUDQVDFWLRQV 39 million membership shares were issued at the par value of $1 each as satisfaction of the consideration of $59 million payable on the acquisition of additional interest in a subsidiary, NTUC Choice Homes Co-operative Ltd (“NCH”) (notes 6 and 15); and 51 million membership shares were issued under the bonus issue where 33 membership shares were issued for every 1,000 membership shares (note 15). ΖQWKHUHZHUHWKHIROORZLQJVLJQLȴFDQWQRQFDVKWUDQVDFWLRQV 174 million membership shares were issued at the par value of $1 each as satisfaction of the consideration of $262 million payable on the acquisition of a subsidiary, NCH (notes 6 and 15); 337 million membership shares were issued at the par value of $1 each as satisfaction of the consideration of $438 million payable on the acquisition of investment properties from a related party; and 562 million membership shares were issued at the par value of $1 each arising from the capitalisation of loans from shareholders totalling $562 million (note 15). 7KHDFFRPSDQ\LQJQRWHVIRUPDQLQWHJUDOSDUWRIWKHVHȴQDQFLDOVWDWHPHQWV 34 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 7KHVHQRWHVIRUPDQLQWHJUDOSDUWRIWKHȴQDQFLDOVWDWHPHQWV 7KHȴQDQFLDOVWDWHPHQWVZHUHDXWKRULVHGIRULVVXHE\WKH%RDUGRI'LUHFWRUVRQ$SULO 1 Domicile and activities 0HUFDWXV &RRSHUDWLYH /LPLWHG WKH Ȋ&RRSHUDWLYHȋ LV LQFRUSRUDWHG LQ 6LQJDSRUH DQG FRQVWLWXWHG XQGHU WKH &RRSHUDWLYH 6RFLHWLHV $FW &KDSWHU 7KH DGGUHVV RI WKH &RRSHUDWLYHȇV UHJLVWHUHG RɝFH LV 1R 0DULQD %RXOHYDUG2QH0DULQD%RXOHYDUG6LQJDSRUH 7KH &RRSHUDWLYH LV D VXEVLGLDU\ RI 178& (QWHUSULVH &RRSHUDWLYH /LPLWHG Ȋ1(ȋ ZKLFK LV DOVR WKH KROGLQJFRRSHUDWLYH 7KHSULQFLSDODFWLYLW\RIWKH&RRSHUDWLYHLVWKDWRIDSURSHUW\RZQHU7KHSULQFLSDODFWLYLWLHVRIWKHVXEVLGLDULHVDUH VHWRXWLQQRWHWRWKHȴQDQFLDOVWDWHPHQWV 7KHȴQDQFLDOVWDWHPHQWVRIWKH*URXSDVDWDQGIRUWKH\HDUHQGHG'HFHPEHUFRPSULVHWKH&RRSHUDWLYH DQG LWV VXEVLGLDULHV WRJHWKHU UHIHUUHG WR DV WKH Ȋ*URXSȋ DQG LQGLYLGXDOO\ DV Ȋ*URXS HQWLWLHVȋ DQG WKH *URXSȇV LQWHUHVWVLQDMRLQWYHQWXUH 2 Basis of preparation 6WDWHPHQWRIFRPSOLDQFH 7KHȴQDQFLDOVWDWHPHQWVKDYHEHHQSUHSDUHGLQDFFRUGDQFHZLWKWKHSURYLVLRQVRIWKH&RRSHUDWLYH6RFLHWLHV$FW &KDSWHU WKHȊ$FWȋ DQG6LQJDSRUH)LQDQFLDO5HSRUWLQJ6WDQGDUGV Ȋ)56Vȋ %DVLVRIPHDVXUHPHQW 7KHȴQDQFLDOVWDWHPHQWVKDYHEHHQSUHSDUHGRQWKHKLVWRULFDOFRVWEDVLVH[FHSWDVRWKHUZLVHGHVFULEHGEHORZ )XQFWLRQDODQGSUHVHQWDWLRQFXUUHQF\ ΖWHPVLQFOXGHGLQWKHȴQDQFLDOVWDWHPHQWVRIWKH*URXSDUHPHDVXUHGXVLQJWKHFXUUHQF\WKDWEHVWUHȵHFWVWKH HFRQRPLF VXEVWDQFH RI WKH XQGHUO\LQJ WUDQVDFWLRQV HYHQWV DQG FRQGLWLRQV UHOHYDQW WR WKDW HQWLW\ WKH ȊIXQFWLRQDOFXUUHQF\ȋ 7KHVHȴQDQFLDOVWDWHPHQWVDUHSUHVHQWHGLQ6LQJDSRUH'ROODUVZKLFKLVWKH&RRSHUDWLYHȇVIXQFWLRQDOFXUUHQF\$OO ȴQDQFLDO LQIRUPDWLRQ SUHVHQWHG LQ 6LQJDSRUH 'ROODUV KDV EHHQ URXQGHG WR WKH QHDUHVW WKRXVDQG XQOHVV RWKHUZLVHVWDWHG 35 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 6LJQLȴFDQWDFFRXQWLQJHVWLPDWHVDQGMXGJHPHQWV 7KHSUHSDUDWLRQRIWKHȴQDQFLDOVWDWHPHQWVLQFRQIRUPLW\ZLWK)56VUHTXLUHVPDQDJHPHQWWRPDNHMXGJHPHQWV HVWLPDWHVDQGDVVXPSWLRQVWKDWDHFWWKHDSSOLFDWLRQRIDFFRXQWLQJSROLFLHVDQGWKHUHSRUWHGDPRXQWVRIDVVHWV OLDELOLWLHVLQFRPHDQGH[SHQVHV$FWXDOUHVXOWVPD\GLHUIURPWKHVHHVWLPDWHV (VWLPDWHVDQGXQGHUO\LQJDVVXPSWLRQVDUHUHYLHZHGRQDQRQJRLQJEDVLV5HYLVLRQVWRDFFRXQWLQJHVWLPDWHVDUH UHFRJQLVHGLQWKHSHULRGLQZKLFKWKHHVWLPDWHVDUHUHYLVHGDQGLQDQ\IXWXUHSHULRGVDHFWHG ΖQIRUPDWLRQDERXWDVVXPSWLRQVDQGHVWLPDWLRQXQFHUWDLQWLHVWKDWKDYHDVLJQLȴFDQWULVNRIUHVXOWLQJLQDPDWHULDO DGMXVWPHQWZLWKLQWKHQH[WȴQDQFLDO\HDULVGHVFULEHGLQQRWH – IΖPSDLUPHQWDVVHVVPHQWRILQYHVWPHQWSURSHUWLHV 0HDVXUHPHQWRIIDLUYDOXHV $ QXPEHU RI WKH *URXSȇV DFFRXQWLQJ SROLFLHV DQG GLVFORVXUHV UHTXLUH WKH PHDVXUHPHQW RI IDLU YDOXHV IRU ERWK ȴQDQFLDODQGQRQȴ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ΖI WKH LQSXWV XVHG WR PHDVXUH WKH IDLU YDOXH RI DQ DVVHW RU D OLDELOLW\ IDOO LQWR GLHUHQW OHYHOV RI WKH IDLU YDOXH KLHUDUFK\WKHQWKHIDLUYDOXHPHDVXUHPHQWLVFDWHJRULVHGLQLWVHQWLUHW\LQWKHVDPHOHYHORIWKHIDLUYDOXHKLHUDUFK\ DVWKHORZHVWOHYHOLQSXWWKDWLVVLJQLȴFDQWWRWKHHQWLUHPHDVXUHPHQW ZLWK/HYHOEHLQJWKHORZHVW 7KH*URXSUHFRJQLVHVWUDQVIHUVEHWZHHQOHYHOVRIWKHIDLUYDOXHKLHUDUFK\DVRIWKHHQGRIWKHUHSRUWLQJSHULRG GXULQJZKLFKWKHFKDQJHKDVRFFXUUHG )XUWKHULQIRUPDWLRQDERXWWKHDVVXPSWLRQVPDGHLQPHDVXULQJIDLUYDOXHVLVLQFOXGHGLQWKHIROORZLQJQRWHV 1RWH ΖQYHVWPHQWSURSHUW\ 1RWH)LQDQFLDOLQVWUXPHQWV &KDQJHVLQDFFRXQWLQJSROLFLHV 7KH*URXSKDVDSSOLHGWKHYDULRXVQHZ)56VDQGDPHQGPHQWVWR)56VIRUWKHȴUVWWLPHIRUWKHDQQXDOSHULRG EHJLQQLQJ RQ -DQXDU\ 7KH HHFW RI DGRSWLQJ WKHVH UHTXLUHPHQWV LV VHW RXW LQ QRWH WR WKHVH ȴQDQFLDOVWDWHPHQWV 36 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N 27(6727+( F Ζ1$1&Ζ$/67$7(0(176 Year ended 31 December 2018 3 6LJQLȴFDQWDFFRXQWLQJSROLFLHV 7KHDFFRXQWLQJSROLFLHVVHWRXWEHORZKDYHEHHQDSSOLHGFRQVLVWHQWO\WRDOOSHULRGVSUHVHQWHGLQWKHVHȴQDQFLDO statements, unless otherwise stated. The accounting policies have been applied consistently by 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 Combinations 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 neWUHFRJQLVHGDPRXQW JHQHUDOO\IDLUYDOXH RIWKHLGHQWLȴDEOHDVVHWVDFTXLUHGDQGOLDELOLWLHVDVVXPHG Any goodwill that arises is tested annually for impairment. :KHQWKHH[FHVVLVQHJDWLYHDEDUJDLQSXUFKDVHJDLQLVUHFRJQLVHGLPPHGLDWHO\LQSURȴWRUORVV The consideration transferred does not include amounts related to the settlement of pre-existing relationships. 6XFKDPRXQWVDUHJHQHUDOO\UHFRJQLVHGLQSURȴWRUORVV Any contingent consideration payable is recognised at fair value at the acquisition date and included in the FRQVLGHUDWLRQWUDQVIHUUHGΖIWKHFRQWLQJHQWFRQVLGHUDWLRQWKDWPHHWVWKHGHȴQLWLRQRIDȴQDQFLDOLQVWUXPHQWLV FODVVLȴHG DV HTXLW\ LW LV QRW UHPHDVXUHG DQG VHWWOHPHQW LV DFFRXQWHG IRU ZLWKLQ HTXLW\ 2WKHUZLVH RWKHU contingent consideration is remeasured at fair value at each reporting date and subsequent changes to the fair YDOXHRIWKHFRQWLQJHQWFRQVLGHUDWLRQDUHUHFRJQLVHGLQSURȴWRUORVV 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 QRQFRQWUROOLQJLQWHUHVWVȇSURSRUWLRQDWHVKDUHRIWKHUHFRJQLVHGDPRXQWVRIWKHDFTXLUHHȇVLGHQWLȴDEOHQHWDVVHWV 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 investments, that the Group incurs in connection with a business combination are expensed as incurred. 37 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 &KDQJHV LQ WKH *URXSȇV LQWHUHVW LQ D VXEVLGLDU\ WKDW GR QRW UHVXOW LQ D ORVV RI FRQWURO DUH DFFRXQWHG IRU DV WUDQVDFWLRQVZLWKRZQHUVLQWKHLUFDSDFLW\DVRZQHUVDQGWKHUHIRUHQRDGMXVWPHQWVDUHPDGHWRJRRGZLOODQGQR JDLQRUORVVLVUHFRJQLVHGLQSURȴWRUORVV$GMXVWPHQWVWR1&ΖDULVLQJIURPWUDQVDFWLRQVWKDWGRQRWLQYROYHWKHORVV of control are based on a proportionate amount of the net assets of the subsidiary. (ii) Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights WRYDULDEOHUHWXUQVIURPLWVLQYROYHPHQWZLWKWKHHQWLW\DQGKDVWKHDELOLW\WRDHFWWKRVHUHWXUQVWKURXJKLWVSRZHU RYHUWKHHQWLW\7KHȴQDQFLDOVWDWHPHQWVRIVXEVLGLDULHVDUHLQFOXGHGLQWKHFRQVROLGDWHGȴQDQFLDOVWDWHPHQWVIURP 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 LQWHUHVWVHYHQLIGRLQJVRFDXVHVWKHQRQFRQWUROOLQJLQWHUHVWVWRKDYHDGHȴFLWEDODQFH (iii) Loss of control When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and the other components of equity related to the subsidiary. Any resulting gain or loss is recognised LQSURȴWRUORVV$Q\LQWHUHVWUHWDLQHGLQWKHIRUPHUVXEVLGLDU\LVPHDVXUHGDWIDLUYDOXHZKHQFRQWUROLVORVW (iv) Investments in associate and joint venture $VVRFLDWHLVDQHQWLW\LQZKLFKRIWKH*URXSKDVVLJQLȴFDQWLQȵXHQFHEXWQRWFRQWURORUMRLQWFRQWURORYHUWKH ȴQDQFLDODQGRSHUDWLQJSROLFLHVRIWKHHQWLW\6LJQLȴFDQWLQȵXHQFHLVSUHVXPHGWRH[LVWZKHQ*URXSKROGVEHWZHHQ DQGRIWKHYRWLQJSRZHURIDQRWKHUHQWLW\$MRLQWYHQWXUHLVDQDUUDQJHPHQWLQZKLFKWKH*URXSKDVMRLQW control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. ΖQYHVWPHQWLQDQDVVRFLDWHDQGDMRLQWYHQWXUH DOVRUHIHUUHGWRDVȊHTXLW\DFFRXQWHGLQYHVWHHȋ DUHDFFRXQWHGIRU using the equity method and are recognised initially at cost, which includes transaction costs. Subsequent to initial UHFRJQLWLRQ WKH FRQVROLGDWHG ȴQDQFLDO VWDWHPHQWV LQFOXGH WKH *URXSȇV VKDUH RI WKH SURȴW RU ORVV DQG RWKHU FRPSUHKHQVLYHLQFRPHRIWKHHTXLW\DFFRXQWHGLQYHVWHHVDIWHUDGMXVWPHQWVWRDOLJQWKHDFFRXQWLQJSROLFLHVZLWK WKRVH RI WKH *URXS IURP WKH GDWH WKDW VLJQLȴFDQW LQȵXHQFH RU MRLQW FRQWURO FRPPHQFHV XQWLO WKH GDWH WKDW VLJQLȴFDQWLQȵXHQFHRUMRLQWFRQWUROFHDVHV :KHQWKH*URXSȇVVKDUHRIORVVHVH[FHHGVLWVLQWHUHVWLQDQHTXLW\DFFRXQWHGLQYHVWHHWKHFDUU\LQJDPRXQWRIWKH 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. 38 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 (v) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group WUDQVDFWLRQV DUH HOLPLQDWHG LQ SUHSDULQJ WKH FRQVROLGDWHG ȴQDQFLDO VWDWHPHQWV 8QUHDOLVHG JDLQV DULVLQJ IURP transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s LQWHUHVWLQWKHLQYHVWHH8QUHDOLVHGORVVHVDUHHOLPLQDWHGLQWKHVDPHZD\DVXQUHDOLVHGJDLQVEXWRQO\WRWKH extent that there is no evidence of impairment. (vi) Accounting for subsidiaries, associate and joint venture by the Co-operative ΖQYHVWPHQWV LQ VXEVLGLDULHV DVVRFLDWH DQG MRLQW YHQWXUH DUH VWDWHG LQ WKH &RRSHUDWLYHȇV VWDWHPHQW RI ȴQDQFLDO 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. :KHQSDUWVRIDQLWHPRISURSHUW\SODQWDQGHTXLSPHQWKDYHGLHUHQWXVHIXOOLYHVWKH\DUHDFFRXQWHGIRUDV separate items (major components) of property, plant and equipment. (ii) Depreciation 'HSUHFLDWLRQLVEDVHGRQWKHFRVWRIDQDVVHWOHVVLWVUHVLGXDOYDOXH6LJQLȴFDQWFRPSRQHQWVRILQGLYLGXDODVVHWVDUH DVVHVVHGDQGLIDFRPSRQHQWKDVDXVHIXOOLIHWKDWLVGLHUHQWIURPWKHUHPDLQGHURIWKDWDVVHWWKDWFRPSRQHQWLV depreciated separately. 'HSUHFLDWLRQLVUHFRJQLVHGDVDQH[SHQVHLQSURȴWRUORVVRQDVWUDLJKWOLQHEDVLVRYHUWKHHVWLPDWHGXVHIXOOLYHVRI 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: )XUQLWXUHȴWWLQJVDQGHTXLSPHQW 3 to 8 years Building improvements 3 to 10 years Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. 39 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 (iii) Subsequent costs The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying DPRXQWRIWKHLWHPLILWLVSUREDEOHWKDWWKHIXWXUHHFRQRPLFEHQHȴWVHPERGLHGZLWKLQWKHFRPSRQHQWZLOOȵRZWR the Group, and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and HTXLSPHQWDUHUHFRJQLVHGLQSURȴWRUORVVDVLQFXUUHG (iv) Disposals The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds IURP GLVSRVDO ZLWK WKH FDUU\LQJ DPRXQW RI SURSHUW\ SODQW DQG HTXLSPHQW DQG LV UHFRJQLVHG QHW ZLWKLQ RWKHU LQFRPHRURWKHUH[SHQVHVLQSURȴWRUORVVRQWKHGDWHRIGLVSRVDO 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 DWWULEXWDEOHWREULQJLQJWKHLQYHVWPHQWSURSHUWLHVWRDZRUNLQJFRQGLWLRQIRUWKHLULQWHQGHGXVHDQGFDSLWDOLVHG ERUURZLQJFRVWV 'HSUHFLDWLRQ LV UHFRJQLVHG LQ SURȴW RU ORVV RQ D VWUDLJKWOLQH EDVLV RYHU WKH HVWLPDWHG XVHIXO OLYHV DW HDFK component of investment properties. 7KHHVWLPDWHGXVHIXOOLYHVIRUWKHFXUUHQWDQGFRPSDUDWLYH\HDUVDUHDVIROORZV 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 LQ SURȴW RU ORVV 7KH FRVW RI PDLQWHQDQFH UHSDLUV DQG PLQRU LPSURYHPHQWV LV UHFRJQLVHG LQ SURȴW RU ORVV as incurred. 2QGLVSRVDORIDQLQYHVWPHQWSURSHUW\WKHGLHUHQFHEHWZHHQWKHGLVSRVDOSURFHHGVDQGWKHFDUU\LQJDPRXQWLV UHFRJQLVHGLQSURȴWRUORVV 3.4 Financial instruments – Policy applicable from 1 January 2018 (i) Recognition and initial measurement 1RQGHULYDWLYHȴQDQFLDODVVHWVDQGȴQDQFLDOOLDELOLWLHV 7UDGHUHFHLYDEOHVDQGGHEWLQYHVWPHQWVLVVXHGDUHLQLWLDOO\UHFRJQLVHGZKHQWKH\DUHRULJLQDWHG$OORWKHUȴQDQFLDO DVVHWVDQGȴQDQFLDOOLDELOLWLHVDUHLQLWLDOO\UHFRJQLVHGZKHQWKH*URXSEHFRPHVDSDUW\WRWKHFRQWUDFWXDOSURYLVLRQV of the instrument. 40 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 $ȴQDQFLDODVVHW XQOHVVLWLVDWUDGHUHFHLYDEOHZLWKRXWDVLJQLȴFDQWȴQDQFLQJFRPSRQHQW RUȴQDQFLDOOLDELOLW\LV LQLWLDOO\PHDVXUHGDWIDLUYDOXHSOXVIRUDQLWHPQRWDWIDLUYDOXHWKURXJKSURȴWRUORVV )973/ WUDQVDFWLRQFRVWV WKDW DUH GLUHFWO\ DWWULEXWDEOH WR LWV DFTXLVLWLRQ RU LVVXH $ WUDGH UHFHLYDEOH ZLWKRXW D VLJQLȴFDQW ȴQDQFLQJ component is initially measured at the transaction price. (ii) &ODVVLȴFDWLRQDQGVXEVHTXHQWPHDVXUHPHQW 1RQGHULYDWLYHȴQDQFLDODVVHWV 2Q LQLWLDO UHFRJQLWLRQ D ȴQDQFLDO DVVHW LV FODVVLȴHG DV PHDVXUHG DW DPRUWLVHG FRVW IDLU YDOXH WKURXJK RWKHU FRPSUHKHQVLYHLQFRPH )92&Ζ ȂGHEWLQYHVWPHQWRU)92&ΖȂHTXLW\LQYHVWPHQWRUIDLUYDOXHWKURXJKSURȴWRUORVV )973/ )LQDQFLDODVVHWVDUHQRWUHFODVVLȴHGVXEVHTXHQWWRWKHLULQLWLDOUHFRJQLWLRQXQOHVVWKH*URXSFKDQJHVLWVEXVLQHVV PRGHOIRUPDQDJLQJȴQDQFLDODVVHWVLQZKLFKFDVHDOODHFWHGȴQDQFLDODVVHWVDUHUHFODVVLȴHGRQWKHȴUVWGD\RI WKHȴUVWUHSRUWLQJSHULRGIROORZLQJWKHFKDQJHLQWKHEXVLQHVVPRGHO Financial assets at amortised cost $ȴQDQFLDODVVHWLVPHDVXUHGDWDPRUWLVHGFRVWLILWPHHWVERWKRIWKHIROORZLQJFRQGLWLRQVDQGLVQRWGHVLJQDWHG as at FVTPL: LWLVKHOGZLWKLQDEXVLQHVVPRGHOZKRVHREMHFWLYHLVWRKROGDVVHWVWRFROOHFWFRQWUDFWXDOFDVKȵRZV and LWVFRQWUDFWXDOWHUPVJLYHULVHRQVSHFLȴHGGDWHVWRFDVKȵRZVWKDWDUHVROHO\SD\PHQWVRISULQFLSDODQG interest on the principal amount outstanding. Debt investments at FVOCI A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: LWLVKHOGZLWKLQDEXVLQHVVPRGHOZKRVHREMHFWLYHLVDFKLHYHGE\ERWKFROOHFWLQJFRQWUDFWXDOFDVKȵRZVDQG VHOOLQJȴQDQFLDODVVHWV DQG LWVFRQWUDFWXDOWHUPVJLYHULVHRQVSHFLȴHGGDWHVWRFDVKȵRZVWKDWDUHVROHO\SD\PHQWVRISULQFLSDODQG interest on the principal amount outstanding. Equity investments at FVOCI On initial recognition of an equity investment that is not held-for-trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment-by-investment basis. Financial assets at FVTPL $OOȴQDQFLDODVVHWVQRWFODVVLȴHGDVPHDVXUHGDWDPRUWLVHGFRVWRU)92&ΖDVGHVFULEHGDERYHDUHPHDVXUHGDW )973/ 2Q LQLWLDO UHFRJQLWLRQ WKH *URXS PD\ LUUHYRFDEO\ GHVLJQDWH D ȴQDQFLDO DVVHW WKDW RWKHUZLVH PHHWV WKH UHTXLUHPHQWVWREHPHDVXUHGDWDPRUWLVHGFRVWRUDW)92&ΖDVDW)973/LIGRLQJVRHOLPLQDWHVRUVLJQLȴFDQWO\ reduces an accounting mismatch that would otherwise arise. 41 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 Financial assets: Business model assessment The Group makes an assessment of the objeFWLYHRIWKHEXVLQHVVPRGHOLQZKLFKDȴQDQFLDODVVHWLVKHOGDWD SRUWIROLR OHYHO EHFDXVH WKLV EHVW UHȵHFWV WKH ZD\ WKH EXVLQHVV LV PDQDJHG DQG LQIRUPDWLRQ LV SURYLGHG WR PDQDJHPHQW7KHLQIRUPDWLRQFRQVLGHUHGLQFOXGHV WKH VWDWHG SROLFLHV DQG REMHFWLYHV IRU WKH SRUWIROLR DQG WKH RSHUDWLRQ RI WKRVH SROLFLHV LQ SUDFWLFH 7KHVH LQFOXGH ZKHWKHU PDQDJHPHQWȇV VWUDWHJ\ IRFXVHV RQ HDUQLQJ FRQWUDFWXDO LQWHUHVW LQFRPH PDLQWDLQLQJ D SDUWLFXODULQWHUHVWUDWHSURȴOHPDWFKLQJWKHGXUDWLRQRIWKHȴQDQFLDODVVHWVWRWKHGXUDWLRQRIDQ\UHODWHG OLDELOLWLHVRUH[SHFWHGFDVKRXWȵRZVRUUHDOLVLQJFDVKȵRZVWKURXJKWKHVDOHRIWKHDVVHWV KRZWKHSHUIRUPDQFHRIWKHSRUWIROLRLVHYDOXDWHGDQGUHSRUWHGWRWKH*URXSȇVPDQDJHPHQW WKHULVNVWKDWDHFWWKHSHUIRUPDQFHRIWKHEXVLQHVVPRGHO DQGWKHȴQDQFLDODVVHWVKHOGZLWKLQWKDWEXVLQHVV PRGHO DQGKRZWKRVHULVNVDUHPDQDJHG KRZPDQDJHUVRIWKHEXVLQHVVDUHFRPSHQVDWHGȂHJZKHWKHUFRPSHQVDWLRQLVEDVHGRQWKHIDLUYDOXHRIWKH DVVHWVPDQDJHGRUWKHFRQWUDFWXDOFDVKȵRZVFROOHFWHG DQG WKHIUHTXHQF\YROXPHDQGWLPLQJRIVDOHVRIȴQDQFLDODVVHWVLQSULRUSHULRGVWKHUHDVRQVIRUVXFKVDOHVDQG H[SHFWDWLRQVDERXWIXWXUHVDOHVDFWLYLW\ 7UDQVIHUVRIȴQDQFLDODVVHWVWRWKLUGSDUWLHVLQWUDQVDFWLRQVWKDWGRQRWTXDOLI\IRUGHUHFRJQLWLRQDUHQRWFRQVLGHUHG VDOHVIRUWKLVSXUSRVHFRQVLVWHQWZLWKWKH*URXSȇVFRQWLQXLQJUHFRJQLWLRQRIWKHDVVHWV )LQDQFLDODVVHWVWKDWDUHKHOGIRUWUDGLQJRUDUHPDQDJHGDQGZKRVHSHUIRUPDQFHLVHYDOXDWHGRQDIDLUYDOXHEDVLV DUHPHDVXUHGDW)973/ 1RQGHULYDWLYHȴQDQFLDODVVHWV $VVHVVPHQWZKHWKHUFRQWUDFWXDOFDVKȵRZVDUHVROHO\SD\PHQWVRISULQFLSDODQG interest )RU WKH SXUSRVHV RI WKLV DVVHVVPHQW ȆSULQFLSDOȇ LV GHȴQHG DV WKH IDLU YDOXH RI WKH ȴQDQFLDO DVVHW RQ LQLWLDO UHFRJQLWLRQȆΖQWHUHVWȇLVGHȴQHGDVFRQVLGHUDWLRQIRUWKHWLPHYDOXHRIPRQH\DQGIRUWKHFUHGLWULVNDVVRFLDWHGZLWK WKHSULQFLSDODPRXQWRXWVWDQGLQJGXULQJDSDUWLFXODUSHULRGRIWLPHDQGIRURWKHUEDVLFOHQGLQJULVNVDQGFRVWV HJOLTXLGLW\ULVNDQGDGPLQLVWUDWLYHFRVWV DVZHOODVDSURȴWPDUJLQ ΖQDVVHVVLQJZKHWKHUWKHFRQWUDFWXDOFDVKȵRZVDUHVROHO\SD\PHQWVRISULQFLSDODQGLQWHUHVWWKH*URXSFRQVLGHUV WKHFRQWUDFWXDOWHUPVRIWKHLQVWUXPHQW7KLVLQFOXGHVDVVHVVLQJZKHWKHUWKHȴQDQFLDODVVHWFRQWDLQVDFRQWUDFWXDO WHUPWKDWFRXOGFKDQJHWKHWLPLQJRUDPRXQWRIFRQWUDFWXDOFDVKȵRZVVXFKWKDWLWZRXOGQRWPHHWWKLVFRQGLWLRQ ΖQPDNLQJWKLVDVVHVVPHQWWKH*URXSFRQVLGHUV FRQWLQJHQWHYHQWVWKDWZRXOGFKDQJHWKHDPRXQWRUWLPLQJRIFDVKȵRZV WHUPVWKDWPD\DGMXVWWKHFRQWUDFWXDOFRXSRQUDWHLQFOXGLQJYDULDEOHUDWHIHDWXUHV SUHSD\PHQWDQGH[WHQVLRQIHDWXUHV DQG WHUPVWKDWOLPLWWKH*URXSȇVFODLPWRFDVKȵRZVIURPVSHFLȴHGDVVHWV HJQRQUHFRXUVHIHDWXUHV 42 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a ȴQDQFLDODVVHWDFTXLUHGDWDVLJQLȴFDQWGLVFRXQWRUSUHPLXPWRLWVFRQWUDFWXDOSDUDPRXQWDIHDWXUHWKDWSHUPLWV RUUHTXLUHVSUHSD\PHQWDWDQDPRXQWWKDWVXEVWDQWLDOO\UHSUHVHQWVWKHFRQWUDFWXDOSDUDPRXQWSOXVDFFUXHG EXW XQSDLG FRQWUDFWXDOLQWHUHVW ZKLFKPD\DOVRLQFOXGHUHDVRQDEOHDGGLWLRQDOFRPSHQVDWLRQIRUHDUO\WHUPLQDWLRQ LV WUHDWHG DV FRQVLVWHQW ZLWK WKLV FULWHULRQ LI WKH IDLU YDOXH RI WKH SUHSD\PHQW IHDWXUH LV LQVLJQLȴFDQW DW initial recognition. 1RQGHULYDWLYHȴQDQFLDODVVHWV 6XEVHTXHQWPHDVXUHPHQWDQGJDLQVDQGORVVHV )LQDQFLDODVVHWVDW)973/ 7KHVHDVVHWVDUHVXEVHTXHQWO\PHDVXUHGDWIDLUYDOXH1HWJDLQVDQGORVVHVLQFOXGLQJDQ\LQWHUHVWRUGLYLGHQG LQFRPHDUHUHFRJQLVHGLQSURȴWRUORVV Financial assets at amortised cost 7KHVHDVVHWVDUHVXEVHTXHQWO\PHDVXUHGDWDPRUWLVHGFRVWXVLQJWKHHHFWLYHLQWHUHVWPHWKRG7KHDPRUWLVHG FRVWLVUHGXFHGE\LPSDLUPHQWORVVHVΖQWHUHVWLQFRPHIRUHLJQH[FKDQJHJDLQVDQGORVVHVDQGLPSDLUPHQWDUH UHFRJQLVHGLQSURȴWRUORVV$Q\JDLQRUORVVRQGHUHFRJQLWLRQLVUHFRJQLVHGLQSURȴWRUORVV 'HEWLQYHVWPHQWVDW)92&Ζ 7KHVH DVVHWV DUH VXEVHTXHQWO\ PHDVXUHG DW IDLU YDOXH ΖQWHUHVW LQFRPH FDOFXODWHG XVLQJ WKH HHFWLYH LQWHUHVW PHWKRGIRUHLJQH[FKDQJHJDLQVDQGORVVHVDQGLPSDLUPHQWDUHUHFRJQLVHGLQSURȴWRUORVV2WKHUQHWJDLQVDQG ORVVHVDUHUHFRJQLVHGLQRWKHUFRPSUHKHQVLYHLQFRPH 2&Ζ 2QGHUHFRJQLWLRQJDLQVDQGORVVHVDFFXPXODWHGLQ 2&ΖDUHUHFODVVLȴHGWRSURȴWRUORVV (TXLW\LQYHVWPHQWVDW)92&Ζ 7KHVHDVVHWVDUHVXEVHTXHQWO\PHDVXUHGDWIDLUYDOXH'LYLGHQGVDUHUHFRJQLVHGDVLQFRPHLQSURȴWRUORVVXQOHVV the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are UHFRJQLVHGLQ2&ΖDQGDUHQHYHUUHFODVVLȴHGWRSURȴWRUORVV 1RQGHULYDWLYHȴQDQFLDOOLDELOLWLHV &ODVVLȴFDWLRQVXEVHTXHQWPHDVXUHPHQWDQGJDLQVDQGORVVHV )LQDQFLDOOLDELOLWLHVDUHFODVVLȴHGDVPHDVXUHGDWDPRUWLVHGFRVWRU)973/$ȴQDQFLDOOLDELOLW\LVFODVVLȴHGDVDW )973/LILWLVFODVVLȴHGDVKHOGIRUWUDGLQJRULWLVGHVLJQDWHGDVVXFKRQLQLWLDOUHFRJQLWLRQ)LQDQFLDOOLDELOLWLHVDW )973/DUHPHDVXUHGDWIDLUYDOXHDQGQHWJDLQVDQGORVVHVLQFOXGLQJDQ\LQWHUHVWH[SHQVHDUHUHFRJQLVHGLQSURȴW RUORVV'LUHFWO\DWWULEXWDEOHWUDQVDFWLRQFRVWVDUHUHFRJQLVHGLQSURȴWRUORVVDVLQFXUUHG 2WKHUȴQDQFLDOOLDELOLWLHVDUHLQLWLDOO\PHDVXUHGDWIDLUYDOXHOHVVGLUHFWO\DWWULEXWDEOHWUDQVDFWLRQFRVWV7KH\DUH VXEVHTXHQWO\ PHDVXUHG DW DPRUWLVHG FRVW XVLQJ WKH HHFWLYH LQWHUHVW PHWKRG ΖQWHUHVW H[SHQVH DQG IRUHLJQ H[FKDQJH JDLQV DQG ORVVHV DUH UHFRJQLVHG LQ SURȴW RU ORVV 7KHVH ȴQDQFLDO OLDELOLWLHV FRPSULVHG ORDQV DQG borrowings, bank overdrafts, and trade and other payables. 43 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU (iii) Derecognition Financial assets 7KH*URXSGHUHFRJQLVHVDȴQDQFLDODVVHWZKHQWKHFRQWUDFWXDOULJKWVWRWKHFDVKȵRZVIURPWKHȴQDQFLDODVVHW H[SLUHRULWWUDQVIHUVWKHULJKWVWRUHFHLYHWKHFRQWUDFWXDOFDVKȵRZVLQDWUDQVDFWLRQLQZKLFKVXEVWDQWLDOO\DOORI WKHULVNVDQGUHZDUGVRIRZQHUVKLSRIWKHȴQDQFLDODVVHWDUHWUDQVIHUUHGRULQZKLFKWKH*URXSQHLWKHUWUDQVIHUV QRU UHWDLQV VXEVWDQWLDOO\ DOO RI WKH ULVNV DQG UHZDUGV RI RZQHUVKLS DQG LW GRHV QRW UHWDLQ FRQWURO RI WKH ȴQDQFLDODVVHW 7KH*URXSHQWHUVLQWRWUDQVDFWLRQVZKHUHE\LWWUDQVIHUVDVVHWVUHFRJQLVHGLQLWVVWDWHPHQWRIȴQDQFLDOSRVLWLRQEXW UHWDLQV HLWKHU DOO RU VXEVWDQWLDOO\ DOO RI WKH ULVNV DQG UHZDUGV RI WKH WUDQVIHUUHG DVVHWV ΖQ WKHVH FDVHV WKH WUDQVIHUUHGDVVHWVDUHQRWGHUHFRJQLVHG Financial liabilities The Group derecognises DȴQDQFLDOOLDELOLW\ZKHQLWVFRQWUDFWXDOREOLJDWLRQVDUHGLVFKDUJHGRUFDQFHOOHGRUH[SLUH 7KH*URXSDOVRGHUHFRJQLVHVDȴQDQFLDOOLDELOLW\ZKHQLWVWHUPVDUHPRGLȴHGDQGWKHFDVKȵRZVRIWKHPRGLȴHG OLDELOLW\DUHVXEVWDQWLDOO\GLHUHQWLQZKLFKFDVHDQHZȴQDQFLDOOLDELOLW\EDVHGRQWKHPRGLȴHGWHUPVLVUHFRJQLVHG DWIDLUYDOXH 2Q GHUHFRJQLWLRQ RI D ȴQDQFLDO OLDELOLW\ WKH GLHUHQFH EHWZHHQ WKH FDUU\LQJ DPRXQW H[WLQJXLVKHG DQG WKH FRQVLGHUDWLRQSDLG LQFOXGLQJDQ\QRQFDVKDVVHWVWUDQVIHUUHGRUOLDELOLWLHVDVVXPHG LVUHFRJQLVHGLQSURȴWRUORVV (iv) 2VHWWLQJ )LQDQFLDO DVVHWV DQG ȴQDQFLDO OLDELOLWLHV DUH RVHW DQG WKH QHW DPRXQW SUHVHQWHG LQ WKH VWDWHPHQW RI ȴQDQFLDO SRVLWLRQZKHQDQGRQO\ZKHQWKH*URXSFXUUHQWO\KDVDOHJDOO\HQIRUFHDEOHULJKWWRVHWRWKHDPRXQWVDQGLW LQWHQGVHLWKHUWRVHWWOHWKHPRQDQHWEDVLVRUWRUHDOLVHWKHDVVHWDQGVHWWOHWKHOLDELOLW\VLPXOWDQHRXVO\ (v) Cash and cash equivalents &DVKDQGFDVKHTXLYDOHQWVFRPSULVHFDVKEDODQFHVDQGVKRUWWHUPGHSRVLWVZLWKPDWXULWLHVRIWKUHHPRQWKVRUOHVV IURPWKHGDWHRIDFTXLVLWLRQWKDWDUHVXEMHFWWRDQLQVLJQLȴFDQWULVNRIFKDQJHVLQWKHLUIDLUYDOXHDQGDUHXVHGE\ WKH*URXSLQWKHPDQDJHPHQWRILWVVKRUWWHUPFRPPLWPHQWV)RUWKHSXUSRVHRIWKHVWDWHPHQWRIFDVKȵRZVEDQN RYHUGUDIWVWKDWDUHUHSD\DEOHRQGHPDQGDQGWKDWIRUPDQLQWHJUDOSDUWRIWKH*URXSȇVFDVKPDQDJHPHQWDUH LQFOXGHGLQFDVKDQGFDVKHTXLYDOHQWV (vi) 'HULYDWLYHȴQDQFLDOLQVWUXPHQWVDQGKHGJHDFFRXQWLQJ 7KH*URXSKROGVGHULYDWLYHȴQDQFLDOLQVWUXPHQWVWRKHGJHLWVLQWHUHVWUDWHULVNH[SRVXUHV(PEHGGHGGHULYDWLYHV DUHVHSDUDWHGIURPWKHKRVWFRQWUDFWDQGDFFRXQWHGIRUVHSDUDWHO\LIWKHKRVWFRQWUDFWLVQRWDȴQDQFLDODVVHWDQG FHUWDLQFULWHULDDUHPHW 'HULYDWLYHVDUHLQLWLDOO\PHDVXUHGDWIDLUYDOXHDQGDQ\GLUHFWO\DWWULEXWDEOHWUDQVDFWLRQFRVWVDUHUHFRJQLVHGLQ SURȴWRUORVVDVLQFXUUHG6XEVHTXHQWWRLQLWLDOUHFRJQLWLRQGHULYDWLYHVDUHPHDVXUHGDWIDLUYDOXHDQGFKDQJHV WKHUHLQUHFRJQLVHGLQSURȴWRUORVV 44 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 7KH *URXS GHVLJQDWHV FHUWDLQ GHULYDWLYH ȴQDQFLDO LQVWUXPHQWV DV KHGJLQJ LQVWUXPHQWV LQ TXDOLI\LQJ KHGJLQJ UHODWLRQVKLSV $W LQFHSWLRQ RI GHVLJQDWHG KHGJLQJ UHODWLRQVKLSV WKH *URXS GRFXPHQWV WKH ULVN PDQDJHPHQW REMHFWLYHDQGVWUDWHJ\IRUXQGHUWDNLQJWKHKHGJH7KH*URXSDOVRGRFXPHQWVWKHHFRQRPLFUHODWLRQVKLSEHWZHHQ WKHKHGJHGLWHPDQGWKHKHGJLQJLQVWUXPHQWLQFOXGLQJZKHWKHUWKHFKDQJHVLQFDVKȵRZVRIWKHKHGJHGLWHPDQG KHGJLQJLQVWUXPHQWDUHH[SHFWHGWRRVHWHDFKRWKHU +HGJLQJUHODWLRQVKLSVGHVLJQDWHGXQGHU)56 Financial Instruments: Recognition and MeasurementWKDWZHUHVWLOO H[LVWLQJ DV DW 'HFHPEHU DUH WUHDWHG DV FRQWLQXLQJ KHGJHV DQG KHGJH GRFXPHQWDWLRQV ZHUH DOLJQHG DFFRUGLQJO\WRWKHUHTXLUHPHQWVRI)56 Financial Instruments. &DVKȵRZKHGJHV 7KH*URXSGHVLJQDWHVFHUWDLQGHULYDWLYHVDVKHGJLQJLQVWUXPHQWVWRKHGJHWKHYDULDELOLW\LQFDVKȵRZVDVVRFLDWHG ZLWKKLJKO\SUREDEOHIRUHFDVWWUDQVDFWLRQVDULVLQJIURPFKDQJHVLQLQWHUHVWUDWHV :KHQDGHULYDWLYHLVGHVLJQDWHGDVDFDVKȵRZKHGJLQJLQVWUXPHQWWKHHHFWLYHSRUWLRQRIFKDQJHVLQWKHIDLU YDOXH RI WKH GHULYDWLYH LV UHFRJQLVHG LQ 2&Ζ DQG DFFXPXODWHG LQ WKH KHGJLQJ UHVHUYH 7KH HHFWLYH SRUWLRQ RI FKDQJHVLQWKHIDLUYDOXHRIWKHGHULYDWLYHWKDWLVUHFRJQLVHGLQ2&ΖLVOLPLWHGWRWKHFXPXODWLYHFKDQJHLQIDLUYDOXH RIWKHKHGJHGLWHPGHWHUPLQHGRQDSUHVHQWYDOXHEDVLVIURPLQFHSWLRQRIWKHKHGJH$Q\LQHHFWLYHSRUWLRQRI FKDQJHVLQWKHIDLUYDOXHRIWKHGHULYDWLYHLVUHFRJQLVHGLPPHGLDWHO\LQSURȴWRUORVV :KHQ WKH KHGJHG IRUHFDVW WUDQVDFWLRQ VXEVHTXHQWO\ UHVXOWV LQ WKH UHFRJQLWLRQ RI D QRQȴQDQFLDO LWHP VXFK DV LQYHQWRU\ WKH DPRXQW DFFXPXODWHG LQ WKH KHGJLQJ UHVHUYH LV LQFOXGHG GLUHFWO\ LQ WKH LQLWLDO FRVW RI WKH QRQȴQDQFLDOLWHPZKHQLWLVUHFRJQLVHG )RUDOORWKHUKHGJHGIRUHFDVWWUDQVDFWLRQVWKHDPRXQWDFFXPXODWHGLQWKHKHGJLQJUHVHUYHLVUHFODVVLȴHGWRSURȴW RUORVVLQWKHVDPHSHULRGRUSHULRGVGXULQJZKLFKWKHKHGJHGH[SHFWHGIXWXUHFDVKȵRZVDHFWSURȴWRUORVV ΖI WKH KHGJH QR ORQJHU PHHWV WKH FULWHULD IRU KHGJH DFFRXQWLQJ RU WKH KHGJLQJ LQVWUXPHQW LV VROG H[SLUHV LV WHUPLQDWHGRULVH[HUFLVHGWKHQKHGJHDFFRXQWLQJLVGLVFRQWLQXHGSURVSHFWLYHO\:KHQKHGJHDFFRXQWLQJIRUFDVK ȵRZKHGJHVLVGLVFRQWLQXHGWKHDPRXQWWKDWKDVEHHQDFFXPXODWHGLQWKHKHGJLQJUHVHUYHUHPDLQVLQHTXLW\XQWLO IRUDKHGJHRIDWUDQVDFWLRQUHVXOWLQJLQUHFRJQLWLRQRIDQRQȴQDQFLDOLWHPLWLVLQFOXGHGLQWKHQRQȴQDQFLDOLWHPȇV FRVWRQLWVLQLWLDOUHFRJQLWLRQRUIRURWKHUFDVKȵRZKHGJHVLWLVUHFODVVLȴHGWRSURȴWRUORVVLQWKHVDPHSHULRGRU SHULRGVDVWKHKHGJHGH[SHFWHGIXWXUHFDVKȵRZVDHFWSURȴWRUORVV ΖIWKHKHGJHGIXWXUHFDVKȵRZVDUHQRORQJHUH[SHFWHGWRRFFXUWKHQWKHDPRXQWVWKDWKDYHEHHQDFFXPXODWHGLQ WKHKHGJLQJUHVHUYHDUHLPPHGLDWHO\UHFODVVLȴHGWRSURȴWRUORVV ΖPSDLUPHQWRIȴQDQFLDODVVHWVȂ3ROLF\DSSOLFDEOHIURP-DQXDU\ (i) 1RQGHULYDWLYHȴQDQFLDODVVHWV 7KH *URXS UHFRJQLVHV ORVV DOORZDQFHV IRU H[SHFWHG FUHGLW ORVVHV (&/V RQ ȴQDQFLDO DVVHWV PHDVXUHG DW DPRUWLVHGFRVW 45 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 Loss allowances of the Group are measured on either of the following bases: 12-month ECLs: these are ECLs that result from default events that are possible within the 12 months after the reporting date (or for a shorter period if the expected life of the instrument is less than 12 months); or /LIHWLPH(&/V WKHVHDUH(&/VWKDWUHVXOWIURPDOOSRVVLEOHGHIDXOWHYHQWVRYHUWKHH[SHFWHGOLIHRIDȴQDQFLDO instrument or contract asset. 6LPSOLȴHGDSSURDFK 7KH*URXSDSSOLHVWKHVLPSOLȴHGDSSURDFKWRSURYLGHIRU(&/VIRUDOOWUDGHUHFHLYDEOHV7KHVLPSOLȴHGDSSURDFK requires the loss allowance to be measured at an amount equal to lifetime ECLs. *HQHUDODSSURDFK 7KH*URXSDSSOLHVWKHJHQHUDODSSURDFKWRSURYLGHIRU(&/VRQDOORWKHUȴQDQFLDOLQVWUXPHQWV8QGHUWKHJHQHUDO approach, the loss allowance is measured at an amount equal to 12-month ECLs at initial recognition. $W HDFK UHSRUWLQJ GDWH WKH *URXS DVVHVVHV ZKHWKHU WKH FUHGLW ULVN RI D ȴQDQFLDO LQVWUXPHQW KDV LQFUHDVHG VLJQLȴFDQWO\ VLQFH LQLWLDO UHFRJQLWLRQ :KHQ FUHGLW ULVN KDV LQFUHDVHG VLJQLȴFDQWO\ VLQFH LQLWLDO UHFRJQLWLRQ ORVV allowance is measured at an amount equal to lifetime ECLs. :KHQGHWHUPLQLQJZKHWKHUWKHFUHGLWULVNRIDȴQDQFLDODVVHWKDVLQFUHDVHGVLJQLȴFDQWO\VLQFHLQLWLDOUHFRJQLWLRQ and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and DYDLODEOHZLWKRXWXQGXHFRVWRUHRUW7KLVLQFOXGHVERWKTXDQWLWDWLYHDQGTXDOLWDWLYHLQIRUPDWLRQDQGDQDO\VLV based on the Group’s historical experience and informed credit assessment and includes forward-looking information. ΖI FUHGLW ULVN KDV QRW LQFUHDVHG VLJQLȴFDQWO\ VLQFH LQLWLDO UHFRJQLWLRQ RU LI WKH FUHGLW TXDOLW\ RI WKH ȴQDQFLDO LQVWUXPHQWVLPSURYHVVXFKWKDWWKHUHLVQRORQJHUDVLJQLȴFDQWLQFUHDVHLQFUHGLWULVNVLQFHLQLWLDOUHFRJQLWLRQORVV allowance is measured at an amount equal to 12-month ECLs. 7KH*URXSFRQVLGHUVDȴQDQFLDODVVHWWREHLQGHIDXOWZKHQWKHERUURZHULVXQOLNHO\WRSD\LWVFUHGLWREOLJDWLRQVWR the Group in full, without recourse by the Group to actions such as realising security (if any is held). 0HDVXUHPHQWRI(&/V ECLs are probability-weighted estimates of credit losses. Credit losses are measured at the present value of all cash VKRUWIDOOV LHWKHGLHUHQFHEHWZHHQWKHFDVKȵRZVGXHWRWKHHQWLW\LQDFFRUGDQFHZLWKWKHFRQWUDFWDQGWKHFDVK ȵRZVWKDWWKH*URXSH[SHFWVWRUHFHLYH (&/VDUHGLVFRXQWHGDWWKHHHFWLYHLQWHUHVWUDWHRIWKHȴQDQFLDODVVHW &UHGLWLPSDLUHGȴQDQFLDODVVHWV $WHDFKUHSRUWLQJGDWHWKH*URXSDVVHVVHVZKHWKHUȴQDQFLDODVVHWVFDUULHGDWDPRUWLVHGFRVWDUHFUHGLWLPSDLUHG $ȴQDQFLDODVVHWLVȆFUHGLWLPSDLUHGȇZKHQRQHRUPRUHHYHQWVWKDWKDYHDGHWULPHQWDOLPSDFWRQWKHHVWLPDWHG IXWXUHFDVKȵRZVRIWKHȴQDQFLDODVVHWKDYHRFFXUUHG 46 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU (YLGHQFHWKDWDȴQDQFLDODVVHWLVFUHGLWLPSDLUHGLQFOXGHVWKHIROORZLQJREVHUYDEOHGDWD VLJQLȴFDQWȴQDQFLDOGLɝFXOW\RIWKHERUURZHURULVVXHU DEUHDFKRIFRQWUDFWVXFKDVDGHIDXOW WKHUHVWUXFWXULQJRIDORDQRUDGYDQFHE\WKH*URXSRQWHUPVWKDWWKH*URXSZRXOGQRWFRQVLGHURWKHUZLVH LWLVSUREDEOHWKDWWKHERUURZHUZLOOHQWHUEDQNUXSWF\RURWKHUȴQDQFLDOUHRUJDQLVDWLRQ RU WKHGLVDSSHDUDQFHRIDQDFWLYHPDUNHWIRUDVHFXULW\EHFDXVHRIȴQDQFLDOGLɝFXOWLHV 3UHVHQWDWLRQRIDOORZDQFHIRU(&/VLQWKHVWDWHPHQWRIȴQDQFLDOSRVLWLRQ /RVVDOORZDQFHVIRUȴQDQFLDODVVHWVPHDVXUHGDWDPRUWLVHGFRVWDUHGHGXFWHGIURPWKHJURVVFDUU\LQJDPRXQWRI WKHVHDVVHWV :ULWHR 7KHJURVVFDUU\LQJDPRXQWRIDȴQDQFLDODVVHWLVZULWWHQR HLWKHUSDUWLDOO\RULQIXOO WRWKHH[WHQWWKDWWKHUHLVQR UHDOLVWLFSURVSHFWRIUHFRYHU\7KLVLVJHQHUDOO\WKHFDVHZKHQWKH*URXSGHWHUPLQHVWKDWWKHGHEWRUGRHVQRWKDYH DVVHWVRUVRXUFHVRILQFRPHWKDWFRXOGJHQHUDWHVXɝFLHQWFDVKȵRZVWRUHSD\WKHDPRXQWVVXEMHFWWRWKHZULWHR +RZHYHUȴQDQFLDODVVHWVWKDWDUHZULWWHQRFRXOGVWLOOEHVXEMHFWWRHQIRUFHPHQWDFWLYLWLHVLQRUGHUWRFRPSO\ ZLWKWKH*URXSȇVSURFHGXUHVIRUUHFRYHU\RIDPRXQWVGXH (ii) Associates and joint venture $QLPSDLUPHQWORVVLQUHVSHFWRIDQDVVRFLDWHRUMRLQWYHQWXUHLVPHDVXUHGE\FRPSDULQJWKHUHFRYHUDEOHDPRXQW RI WKH LQYHVWPHQW ZLWK LWV FDUU\LQJ DPRXQW LQ DFFRUGDQFH ZLWK WKH UHTXLUHPHQWV IRU QRQȴQDQFLDO DVVHWV $QLPSDLUPHQWORVVLVUHFRJQLVHGLQSURȴWRUORVV$QLPSDLUPHQWORVVLVUHYHUVHGLIWKHUHKDVEHHQDIDYRXUDEOH FKDQJHLQWKHHVWLPDWHVXVHGWRGHWHUPLQHWKHUHFRYHUDEOHDPRXQW 3.6 Financial instruments – Policy applicable before 1 January 2018 1RQGHULYDWLYHȴQDQFLDODVVHWV 7KH*URXSLQLWLDOO\UHFRJQLVHVORDQVDQGUHFHLYDEOHVDQGGHSRVLWVRQWKHGDWHWKDWWKH\DUHRULJLQDWHG$OORWKHU ȴQDQFLDODVVHWVDUHUHFRJQLVHGLQLWLDOO\RQWKHWUDGHGDWHDWZKLFKWKH*URXSEHFRPHVDSDUW\WRWKHFRQWUDFWXDO SURYLVLRQVRIWKHLQVWUXPHQW 7KH*URXSGHUHFRJQLVHVDȴQDQFLDODVVHWZKHQWKHFRQWUDFWXDOULJKWVWRWKHFDVKȵRZVIURPWKHDVVHWH[SLUHRULW WUDQVIHUV WKH ULJKWV WR UHFHLYH WKH FRQWUDFWXDO FDVK ȵRZV RQ WKH ȴQDQFLDO DVVHW LQ D WUDQVDFWLRQ LQ ZKLFK VXEVWDQWLDOO\ DOO WKH ULVNV DQG UHZDUGV RI RZQHUVKLS RI WKH ȴQDQFLDO DVVHW DUH WUDQVIHUUHG $Q\ LQWHUHVW LQ WUDQVIHUUHGȴQDQFLDODVVHWVWKDWLVFUHDWHGRUUHWDLQHGE\WKH*URXSLVUHFRJQLVHGDVDVHSDUDWHDVVHWRUOLDELOLW\ )LQDQFLDODVVHWVDQGOLDELOLWLHVDUHRVHWDQGWKHQHWDPRXQWSUHVHQWHGLQWKHVWDWHPHQWRIȴQDQFLDOSRVLWLRQZKHQ DQGRQO\ZKHQWKH*URXSKDVDOHJDOULJKWWRRVHWWKHDPRXQWVDQGLQWHQGVHLWKHUWRVHWWOHRQDQHWEDVLVRUWR UHDOLVHWKHDVVHWDQGVHWWOHWKHOLDELOLW\VLPXOWDQHRXVO\ 7KH*URXSFODVVLȴHVQRQGHULYDWLYHȴQDQFLDODVVHWVLQWRWKHIROORZLQJFDWHJRULHV KHOGWRPDWXULW\ȴQDQFLDODVVHWV DQGORDQVDQGUHFHLYDEOHV 47 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 +HOGWRPDWXULW\ȴQDQFLDODVVHWV ΖIWKH*URXSKDVWKHSRVLWLYHLQWHQWDQGDELOLW\WRKROGGHEWVHFXULWLHVWRPDWXULW\WKHQVXFKȴQDQFLDODVVHWVDUH FODVVLȴHGDVKHOGWRPDWXULW\+HOGWRPDWXULW\ȴQDQFLDODVVHWVDUHLQLWLDOO\PHDVXUHGDWIDLUYDOXHSOXVDQ\GLUHFWO\ DWWULEXWDEOHWUDQVDFWLRQFRVWV6XEVHTXHQWWRLQLWLDOUHFRJQLWLRQKHOGWRPDWXULW\ȴQDQFLDODVVHWVDUHPHDVXUHGDW DPRUWLVHGFRVWXVLQJWKHHHFWLYHLQWHUHVWPHWKRGOHVVDQ\LPSDLUPHQWORVVHV +HOGWRPDWXULW\ȴQDQFLDODVVHWVFRPSULVHGHEWVHFXULWLHV /RDQVDQGUHFHLYDEOHV /RDQVDQGUHFHLYDEOHVDUHȴQDQFLDODVVHWVZLWKȴ[HGRUGHWHUPLQDEOHSD\PHQWVWKDWDUHQRWTXRWHGLQDQDFWLYH PDUNHW6XFKDVVHWVDUHUHFRJQLVHGLQLWLDOO\DWIDLUYDOXHSOXVDQ\GLUHFWO\DWWULEXWDEOHWUDQVDFWLRQFRVWV6XEVHTXHQW WRLQLWLDOUHFRJQLWLRQORDQVDQGUHFHLYDEOHVDUHPHDVXUHGDWDPRUWLVHGFRVWXVLQJWKHHHFWLYHLQWHUHVWPHWKRG OHVVDQ\LPSDLUPHQWORVVHV /RDQVDQGUHFHLYDEOHVFRPSULVHWUDGHDQGRWKHUUHFHLYDEOHVDQGFDVKDQGFDVKHTXLYDOHQWV &DVKDQGFDVKHTXLYDOHQWVFRPSULVHFDVKRQKDQGEDQNEDODQFHVDQGȴ[HGGHSRVLWVWKDWDUHUHDGLO\FRQYHUWLEOHWR DNQRZQDPRXQWRIFDVKDQGDUHVXEMHFWWRDQLQVLJQLȴFDQWULVNRIFKDQJHVLQWKHLUIDLUYDOXH ΖPSDLUPHQWRIȴQDQFLDODVVHWV $ȴQDQFLDODVVHWQRWFDUULHGDWIDLUYDOXHWKURXJKSURȴWRUORVVLVDVVHVVHGDWHDFKUHSRUWLQJGDWHWRGHWHUPLQH ZKHWKHU WKHUH LV DQ\ REMHFWLYH HYLGHQFH WKDW LW LV LPSDLUHG $ ȴQDQFLDO DVVHW LV LPSDLUHG LI REMHFWLYH HYLGHQFH LQGLFDWHVWKDWDORVVHYHQWKDVRFFXUUHGDIWHUWKHLQLWLDOUHFRJQLWLRQRIWKHDVVHWDQGWKDWWKHORVVHYHQWKDVD QHJDWLYHHHFWRQWKHHVWLPDWHGIXWXUHFDVKȵRZVRIWKDWDVVHWWKDWFDQEHHVWLPDWHGUHOLDEO\ 2EMHFWLYH HYLGHQFH WKDW ȴ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ȴFDVVHWDQGFROOHFWLYHOHYHO$OOLQGLYLGXDOO\VLJQLȴFDQWORDQVDQGUHFHLYDEOHVDQGKHOGWRPDWXULW\ ȴQDQFLDODVVHWVDUHDVVHVVHGIRUVSHFLȴFLPSDLUPHQW$OOLQGLYLGXDOO\VLJQLȴFDQWUHFHLYDEOHVDQGKHOGWRPDWXULW\ ȴQDQFLDODVVHWVIRXQGQRWWREHVSHFLȴFDOO\LPSDLUHGDUHWKHQFROOHFWLYHO\DVVHVVHGIRUDQ\LPSDLUPHQWWKDWKDV EHHQ LQFXUUHG EXW QRW \HW LGHQWLȴHG /RDQV DQG UHFHLYDEOHV DQG KHOGWRPDWXULW\ ȴQDQFLDO DVVHWV WKDW DUH QRW LQGLYLGXDOO\VLJQLȴFDQWDUHFROOHFWLYHO\DVVHVVHGIRULPSDLUPHQWE\JURXSLQJWRJHWKHUORDQVDQGUHFHLYDEOHVDQG KHOGWRPDWXULW\ȴQDQFLDODVVHWVZLWKVLPLODUULVNFKDUDFWHULVWLFV ΖQDVVHVVLQJFROOHFWLYHLPSDLUPHQWWKH*URXSXVHVKLVWRULFDOWUHQGVRIWKHSUREDELOLW\RIGHIDXOWWKHWLPLQJRI UHFRYHULHV DQG WKH DPRXQW RI ORVV LQFXUUHG DGMXVWHG IRU PDQDJHPHQWȇV MXGJHPHQW DV WR ZKHWKHU FXUUHQW HFRQRPLFDQGFUHGLWFRQGLWLRQVDUHVXFKWKDWWKHDFWXDOORVVHVDUHOLNHO\WREHJUHDWHURUOHVVWKDQVXJJHVWHGE\ KLVWRULFDOWUHQGV 48 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU $Q LPSDLUPHQW ORVV LQ UHVSHFW RI D ȴQDQFLDO DVVHW PHDVXUHG DW DPRUWLVHG FRVW LV FDOFXODWHG DV WKH GLHUHQFH EHWZHHQLWVFDUU\LQJDPRXQWDQGWKHSUHVHQWYDOXHRIWKHHVWLPDWHGIXWXUHFDVKȵRZVGLVFRXQWHGDWWKHDVVHWȇV RULJLQDOHHFWLYHLQWHUHVWUDWH/RVVHVDUHUHFRJQLVHGLQSURȴWRUORVVDQGUHȵHFWHGLQDQDOORZDQFHDFFRXQWDJDLQVW ORDQV DQG UHFHLYDEOHV RU KHOGWRPDWXULW\ ȴQDQFLDO DVVHWV ΖQWHUHVW RQ WKH LPSDLUHG DVVHW FRQWLQXHV WR EH recognised. When the Group considers that there are no realistic prospects of recovery of the asset, the relevant DPRXQWV DUH ZULWWHQ R ΖI WKH DPRXQW RI LPSDLUPHQW ORVV VXEVHTXHQWO\ GHFUHDVHV DQG WKH GHFUHDVH FDQ EH UHODWHGREMHFWLYHO\WRDQHYHQWRFFXUULQJDIWHUWKHLPSDLUPHQWZDVUHFRJQLVHGWKHQWKHSUHYLRXVO\UHFRJQLVHG LPSDLUPHQWORVVLVUHYHUVHGWKURXJKSURȴWRUORVV 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. 7KH*URXSGHUHFRJQLVHVDȴQDQFLDOOLDELOLW\ZKHQLWVFRQWUDFWXDOREOLJDWLRQVDUHGLVFKDUJHGFDQFHOOHGRUH[SLUH )LQDQFLDODVVHWVDQGOLDELOLWLHVDUHRVHWDQGWKHQHWDPRXQWSUHVHQWHGLQWKHVWDWHPHQWRIȴQDQFLDOSRVLWLRQZKHQ DQGRQO\ZKHQWKH*URXSFXUUHQWO\KDVDOHJDOO\HQIRUFHDEOHULJKWWRRVHWWKHDPRXQWVDQGLQWHQGVHLWKHUWR settle them on a net basis or to realise the asset and settle the liability simultaneously. 7KH*URXSFODVVLȴHVQRQGHULYDWLYHȴQDQFLDOOLDELOLWLHVLQWRWKHRWKHUȴQDQFLDOOLDELOLWLHVFDWHJRU\6XFKȴQDQFLDO OLDELOLWLHVDUHUHFRJQLVHGLQLWLDOO\DWIDLUYDOXHOHVVDQ\GLUHFWO\DWWULEXWDEOHWUDQVDFWLRQFRVWV6XEVHTXHQWWRLQLWLDO UHFRJQLWLRQWKHVHȴQDQFLDOOLDELOLWLHVDUHPHDVXUHGDWDPRUWLVHGFRVWXVLQJWKHHHFWLYHLQWHUHVWPHWKRG 2WKHUȴQDQFLDOOLDELOLWLHVFRPSULVHORDQVDQGERUURZLQJVWUDGHDQGRWKHUSD\DEOHVDQGUHQWDOGHSRVLWV 'HULYDWLYHȴQDQFLDOLQVWUXPHQWVLQFOXGLQJKHGJHDFFRXQWLQJ 7KH*URXSKROGVGHULYDWLYHȴQDQFLDOLQVWUXPHQWVWRKHGJHLWVLQWHUHVWUDWHULVNH[SRVXUHV(PEHGGHGGHULYDWLYHV DUHVHSDUDWHGIURPWKHKRVWFRQWUDFWDQGDFFRXQWHGIRUVHSDUDWHO\LIWKHHFRQRPLFFKDUDFWHULVWLFVDQGULVNVRIWKH host contract and the embedded derivative are not closely related, a separate instrument with the same terms as WKHHPEHGGHGGHULYDWLYHZRXOGPHHWWKHGHȴQLWLRQRIDGHULYDWLYHDQGWKHFRPELQHGLQVWUXPHQWLVQRWPHDVXUHG DWIDLUYDOXHWKURXJKSURȴWRUORVV On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship EHWZHHQWKHKHGJLQJLQVWUXPHQWDQGWKHKHGJHGLWHPLQFOXGLQJWKHULVNPDQDJHPHQWREMHFWLYHVDQGVWUDWHJ\LQ XQGHUWDNLQJWKHKHGJHWUDQVDFWLRQDQGWKHKHGJHGULVNWRJHWKHUZLWKWKHPHWKRGVWKDWZLOOEHXVHGWRDVVHVVWKH HHFWLYHQHVVRIWKHKHGJLQJUHODWLRQVKLS7KH*URXSPDNHVDQDVVHVVPHQWERWKDWWKHLQFHSWLRQRIWKHKHGJH UHODWLRQVKLS DV ZHOO DV RQ DQ RQJRLQJ EDVLV RI ZKHWKHU WKH KHGJLQJ LQVWUXPHQWV DUH H[SHFWHG WR EH ȆKLJKO\ HHFWLYHȇLQRVHWWLQJWKHFKDQJHVLQWKHIDLUYDOXHRUFDVKȵRZVRIWKHUHVSHFWLYHKHGJHGLWHPVDWWULEXWDEOHWRWKH KHGJHGULVNDQGZKHWKHUWKHDFWXDOUHVXOWVRIHDFKKHGJHDUHZLWKLQDUDQJHRI)RUDFDVKȵRZKHGJH RIDIRUHFDVWWUDQVDFWLRQWKHWUDQVDFWLRQVKRXOGEHKLJKO\SUREDEOHWRRFFXUDQGVKRXOGSUHVHQWDQH[SRVXUHWR YDULDWLRQVLQFDVKȵRZVWKDWFRXOGXOWLPDWHO\DHFWUHSRUWHGSURȴWRUORVV 49 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 'HULYDWLYHVDUHLQLWLDOO\PHDVXUHGDWIDLUYDOXH DQ\DWWULEXWDEOHWUDQVDFWLRQFRVWVDUHUHFRJQLVHGLQSURȴWRUORVVDV LQFXUUHG 6XEVHTXHQW WR LQLWLDO UHFRJQLWLRQ GHULYDWLYHV DUH PHDVXUHG DW IDLU YDOXH DQG FKDQJHV WKHUH LQ DUH DFFRXQWHGIRUDVGHVFULEHGEHORZ &DVKȵRZKHGJHV :KHQDGHULYDWLYHLVGHVLJQDWHGDVWKHKHGJLQJLQVWUXPHQWLQDKHGJHRIWKHYDULDELOLW\LQFDVKȵRZVDWWULEXWDEOHWR DSDUWLFXODUULVNDVVRFLDWHGZLWKDUHFRJQLVHGDVVHWRUOLDELOLW\RUDKLJKO\SUREDEOHIRUHFDVWWUDQVDFWLRQWKDWFRXOG DHFW SURȴW RU ORVV WKH HHFWLYH SRUWLRQ RI FKDQJHV LQ WKH IDLU YDOXH RI WKH GHULYDWLYH LV UHFRJQLVHG LQ RWKHU FRPSUHKHQVLYHLQFRPHDQGSUHVHQWHGLQWKHKHGJLQJUHVHUYHLQHTXLW\$Q\LQHHFWLYHSRUWLRQRIFKDQJHVLQWKH IDLUYDOXHRIWKHGHULYDWLYHLVUHFRJQLVHGLPPHGLDWHO\LQSURȴWRUORVV :KHQ WKH KHGJHG LWHP LV D QRQȴQDQFLDO DVVHW WKH DPRXQW DFFXPXODWHG LQ HTXLW\ LV UHWDLQHG LQ RWKHU FRPSUHKHQVLYH LQFRPH DQG UHFODVVLȴHG WR SURȴW RU ORVV LQ WKH VDPH SHULRG RU SHULRGV GXULQJ ZKLFK WKH QRQȴQDQFLDOLWHPDHFWVSURȴWRUORVVΖQRWKHUFDVHVDVZHOOWKHDPRXQWDFFXPXODWHGLQHTXLW\LVUHFODVVLȴHGWR SURȴWRUORVVLQWKHVDPHSHULRGWKDWWKHKHGJHGLWHPDHFWVSURȴWRUORVVΖIWKHKHGJLQJLQVWUXPHQWQRORQJHU PHHWVWKHFULWHULDIRUKHGJHDFFRXQWLQJH[SLUHVRULVVROGWHUPLQDWHGRUH[HUFLVHGRUWKHGHVLJQDWLRQLVUHYRNHG WKHQKHGJHDFFRXQWLQJLVGLVFRQWLQXHGSURVSHFWLYHO\ΖIWKHIRUHFDVWWUDQVDFWLRQLVQRORQJHUH[SHFWHGWRRFFXU WKHQWKHEDODQFHLQHTXLW\LVUHFODVVLȴHGWRSURȴWRUORVV 3.7 ΖPSDLUPHQWRIQRQȴQDQFLDODVVHWV 7KH FDUU\LQJ DPRXQWV RI WKH *URXSȇV QRQȴQDQFLDO DVVHWV DUH UHYLHZHG DW HDFK UHSRUWLQJ GDWH WR GHWHUPLQH ZKHWKHUWKHUHLVDQ\LQGLFDWLRQRILPSDLUPHQWΖIDQ\VXFKLQGLFDWLRQH[LVWVWKHQWKHDVVHWȇVUHFRYHUDEOHDPRXQWLV estimated. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit Ȋ&*8ȋ H[FHHGVLWVHVWLPDWHGUHFRYHUDEOHDPRXQW &DOFXODWLRQRIUHFRYHUDEOHDPRXQW 7KHUHFRYHUDEOHDPRXQWRIDQDVVHWRU&*8LVWKHJUHDWHURILWVYDOXHLQXVHDQGLWVIDLUYDOXHOHVVFRVWVWRVHOOΖQ DVVHVVLQJ YDOXH LQ XVH WKH HVWLPDWHG IXWXUH FDVK ȵRZV DUH GLVFRXQWHG WR WKHLU SUHVHQW YDOXH XVLQJ D SUHWD[ GLVFRXQWUDWHWKDWUHȵHFWVFXUUHQWPDUNHWDVVHVVPHQWVRIWKHWLPHYDOXHRIPRQH\DQGWKHULVNVVSHFLȴFWRWKHDVVHW RU&*8)RUWKHSXUSRVHRILPSDLUPHQWWHVWLQJDVVHWVWKDWFDQQRWEHWHVWHGLQGLYLGXDOO\DUHJURXSHGWRJHWKHULQWR WKHVPDOOHVWJURXSRIDVVHWVWKDWJHQHUDWHVFDVKLQȵRZVIURPFRQWLQXLQJXVHWKDWDUHODUJHO\LQGHSHQGHQWRIWKH FDVKLQȵRZVRIRWKHUDVVHWVRU&*8V ΖPSDLUPHQWORVVHVDUHUHFRJQLVHGLQSURȴWRUORVVΖPSDLUPHQWORVVHVUHFRJQLVHGLQUHVSHFWRI&*8VDUHDOORFDWHG to reduce the carrying amounts of the assets in the CGU (group of CGUs) on a pro rata basis. 5HYHUVDOVRILPSDLUPHQW ΖPSDLUPHQWORVVHVUHFRJQLVHGLQSULRUSHULRGVDUHDVVHVVHGDWHDFKUHSRUWLQJGDWHIRUDQ\LQGLFDWLRQVWKDWWKHORVV KDVGHFUHDVHGRUQRORQJHUH[LVWV$QLPSDLUPHQWORVVLVUHYHUVHGLIWKHUHKDVEHHQDFKDQJHLQWKHHVWLPDWHVXVHG WRGHWHUPLQHWKHUHFRYHUDEOHDPRXQW$QLPSDLUPHQWORVVLVUHYHUVHGRQO\WRWKHH[WHQWWKDWWKHDVVHWȇVFDUU\LQJ DPRXQW GRHV QRW H[FHHG WKH FDUU\LQJ DPRXQW WKDW ZRXOG KDYH EHHQ GHWHUPLQHG QHW RI GHSUHFLDWLRQ RU DPRUWLVDWLRQLIQRLPSDLUPHQWORVVKDGEHHQUHFRJQLVHG 50 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 3.8 Non-current assets held for sale Non-current assets that are highly probable to be recovered primarily through sale rather than through continuing XVHDUHFODVVLȴHGDVKHOGIRUVDOHΖPPHGLDWHO\EHIRUHFODVVLȴFDWLRQDVKHOGIRUVDOHWKHDVVHWVDUHUHPHDVXUHGLQ DFFRUGDQFHZLWKWKH*URXSȇVDFFRXQWLQJSROLFLHV7KHUHDIWHUWKHDVVHWVFODVVLȴHGDVKHOGIRUVDOHDUHJHQHUDOO\ measured at the lower of their carrying amount and fair value less costs to sell. 3.9 (PSOR\HHEHQHȴWV L 'HȴQHGFRQWULEXWLRQSODQV $GHȴQHGFRQWULEXWLRQSODQLVDSRVWHPSOR\PHQWEHQHȴWSODQXQGHUZKLFKDQHQWLW\SD\Vȴ[HGFRQWULEXWLRQVLQWR a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for FRQWULEXWLRQVWRGHȴQHGFRQWULEXWLRQSHQVLRQSODQVDUHUHFRJQLVHGDVDQHPSOR\HHEHQHȴWH[SHQVHLQSURȴWRU loss in the periods during which services are rendered by employees. LL 6KRUWWHUPHPSOR\HHEHQHȴWV 6KRUWWHUPHPSOR\HHEHQHȴWREOLJDWLRQVDUHPHDVXUHGRQDQXQGLVFRXQWHGEDVLVDQGDUHH[SHQVHGDVWKHUHODWHG 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 FDQ EH HVWLPDWHG UHOLDEO\ DQG LW LV SUREDEOH WKDW DQ RXWȵRZ RI HFRQRPLF EHQHȴWV ZLOO EH UHTXLUHG WR VHWWOH the obligation. 7KHDPRXQWUHFRJQLVHGDVDSURYLVLRQLVWKHEHVWHVWLPDWHRIWKHFRQVLGHUDWLRQUHTXLUHGWRVHWWOHWKHSUHVHQW obligation at the end of the reporting year, taking into account the risks and uncertainties surrounding the REOLJDWLRQ :KHUH D SURYLVLRQ LV PHDVXUHG XVLQJ WKH FDVK ȵRZV HVWLPDWHG WR VHWWOH WKH SUHVHQW REOLJDWLRQ LWV FDUU\LQJDPRXQWLVWKHSUHVHQWYDOXHRIWKRVHFDVKȵRZV :KHQVRPHRUDOORIWKHHFRQRPLFEHQHȴWVUHTXLUHGWRVHWWOHDSURYLVLRQDUHH[SHFWHGWREHUHFRYHUHGIURPDWKLUG 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 0HPEHUVKLSVKDUHVDUHFODVVLȴHGDVHTXLW\ΖQFUHPHQWDOFRVWVGLUHFWO\DWWULEXWDEOHWRWKHLVVXHRIPHPEHUVKLS VKDUHVDUHUHFRJQLVHGDVDGHGXFWLRQIURPHTXLW\ 3.12 Government grants Government grants are recognised when there is reasonable assurance that they will be received and the Group ZLOOFRPSO\ZLWKWKHFRQGLWLRQVDVVRFLDWHGZLWKWKHJUDQW)RUJUDQWVUHODWLQJWRDFTXLVLWLRQRIORQJWHUPDVVHWVWKH JUDQW UHFHLYHG LV RVHW DJDLQVW WKH FRVW RI WKH ORQJWHUP DVVHWV DQG UHGXFHV IXWXUH GHSUHFLDWLRQ RU DPRUWLVDWLRQH[SHQVHV 51 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 3.13 Revenue Rental income Rental income from investment properties is recognised on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. 3.14 Lease payments (when the entities within the Group are lessees of an operating lease) 3D\PHQWVPDGHXQGHURSHUDWLQJOHDVHVDUHUHFRJQLVHGLQSURȴWRUORVVRQDVWUDLJKWOLQHEDVLVRYHUWKHWHUPRIWKH lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of WKHOHDVHZKHQWKHOHDVHDGMXVWPHQWLVFRQȴUPHG Determining whether an arrangement contains a lease At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. This will be the case if the following two criteria are met: WKHIXOȴOPHQWRIWKHDUUDQJHPHQWLVGHSHQGHQWRQWKHXVHRIDVSHFLȴFDVVHWRUDVVHWV DQG the arrangement contains a right to use the asset(s). At inception or upon reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative IDLUYDOXHVΖIWKH*URXSFRQFOXGHVIRUDȴQDQFHOHDVHWKDWLWLVLPSUDFWLFDEOHWRVHSDUDWHWKHSD\PHQWVUHOLDEO\ then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. 6XEVHTXHQWO\ WKH OLDELOLW\ LV UHGXFHG DV SD\PHQWV DUH PDGH DQG DQ LPSXWHG ȴQDQFH FKDUJH RQ WKH OLDELOLW\ LV UHFRJQLVHGXVLQJWKH*URXSȇVLQFUHPHQWDOERUURZLQJUDWH 3.15 )LQDQFHLQFRPHDQGȴQDQFHFRVWV Finance income comprises interest income on cash balances and investments in debt instruments. Interest income LVUHFRJQLVHGDVLWDFFUXHVLQSURȴWRUORVVXVLQJWKHHHFWLYHLQWHUHVWPHWKRG Finance costs comprise interest expense on borrowings and amortisation of borrowing costs. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in SURȴWRUORVVXVLQJWKHHHFWLYHLQWHUHVWPHWKRG 7KHȆHHFWLYHLQWHUHVWUDWHȇLVWKHUDWHWKDWH[DFWO\GLVFRXQWVHVWLPDWHGIXWXUHFDVKSD\PHQWVRUUHFHLSWVWKURXJK WKHH[SHFWHGOLIHRIWKHȴQDQFLDOLQVWUXPHQWWRWKHJURVVFDUU\LQJDPRXQWRIWKHȴQDQFLDODVVHWRUWKHDPRUWLVHG FRVWRIWKHȴQDQFLDOOLDELOLW\ ΖQFDOFXODWLQJLQWHUHVWLQFRPHDQGH[SHQVHWKHHHFWLYHLQWHUHVWUDWHLVDSSOLHGWRWKHJURVVFDUU\LQJDPRXQWRIWKH DVVHW ZKHQWKHDVVHWLVQRWFUHGLWLPSDLUHG RUWRWKHDPRUWLVHGFRVWRIWKHOLDELOLW\+RZHYHUIRUȴQDQFLDODVVHWV that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the HHFWLYHLQWHUHVWUDWHWRWKHDPRUWLVHGFRVWRIWKHȴQDQFLDODVVHWΖIWKHDVVHWLVQRORQJHUFUHGLWLPSDLUHGWKHQWKH calculation of interest income reverts to the gross basis. 52 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 3.16 Tax 7D[ H[SHQVH FRPSULVHV FXUUHQW DQG GHIHUUHG WD[ &XUUHQW WD[ DQG GHIHUUHG WD[ LV UHFRJQLVHG LQ SURȴW RU ORVV H[FHSWWRWKHH[WHQWWKDWLWUHODWHVWRDEXVLQHVVFRPELQDWLRQRULWHPVUHFRJQLVHGGLUHFWO\LQHTXLW\RULQRWKHU comprehensive income. &XUUHQWWD[LVWKHH[SHFWHGWD[SD\DEOHRUUHFHLYDEOHRQWKHWD[DEOHLQFRPHRUORVVIRUWKHȴQDQFLDO\HDUXVLQJWD[ UDWHVHQDFWHGRUVXEVWDQWLYHO\HQDFWHGDWWKHUHSRUWLQJGDWHDQGDQ\DGMXVWPHQWWRWD[SD\DEOHLQUHVSHFWRI SUHYLRXV\HDUV7KHDPRXQWRIFXUUHQWWD[SD\DEOHRUUHFHLYDEOHLVWKHEHVWHVWLPDWHRIWKHWD[DPRXQWH[SHFWHG WREHSDLGRUUHFHLYHGWKDWUHȵHFWVXQFHUWDLQW\UHODWHGWRLQFRPHWD[HVLIDQ\ 'HIHUUHG WD[ LV UHFRJQLVHG LQ UHVSHFW RI WHPSRUDU\ GLHUHQFHV EHWZHHQ WKH FDUU\LQJ DPRXQWV RI DVVHWV DQG OLDELOLWLHV IRU ȴQDQFLDO UHSRUWLQJ SXUSRVHV DQG WKH DPRXQWV XVHG IRU WD[DWLRQ SXUSRVHV 'HIHUUHG WD[ LV QRW recognised for: WHPSRUDU\GLHUHQFHVRQWKHLQLWLDOUHFRJQLWLRQRIDVVHWVRUOLDELOLWLHVLQDWUDQVDFWLRQWKDWLVQRWDEXVLQHVV FRPELQDWLRQDQGWKDWDHFWVQHLWKHUDFFRXQWLQJQRUWD[DEOHSURȴWRUORVV DQG WHPSRUDU\GLHUHQFHVUHODWHGWRLQYHVWPHQWVLQVXEVLGLDULHVDQGMRLQWYHQWXUHVWRWKHH[WHQWWKDWWKH*URXS LVDEOHWRFRQWUROWKHWLPLQJRIWKHUHYHUVDORIWKHWHPSRUDU\GLHUHQFHDQGLWLVSUREDEOHWKDWWKH\ZLOOQRW UHYHUVHLQWKHIRUHVHHDEOHIXWXUH 7KHPHDVXUHPHQWRIGHIHUUHGWD[HVUHȵ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ȴWVZLOOEHDYDLODEOHDJDLQVWZKLFKWKH\FDQEHXWLOLVHG'HIHUUHG WD[DVVHWVDUHUHYLHZHGDWHDFKUHSRUWLQJGDWHDQGDUHUHGXFHGWRWKHH[WHQWWKDWLWLVQRORQJHUSUREDEOHWKDWWKH UHODWHGWD[EHQHȴWZLOOEHUHDOLVHG Ζ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ercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 3.17 1HZVWDQGDUGVDQGLQWHUSUHWDWLRQVQRW\HWHHFWLYH $QXPEHURIQHZVWDQGDUGVDPHQGPHQWVWRVWDQGDUGVDQGLQWHUSUHWDWLRQVDUHQRW\HWHHFWLYHDQGKDYHQRWEHHQ DSSOLHGLQSUHSDULQJWKHVHȴQDQFLDOVWDWHPHQWV%DVHGRQDSUHOLPLQDU\DVVHVVPHQWWKHDGRSWLRQRIWKHVHQHZ DFFRXQWLQJ VWDQGDUGV DQG LQWHUSUHWDWLRQV DUH QRW H[SHFWHG WR KDYH D PDWHULDO LPSDFW RQ WKH *URXSȇV ȴQDQFLDOVWDWHPHQWV 4 Property, plant and equipment Furniture, ȴWWLQJVDQG Building Construction equipment improvements in progress Total $’000 $’000 $’000 $’000 Group Cost At 1 January 2017 2,600 Additions 176 'LVSRVDOVZULWWHQR – – 5HFODVVLȴFDWLRQWRLQYHVWPHQWSURSHUWLHV VHHQRWH – – Transfer 440 – – $W'HFHPEHU 2,776 Additions 276 'LVSRVDOVZULWWHQR – – *RYHUQPHQWJUDQWUHFHLYHG – – $W'HFHPEHU 460 Accumulated depreciation At 1 January 2017 961 – 3,229 'HSUHFLDWLRQIRUWKH\HDU 617 446 – 1,063 'LVSRVDOVZULWWHQR – – $W'HFHPEHU 1,407 – 4,290 'HSUHFLDWLRQIRUWKH\HDU 694 – 1,077 'LVSRVDOVZULWWHQR – – $W'HFHPEHU 1,790 – Carrying amounts At 1 January 2017 1,639 7,079 $W'HFHPEHU 1,990 1,369 $W'HFHPEHU 460 54 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 Furniture, ȴWWLQJVDQG Building Construction equipment improvements in progress Total $’000 $’000 $’000 $’000 Co-operative Cost At 1 January 2017 2,680 2,102 440 5,222 Additions 60 – – 60 Transfer 440 – (440) – Disposals (2,446) (2,102) – (4,548) At 31 December 2017 734 – – 734 Additions 171 – – 171 Disposals (1) – – (1) At 31 December 2018 904 – – 904 Accumulated depreciation At 1 January 2017 2,241 826 – 3,067 Depreciation for the year 229 – – 229 Disposals (2,155) (826) – (2,981) At 31 December 2017 315 – – 315 Depreciation for the year 252 – – 252 Disposals (1) – – (1) At 31 December 2018 566 – – 566 Carrying amounts At 1 January 2017 439 1,276 440 2,155 At 31 December 2017 419 – – 419 At 31 December 2018 338 – – 338 55 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 5 Investment properties Leasehold Freehold Leasehold buildings and buildings and land premises premises Total $’000 $’000 $’000 $’000 Group Cost At 1 January 2017 – Addition 5HFODVVLȴFDWLRQIURPSURSHUW\SODQWDQGHTXLSPHQW (see note 4) – – $W'HFHPEHU Addition – – 5HFODVVLȴFDWLRQWRDVVHWVKHOGIRUVDOH VHHQRWH – – $W'HFHPEHU Accumulated depreciation At 1 January 2017 – 'HSUHFLDWLRQIRUWKH\HDU $W'HFHPEHU 'HSUHFLDWLRQIRUWKH\HDU 5HFODVVLȴFDWLRQWRDVVHWVKHOGIRUVDOH VHHQRWH – – $W'HFHPEHU 772 Carrying amounts At 1 January 2017 – $W'HFHPEHU $W'HFHPEHU 56 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 Leasehold Freehold Leasehold buildings and buildings and land premises premises Total $’000 $’000 $’000 $’000 Co-operative Cost At 1 January 2017 424,000 184,594 – 608,594 Disposals (424,000) (184,594) – (608,594) At 31 December 2017 and 2018 – – – – Accumulated depreciation At 1 January 2017 23,678 20,965 – 44,643 Disposals (23,678) (20,965) – (44,643) At 31 December 2017 and 2018 – – – – Carrying amounts At 1 January 2017 400,322 163,629 – 563,951 At 31 December 2017 and 2018 – – – – Investment properties comprise a number of commercial properties that are leased to related parties and external customers. 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 $6.8 million (2017: $4.6 million) was FKDUJHGDQGUHFRJQLVHGDVUHQWDOLQFRPHLQSURȴWRUORVV The following amounts relating to the investment properties are recognised in the statement of comprehensive income: Group Co-operative 2018 2017 2018 2017 $’000 $’000 $’000 $’000 Rental income 244,459 184,893 – 222 Operating expenses 127,368 54,777 – – Security At 31 December 2018, investment properties of the Group with a carrying amount of $575 million (2017: $555 million) are pledged as security to secure bank loans (see note 13). 57 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 Impairment assessment Management performed an annual review of the carrying amounts of investment properties for indicators of impairment. In 2018, an indicator of impairment was noted for one 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 YDOXHLQXVH ZDVHVWLPDWHGXVLQJWKHYDOXHLQXVHDSSURDFKDQGZDVGHULYHGIURPGLVFRXQWHGFDVKȵRZIRUHFDVWV prepared by management. As at 31 December 2018, the recoverable amount of the investment property was determined to be higher than its carrying amount and no impairment of the property was required. The same impairment assessment was performed on the investment property in 2017, with no impairment of the property required as at 31 December 2017. Determination of fair value for disclosure The Group adopts the cost model to measure the investment properties, and discloses their fair values. External DQG LQGHSHQGHQW YDOXDWLRQ FRPSDQLHV KDYLQJ DSSURSULDWH UHFRJQLVHG SURIHVVLRQDO TXDOLȴFDWLRQV DQG UHFHQW experience in the locations and category of properties being valued, value the Group’s investment properties. The fair value of investment properties for the Group as at 31 December 2018 is $4,277 million (2017: $4,299 million). The valuations are carried out by Jones Lang LaSalle Property Consultants Pte Ltd and Savills Valuation and Professional Services (S) Pte Ltd (2017: Jones Lang LaSalle Property Consultants Pte Ltd and Savills Valuation and 3URIHVVLRQDO6HUYLFHV 6 3WH/WG ZKLFKDUHȴUPVRILQGHSHQGHQWSURIHVVLRQDOYDOXHUV The valuers have considered valuation techniques including the direct comparison method, the capitalisation DSSURDFKDQGWKHGLVFRXQWHGFDVKȵRZDSSURDFKLQDUULYLQJDWWKHIDLUYDOXHDVDWWKHUHSRUWLQJGDWH7KHGLUHFW comparison method involves the analysis of comparable sales of similar properties and adjusting the sales prices WRWKDWUHȵHFWLYHRIWKHLQYHVWPHQWSURSHUWLHV7KHFDSLWDOLVDWLRQDSSURDFKFDSLWDOLVHVDQLQFRPHVWUHDPLQWRD SUHVHQW YDOXH XVLQJ UHYHQXH PXOWLSOLHUV RU VLQJOH\HDU FDSLWDOLVDWLRQ UDWHV 7KH GLVFRXQWHG FDVK ȵRZ DSSURDFK involves the estimation and the projection of an income stream over a period and discounting the income stream with an approximate rate of return. The valuation techniques involve certain estimates. The key assumptions used to determine the fair value of investment properties include price per square foot capitalisation yield, terminal yield, discount rate and average rental growth rate. The fair values of the investment properties are categorised as Level 3 fair value. 6 Investment in subsidiaries Co-operative 2018 2017 $’000 $’000 Investment in subsidiaries 751,554 692,933 58 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 'XULQJWKHȴQDQFLDO\HDUHQGHG'HFHPEHU 7KH&RRSHUDWLYHDFTXLUHGDGGLWLRQDOVKDUHVLQLWVVXEVLGLDU\178&&KRLFH+RPHV&RRSHUDWLYH/WG Ȋ1&+ȋ IURP DQRQFRQWUROOLQJVKDUHKROGHU178&)DLUSULFH&RRSHUDWLYH/LPLWHG Ȋ)3ȋ IRUDFRQVLGHUDWLRQRI PLOOLRQ7KH FRQVLGHUDWLRQZDVVDWLVȴHGWKURXJKWKHLVVXDQFHRIDSSUR[LPDWHO\ PLOOLRQVKDUHVWR)3 QRWH $VDUHVXOWRI WKHDFTXLVLWLRQWKH&RRSHUDWLYHȇVHHFWLYHHTXLW\LQWHUHVWLQWKHVXEVLGLDU\LQFUHDVHGIURP WR ZKLOH UHWDLQLQJFRQWURO 7KHVKDUHDFTXLVLWLRQUHVXOWHGLQ DQLQFUHDVHLQFDSLWDOUHVHUYHRIWKH*URXSDQG&RRSHUDWLYHRIPLOOLRQ DQG DGHFUHDVHLQQRQFRQWUROOLQJLQWHUHVWVRIWKH*URXSRI PLOOLRQ 'XULQJWKHȴQDQFLDO\HDUHQGHG'HFHPEHU D 7KH&RRSHUDWLYHLQFRUSRUDWHGWZRVXEVLGLDULHVDQGLQFUHDVHGLWVLQYHVWPHQWVLQFHUWDLQVXEVLGLDULHVE\ PLOOLRQ D 7KH&RRSHUDWLYHDFTXLUHGDVXEVLGLDU\1&+IURP1(IRUDFRQVLGHUDWLRQRIPLOOLRQ7KHFRQVLGHUDWLRQ ZDVVDWLVȴHGWKURXJKWKHLVVXDQFHRIPLOOLRQVKDUHVDWSDUYDOXHRIHDFKWR1( QRWH 7KHIROORZLQJWDEOHVXPPDULVHVWKHUHFRJQLVHGDPRXQWVRIDVVHWVDFTXLUHGDQGOLDELOLWLHVDVVXPHGDWWKH GDWHRIDFTXLVLWLRQ $’000 ΖQYHVWPHQWLQDQDVVRFLDWH 2WKHULQYHVWPHQWVȂXQTXRWHGERQGV 7UDGHDQGRWKHUUHFHLYDEOHV &DVKDQGEDQNEDODQFHV 7UDGHDQGRWKHUSD\DEOHV 1RQFRQWUROOLQJLQWHUHVW *URXSȇVVKDUHRIQHWDVVHWVDFTXLUHG &RQVLGHUDWLRQ /HVV $PRXQWVDWLVȴHGWKURXJKLVVXDQFHRIVKDUHV QRWH ([FHVVRIIDLUYDOXHRYHUWKHSDUYDOXHRIVKDUHVLVVXHG $GG &DVKDFTXLUHG 1HWFDVKLQȵRZDULVLQJIURPDFTXLVLWLRQRIVXEVLGLDU\ Measurement of fair value Material assets acquired Valuation technique 2WKHULQYHVWPHQWVȂXQTXRWHGERQGV 'LVFRXQWHG FDVK ȵRZV 7KH YDOXDWLRQ PRGHO FRQVLGHUV WKH SUHVHQW YDOXH RI H[SHFWHG SD\PHQW GLVFRXQWHG XVLQJ D ULVNDGMXVWHG GLVFRXQWUDWH 7KHIDLUYDOXHVRIRWKHULQYHVWPHQWVDUHFDWHJRULVHGDV/HYHOIDLUYDOXH 59 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 Details of the Co-operative’s subsidiaries are as follows: Place of incorporation Principal (HFWLYHHTXLW\ Name and business activities interest 2018 2017 % % Subsidiaries of the Co-operative Mercatus Holdings Pte. Ltd. (1) Singapore Investment 100 100 holding Mercatus Alpha Co-operative Limited (1) Singapore Property owner 100 100 Mercatus Beta Co-operative Limited (1) Singapore Property owner 100 100 Mercatus Delta 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 100 100 Mercatus Zeta Co-operative Limited (1) Singapore Dormant 50 50 NTUC Choice Homes Co-operative Ltd (1) Singapore Property 69.6 56.9 development and investment holding Subsidiary of Mercatus Beta Co-operative Limited Thomson Plaza Pte. Ltd. (2) Singapore Dormant 100 100 Subsidiary of Mercatus Epsilon Co-operative Limited SMCP Pte. Ltd. (1) Singapore Carpark 100 100 management and operation services Subsidiaries of Mercatus Holdings Pte. Ltd. ASPF II (Mauritius) Limited (3) Mauritius Dormant – 100 Mercatus Uno Pte. Ltd. (2) Singapore Dormant 100 100 Mercatus Dos Pte. Ltd. (2) Singapore Dormant 100 100 60 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N 27(6727+( F Ζ1$1&Ζ$/67$7(0(176 YHDUHQGHG'HFHPEHU Place of incorporation Principal (HFWLYHHTXLW\ Name and business activities interest 2018 2017 % % Subsidiary of NTUC Choice Homes Co-operative Ltd &KRLFH+RPHVΖQYHVWPHQWV3WH/WG(1) 6LQJDSRUH ΖQYHVWPHQW 69.6 56.9 holding and management and maintenance of properties Subsidiaries of ChoiceHomes Investments Pte. Ltd. 3XQJJRO)LHOG(&3WH/WG(1) (4) 6LQJDSRUH 3URSHUW\ 41.8 34.1 GHYHORSPHQW (1) (4) 3DVLU5LV(&3WH/WG 6LQJDSRUH 3URSHUW\ 41.8 34.1 GHYHORSPHQW (1) Audited by KPMG LLP Singapore (2) Not required to be audited under the laws of country of incorporation (3) The Company was liquidated during the year (4) Although the Group owns less than 50% of Punggol Field EC Pte. Ltd. and Pasir Ris EC Pte. Ltd., management has determined that the Group has control through the Board of Directors of these entities. Non-controlling interests The following subsidiary has non-controlling interests (NCI) that are material to the Group. Name &RXQWU\RI Ownership interests incorporation KHOGE\1&Ζ 2018 2017 % % 178&&KRLFH+RPHV&RRSHUDWLYH/LPLWHG Ȋ1&+ȋ 6LQJDSRUH 30.4 43.1 7KH IROORZLQJ VXPPDULVHG ȴQDQFLDO LQIRUPDWLRQ IRU WKH DERYH VXEVLGLDU\ LV SUHSDUHG LQ DFFRUGDQFH ZLWK )56 DQG WKH Group’s accounting policies. NTUC Choice Homes Co-operative Limited Group $'000 2018 3URȴWUHSUHVHQWLQJWRWDOFRPSUHKHQVLYHLQFRPH Attributable to NCI: 3URȴWUHSUHVHQWLQJWRWDOFRPSUHKHQVLYHLQFRPH 61 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU NTUC Choice Homes Co-operative Limited $'000 Group 2018 1RQFXUUHQWDVVHWV 195,000 &XUUHQWDVVHWV &XUUHQWOLDELOLWLHV Net assets Net assets attributable to NCI 2017 1RQFXUUHQWDVVHWV &XUUHQWDVVHWV &XUUHQWOLDELOLWLHV Net assets Net assets attributable to NCI )RU WKH ȴQDQFLDO \HDU HQGHG 'HFHPEHU 1&+ȇV FRQWULEXWLRQ RI UHYHQXH DQG SURȴW ZHUH LPPDWHULDO to the Group. 7 Investment in an associate Group 2018 2017 $’000 $’000 Interest in an associate – Associate of NTUC Choice Homes Co-operative Limited Place of incorporation Principal (HFWLYHHTXLW\ and business activities interest Name 2018 2017 % % One Marina Property Services Pte Ltd (1) Singapore Provision of facility – 20 management, project management, leasing services and accounting services (1) $XGLWHGE\RWKHUȴUPRISXEOLFDFFRXQWDQWVDQGFKDUWHUHGDFFRXQWDQWV 62 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 'LVSRVDORILQYHVWPHQWLQDVVRFLDWHGXULQJWKHȴQDQFLDO\HDU In July 2018, the Group entered into a share purchase agreement to dispose of its 20% equity interest in One Marina Property Services Pte Ltd and its subsidiary, One Marina Integrated Solutions Pte Ltd, for a total consideration of $2.3 million. As at 31 December 2018, the Group has received $1.7 million of the consideration in cash. The remaining purchase consideration receivable of $0.6 million was included in the Group’s other receivables. The disposal resulted in a loss of $2,105, which was recognised as ‘Other expenses’ in the Group’s consolidated statement of comprehensive income. 7KHDVVRFLDWHZDVLPPDWHULDOWRWKH*URXSDQGZDVHTXLW\DFFRXQWHGIRU7KHVXPPDULVHGȴQDQFLDOLQIRUPDWLRQ of the associate, not adjusted for the percentage of ownership held by the Group, was as follows: 2018 2017 $’000 $’000 Combined Assets and Liabilities Total assets – 15,700 Total liabilities – 4,528 Combined Results Revenue 11,349 18,455 Expenses (10,830) (17,297) 3URȴWIRUWKH\HDU 519 1,158 )RUWKHȴQDQFLDO\HDUHQGHG'HFHPEHUWKHDVVRFLDWHȇVFRQWULEXWLRQRISURȴWDQGUHYHQXHWRWKH*URXS was immaterial as it was acquired by the Group only on 31 December 2017. 8 Investment in a joint venture Group 2018 2017 $’000 $’000 Investment in a joint venture 353,836 362,912 The Group has 50% (2017: 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. 63 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 7KH IROORZLQJ VXPPDULVHV WKH ȴQDQFLDO LQIRUPDWLRQ RI *ROG 5LGJH 3WH /WG EDVHG RQ LWV ȴQDQFLDO VWDWHPHQWV SUHSDUHGLQDFFRUGDQFHZLWK)56DQGWKH*URXSȇVDFFRXQWLQJSROLFLHV Gold Ridge Pte Ltd 2018 2017 $’000 $’000 5HYHQXH 3URȴWIURPFRQWLQXLQJRSHUDWLRQV2WKHUFRPSUHKHQVLYHLQFRPHIRUWKH\HDU Total comprehensive income for the year 3URȴWIURPFRQWLQXLQJRSHUDWLRQVLQFOXGH ȂΖQWHUHVWLQFRPH Ȃ'HSUHFLDWLRQDQGDPRUWLVDWLRQ – Interest expense ȂΖQFRPHWD[H[SHQVH 1RQFXUUHQWDVVHWV Current assets 1RQFXUUHQWOLDELOLWLHV &XUUHQWOLDELOLWLHV Net assets 1HWDVVHWVLQFOXGH Ȃ&DVKDQGFDVKHTXLYDOHQWV Ȃ1RQFXUUHQWȴQDQFLDOOLDELOLWLHV H[FOXGLQJGHIHUUHGWD[OLDELOLWLHV Group’s interest in net assets of joint venture at beginning of the year 'LYLGHQGVUHFHLYHGGXULQJWKH\HDU 6KDUHRIWRWDOFRPSUHKHQVLYHLQFRPH Carrying amount of interest in joint venture at end of the year 64 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 9 Other investments Group 2018 2017 $’000 $’000 Non-current 'HEWLQYHVWPHQWVȂDWDPRUWLVHGFRVW – 'HEWLQYHVWPHQWVȂKHOGWRPDWXULW\ – Current 'HEWLQYHVWPHQWVȂDWDPRUWLVHGFRVW – 'HEWLQYHVWPHQWVȂKHOGWRPDWXULW\ – Total ΖQFOXGHG LQ WKH GHEW LQYHVWPHQWV FODVVLȴHG DV DW DPRUWLVHG FRVW KHOGWRPDWXULW\ LQYHVWPHQWV DUH WKH *URXSȇVLQYHVWPHQWVLQXQTXRWHGERQGVLVVXHGE\WKHKROGLQJFRRSHUDWLYH1(7KHWHUPVDQGFRQGLWLRQVRIWKH RXWVWDQGLQJGHEWLQYHVWPHQWVFODVVLȴHGDVDWDPRUWLVHGFRVW KHOGWRPDWXULW\LQYHVWPHQWV DUHDVIROORZV Group Nominal interest rate (%) Interest payments Year of maturity 2018 2017 $’000 $’000 L $QQXDOO\ – LL $QQXDOO\ – LLL $QQXDOO\ – LY $QQXDOO\ Y $QQXDOO\ – YL $QQXDOO\ – YLL $QQXDOO\ – ΖQIRUPDWLRQ DERXW WKH *URXSȇV H[SRVXUH WR FUHGLW DQG PDUNHW ULVNV DQG IDLU YDOXH PHDVXUHPHQW LV LQFOXGHG LQQRWH 65 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 10 Trade and other receivables Group Co-operative 2018 2017 2018 2017 $’000 $’000 $’000 $’000 Trade receivables – – Accrued revenue 3,490 – – Interest receivable 4 Loans to subsidiaries: - Measured at amortised cost – – - Mandatorily measured at FVTPL – – – $PRXQWVGXHIURPVXEVLGLDULHV QRQWUDGH – – 41,999 Other receivables Prepayments – Trade receivables consist of mainly rental receivables from tenants of the investment properties. Interest may be charged at commercial rates where the terms of repayment exceed 14 days after 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, interest-free and repayable on demand. Loans to subsidiaries are unsecured, repayable on demand and comprise the following: D PLOOLRQ PLOOLRQ ZLWKDZHLJKWHGDYHUDJHLQWHUHVWRI SHUDQQXPGXULQJ WKH\HDU DQG E PLOOLRQ PLOOLRQ ZLWK WKH LQWHUHVW FDOFXODWHG EDVHG RQ L RI WKH VKDUHKROGHUVȇ ORDQ DPRXQW RU LL RI WKH VXEVLGLDULHVȇ QHW VXUSOXV RI WKH VXEVLGLDULHVȇ QHW GLVWULEXWDEOHVXUSOXV RIHDFKȴQDQFLDO\HDUZKLFKHYHUDPRXQWLVORZHU On adoption of FRS 109 Financial Instruments, the loans to subsidiaries with interest dependent on the subsidiaries’ QHWVXUSOXVKDYHEHHQPHDVXUHGPDQGDWRULO\DWIDLUYDOXHWKURXJKSURȴWRUORVV FDUULHGDWDPRUWLVHGFRVW 5HIHUWRQRWHIRUGHWDLOVRQWKH*URXSȇVDGRSWLRQRI)56 66 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 11 Cash and cash equivalents Group Co-operative 2018 2017 2018 2017 $’000 $’000 $’000 $’000 &DVKRQKDQG 2 2 – 2 &DVKDWEDQN 56,690 12,800 )L[HGGHSRVLWV 159,792 52,008 158,160 &DVKDQGFDVKHTXLYDOHQWV 170,960 12 Assets held for sale ΖQWKH*URXSUHFODVVLȴHGWZRRILWVLQYHVWPHQWSURSHUWLHVWRDVVHWVKHOGIRUVDOHDV D ΖQ0D\WKH*URXSUHFHLYHGDQRWLFHRIFRPSXOVRU\DFTXLVLWLRQIURP6LQJDSRUH/DQG$XWKRULW\ 6/$ IRU RQHRILWVOHDVHKROGLQYHVWPHQWSURSHUWLHV7KHFDUU\LQJYDOXHRIWKHLQYHVWPHQWSURSHUW\DW'HFHPEHU ZDVPLOOLRQ7KHFRPSOHWLRQRIWKHDFTXLVLWLRQLVH[SHFWHGWREHLQ0DUFK$VDWGDWHRIWKLV UHSRUWWKHFRQVLGHUDWLRQIRUWKHFRPSXOVRU\DFTXLVLWLRQLVVWLOOXQGHUȴQDOLVDWLRQ E IQ'HFHPEHUWKH*URXSHQWHUHGLQWRDVDOHDQGSXUFKDVHDJUHHPHQWZLWKDQH[WHUQDOSDUW\WRVHOORQH RILWVOHDVHKROGLQYHVWPHQWSURSHUWLHVDWPLOOLRQ7KHFRPSOHWLRQRIWKHVDOHLVH[SHFWHGWREHLQ-XQH 7KH*URXSH[SHFWVWRUHFRJQLVHDJDLQRIPLOOLRQXSRQFRPSOHWLRQRIWKHVDOHEDVHGRQWKHDVVHWȇV FDUU\LQJDPRXQWRIPLOOLRQDW'HFHPEHU 13 Loans and borrowings Group Co-operative 2018 2017 2018 2017 $’000 $’000 $’000 $’000 Non-current 8QVHFXUHGEDQNORDQV 1,958,000 1,958,000 6HFXUHGEDQNORDQV – 175,000 – – 8QVHFXUHGȴ[HGUDWHQRWHV 200,000 200,000 2,158,000 Current 8QVHFXUHGEDQNORDQV 279,970 – 279,970 – 6HFXUHGEDQNORDQV 175,000 175,000 – – 175,000 279,970 – 67 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 Terms and conditions of outstanding loans and borrowings are as follows: Nominal Year of Face Carrying Group interest rate maturity value amount % $’000 $’000 2018 Unsecured bank loans SOR(1)+Margin 2019-2022 1,378,000 1,376,354 Unsecured bank loans COF(2)+Margin 2019 80,000 80,000 Unsecured bank loans 2.38% - 2.64% 2021-2022 450,000 449,700 Secured bank loans 3.19% 2019 175,000 175,000 8QVHFXUHGȴ[HGUDWHQRWHV 2.80% - 3.10% 2024-2028 350,000 348,760 2,433,000 2,429,814 2017 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 bank loans 2.18% - 3.19% 2018-2019 350,000 350,000 8QVHFXUHGȴ[HGUDWHQRWHV 2.80% 2024 200,000 200,000 2,508,000 2,508,000 Co-operative 2018 Unsecured bank loans SOR(1)+Margin 2019-2022 1,378,000 1,376,354 Unsecured bank loans COF(2)+Margin 2019 80,000 80,000 Unsecured bank loans 2.38% - 2.64% 2021-2022 450,000 449,700 8QVHFXUHGȴ[HGUDWHQRWHV 2.80% - 3.10% 2024-2028 350,000 348,760 2,258,000 2,254,814 2017 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 8QVHFXUHGȴ[HGUDWHQRWHV 2.80% 2024 200,000 200,000 2,158,000 2,158,000 (1) 6ZDS2HU5DWH (2) %DQNȇVFRVWRIIXQGV Security The secured bank loans are secured over investment properties with carrying amounts of $575 million (2017: $555 million) (see note 5). 68 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 8QVHFXUHGȴ[HGUDWHQRWHV 2Q-XO\DQG -DQXDU\WKH&RRSHUDWLYHLVVXHGPLOOLRQQRWHVDWȴ[HGFRXSRQUDWHDQG PLOOLRQQRWHVDWȴ[HGFRXSRQUDWHUHVSHFWLYHO\XQGHUWKHPLOOLRQ0XOWLFXUUHQF\0HGLXP7HUP 1RWH3URJUDPPH Ȋ071ȋ 7KHPLOOLRQQRWHVDQGPLOOLRQQRWHVPDWXUHLQDQGUHVSHFWLYHO\DQG interest is repayable semi-annually from the date of issue. ΖQWHUHVWUDWHVZDSV 7KH*URXSHQWHUHGLQWRLQWHUHVWUDWHVZDSVZLWKDFRXQWHUSDUW\WRSURYLGHȴ[HGUDWHIXQGLQJIRUXQVHFXUHGEDQN loans. Details of the interest rate swaps are set out in note 24. 5HFRQFLOLDWLRQRIPRYHPHQWVRIOLDELOLWLHVWRFDVKȵRZVDULVLQJIURPȴQDQFLQJDFWLYLWLHV Interest rate swaps used Loans and for hedging Interest borrowings – liabilities payable* Total $’000 $’000 $’000 $’000 Group Balance as at 1 January 2017 463,875 – 5,357 469,232 &KDQJHVIURPȴQDQFLQJFDVKȵRZV Interest paid – – Proceeds from loans and borrowings 2,158,000 – – 2,158,000 7RWDOFKDQJHVIURPȴQDQFLQJFDVKȵRZV 2,158,000 – 2,130,418 Conversion of term loan from a shareholder to membership shares – – Interest expense – – 31,624 31,624 Change in fair value – – Balance as at 31 December 2017 2,508,000 9,399 2,517,361 &KDQJHVIURPȴQDQFLQJFDVKȵRZV Interest paid – – Proceeds from loans and borrowings 150,000 – – 150,000 Repayment of loans and borrowings – – 7RWDOFKDQJHVIURPȴQDQFLQJFDVKȵRZV – Interest expense – – 60,893 60,893 Change in fair value – – Others – – Balance as at 31 December 2018 2,429,814 9,093 2,437,032 ΖQFOXGHGDVSDUWRIWUDGHDQGRWKHUSD\DEOHV 69 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 14 Trade and other payables, including derivatives Group Co-operative 2018 2017 2018 2017 $’000 $’000 $’000 $’000 Advance rental billings 1,578 1,967 – – Refundable deposits 3,034 2,165 – 1 Interest payable on loans and borrowings 9,093 9,399 6,722 5,357 Amount due to a subsidiary – – 252,941 364,653 Accrued expenses 28,916 11,969 3,711 2,285 Other payables 7,842 6,051 2,803 349 'HULYDWLYHȴQDQFLDOOLDELOLW\ 1,875 38 1,875 38 Contribution payable to: - Central Co-operative Fund 115 50 25 25 - Singapore Labour Foundation 16,009 19,648 14,689 18,323 68,462 51,287 282,766 391,031 Trade and other payables Current 65,135 50,000 280,891 390,993 Non-current 3,327 1,287 1,875 38 68,462 51,287 282,766 391,031 Amount due to a subsidiary The amount due to a subsidiary is non-trade, unsecured, interest-free and repayable on demand. 15 Membership shares Group and Co-operative 2018 2017 No. of shares No. of shares (‘000) $’000 (‘000) $’000 Issued and fully paid membership shares, at par value of $1 each: In issue at 1 January 1,713,857 1,713,857 640,393 640,393 Issued during the year 89,770 89,770 1,073,464 1,073,464 At 1 January and 31 December 1,803,627 1,803,627 1,713,857 1,713,857 In 2018, there were the following issuance of membership shares: 51 million membership shares were issued under the bonus issue where 33 membership shares were issued for every 1,000 membership shares; and 39 million membership shares were issued at the par value of $1 each as satisfaction of the consideration of $59 million payable on the acquisition of additional interest in a subsidiary, NCH (note 6). 70 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 ΖQWKHUHZHUHWKHIROORZLQJLVVXDQFHRIPHPEHUVKLSVKDUHV 562 million membership shares were issued at the par value of $1 each arising from the capitalisation of loans from shareholders totalling $562 million; 337 million membership shares were issued at the par value of $1 each as satisfaction of the consideration of $438 million payable on the acquisition of investment properties from a shareholder; and 174 million membership shares were issued at the par value of $1 each as satisfaction of the consideration of $262 million payable on the acquisition of a subsidiary, NCH (note 6). Rights of members (a) 7KHPHPEHUVKLSVKDUHVUHODWHWRVKDUHVKHOGE\PHPEHUVZKHUHUHGHPSWLRQRIVKDUHLVVXEMHFWWRDSSURYDO of the Board of Directors. (b) $OOPHPEHUVDUHHQWLWOHGWRUHGHHPWKHLUVKDUHVDWWKHSDUYDOXHRUWKHQHWDVVHWYDOXHRIWKH&RRSHUDWLYH EDVHGRQWKHODWHVWDXGLWHGȴQDQFLDOSRVLWLRQDVDWWKHGDWHRIUHGHPSWLRQZKLFKHYHULVORZHU (c) 7KHVKDUHVGRQRWFDUU\DQ\ULJKWVWRȴ[HGLQFRPH (d) In accordance with Section 4.5 of the Co-operative’s By-Laws, every member shall, unless otherwise GLVTXDOLȴHGXQGHUWKH$FWRUWKH%\/DZVKDYHWKHULJKWWR (i) avail himself of all services of the Co-operative; (ii) QRPLQDWH FDQGLGDWHV IRU HOHFWLRQ RU WR EH FRRSWHG WR RɝFH VXEMHFW WR WKH SURYLVLRQV RI WKH $FW and the By-Laws; (iii) EHUHSUHVHQWHGE\GHOHJDWHVVXEMHFWWRWKHSURYLVLRQVRIWKH$FWDQGWKH%\/DZV (iv) participate and vote at General Meetings; and (v) HQMR\DOORWKHUULJKWVSULYLOHJHVDQGEHQHȴWVDVSUHVFULEHGE\WKH%\/DZV (e) Members are entitled to receive dividends as and when declared by the Co-operative. (f) ΖQWKHHYHQWRIWKHZLQGLQJXSRIWKH&RRSHUDWLYHWKHDVVHWVVKDOOEHDSSOLHGȴUVWWRWKHFRVWRIOLTXLGDWLRQ 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 GLYLGHQGRUSDWURQDJHUHIXQGDWDUDWHQRWH[FHHGLQJWKDWODLGGRZQLQWKH5XOHVRULQWKH%\/DZV (g) $Q\PRQLHVUHPDLQLQJDIWHUWKHDSSOLFDWLRQRIWKHIXQGVWRWKHSXUSRVHVVSHFLȴHGLQWKHDERYHSDUDJUDSK VHFWLRQRI&RRSHUDWLYH6RFLHWLHV$FW DQGDQ\VXPVXQFODLPHGDIWHUWZR\HDUVXQGHU6HFWLRQ RIWKH $FW ZKLFKUHODWHVWRFODLPVRIFUHGLWRUV VKDOOQRWEHGLYLGHGDPRQJWKHPHPEHUVEXWVKDOOEHFDUULHGWRWKH &RRSHUDWLYH6RFLHWLHV/LTXLGDWLRQ$FFRXQWNHSWE\WKH5HJLVWUDURIWKH&RRSHUDWLYH6RFLHWLHV (h) $VXPFDUULHGWRWKH&RRSHUDWLYH6RFLHWLHV/LTXLGDWLRQ$FFRXQWVKDOOEHNHSWLQWKLV$FFRXQWIRUDWOHDVWWZR \HDUV2XWRIWKH&RRSHUDWLYH6RFLHWLHV/LTXLGDWLRQ$FFRXQWVXFKVXPVPD\EHWUDQVIHUUHGWRWKH&HQWUDO 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. 71 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 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 or return capital to members. The Group and the Co-operative’s overall strategy remains unchanged during the year. 16 Other reserves Group Co-operative 2018 2017 2018 2017 $’000 $’000 $’000 $’000 Capital reserve 386,457 366,539 384,821 365,139 Asset replacement reserve 10,952 23,717 – – Hedging reserve (1,875) (38) (1,875) (38) Dividend reserve 2,734 – – – 398,268 390,218 382,946 365,101 Capital reserve Capital reserve arose from the following: (i) acquisition of investment properties in relation to the past property restructuring exercise; and (ii) acquisition of a subsidiary and the subsequent acquisition of additional interest in the subsidiary, representing the excess of the fair value of the membership shares issued over the par value of the membership shares issued in satisfaction of the purchase consideration. 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 2018 2017 2018 2017 $’000 $’000 $’000 $’000 Balance as at 1 January 23,717 8,752 – 1,540 7UDQVIHU WR IURPDFFXPXODWHGSURȴWV (12,765) 14,965 – (1,540) (losses) Balance as at 31 December 10,952 23,717 – – Available for use 10,952 23,717 – – 72 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU Hedging reserve 7KHKHGJLQJUHVHUYHFRPSULVHVWKHHHFWLYHSRUWLRQRIWKHFXPXODWLYHQHWFKDQJHLQWKHIDLUYDOXHRIKHGJLQJ LQVWUXPHQWVXVHGLQFDVKȵRZKHGJHVSHQGLQJVXEVHTXHQWUHFRJQLWLRQLQSURȴWRUORVVDVWKHKHGJHGFDVKȵRZV RULWHPVDHFWSURȴWRUORVV Dividend reserve 7KLVUHODWHVWRWKH*URXSȇVVKDUHRIWKHGLYLGHQGUHVHUYHRIDVXEVLGLDU\ZKLFKKDVHVWDEOLVKHGDVHSDUDWHGLYLGHQG UHVHUYHIRUWKHSURSRVHGȴQDOH[HPSWGLYLGHQGWRLWVVKDUHKROGHUVDWLWVQH[WDQQXDOJHQHUDOPHHWLQJ 17 Revenue Group &RRSHUDWLYH 2018 2017 2018 2017 $’000 $’000 $’000 $’000 5HQWDOLQFRPHIURPLQYHVWPHQWSURSHUWLHV – &DUSDUNLQFRPH – – $GYHUWLVLQJDQGSURPRWLRQLQFRPH – – – 18 Other income Group &RRSHUDWLYH 2018 2017 2018 2017 $’000 $’000 $’000 $’000 0DQDJHPHQWIHHLQFRPH Others 19 3URȴWEHIRUHWD[DQGFRQWULEXWLRQV ΖQFOXGHGLQSURȴWEHIRUHWD[DQGFRQWULEXWLRQVDUHWKHIROORZLQJLWHPV Group &RRSHUDWLYH 2018 2017 2018 2017 $’000 $’000 $’000 $’000 8WLOLWLHV – – 0DUNHWLQJH[SHQVHV – – /RVVRQGLVSRVDORIDVVRFLDWH – – – ΖQFOXGHGLQVWDFRVWV GHȴQHGFRQWULEXWLRQSODQV 'LUHFW RSHUDWLQJ H[SHQVHV DULVLQJ IURP UHQWDO JHQHUDWLQJ LQYHVWPHQW SURSHUWLHV LQFOXGLQJ UHSDLUV DQG PDLQWHQDQFHEXWH[FOXGLQJGHSUHFLDWLRQWKDWDUHLQFOXGHGLQRWKHURSHUDWLQJH[SHQVHVDPRXQWWRPLOOLRQ PLOOLRQ 73 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 20 )LQDQFHLQFRPHDQGȴQDQFHFRVWV Group &RRSHUDWLYH 2018 2017 2018 2017 $’000 $’000 $’000 $’000 Finance income ΖQWHUHVWLQFRPHXQGHUWKHHHFWLYHLQWHUHVW PHWKRG DULVLQJ IURP ȴQDQFLDO DVVHWV measured at amortised cost: - Loans to subsidiaries – – 8,849 107,723 )L[HGGHSRVLWVDQGEDQNEDODQFHV 1,300 349 438 60 - Debt instruments – unquoted bonds 8,469 – – – - Others 52 71 – 1 9,821 420 9,287 107,784 ΖQWHUHVW LQFRPH IURP ȴQDQFLDO DVVHWV – – 104,159 – FDUULHGDW)973/ȂORDQVWRVXEVLGLDULHV 7RWDOȴQDQFHLQFRPH 9,821 420 113,446 107,784 Finance costs Interest expense and borrowing costs on ȴQDQFLDO OLDELOLWLHV PHDVXUHG DW DPRUWLVHG cost: %DQNORDQV 51,859 29,624 46,016 20,226 - Medium Term Notes 10,021 2,439 10,021 2,439 61,880 32,063 56,037 22,665 21 7D[H[SHQVH Group 2018 2017 $’000 $’000 &XUUHQWWD[ Current year 5 – 8QGHUSURYLVLRQLQUHVSHFWRISUHYLRXV\HDU 4 2 9 2 5HFRQFLOLDWLRQRIHHFWLYHWD[UDWH 3URȴWEHIRUHWD[DQGFRQWULEXWLRQV 88,596 82,116 6KDUHRIUHVXOWVRIDVVRFLDWHDQGMRLQWYHQWXUH (19,128) (19,226) 69,468 62,890 7D[FDOFXODWHGXVLQJ6LQJDSRUHWD[UDWHRI 11,810 10,691 Exempt income * (13,867) (10,732) 1RQGHGXFWLEOHH[SHQVHV 2,062 41 8QGHUSURYLVLRQLQUHVSHFWRISUHYLRXV\HDU 4 2 9 2 * Includes income of any co-operative society registered under the Co-operative Societies Act, Chapter 62, which is exempted from income tax under Section 13 (1)(f)(ii) of the Singapore Income Tax Act, Chapter 134. 74 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 22 Contributions to Central Co-operative Fund and Singapore Labour Foundation ΖQDFFRUGDQFHZLWK6HFWLRQ D RIWKH$FWDOOFRRSHUDWLYHVXQGHUWKH*URXSFRQWULEXWHVRIWKHȴUVW PLOOLRQRILWVVXUSOXVUHVXOWLQJIURPWKHRSHUDWLRQVGXULQJWKH\HDUWRWKH&HQWUDO&RRSHUDWLYH)XQG ΖQDFFRUGDQFHZLWK6HFWLRQ E RIWKH$FWDOOFRRSHUDWLYHVXQGHUWKH*URXSKDYHRSWHGWRFRQWULEXWHRI LWVVXUSOXV H[FOXGLQJFDSLWDOJDLQVDULVLQJIURPWKHGLVSRVDORIDQ\RɝFHSUHPLVHVDQGVKDUHV LQH[FHVVRI PLOOLRQIURPWKHRSHUDWLRQVWRWKH6LQJDSRUH/DERXU)RXQGDWLRQ 23 Commitments As at the reporting date, the following are the outstanding commitments which have not been provided in the ȴQDQFLDOVWDWHPHQWV (i) Capital commitment $V DW 'HFHPEHU WKH *URXS KDV FDSLWDO H[SHQGLWXUH FRQWUDFWHG EXW QRW UHFRJQLVHG LQ WKH ȴQDQFLDO VWDWHPHQWVRIPLOOLRQUHODWLQJWRWKHSXUFKDVHRIFHUWDLQSURSHUW\SODQWDQGHTXLSPHQWRIWKH*URXS (ii) Operating lease commitments (a) Leases as lessee 7KH*URXSDQGWKH&RRSHUDWLYHOHDVHWKHLURɝFHDQGRɝFHHTXLSPHQWXQGHUOHDVHDJUHHPHQWVZKLFKDUH QRQFDQFHOODEOH$VDWUHSRUWLQJGDWHWKHIXWXUHPLQLPXPOHDVHSD\PHQWVDUHDVIROORZV Group Co-operative 2018 2017 2018 2017 $’000 $’000 $’000 $’000 Within one year 24 285 – 243 %HWZHHQRQHDQGȴYH\HDUV 18 42 – – 42 327 – 243 75 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 (b) Leases as lessor The Group leases out investment properties in Singapore under operating leases. Future minimum lease payments under non-cancellable leases receivable are as follows: Group Co-operative 2018 2017 2018 2017 $’000 $’000 $’000 $’000 Within one year 213,232 210,304 – – %HWZHHQRQHDQGȴYH\HDUV 277,583 312,885 – – 0RUHWKDQȴYH\HDUV 151,669 153,545 – – 642,484 676,734 – – Share of joint venture’s operating lease commitments in relation to investment property is as follows: Group 2018 2017 $’000 $’000 Within one year 46,808 53,527 %HWZHHQRQHDQGȴYH\HDUV 6,819 55,006 53,627 108,533 24 Financial instruments 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 7KH*URXSȇVRYHUDOOULVNPDQDJHPHQWVWUDWHJ\VHHNVWRPLQLPLVHDGYHUVHHHFWVIURPWKHYRODWLOLW\RIȴQDQFLDO PDUNHWVRQWKH*URXSȇVȴQDQFLDOSHUIRUPDQFH The Board of Directors of the Co-operative are responsible for setting the objectives and underlying principles of ȴQDQFLDOULVNPDQDJHPHQWIRUWKH*URXS7KHPDQDJHPHQWWKHQHVWDEOLVKHVWKHGHWDLOHGSROLFLHVVXFKDVDXWKRULW\ OHYHOVRYHUVLJKWUHVSRQVLELOLWLHVULVNLGHQWLȴFDWLRQDQGPHDVXUHPHQWDQGH[SRVXUHOLPLWVLQDFFRUGDQFHZLWKWKH objectives and underlying principles approved by the Board of Directors. 76 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 7KHUHKDVEHHQQRFKDQJHWRWKH*URXSȇVH[SRVXUHWRWKHVHȴQDQFLDOULVNVRUWKHPDQQHULQZKLFKLWPDQDJHVDQG measures the risk. (i) Credit risk &UHGLWULVNLVWKHULVNRIȴQDQFLDOORVVWRWKH*URXSLIDFXVWRPHURUFRXQWHUSDUW\WRDȴQDQFLDOLQVWUXPHQWIDLOVWR meet its contractual obligations, and arises principally from the Group’s receivables from customers and debt investments. 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, other investments 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 EDQNVDQGȴQDQFLDOLQVWLWXWLRQVZKLFKDUHUHJXODWHG 7KH*URXSDQGWKH&RRSHUDWLYHKDYHQRVLJQLȴFDQWFRQFHQWUDWLRQRIFUHGLWULVNH[FHSWIRUWKHORDQVWRVXEVLGLDULHV by the Co-operative. Impairment loss Expected credit loss assessment (ECL) as at 1 January and 31 December 2018 The Group uses an allowance matrix to measure the ECLs of trade receivables from individual customers. ECL is FDOFXODWHGEDVHGRQDFWXDOFUHGLWORVVH[SHULHQFHRYHUWKHSDVWWKUHH\HDUVDQGDGMXVWHGIRUGLHUHQFHVEHWZHHQ economic conditions during the period over which the historic data has been collected, current market conditions and the Group’s view of economic conditions over the expected lives of the receivables. Based on the Group’s assessment, the amount of expected credit loss on trade receivables is negligible. The following table provides information about the exposure to credit risk for trade receivables as at 31 December 2018: Group $’000 31 December 2018 Not past due 979 Past due 1 – 30 days 464 Past due 31 – 120 days 181 1,624 Debt investments The Group invests in bonds issued by the holding co-operative, NTUC Enterprise Co-operative Limited, of $455 million (2017: $455 million) (note 9). Impairment on the bonds has been measured on the 12-month expected loss EDVLVZKLFKUHȵHFWVWKHORZFUHGLWULVNRIWKHH[SRVXUH7KHDPRXQWRIWKHLPSDLUPHQWDOORZDQFHRQWKHVHERQGV is negligible. 77 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU Cash and cash equivalents ΖPSDLUPHQWRQFDVKDQGFDVKHTXLYDOHQWVKDVEHHQPHDVXUHGRQWKHPRQWKH[SHFWHGORVVEDVLVDQGUHȵHFWVWKH VKRUWPDWXULWLHVRIWKHH[SRVXUH7KH*URXSFRQVLGHUVWKDWLWVFDVKDQGFDVKHTXLYDOHQWVKDYHORZFUHGLWULVNEDVHG RQWKHH[WHUQDOFUHGLWUDWLQJVRIWKHFRXQWHUSDUWLHV7KHDPRXQWRIWKHDOORZDQFHRQFDVKDQGFDVKHTXLYDOHQWV ZDVQHJOLJLEOH Derivatives 7KHGHULYDWLYHVDUHHQWHUHGLQWRZLWKEDQNDQGȴQDQFLDOLQVWLWXWLRQFRXQWHUSDUWLHVZLWKVRXQGFUHGLWUDWLQJV$VDW WKHUHSRUWLQJGDWHWKH*URXSDQGWKH&RRSHUDWLYHKDYHHQWHUHGLQWRLQWHUHVWUDWHVZDSVZLWKDWRWDOQRWLRQDO DPRXQWRIPLOOLRQ PLOOLRQ Amounts due from subsidiaries, including loans to subsidiaries 7KH&RRSHUDWLYHKDVEDODQFHVRZLQJIURPLWVVXEVLGLDULHVRIPLOOLRQ PLOOLRQ 7KHVHEDODQFHV LQFOXGHDPRXQWVOHQWWRVXEVLGLDULHVWRVDWLVI\IXQGLQJUHTXLUHPHQWV7KH&RRSHUDWLYHXVHVDVLPLODUDSSURDFKIRU DVVHVVPHQWRI(&/VIRUWKHVHUHFHLYDEOHVWRWKRVHXVHGIRUGHEWLQYHVWPHQWVΖPSDLUPHQWRQWKHVHEDODQFHVKDV EHHQ PHDVXUHG RQ WKH PRQWK H[SHFWHG ORVV EDVLV ZKLFK UHȵHFWV WKH ORZ FUHGLW ULVN RI WKH H[SRVXUHV 7KHDPRXQWRIWKHDOORZDQFHRQWKHVHEDODQFHVLVQHJOLJLEOH Comparative information under FRS 39 7KHDJHLQJDQDO\VLVRIWKHWUDGHUHFHLYDEOHVDVDW'HFHPEHUZDVDVIROORZV Group $’000 31 December 2017 Not past due 3DVWGXHȂGD\V 3DVWGXHȂGD\V Impairment losses under FRS 39 7KH*URXSHVWDEOLVKHGDQDOORZDQFHIRULPSDLUPHQWWKDWUHSUHVHQWVLWVHVWLPDWHRILQFXUUHGORVVHVLQUHVSHFWRI WUDGHDQGRWKHUUHFHLYDEOHV%DVHGRQKLVWRULFDOGHIDXOWUDWHVWKH*URXSEHOLHYHGWKDWQRLPSDLUPHQWDOORZDQFHLV QHFHVVDU\LQUHVSHFWRIWUDGHUHFHLYDEOHVGXHWRWKHJRRGSD\PHQWUHFRUGVIURPLWVFXVWRPHUV (ii) Liquidity risk /LTXLGLW\ ULVN LV WKH ULVN WKDW WKH *URXS ZLOO HQFRXQWHU GLɝFXOW\ LQ PHHWLQJ WKH REOLJDWLRQV DVVRFLDWHG ZLWK LWV ȴQDQFLDOOLDELOLWLHVWKDWDUHVHWWOHGE\GHOLYHULQJFDVKRUDQRWKHUȴQDQFLDODVVHW7KH*URXSȇVDSSURDFKWRPDQDJLQJ OLTXLGLW\LVWRHQVXUHDVIDUDVSRVVLEOHWKDWLWZLOODOZD\VKDYHVXɝFLHQWOLTXLGLW\WRPHHWLWVOLDELOLWLHVZKHQGXH XQGHUERWKQRUPDODQGVWUHVVHGFRQGLWLRQVZLWKRXWLQFXUULQJXQDFFHSWDEOHORVVHVRUULVNLQJGDPDJHWRWKH*URXSȇV UHSXWDWLRQ 7KH IROORZLQJ DUH WKH FRQWUDFWXDO PDWXULWLHV RI ȴQDQFLDO OLDELOLWLHV LQFOXGLQJ HVWLPDWHG LQWHUHVW SD\PHQWV DQG H[FOXGLQJWKHLPSDFWRIQHWWLQJDJUHHPHQWV 78 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 &DVKȵRZV &DUU\LQJ &RQWUDFWXDO :LWKLQ WR DPRXQW FDVKȵRZV \HDU \HDUV $’000 $’000 $’000 $’000 *URXS 2018 1RQGHULYDWLYHȴQDQFLDOOLDELOLWLHV Rental deposits 53,017 (53,017) (14,807) (38,210) Trade and other payables* 65,009 (65,009) (65,009) – Loans and borrowings 2,429,814 (2,606,956) (513,267) (2,093,689) 2,547,840 (2,724,982) (593,083) (2,131,899) 'HULYDWLYHȴQDQFLDOOLDELOLW\ Interest rate swaps used for hedging 1,875 (2,354) (859) (1,495) (net-settled) 2017 1RQGHULYDWLYHȴQDQFLDOOLDELOLWLHV Rental deposits 50,680 (50,680) (19,573) (31,107) Trade and other payables* 49,282 (49,282) (49,282) – Loans and borrowings 2,508,000 (2,688,186) (226,622) (2,461,564) 2,607,962 (2,788,148) (295,477) (2,492,671) 'HULYDWLYHȴQDQFLDOOLDELOLW\ Interest rate swaps used for hedging 38 (716) (253) (463) (net-settled) &RRSHUDWLYH 2018 1RQGHULYDWLYHȴQDQFLDOOLDELOLWLHV Trade and other payables* 280,891 (280,891) (280,891) – Loans and borrowings 2,254,814 (2,431,543) (337,854) (2,093,689) 2,535,705 (2,712,434) (618,745) (2,093,689) 'HULYDWLYHȴQDQFLDOOLDELOLW\ Interest rate swaps used for hedging 1,875 (2,354) (859) (1,495) (net-settled) 2017 1RQGHULYDWLYHȴQDQFLDOOLDELOLWLHV Trade and other payables* 390,993 (390,993) (390,993) – Loans and borrowings 2,158,000 (2,332,382) (46,200) (2,286,182) 2,548,993 (2,723,375) (437,193) (2,286,182) 'HULYDWLYHȴQDQFLDOOLDELOLW\ Interest rate swaps used for hedging 38 (716) (253) (463) (net-settled) * Excludes advance rental billings and interest rate swaps 79 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N 27(6727+( F Ζ1$1&Ζ$/67$7(0(176 Year ended 31 December 2018 (iii) 0DUNHWULVNȂ&DVKȵRZDQGLQWHUHVWUDWHULVNV 0DUNHWULVNLVWKHULVNWKDWFKDQJHVLQPDUNHWSULFHVZLOODHFWWKH*URXSȇVSURȴWRUORVVRUWKHYDOXHRILWVKROGLQJV RIȴQDQFLDOLQVWUXPHQWV7KHREMHFWLYHRIPDUNHWULVNPDQDJHPHQWLVWRPDQDJHDQGFRQWUROPDUNHWULVNH[SRVXUHV ZLWKLQDFFHSWDEOHSDUDPHWHUV ΖQWHUHVWUDWHULVN 7KH *URXS VHHNV WR PDLQWDLQ DQ HɝFLHQW DQG RSWLPDO LQWHUHVW FRVW VWUXFWXUH XVLQJ D PL[ RI ȴ[HG DQG YDULDEOH LQWHUHVW UDWH LQVWUXPHQWV 7KH *URXSȇV H[SRVXUH WR FDVKȵRZ LQWHUHVW UDWHV DULVHV PDLQO\ IURP YDULDEOH EDQN ERUURZLQJV7KH*URXSPDQDJHVWKHVHFDVKȵRZLQWHUHVWUDWHVXVLQJȵRDWLQJWRȴ[HGLQWHUHVWUDWHVZDSV :KHUHXVHGLQWHUHVWUDWHGHULYDWLYHVDUHFODVVLȴHGDVFDVKȵRZKHGJHVDQGVWDWHGDWIDLUYDOXHZLWKLQWKH*URXSȇV VWDWHPHQWRIȴQDQFLDOSRVLWLRQ $WWKHUHSRUWLQJGDWHWKHSURȴOHRIWKHYDULDEOHLQWHUHVWEHDULQJȴQDQFLDOLQVWUXPHQWVLVDVIROORZV Group Co-operative Carrying amount Carrying amount 2018 2017 2018 2017 $’000 $’000 $’000 $’000 Variable rate instruments Cash at bank 56,690 104,931 12,800 36,737 Loans to subsidiaries – – 3,525,479 3,545,479 Loans and borrowings^ 2,506,925 2,124,216 ^ Excludes the $425 million (2017: $50 million) term loans which are hedged by the interest rate swaps &DVKȵRZVHQVLWLYLW\DQDO\VLVIRUYDULDEOHUDWHLQVWUXPHQWV 7KH*URXSȇVȴQDQFLDODVVHWVDQGOLDELOLWLHVDWYDULDEOHUDWHVIRUZKLFKHHFWLYHKHGJHVKDYHQRWEHHQHQWHUHGLQWR DUHGHQRPLQDWHGLQ6LQJDSRUH'ROODUVΖIWKH6LQJDSRUH'ROODULQWHUHVWUDWHVLQFUHDVHGHFUHDVHE\ZLWKRWKHU YDULDEOHV KHOG FRQVWDQW WKH SURȴW ORVV EHIRUH WD[ DQG FRQWULEXWLRQV ZLOO LQFUHDVH GHFUHDVH E\ WKH DPRXQWV DVIROORZV 3URȴW /RVV EHIRUHWD[DQGFRQWULEXWLRQV 2018 2017 Increase by Decrease by Increase by Decrease by 0.5% 0.5% 0.5% 0.5% $’000 $’000 $’000 $’000 Group Variable rate instruments 4,873 6,765 Co-operative Variable rate instruments 12,535 10,621 80 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU +HGJHDFFRXQWLQJȂFDVKȵRZKHGJHV 7KH*URXSKHGJHVLWVH[SRVXUHWRFKDQJHVLQLQWHUHVWUDWHVRILWVYDULDEOHUDWHERUURZLQJVE\HQWHULQJLQWRLQWHUHVW UDWHVZDSVZLWKQRWLRQDOFRQWUDFWDPRXQWRIPLOOLRQ PLOOLRQ ZKHUHE\LWUHFHLYHVYDULDEOHUDWHV HTXDOWRWKH6LQJDSRUHVZDSRHUUDWHRQWKHQRWLRQDODPRXQWDQGSD\Vȴ[HGLQWHUHVWUDWHEHWZHHQWR SHUDQQXP7KHKHGJHVDUHLQSODFHIRUD\HDUWHQXUHWR\HDUVWR 7KHUHZDVQRKHGJHLQHHFWLYHQHVVUHFRJQLVHGLQWKH*URXSȇVSURȴWRUORVVLQDQG$FFRUGLQJO\WKH FKDQJHVLQWKHYDOXHRIWKHKHGJLQJLQVWUXPHQWVRI ZHUHUHFRJQLVHGLQWKH*URXSȇV RWKHUFRPSUHKHQVLYHLQFRPHDQGUHFRJQLVHGLQHTXLW\DVSDUWRIKHGJLQJUHVHUYH LY $FFRXQWLQJFODVVLȴFDWLRQVDQGIDLUYDOXHV 7KHFDUU\LQJDPRXQWVDQGIDLUYDOXHVRIȴQDQFLDODVVHWVDQGȴQDQFLDOOLDELOLWLHVLQFOXGLQJWKHLUOHYHOVLQWKHIDLU YDOXHKLHUDUFK\DUHDVIROORZVΖWGRHVQRWLQFOXGHIDLUYDOXHLQIRUPDWLRQIRUȴQDQFLDODVVHWVDQGȴQDQFLDOOLDELOLWLHV QRWPHDVXUHGDWIDLUYDOXHLIWKHFDUU\LQJDPRXQWLVDUHDVRQDEOHDSSUR[LPDWLRQRIIDLUYDOXH 81 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS Year ended 31 December 2018 1,875 1,875 $’000 Total 2,440,245 2,265,245 fair value – – – – $’000 Level 3 1,875 1,875 $’000 Level 2 2,099,078 1,924,078 – – $’000 Level 1 341,167 341,167 1,875 1,875 13,347 53,017 65,009 35,343 $’000 Total 216,484 455,000 684,831 170,960 302,000 508,303 280,891 carrying amount 2,429,814 2,547,840 3,525,479 2,254,814 2,535,705 – – – – – – – – – – – 53,017 65,009 cost $’000 280,891 Financial 2,429,814 2,547,840 2,254,814 2,535,705 amortised liabilities at – – – – – – – – – – – – – – – – $’000 1,875 1,875 – hedging Fair value instruments – – – – – – – – – – – – – – – – – Financial 3,525,479 SURȴWRUORVV assets at fair value through – – – – – – – – – – cost 13,347 35,343 $’000 216,484 455,000 684,831 170,960 302,000 508,303 assets at Financial amortised 9 11 10 13 14 14 11 10 10 10 13 14 14 Note Excludes advance rental billings and interest rate swaps Group Financial assets not measured at fair value Cash and cash equivalents Trade and other receivables Debt investments – at amortised cost Financial liabilities not measured at fair value Loans and borrowings Rental deposits Trade and other payables^ Financial liabilities measured at fair value Interest rate swaps used for hedging Co-operative Financial assets not measured at fair value Cash and cash equivalents Loans to subsidiaries Trade and other receivables Financial assets measured at fair value Loans to subsidiaries Financial liabilities not measured at fair value Loans and borrowings Trade and other payables^ Financial liabilities measured at fair value Interest rate swaps used for hedging ^ 31 December 2018 82 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS Fair value Other Total Loans and Held-to- – hedging ȴQDQFLDO carrying Total 31 December 2017 Note receivables maturity instruments liabilities amount Level 1 Level 2 Level 3 fair value Mercatus Co-operative Limited | Annual Report 2018 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Group Financial assets not measured at fair value Cash and cash equivalents 11 156,941 – – – 156,941 Trade and other receivables 10 16,925 – – – 16,925 Debt investments – held to maturity 9 – 455,000 – – 455,000 173,866 455,000 – – 628,866 Financial liabilities not measured at fair value Loans and borrowings 13 – – – 2,508,000 2,508,000 200,000 2,330,755 – 2,530,755 Rental deposits – – – 50,680 50,680 Trade and other payables^ 14 – – – 49,282 49,282 – – – 2,607,962 2,607,962 Financial liabilities measured at fair value Interest rate swaps used for hedging 14 – – 38 – – – 38 – 38 Co-operative F Financial assets not measured at fair value INANCIAL STATEMENTS Cash and cash equivalents 11 68,747 – – – 68,747 Trade and other receivables 10 3,915,908 – – – 3,915,908 3,984,655 – – – 3,984,655 Y ear ended31December2018 5.0 FINANCIAL STATEMENTS Financial liabilities not measured at fair value N Loans and borrowings 13 – – – 2,158,000 2,158,000 200,000 1,982,729 – 2,182,729 OTES TOTHE Trade and other payables^ 14 – – – 390,993 390,993 – – – 2,548,993 2,548,993 ^ Excludes advance rental billings, interest rate swaps 83 N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 25 Related party transactions 3DUWLHVDUHFRQVLGHUHGWREHUHODWHGLIRQHSDUW\KDVWKHDELOLW\WRFRQWUROWKHRWKHUSDUW\RUH[HUFLVHVLJQLȴFDQW LQȵXHQFHRYHUWKHRWKHUSDUW\LQPDNLQJȴQDQFLDODQGRSHUDWLQJGHFLVLRQV Related party transactions ΖQ DGGLWLRQ WR WKH WUDQVDFWLRQV GLVFORVHG HOVHZKHUH LQ WKH ȴQDQFLDO VWDWHPHQWV WKH IROORZLQJ VLJQLȴFDQW UHODWHG SDUW\WUDQVDFWLRQVZHUHLQFXUUHGEDVHGRQWHUPVDVDJUHHGEHWZHHQWKHSDUWLHVGXULQJWKHȴQDQFLDO\HDU Group Co-operative 2018 2017 2018 2017 $’000 $’000 $’000 $’000 5HQWDO DGYHUWLVLQJ DQG SURPRWLRQ LQFRPH IURPUHODWHGHQWLWLHVLQFOXGHGLQUHYHQXH – 0DQDJHPHQWIHHLQFRPHIURPUHODWHGHQWLWLHV LQFOXGHGLQRWKHULQFRPH 167 5HQWDO DQG DɝOLDWLRQ H[SHQVHV WR UHODWHG HQWLWLHVLQFOXGHGLQDGPLQLVWUDWLYHH[SHQVHV 0DQDJHPHQWIHHVDQGJURXSZLGHSURJUDPPH IHH SDLG WR UHODWHG HQWLWLHV LQFOXGHG LQ RWKHU operating expenses Key management personnel remuneration .H\PDQDJHPHQWSHUVRQQHOFRPSHQVDWLRQFRPSULVHG Group Co-operative 2018 2017 2018 2017 $’000 $’000 $’000 $’000 6KRUWWHUPEHQHȴWV 3RVWHPSOR\PHQWEHQHȴWV LQFOXGLQJ&3) 48 38 48 38 Directors’ fees 84 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU 26 Subsequent events There were the following events subsequent to the reporting date: 2Q-DQXDU\ WKH&RRSHUDWLYHLVVXHGPLOOLRQQRWHVDWȴ[HGFRXSRQUDWHXQGHULWVH[LVWLQJ PLOOLRQ0XOWLFXUUHQF\0HGLXP7HUP1RWH3URJUDPPH Ȋ071ȋ 7KHPLOOLRQQRWHVZLOOPDWXUHLQ DQGLQWHUHVWLVUHSD\DEOHVHPLDQQXDOO\RQWKHGDWHRILVVXH7KHSURFHHGVIURPWKHQRWHVZHUHXVHGWR SDUWUHSD\Dȴ[HGUDWHEDQNORDQRIPLOOLRQRQ-DQXDU\ 2Q-DQXDU\ Dȴ[HGUDWHEDQNORDQRIPLOOLRQZDVUHSDLGIURPWKH071SURFHHGVRIPLOOLRQ DVGHVFULEHGDERYHDQGWKHUHPDLQLQJEDODQFHZDVUHSDLGWKURXJKLQWHUQDOUHVRXUFHV 27 Adoption of new standards 7KH*URXSDSSOLHGWKHIROORZLQJ)56VLQWHUSUHWDWLRQVRI)56VDQGUHTXLUHPHQWVRI)56VZKLFKDUHPDQGDWRULO\ HHFWLYHIRUDQQXDOSHULRGEHJLQQLQJRQ-DQXDU\ FRS 115 Revenue from Contracts with Customers ZKLFKLQFOXGHVFODULȴFDWLRQVWR)56Revenue from Contracts with Customers; FRS 109 Financial InstrumentsZKLFKLQFOXGHVDPHQGPHQWVDULVLQJIURP)56Insurance Contracts; requirements in FRS 102 Share-based Payment arising from the amendments to FRS 102 – &ODVVLȴFDWLRQDQG measurement of share-based payment transactions; requirements in FRS 40 Investment Property arising from the amendments to FRS 40 – Transfers of investment property; requirements in FRS 28 Investments in Associates and Joint Ventures arising from the amendments to FRS 28 – Measuring an associate or joint venture at fair value; and Ζ17)56Foreign Currency Transactions and Advance Consideration. 7KH DSSOLFDWLRQ RI WKH DERYH VWDQGDUGV DQG LQWHUSUHWDWLRQV GLG QRW KDYH D PDWHULDO HHFW RQ WKH ȴQDQFLDO VWDWHPHQWVH[FHSWIRU)56 FRS 109 Financial Instruments )56 VHWV RXW UHTXLUHPHQWV IRU UHFRJQLVLQJ DQG PHDVXULQJ ȴQDQFLDO DVVHWV ȴQDQFLDO OLDELOLWLHV DQG VRPH FRQWUDFWV WR EX\ RU VHOO QRQȴQDQFLDO LWHPV 7KLV VWDQGDUG UHSODFHV )56 Financial Instruments: Recognition and Measurement. $QH[SODQDWLRQRIKRZWKHDGRSWLRQRI)56 KDVDHFWHGWKH*URXSDQG&RRSHUDWLYHȇVȴQDQFLDOVWDWHPHQWVLV set out below. 85 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS N OTES TO THE F INANCIAL STATEMENTS YHDUHQGHG'HFHPEHU (a) &ODVVLȴFDWLRQDQGPHDVXUHPHQW ȴQDQFLDODVVHWV 7KH &RRSHUDWLYH KDV ORDQV WR VXEVLGLDULHV ZLWK LQWHUHVW FDOFXODWHG EDVHG RQ L RI WKH VKDUHKROGHUVȇ ORDQ DPRXQW RU LL RI WKH VXEVLGLDULHVȇ QHW VXUSOXV RI WKH VXEVLGLDULHVȇ QHW GLVWULEXWDEOHVXUSOXV RIHDFKȴQDQFLDO\HDUZKLFKHYHUDPRXQWLVORZHU UHIHUWRQRWH $VWKHFRQWUDFWXDOFDVK ȵRZVRIWKHORDQDUHQRWVROHO\SD\PHQWVRISULQFLSDODQGLQWHUHVWWKHORDQVWRVXEVLGLDULHVDUHWREHFDUULHGDWIDLU YDOXHWKURXJKSURȴWRUORVVXQGHU)56 SUHYLRXVO\XQGHU)56 FDUULHGDWDPRUWLVHGFRVW (b) ΖPSDLUPHQWRIȴQDQFLDODVVHWV )56 UHSODFHVWKHȆLQFXUUHGORVVȇPRGHOLQ)56 ZLWKDQȆH[SHFWHGFUHGLWORVVȇ (&/ PRGHO7KHQHZLPSDLUPHQW PRGHO DSSOLHV WR ȴQDQFLDO DVVHWV PHDVXUHG DW DPRUWLVHG FRVW DQG GHEW LQYHVWPHQWV DW )92&Ζ EXW QRW WR LQYHVWPHQWVLQHTXLW\LQVWUXPHQWV8QGHU)56 FUHGLWORVVHVDUHUHFRJQLVHGHDUOLHUWKDQXQGHU)56 )RUDVVHWVLQWKHVFRSHRIWKH)56 LPSDLUPHQWPRGHOLPSDLUPHQWORVVHVDUHJHQHUDOO\H[SHFWHGWRLQFUHDVHDQG EHFRPHPRUHYRODWLOH7KH*URXSKDVGHWHUPLQHGWKDWWKHDSSOLFDWLRQRI)56 ȇVLPSDLUPHQWUHTXLUHPHQWVDW -DQXDU\GLGQRWKDYHDPDWHULDOLPSDFWRQWKHȴQDQFLDOVWDWHPHQWV $GGLWLRQDOLQIRUPDWLRQDERXWKRZWKH*URXSPHDVXUHVWKHDOORZDQFHIRULPSDLUPHQWLVGHVFULEHGLQQRWH F 7UDQVLWLRQ &KDQJHVLQDFFRXQWLQJSROLFLHVUHVXOWLQJIURPWKHDGRSWLRQRI)56 KDYHEHHQJHQHUDOO\DSSOLHGE\WKH*URXS UHWURVSHFWLYHO\H[FHSWDVGHVFULEHGEHORZ The Group has used an exemption not to restate comparative information for prior periods with respect to FODVVLȴFDWLRQDQGPHDVXUHPHQW LQFOXGLQJLPSDLUPHQW UHTXLUHPHQWV'LHUHQFHVLQWKHFDUU\LQJDPRXQWVRI ȴQDQFLDO DVVHWV DQG ȴQDQFLDO OLDELOLWLHV UHVXOWLQJ IURP WKH DGRSWLRQ RI )56 DUH UHFRJQLVHG LQ UHWDLQHG HDUQLQJV DQG UHVHUYHV DV DW -DQXDU\ $FFRUGLQJO\ WKH LQIRUPDWLRQ SUHVHQWHG IRU GRHV QRW JHQHUDOO\UHȵHFWWKHUHTXLUHPHQWVRI)56 EXWUDWKHUWKRVHRI)56 7KHIROORZLQJDVVHVVPHQWVZHUHPDGHRQWKHEDVLVRIIDFWVDQGFLUFXPVWDQFHVWKDWH[LVWHGDW-DQXDU\ 7KHGHWHUPLQDWLRQRIWKHEXVLQHVVPRGHOZLWKLQZKLFKDȴQDQFLDODVVHWLVKHOG DQG 7KHGHWHUPLQDWLRQRIZKHWKHUWKHFRQWUDFWXDOWHUPVRIDȴQDQFLDODVVHWJLYHULVHWRFDVKȵRZVWKDWDUH VROHO\SD\PHQWVRISULQFLSDODQGLQWHUHVWRQWKHSULQFLSDODPRXQWRXWVWDQGLQJ ΖIDGHEWLQYHVWPHQWKDVORZFUHGLWULVNDW-DQXDU\WKH*URXSKDGDVVXPHGWKDWWKHFUHGLWULVNRQWKH DVVHWKDVQRWLQFUHDVHGVLJQLȴFDQWO\VLQFHLWVLQLWLDOUHFRJQLWLRQ 1HZKHGJHDFFRXQWLQJUHTXLUHPHQWVDUHDSSOLHGSURVSHFWLYHO\$OOKHGJLQJUHODWLRQVKLSVGHVLJQDWHGXQGHU )56 DW 'HFHPEHU PHW WKH FULWHULD IRU KHGJH DFFRXQWLQJ XQGHU )56 DW -DQXDU\ DQG WKHUHIRUHZHUHUHJDUGHGDVFRQWLQXLQJKHGJLQJUHODWLRQVKLSV 86 Mercatus Co-operative Limited | Annual Report 2018 5.0 FINANCIAL STATEMENTS Mercatus Co-operative Limited N o.1 Marina Boulevard #15-07/08 One Marina Boulevard Singapore 018989 T: +65 6213 8001 F: +65 6438 4506 www.mercatus.com.sg