3   Notes on the consolidated statement of comprehensive income

The rental income is calculated as follows:

The accumulated vacancy rate for the 2012 financial year amounted to a total of 5.0% of target rental income (2011: 4.4%), with commercial properties accounting for 5.7% of vacancies, while residential properties accounted for 1.6% (2011: 4.6% and 3.7% respectively).

Loss of income as a result of rent-free periods relates to commercial premises let out for the first time or re-let during the period under review in cases where tenants moved into the premises in stages in accordance with contractual agreements and during this period paid no rent or reduced rent totalling CHF 0.1 million (2011: CHF 0.6 million). As a result of the comprehensive refurbishment of the commercial property at Hohlstrasse 600 in Zurich, there were several months during which no rental income was collected from the new tenants while the conversion was underway (CHF 1.8 million). The effective collection losses amounted to CHF 0.1 million (2011: CHF 0.1 million).

In the case of two yield-producing properties, Allreal is the ground lessee, but ground rent is only due for one commercial property. Under a contractual agreement, the ground rent is reset annually for a further 12-month period on the basis of capital market interest rates.

Future ground rents will be due as follows:

Other rental income breaks down as follows:

The year-on-year change in rental income from commercial and residential real estate held on a continuous basis came to –0.67% and –0.25% respectively (like-for-like rental growth). In calculating the growth rate on the real estate portfolio, additions and disposals in 2011 and 2012 were not taken into account.

The real estate expenses relate solely to the yield-producing properties in the Real Estate division.

The administrative and operating expenses break down as follows:

In 2012, real estate expenses for unlet properties amounted to CHF 0.9 million (2011: CHF 0.5 million).

With the acquisition of the Hammer Retex Group as at 4 April 2012 (see 4.5), the scope of consolidation expanded by the acquired companies with effect from the acquisition date. The income posted during the period under review relates to the period from April to December 2012 (9 months).

As at 30 March 2012, the commercial building St. Jakobs-Strasse 110 in Muttenz was sold at a price of CHF 7.2 million. After deduction of transaction costs, the sale generated a pre-tax profit of CHF –0.4 million.

The third-party fees and earnings from construction activities consist of architects’ and project & development fees (CHF 43.3 million) and earnings from construction activity (CHF 19.6 million). This contrasts with directly offset sales deductions for construction insurance and guarantees, performance guarantees, bad debt allowances and third-party expenses arising from tendering (CHF –1.9 million).

During the period under review, ownership of units under the projects Markthalle Basel (selling price CHF 89.2 million), Aublickweg Au-Wädenswil (selling price CHF 34.0 million) and Schinebüel Birmenstorf (selling price CHF 23.3) was transferred to third parties, resulting in gains on sales of CHF 19.0 million. The Holengass Meilen project (selling price 15.4 million) did not generate any gains on sales despite initial transfers of ownership; the balance sheet item had to be adjusted by CHF –1.7 million as a result of impairment tests (see 4.2).

The diverse income of CHF 1.1 million includes fees for third-party project development activities amounting to CHF 0.5 million and other earnings from commissions and services provided for third parties amounting to CHF 0.5 million.

The share of personnel expenses attributable to the Projects & Development division amounts to CHF 40.5 million; the share attributable to the Hammer Retex Group is CHF 4.6 million. In addition, payments were made to the Board of Directors (CHF 0.5 million) and to employees of Allreal Finanz AG (CHF 0.1 million). Personnel services provided to other divisions are paid in the form of management fees and are eliminated again for the consolidated financial statements.

Salaries and wages amounting to CHF 45.7 million include variable compensation in the form of bonuses (CHF 4.1 million). For share-based remuneration for members of Group Management and selected management employees see 3.12.

Other personnel expenses include spending on actual and flat-rate staff expenses (CHF 3.1 million), training and development (CHF 0.6 million) and costs for the recruitment of new employees (CHF 0.4 million).

On the balance sheet cut-off date, the staff headcount stood at 409 employees, corresponding to 378 full-time equivalents (2011: 316 employees/297 full-time equivalents).

Rental expenses relate to business premises and parking spaces in Zurich, Basel, Bern, Cham and St. Gallen. For its head office in Zurich, Allreal has an indexed lease which runs until 31 January 2018, with an annual rent of CHF 2.9 million. The leases for the other sites, with annual rents of CHF 1.0 million have fixed terms, the longest of which runs until July 2017.

Administrative expenses include the cost of corporate communications, telecommunications, property insurance and office supplies.

Other general operating expenses consist essentially of costs for the operation, maintenance and repair of operating facilities, postage costs and the cost of pre-tax cuts in VAT. During the period under review, CHF 1.7 million in provisions no longer required were written back in favour of operating expenses.

The finance expense for the 2.50% bond issue 2011–2016 includes paid and accrued interest of CHF 3.7 million (2011: CHF 2.3 million) up to the balance sheet cut-off date and amortisation of CHF 0.3 million (2011: CHF 0.2 million) between the debt component and the redemption amount.

The finance expense for the 2.125% convertible bond 2009–2014 comprises paid and accrued interest of CHF 4.2 million up until the balance sheet cut-off date (2011: CHF 4.2 million) and amortisation of CHF 3.0 million between the debt component and the redemption amount (2011: CHF 2.9 million).

Capitalised building loan interest of CHF 9.6 million breaks down into development real estate under construction (CHF 3.3 million) and investment real estate under construction (CHF 6.3 million), applying an average interest rate of 2.15% to 2.40% (2011: 2.40%).

The average interest rate on the outstanding financial liabilities is 2.13%, with an average interest lock-in period of 4.5 years for all financial liabilities (2011: 2.30% and 4.3 years).

Based on the financial liabilities which have interest lock-in periods of less than one year outstanding on the balance sheet date and which are not hedged by means of hedge accounting, a rise in interest rates by 1% would increase the annualised interest costs by CHF 1.3 million (2011: CHF 1.4 million).

As a result of the rights issue in May 2012 and the adjusted values owing to the realisation of gains on development real estate (see 1.3), the earnings per share for the 2011 financial year was recalculated in order to enable comparability with the current reporting period.

In line with IAS 33, the issuing of convertible bonds has the effect of diluting the earnings per share. To calculate the dilution, the net profit was corrected for the effects resulting from the convertible bond (finance expense, deferred and current taxes). This results in a diluted net profit of CHF 103.6 million including revaluation effect and CHF 110.7 million excluding revaluation effect. For the calculation of the diluted net profit, the average number of outstanding shares increases on a time-weighted basis from 15 481 040 to 16 973 855 shares and takes account of the maximum number of outstanding shares arising from the conversion and from share-based remuneration.

If all the conversion rights arising from the 2009–2014 2.125% convertible bond were exercised at a conversion price of CHF 135.89 per registered share, this would result in the creation of 1 471 410 new shares from conditional capital.

At the end of the year, the share price stood at CHF 141.10. This represents a premium of 17.7% compared to the net asset value per share after deferred taxes of CHF 119.90 (31.12.2011: premium 15.4%).

Change in pension commitments

Changes in pension fund assets at market value

The effective yield on the pension fund assets amounted to 6.8% in 2012 (2011: 0.7%).

In 2012, plan assets break down into the individual investment categories as follows: real estate 38.3% (2011: 44.4%), bonds 32.6% (2011: 28.6%), equities 22.3% (2011: 19.6%) as well as other assets 6.8% (2011: 7.4%).

Depending on the pension plan, the expected return on the pension assets is between 2.2% and 3.9% (2011: 3.7%) and corresponds to the weighted average of the asset distribution and the expected returns for each investment category. These break down as follows: real estate 4.0% (2011: 4.8%), bonds 1.5%–2.6% (2011: 2.0%–3.0%), equities 5.6%–5.8% (2011: 6.0%–6.2%), active mortgages 2.0% (2011: –), alternative investments 4.0% (2011: –) and cash 0.25% (2011: 0.5%).

The pension commitments were calculated on the basis of the following assumptions:

Effective 1 January 2012, the pension fund amended the pension plan such that retirement credits were increased by 0.5%, while risk premiums were reduced by 0.5%. In addition, the conversion rates were reduced and death and disability benefits increased. Savings capital was increased for all actively insured members by means of a single premium to the debit of the pension fund in order to partly offset the reduction in the conversion rate. The difference of CHF 0.4 million between the pension commitments under the new plan and under the previous plan is recognised as past service cost and amortised over the average remaining service period from 2011 to 2021.

The following table shows the cover of the defined benefit pension plans and the impact of deviations stemming from expected and actual values of the pension commitments and the assets of the pension fund for recent reporting periods:

Statement of development of net pension liabilities/technical shortfall

Experience-based adjustments to the plan assets amounted to CHF –3.3 million (2011: CHF 2.8 million), while such adjustments to the pension liabilities amounted to CHF –0.5 million (2011: CHF –1.2 million).

Under IAS 19.58 (IFRIC 14), an economic benefit to be capitalised in the balance sheet may arise if the current pension expenditure is greater than the regulatory contributions. As in the previous year, these preconditions do not apply as at the balance sheet cut-off date.

For the following year, contributions to the plan are expected to come to CHF 3.8 million (employer) and CHF 3.4 million (employees) (2011: both CHF 2.8 million).

Calculation of pension expenses

In addition to the Allreal pension fund, some Allreal staff are covered by a management insurance plan taken out with an insurance company. Allreal’s only commitment in respect of this plan is to pay the annual contributions. In the period under review, these amounted to CHF 0.9 million (2011: CHF 0.6 million). The management plan is classified as a defined contribution plan in accordance with IAS 19.

In 2012, employee benefits came to a total of CHF 3.6 million (2011: CHF 3.4 million).

The Board of Directors may, at its discretion and without giving rise to any recurrent entitlement, award members of Group Management and selected senior executives remuneration in the form of shares of Allreal Holding AG. Beneficiaries have immediate right of disposal over the first half of the shares allocated to them. The second half of the shares allocated will be placed at the beneficiary’s disposal in two years, provided that the employment relationship has not been terminated by such time. Entitlements will be satisfied by the company by means of treasury shares. The amount in connection with the share allocation is charged to personnel expenses over the vesting period.

Total expenses for share-based reimbursement amounted to CHF 0.19 million in the period under review (2011: CHF 0.11 million).