3   Notes on the consolidated statement of comprehensive income

The rental income is calculated as follows:

The accumulated vacancy rate for the 2013 financial year amounted to a total of 4.7% of target rental income (2012: 5.0%), with commercial properties accounting for 5.0% of vacancies, while residential properties accounted for 3.3% (2012: 5.7% and 1.6%, 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 0.7 million (2012: CHF 1.9 million). The main premises affected were the commercial property at Brandschenkestrasse 38/40 in Zurich and the retail sales areas at Richti-Shopping in Wallisellen. The effective collection losses amounted to CHF 0.1 million (2012: 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:

The rest of the rental income breaks down as follows:

The year-on-year change in rental income from residential and commercial real estate held on a continuous basis came to –0.11% and –1.16% respectively (like-for-like rental growth). In calculating the growth rate on the real estate portfolio, additions and disposals in 2012 and 2013 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 2013 real estate expenses for unlet properties amounted to CHF 0.5 million (2012: CHF 0.9 million).

With the acquisition of the Hammer Retex Group as at 4 April 2012, the scope of consolidation expanded by the acquired companies. The income posted during the period under review relates to the period from January to December 2013 (previous year: April to December 2012).

The period under review saw the sale of the commercial properties Kronenstrasse 10 in Dielsdorf, Neugutstrasse 2–6/Bahnhofplatz 2/Bahnhofstrasse 25 (town centre development) in Wallisellen, Farlifangstrasse 1 in Zumikon and Dreikönigstrasse 37 in Zurich and the sale of the two residential properties Zürcherstrasse 52 and 64 in Schlieren.

After deduction of transaction costs, the sale resulted in earnings of CHF 20.0 million on total selling prices of CHF 217.1 million.

In the first half of 2012, the sale of a commercial property in Muttenz produced earnings of CHF –0.4 million.

The third-party fees and earnings from construction activities consist of architects’ and project & development fees (CHF 40.7 million) and earnings from construction activity (CHF 15.3 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 –4.9 million).

During the 2013 financial year, ownership of units under the projects Konradhof Wallisellen (selling price CHF 134.7 million), Escherhof Wallisellen (CHF 67.1 million), Schinebüel Birmenstorf (CHF 25.0 million), Holengass Meilen (CHF 14.4 million), Aublickweg Au-Wädenswil (CHF 14.5 million), Lerchenbergstrasse Erlenbach (CHF 27.2 million), Stockenstrasse Kilchberg (CHF 7.0 million) and Nelkenstrasse Zurich (CHF 4.0 million) was transferred to third parties, resulting in gains on sales of CHF 33.7 million.

The diverse income of CHF 1.1 million includes fees for third-party project development activities amounting to CHF 1.1 million and other earnings from commissions and services provided for third parties amounting to CHF 0.2 million.

The share of wages and salaries attributable to the Projects & Development division amounts to CHF 42.6 million; the share attributable to the Hammer Retex Group is CHF 6.0 million. In addition, payments were made to the Board of Directors of Allreal Holding AG (CHF 0.5 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 49.1 million include variable compensation in the form of bonuses (CHF 4.4 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 2.3 million), training and development (CHF 0.3 million), costs for the recruitment of new employees (CHF 0.4 million) and other directly attributable staff expenses (CHF 0.6 million).

On the balance sheet cut-off date, the staff headcount stood at 388 employees, corresponding to 371 full-time equivalents (31.12.2012: 409 employees/378 full-time equivalents).

Rental expenses relate to business premises and parking spaces in Zurich, Basel, Bern, Cham, St. Gallen and Wallisellen. 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 0.8 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, as well as postage costs and the cost of pre-tax cuts in VAT.

The sale of a 1.14% minority interest in Olmero AG, Opfikon, for CHF 0.8 million resulted in a book gain of CHF 0.8 million

The financial expense for the 2.00% bond issue 2013-2020 includes accrued interest of CHF 0.8 million up to the balance sheet cut-off date and amortisation of CHF 0.1 million between the debt component and the redemption amount.

The financial expense for the 2.50% bond issue 2011–2016 includes paid and accrued interest of CHF 3.8 million (2012: CHF 3.7 million) up to the balance sheet cut-off date and amortisation of CHF 0.2 million (2012: CHF 0.3 million) between the debt component and the redemption amount.

The financial 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 (2012: CHF 4.2 million) and amortisation of CHF 3.1 million between the debt component and the redemption amount (2012: CHF 3.0 million).

Capitalised building loan interest of CHF 7.2 million (2012: CHF 9.6 million) breaks down into development real estate under construction (CHF 3.0 million) and investment real estate under construction (CHF 4.2 million), applying an average interest rate of 1.95% to 2.13% (2012: 2.40%).

The average interest rate on the outstanding financial liabilities is 2.13%, with an average interest lock-in period of 4.7 years for all financial liabilities (2012: 2.13% and 4.5 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 derivatives, a rise in interest rates by 1% would increase the annualised interest costs by CHF 1.0 million (2012: CHF 1.3 million).

As a result of IAS 19 (revised), the earnings per share for the 2012 financial year were recalculated (see 1.3).

The issuing of the 2009–2014 2.125% convertible bond and the share-based remuneration of members of Group Management 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 and the share-based remuneration. This results in a diluted net profit of CHF 127.7 million including revaluation effect or CHF 122 million excluding revaluation effect. For the calculation of the diluted net profit, the average number of outstanding shares increases from 15 912 684 to 17 385 137 shares.

If all the conversion rights arising from the 2009–2014, 2.125% convertible bond issue were exercised at a conversion price of CHF 135.89 per registered share, this would result in the creation of 1 471 226 new shares from conditional capital.

At the end of the year, the share price stood at CHF 123.50 (31.12.2012: CHF 141.10). This represents a premium of –0.2% compared to the net asset value per share after deferred taxes of CHF 123.80 (31.12.2012: premium 17.9%).

Swiss pension institutions are regulated by the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG). The BVG stipulates that pension institutions must be managed autonomously and as legally independent institutions.

The Board of Trustees, as the governing body of the pension fund, is made up of an equal number of employee and employer representatives. The Board of Trustees is tasked with defining and implementing investment strategy.

Plan members are insured against the economic consequences of old age, death and disability, in respect of which the BVG stipulates minimum benefits. Both employer and employee pay a share of the contributions to the pension fund; these are based on the insured salary and on the age of the plan member. Pension contributions and annual interest are credited to the individual savings accounts. Upon retirement of a plan member, the balance of the savings account is either paid out or, applying a statutory conversion rate, converted into a retirement pension. Benefits will also be paid in cases of long-term occupational disability.

All actuarial risks, comprising demographic risks (life expectancy) as well as financial risks (return on plan assets or development of wages, salaries and pensions), are borne by the pension fund and regularly assessed by the Board of Trustees. In the event of a shortfall in cover as defined by the BVG, recourse may be had to various measures. These primarily include increasing current contributions, payment of additional restructuring contributions by the employer, or adjusting the conversion rates.

Development of pension fund commitments and assets

Defined benefit pension plan expenses break down as follows:

Change in pension commitments

Changes in pension fund assets at market value

As at the balance sheet cut-off date, plan assets break down into the individual investment categories as follows:

The calculation was performed on the basis of the following assumptions:

The discount rate and the future development of wages and salaries were identified as significant actuarial assumptions.

If the discount rate were 25 basis points higher or lower than at the balance sheet cut-off date and if all other variables were to remain constant, the present value of pension fund commitments would be CHF 4.6 million lower or CHF 4.5 million higher, respectively (31.12.2012: CHF –4.0 million/CHF 4.2 million).

The revaluation component of pension fund positions recognised in other comprehensive income breaks down as follows:

Development of asset ceiling

A probable CHF 3.6 million will be paid out under defined benefit commitments within the next 12 months, and a probable CHF 40.3 million in the subsequent 9 years.

The average term of defined benefit commitments to the end of the period under review is 13.2 years (31.12.2012: 13.5 years).

For the following year, contributions to the plan are expected to come to CHF 3.8 million (employer) and CHF 3.5 million (employees) (2012: CHF 3.8 million and CHF 3.4 million, respectively).

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 0.6 million (2012: CHF 0.9 million). The management pension plan is classified as a defined contribution plan in accordance with IAS 19.

In 2013, employee benefits came to a total of CHF 5.0 million (2012: CHF 4.2 million).

[R]Restated values owing to IAS 19 (revised)

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.

Provided that all preconditions are met, a total of 1 367 shares of Allreal Holding AG will be distributed to eligible beneficiaries in 2014 and 2015.

Total expenses for share-based reimbursement amounted to CHF 0.18 million in the period under review (2012: CHF 0.19 million).