3   Notes on the consolidated statement of comprehensive income

The rental income is calculated as follows:

The accumulated vacancy rate for the 2014 financial year amounted to a total of 7.9% of projected rental income (2013: 4.7%), with commercial properties accounting for 7.8%, while residential properties accounted for 8.5% (2013: 5.0% and 3.3%, respectively).

The rest of the 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 0.62 and 0.35% respectively (like-for-like rental growth). In calculating the growth rate on the real estate portfolio, additions and disposals in 2013 and 2014 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 2014 real estate expenses for unlet properties amounted to CHF 1.1 million (2013: CHF 0.5 million).

The period under review saw the sale of the commercial properties Buckhauserstrasse 32 and Thurgauerstrasse 39 in Zurich and the residential property Badenerstrasse 58–60 in Schlieren. After deduction of transaction costs, the sale resulted in earnings of CHF 3.1 million on total selling prices of CHF 54.6 million.

In 2013, the sale of six properties produced earnings of CHF 20.0 million.

Income from realisation Projects & Development consists of architects’ and project & development fees (CHF 37.5 million) and earnings from construction activity (CHF 11.9 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 −3.7 million).

During the 2014 financial year, ownership of units under the projects Ringhof Wallisellen (selling price CHF 87.5 million), Bruggächer Mönchaltorf (CHF 45.2 million), Cholplatz Bülach (CHF 33.6 million), Lerchenbergstrasse Erlenbach (CHF 21.9 million), Holengass Meilen (CHF 10.2 million), Escherhof Wallisellen (CHF 10.0 million), Stockenstrasse Kilchberg (CHF 2.0 million) and Lilienthal-Boulevard Opfikon (CHF 1.2 million) was transferred to third parties, resulting in gains on sales of CHF 34.6 million.

Diverse income includes fees for third-party project development activities amounting to CHF 0.8 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 39.3 million; the share attributable to Hammer Retex is CHF 6.6 million. In addition, payments were made to the Board of Directors of Allreal Holding AG (CHF 0.4 million). Personnel services provided to other divisions are paid in the form of management fees and are eliminated again for the consolidated financial statements.

A CHF 5.4 million past service cost was credited to employee pension expenses in application of IAS 19, since, among other factors, the Board of Trustees of the Allreal pension fund had decided to lower the pension conversion rates for all age brackets by 0.5% effective 1 January 2015; see 3.11.

Other personnel expenses include spending on actual and flat-rate staff expenses (CHF 2.0 million), training and development (CHF 0.2 million), costs for the recruitment of new employees (CHF 0.4 million), expenses for employee events (CHF 0.2 million) and other directly attributable staff expenses (CHF 0.4 million).

On the balance sheet cut-off date, the staff headcount stood at 376 employees, corresponding to 348 full-time equivalents (31.12.2013: 388 employees/371 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 0.7 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.

In the previous year, the sale of a 1.14% minority interest in Olmero AG, Opfikon, resulted in a book gain of CHF 0.8 million.

The financial expense for the 2.00% bond issue 2013–2020 includes paid and accrued interest of CHF 3.0 million (2013: CHF 0.8 million) up to the balance sheet cut-off date and amortisation of CHF 0.1 million (2013: CHF 0.1 million) between the debt component and the redemption amount.

The financial expense for the 1.25% bond issue 2014–2019 includes accrued interest of CHF 1.2 million up to the balance sheet cut-off date and amortization 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 (2013: CHF 3.8 million) up to the balance sheet cut-off date and amortisation of CHF 0.3 million (2013: CHF 0.2 million) between the debt component and the redemption amount.

The financial expense for the 2.125% convertible bond 2009–2014 redeemed on 9 October 2014 comprises paid interest of CHF 3.3 million (2013: CHF 4.2 million) and amortisation of CHF 4.1 million (2013: CHF 3.1 million) between the debt component and the redemption amount.

Capitalised building loan interest of CHF 2.8 million (2013: CHF 7.2 million) breaks down into development real estate under construction (CHF 1.3 million) and investment real estate under construction (CHF 1.5 million), applying an average interest rate of 1.91–2.07% (2013: 1.95–2.13%).

The average interest rate on the outstanding financial liabilities is 1.93%, with an average interest lock-in period of 4.2 years for all financial liabilities (2013: 2.13% and 4.7 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 2.1 million (2013: CHF 1.0 million).

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 share-based remuneration. This results in a diluted net profit of CHF 104.6 million including revaluation effect or CHF 109.3 million excluding revaluation effect. For the calculation of the diluted net profit, the average number of outstanding shares increases from 15 929 684 to 15 931 099 shares.

At the end of the year, the share price stood at CHF 137.10 (31.12.2013: CHF 123.50). This represents a premium of 11.8% compared to the net asset value per share after deferred taxes of CHF 122.55 (31.12.2013: discount −0.2%).

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:

The past service cost of CHF 5.4 million was credited to the income statement under personnel expenses.

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 5.7 million lower or CHF 6.1 million higher (31.12.2013: CHF –4.6 million/CHF 4.5 million).

If the development of wages and salaries were 25 basis points higher or lower than the assumptions made 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 0.9 million higher or CHF 0.9 million lower, respectively.

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

Development of asset ceiling

A probable CHF 4.1 million will be paid out under defined benefit commitments within the next 12 months, and a probable CHF 42.0 million in the subsequent 9 years.

The average term of defined benefit commitments to the end of the period under review is 16.9 years (31.12.2013: 15.7 years).

For the following year, contributions to the plan are expected to come to CHF 3.6 million (employer) and CHF 3.3 million (employees) (2013: CHF 3.8 million and 3.5 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 (2013: CHF 0.6 million). The management plan is classified as a defined contribution plan in accordance with IAS 19.

In 2014, employee benefits came to a total of CHF −0.3 million (2013: CHF 5.0 million). CHF 5.0 million).

Members of Group Management receive an additional 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. 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 1 561 shares of Allreal Holding AG will be distributed to eligible beneficiaries in 2015 and 2016.

Total expenses for share-based reimbursement amounted to CHF 0.20 million in the period under review (2013: CHF 0.18 million).