Annual Report 2011-2012

Other Notes

1. Rental income

1. Rental income
in CHF thousand Switzerland France Germany Netherlands Total
           
Financial year 2010/2011          
Rental income in reporting currency 17 481 31 300 26 307 16 072 91 160
Rental income in local currency 17 481 23 407 19 673 12 019  
           
Financial year 2011/2012          
Rental income in presentation currency 15 778 21 878 23 251 12 271 73 178
Rental income in local currency 15 778 18 037 19 170 10 117  
Change to prior year in local currency –1 703 –5 370 –503 –1 902  
arising from:          
– Purchases 0 0 0 0  
– Disposals –3 671 0 –819 –1 380  
– Vacancy and indexation 1 968 –5 370 316 –522  

The CHF 18.0 million reduction in rental income (previous year: reduction of CHF 11.5 million) stems from the sales that have been made in the last two financial years combined with the depreciation of the euro against the Swiss franc and the temporary vacancy in Berne and Paris due to renovation work.

2. Result from the sale of investment propertie

2. Result from the sale of investment propertie
in CHF thousand 1.4.2011 to 31.3.2012 1.4.2010 to 31.3.2011
     
Sales proceeds 36 020 98 734
Market value as of the last valuation –38 827 –94 867
Result from the sale of investment properties –2 807 3 867

In the last financial year seven investment properties were sold, four in the Netherlands and three in Germany (previous year: three properties sold). For six of the seven investment properties the selling price was equal to or slightly above the market value and for one property it was CHF 2.5 million below the market value. This loss plus selling costs led to an overall loss of CHF 2.8 million on the sale of investment properties.

3. Real estate expense

3. Real estate expense
in CHF thousand 1.4.2011 to 31.3.2012 1.4.2010 to 31.3.2011
     
Property taxes –310 –465
Legal fees –185 –273
Bad debts 21 –237
External property management fees –500 –462
Non recoverable service charges –4 923 –3 991
Other property-related expense –1 539 –1 717
Total real estate expense –7 436 –7 144

4. Administrative expense

4. Administrative expense
in CHF thousand 1.4.2011 to 31.3.2012 1.4.2010 to 31.3.2011
     
Salaries and Board of Directors' fees –5 434 –6 664
Valuation –228 –365
Audit –561 –597
Legal and tax advisory –386 –510
Other taxes –423 –339
Depreciation –219 –150
Bookkeeping and IT –947 –937
Other advisory and investor relations –752 –1 096
Other administrative expense –965 –324
Total administrative expense –9 915 –10 982

Total administrative expenses decreased by CHF 1.1 million during the current year compared with a reduction of CHF 3.5 million in 2010/2011. The decrease during the current year mainly stems from lower salaries due to changes within the Group Management.

5. Financial expense and income

5. Financial expense and income
in CHF thousand 1.4.2011 to 31.3.2012 1.4.2010 to 31.3.2011
     
Financial expense    
Mortgage interest expense 1 –37 362 –46 463
Interest expense and other financial charges 1 –1 750 –2 069
Interest expense 4% bond Züblin Immobilien Holding AG 1 –1 652
Interest expense mandatory convertible securities Züblin France –224 –333
Total financial expense –40 988 –48 865
     
Financial income    
Interest income 2 570 110
Currency translation adjustments 3 1 774 1 955
Total financial income 2 344 2 065
Total net financial expense –38 644 –46 800

1The liabilities associated with these costs belong to the category “Financial liabilities at amortized cost”.

2The liability associated with this expense is included in the category “Financial instruments valued at fair value through the income statement”.

3Thereof profit of CHF 0.6 million due to derecognition of CTA in equity of the six subholding companies Züblin Investment G1 to G6 subsequent their liquidation.

Financial expense

Total financial expenses declined by CHF 7.9 million during the current year to CHF 41.0 million (previous year CHF 48.9 million). The decrease arose from the decline in mortgage interest expenses in the wake of the significant asset sales as well as the reduction of other financial liabilities and the impact of the lower Swiss franc-euro exchange rate. On the other hand, there were interest expenses for the bond issued in the reporting financial year.

Financial income

The Züblin Group recorded financial income of CHF 2.3 million (previous year CHF 2.1 million). The financial income stems mainly from positive currency translation of euro liabilities repaid within the reporting year.

6. Income taxes

6. Income taxes
in CHF thousand Switzerland France Germany Netherlands Holding 1 Total
             
Financial year 2011/2012            
Income taxes in profit and loss            
Current taxes –48 –48
Current taxes from prior year 175 205 380
Total current taxes 175 205 –48 332
             
Changes in tax loss carry forwards 1 652 1 339 2 991
Changes in valuation –7 895 –2 344 –10 239
Changes in other positions –181 8 38 –135
Impact from change in holding period 2 112 2 112
Total deferred taxes –4 312 –997 38 –5 271
Total income taxes in profit and loss –4 137 –792 –10 –4 939
             
Income taxes in comprehensive income statement            
Current taxes
Deferred taxes in equity 3 024 693 3 717
Total income taxes in comprehensive income statement 3 024 693 3 717
             
Financial year 2010/2011            
Income taxes in profit and loss            
Current taxes –1 011 –272 –1 283
Current taxes from prior year 1 010 1 010
Total current taxes –1 011 1 010 –272 –273
             
Changes in tax loss carry forwards 484 4 820 5 304
Changes in valuation –4 442 –2 800 –7 242
Changes in other positions –653 147 27 –479
Total deferred taxes –4 611 2 167 27 –2 417
Total income taxes in profit and loss –5 622 3 177 –245 –2 690
             
Income taxes in comprehensive income statement            
Current taxes 234 234
Deferred taxes in equity –334 –1 329 –1 663
Total income taxes in comprehensive income statement –100 –1 329 –1 429

1Related to all non-property companies.

Income tax reconciliation

in CHF thousand Switzerland France Germany Netherlands Holding 1 Consolidaton Total
               
Financial year 2011/2012              
Profit before tax 22 725 2 645 –330 –13 470 4 428 –6 339 9 659
Reference rate 2 21.17% 0.00% 31.11% 25.00% 8.99% 7.83% 12.86%
Income taxes at reference rate –4 811 103 3 368 –398 496 –1 242
Income taxes recogized in Profit & Loss –4 137 –792 –10 –4 939
Difference 674 –895 –3 368 388 –496 –3 697
Adjustments:              
– Non tax-deductible expenses –202 –44 –176 –422
– Non-taxable income 519   519
– Changes in tax rates on deferred tax positions –1 540 –1 540
– Items taxed at other than reference rate 1 538 68 1 606
– Changes in loss carry forwards not recognized 137 –743 –3 324 320 –320 –3 930
– Income taxes from previous periods 175 172 347
– Others –155 –122 –277
               
Financial year 2010/2011              
Profit before tax 15 475 15 106 –17 588 –4 180 2 341 –1 187 9 967
Reference rate 2 22.00% 0.00% 31.11% 25.07% 14.61% 7.83% 28.74%
Income taxes at reference rate –3 405 5 471 1 048 –342 93 2 865
Income taxes recogized in Profit & Loss –5 622 3 177 –245 –2 690
Difference –2 217 –2 294 –1 048 98 –93 –5 554
Adjustments:              
– Non tax-deductible expenses –288 –48 –336
– Non-taxable income 87 82 –93 76
– Changes in tax rates on deferred tax positions –1 312 –1 312
– Items taxed at other than reference rate –658 16 –642
– Changes in loss carry forwards not recognized –3 275 –991 –4 266
– Income taxes from previous periods 974 974
– Others –247 208 –9 –48

1Related to all non-property companies.

2The reference tax rate for the Group is calculated at 12.86% (prior year 28.74%). The calculation was made using absolute numbers.

Income taxes

In the past financial year the Züblin Group incurred an income tax expense of CHF 4.9 million, compared with an expense of CHF 2.7 million in the prior year. The most important changes in each of our operating countries are set out below. The fall in the weighted average tax rate from 28.74% to 12.86% was primarily due to changes in the share of individual country results in the total.

Switzerland

The income tax expense in Switzerland amounted to CHF 4.1 million (previous year CHF 5.6 million), of which CHF 0.2 million related to a current taxes income (previous year expense of CHF 1.0 million) and an expense of CHF 4.3 million (previous year expense of CHF 4.6 million) to deferred taxes. The deferred tax expense comprises an expense of CHF 5.9 million from valuation differences and tax income of CHF 1.6 million from tax loss carryforwards. The deferred tax expense of CHF 5.9 million from valuation differences contains a positive effect of CHF 2.1 million as a result of the change in the assumption for the minimum holding period set out in 3.2.2.

France

Due to the company's SIIC status, the Company is not liable for income taxes in France. Accordingly, there was no tax expense in the reporting financial year. Under the current SIIC regime, if the French entity disposes of any property within the first five years after acquisition, it is liable for a one-off payment of 25% of the initial purchase price.

Germany

There was an income tax expense of CHF 0.8 million (previous year: income of CHF 3.1 million) in Germany, consisting of income of CHF 0.2 million (previous year: income of CHF 1.0 million) from current taxes and an expense of CHF 1.0 million (previous year: income of CHF 2.2 million) from deferred taxes.

Netherlands

There was no impact from income taxes in the Netherlands either in the reporting year nor in the previous year.

7. Earnings per share

7. Earnings per share
in CHF 1.4.2011 to 31.3.2012 1.4.2010 to 31.3.2011
     
Average number of shares entitled to dividends 59 165 446 59 111 806
Earnings of shareholders of Züblin Immobilien Holding AG 3 304 293 –806 064
Earnings per share 0.06 –0.01

Züblin Immobilien Holding AG no longer has any equity instruments which lead to a dilution.

8. Investment properties

Financial year 2011/2012

in CHF thousand Switzerland France Germany Netherlands Total
           
Balance as of 31.3.2011 337 560 405 067 360 494 178 909 1 282 030
Purchases 0 0 0 0 0
Value-enhancing investments 17 515 8 233 8 281 1 000 35 029
Sales 0 0 –7 699 –31 128 –38 827
Positive change in market value of investment properties 24 488 5 104 3 961 38 33 591
Negative change in market value of investment properties –9 203 –5 720 –7 615 –13 639 –36 177
Currency translation adjustments 0 –29 954 –26 591 –12 959 –69 503
Balance as of 31.3.2012 370 360 382 730 330 830 122 221 1 206 143
– of which investment properties 304 200 382 730 264 464 121 498 1 072 892
– of which held for sale 66 160 0 66 368 723 133 251
           
Reconciliation of market value to book value as of 31.3.2012          
Valuation by external appraiser 1 370 360 382 730 330 832 123 112 1 207 034
Valuation adjustment property held for sale 2 0 0 0 –891 –891
Balance as of 31.3.2012 370 360 382 730 330 832 122 221 1 206 143

1The report of the independent appraisers (Wüest & Partner [CH + GER], BNP Paribas [FR] and Troostwijk [NL] as of 31 March 2012 may be found on pages 159 to 164.

2In certain cases, the Company has made adjustments to the valuations from the external appraisers. In particular, these adjustments were made in cases where, as of the balance sheet date, the Company was in sales negotiations for the sale of a property, the effects of which were not yet reflected in the external valuation.

The reduction in the value of the investment properties from CHF 1 282.0 million to CHF 1 206.1 million stems primarily from the following factors:

  • The value of the portfolio was increased by investments of CHF 35.0 million (previous year 50.2 million) which the Company made in the reporting period. Approximately 50% of these investments were in Switzerland and related to the renovation projects in Zurich, Berne and Geneva. Furthermore, value enhancing investments in the amount of CHF 8.2 million were made in Paris and of CHF 8.3 million in Germany, mainly in Dortmund.
  • At the same time the Company sold properties for CHF 38.8 million (previous year CHF 93.9 million). The sales were in Germany and the Netherlands and are in line with the investment strategy of the Züblin Group.
  • A further reduction in the value of the portfolio resulted from the net downward revaluation of the investment properties of CHF 2.6 million (previous year CHF –17.0 million). While values rose in Switzerland, the positive impacts were offset mainly by the downward revaluations in the Netherlands. The positive change in market value in Switzerland stems from lower discount rates caused by the declined yields on the transaction market. In the Netherlands, the decline in market value is a result of structural problems in the real estate sector.
  • The devaluation of the euro against the Swiss franc also had a negative impact of CHF 69.5 million (previous year CHF 94.2 million) on the overall value of the portfolio.
  • The fire insurance value of the investment properties amounts to CHF 1 060.8 million (previous year CHF 1 275.1 million).

A complete list of all investment properties along with all information in accordance with the Directive on Financial Reporting of the SIX Swiss Exchange can be found on pages 29 to 45. This additional information is integral part of the notes to the consolidated financial statements.

Financial year 2010/2011

in CHF thousand Switzerland France Germany Netherlands Total
           
Balance as of 31.3.2010 372 800 438 230 422 247 203 713 1 436 990
Purchases 0 0 0 0 0
Value-enhancing investments 35 765 2 853 9 361 2 198 50 177
Sales –77 743 0 –16 126 0 –93 869
Positive change in market value of investment properties 18 164 7 322 4 319 4 052 33 857
Negative change in market value of investment properties –11 426 –4 158 –22 278 –13 039 –50 901
Currency translation adjustments 0 –39 180 –37 029 –18 015 –94 224
Balance as of 31.3.2011 337 560 405 067 360 494 178 909 1 282 030
– of which investment properties 337 560 405 067 352 040 167 140 1 261 807
– of which held for sale 0 0 8 454 11 769 20 223
           
Reconciliation of market value to book value as of 31.3.2011          
Valuation by external appraiser 1 337 560 405 067 363 162 183 787 1 289 576
Valuation adjustment property held for sale 2 0 0 –2 668 –4 878 –7 546
Balance as of 31.3.2011 337 560 405 067 360 494 178 909 1 282 030

1The report of the independent appraisers (Wüest & Partner [CH + GER], BNP Paribas [FR] and Troostwijk [NL] as of 31 March 2011 may be found in the annual report 2010/2011.

2In certain cases, the Company has made adjustments to the valuations from the external appraisers. In particular, these adjustments were made in cases where, as of the balance sheet date, the Company was in sales negotiations for the sale of a property, the effects of which were not yet reflected in the external valuation.

9. Furnishing

9. Furnishing
in CHF thousand Office furnishing and fittings EDP Total 2011/2012 Total 2010/2011
         
Acquisition costs        
Balance as of 1.4. 2 820 1 406 4 226 4 290
Additions 138 205 343 73
Disposals 0 0 0 –60
Currency translation adjustments –54 –5 –59 –77
Balance as of 31.3. 2 904 1 606 4 510 4 226
         
Accumulated depreciation        
Balance as of 1.4. 2 422 1 351 3 773 3 734
Additions 157 62 219 150
Disposals 0 0 0 –74
Currency translation adjustments –29 –4 –33 –37
Balance as of 31.3. 2 550 1 409 3 959 3 773
         
Net book value as of 31.3. 354 197 551 453

10. Deferred tax assets and liabilities

10. Deferred tax assets and liabilities
in CHF thousand Switzerland France Germany Netherlands Holding 1 Total
             
Financial year 2011/2012            
Deferred tax assets arising from:            
– Tax loss carry-forwards 4 926 0 9 380 0 0 14 306
– Negative valuations of investment properties 0 0 0 3 152 0 3 152
– Derivative financial instruments 0 0 2 140 0 0 2 140
– Other valuation differences 0 0 0 0 170 170
Total deferred tax assets as of 31.3.2012 4 926 0 11 520 3 152 170 19 768
             
Deferred tax liabilities arising from:            
– Positive valuations of investment properties 24 706 0 8 214 3 152 0 36 072
– Derivative financial instruments 0 0 0 0 0 0
– Other valuation differences 833 0 75 0 0 908
Total deferred tax liabilities as of 31.3.2012 25 539 0 8 289 3 152 0 36 980
             
Net amounts as presented in balance sheet            
Presented deferred tax assets 0 0 3 438 0 170 3 608
Presented deferred tax liabilities 20 613 0 207 0 0 20 820
             
Net deferred tax liabilities            
Balance as of 31.3.2011 –19 325 0 3 814 0 132 –15 379
Deferred taxes recognized in Profit & Loss –4 312 0 –997 0 38 –5 271
Deferred taxes recognized in equity 3 024 0 693 0 0 3 717
Currency translation adjustments 0 0 –278 0 0 –278
Balance as of 31.3.2012 –20 613 0 3 231 0 170 –17 211

1Related to all non-property companies.

in CHF thousand Switzerland France Germany Netherlands Holding 1 Total
             
Financial year 2010/2011            
Deferred tax assets arising from:            
– Tax loss carry-forwards 585 0 8 694 0 0 9 279
– Negative valuations of investment properties 0 0 540 4 922 0 5 462
– Derivative financial instruments 0 0 1 615 0 0 1 615
– Other valuation differences 0 0 0 0 132 132
Total deferred tax assets as of 31.3.2011 585 0 10 849 4 922 132 16 488
             
Deferred tax liabilities arising from:            
– Positive valuations of investment properties 18 923 0 6 898 4 922 0 30 743
– Derivative financial instruments 334 0 0 0 0 334
– Other valuation differences 653 0 137 0 0 790
Total deferred tax liabilities as of 31.3.2011 19 910 0 7 035 4 922 0 31 867
             
Net amounts as presented in balance sheet            
Presented deferred tax assets 585 0 4 132 0 132 4 849
Presented deferred tax liabilities 19 910 0 318 0 0 20 228
             
Net deferred tax liabilities            
Balance as of 31.3.2010 –14 380 0 3 370 0 105 –10 905
Deferred taxes recognized in Profit & Loss –4 611 0 2 166 0 27 –2 418
Deferred taxes recognized in equity –334 0 –1 329 0 0 –1 663
Currency translation adjustments 0 0 –393 0 0 –393
Balance as of 31.3.2011 –19 325 0 3 814 0 132 –15 379

1Related to all non-property companies.

in CHF thousand Switzerland France Germany Netherlands Holding 1 Total
             
Tax loss carry-forwards            
As of 31.3.2012 23 271 49 098 91 455 36 619 351 966 552 409
Maturity within            
1 to 12 months 0 0 0 0 0 0
1 to 3 years 0 0 0 2 540 0 2 540
3 to 5 years 461 0 0 2 393 87 231 90 085
more than 5 years 22 810 0 0 31 686 264 735 319 231
without time limitation 0 49 098 91 455 0 0 140 553
Captialization:            
not capitalized 0 49 098 59 017 36 619 351 966 496 700
capitalized 23 271 0 32 438 0 0 55 709
capitalized at reference tax rate 4 926 0 9 380 0 0 14 306
             
As of 31.3.2011 2 763 49 444 96 019 11 260 335 072 494 558
Maturity within            
1 to 12 months 0 0 0 0 0 0
1 to 3 years 0 0 0 3 452 0 3 452
3 to 5 years 0 0 0 2 583 0 2 583
more than 5 years 2 763 0 0 5 225 335 072 343 060
without time limitation 0 49 444 96 019 0 0 145 463
Captialization:            
not capitalized 0 49 444 61 587 11 260 335 072 457 363
capitalized 2 763 0 34 432 0 0 37 195
capitalized at reference tax rate 585 0 8 694 0 0 9 279

1Related to all non-property companies.

11. Trade accounts receivable

11. Trade accounts receivable
in CHF thousand   31.3.2012   31.3.2011
  Accounts receivable Value adjustment Accounts receivable Value adjustment
         
Not yet due 4 728 5 406
< 30 days past due 415 394 –57
30–60 days past due 403 –7 339 –32
61–90 days past due 119 –7 235 –14
91–180 days past due 170 –61 229 –54
181–360 days past due 464 –370 2 057 –1 893
Total 6 299 –445 8 660 –2 050
         
Total accounts receivable 5 854   6 610  

Value adjustment for doubtful receivables

in CHF thousand 2011/2012 2010/2011
     
Balance 1.4 –2 050 –1 938
Changes in value adjustment for doubtful receivables –178 35
Utilisation of value adjustment for doubtful receivables 1 365 84
Release of value adjustment for doubtful receivables 268 –411
Currency translation adjustments 150 180
Balance 31.3. –445 –2 050

12. Cash and cash equivalents

As of the balance sheet date, the Company had cash and cash equivalents of CHF 39.6 million (previous year CHF 51.4 million), which are comprised solely of freely available cash balances.

13. Share capital

13. Share capital
  Number of shares in CHF thousand
     
Issued shares at a nominal value CHF 1.00 as of 31.3.3010 59 724 486 59 724
No changes in capital structure in financial year 2010/2011
Issued shares at a nominal value CHF 1.00 as of 31.3.2011 59 724 486 59 724
No changes in capital structure in financial year 2011/2012
Issued shares at a nominal value CHF 1.00 as of 31.3.2012 59 724 486 59 724

In order to strengthen the Company's balance sheet, the Board of Directors will propose at the Annual General Meeting on 29 June 2012 that no dividend nor par value reduction will be paid.

The Company's holding of treasury shares during financial year 2011/2012 was as follows:

  Number of shares in CHF thousand
     
Balance as of 31.3.2010 627 432 3 017
Purchase of treasury shares 1 256 263 4 775
Sale of treasury shares –1 426 100 –5 604
Result from treasury shares   –401
Balance as of 31.3.2011 457 595 1 787
Purchase of treasury shares 677 288 2 302
Sale of treasury shares –385 006 –1 343
Result from treasury shares   –114
Balance as of 31.3.2012 749 877 2 632

14. Non-controlling interests

The following non-controlling interests represent the part of Züblin Immobilière France SA which is not held by Züblin Immobilien Holding AG:

  31.3.2012 31.3.2011
     
Non-controlling interests in EUR thousand 46 857 49 361
Non-controlling interests in CHF thousand 56 440 64 194
Non-controlling interests in percentage 53.51% 53.51%

Share capital structure of Züblin Immobilière France SA (ZIF)

in CHF thousand 31.3.2012 31.3.2011
     
Number of shares 9 745 551 9 172 283
Number of shares of conversion 2.0% mandatory convertible 2 656 250 2 500 000
Fully diluted number of shares 12 401 801 11 672 283
     
Part of Züblin Immobilien Holding AG    
In share capital of ZIF 5 765 375 5 426 236
In 2.0% mandatory convertible securities
     
Share of Züblin Immobilien Holding AG as a percentage    
In share capital of ZIF 59.16% 59.16%
In fully diluted share capital of ZIF 46.49% 46.49%

Züblin Immobilien Holding AG holds 59.16% of the shares of Züblin Immobilière France SA and 46.49% on a fully diluted basis. The difference in this ownership stake arises from the fact that the 10-year Mandatory Convertible Securities issued by Züblin Immobilière France SA in August 2007 for EUR 35.5 million are assumed to be fully converted for the purposes of the consolidated financial statements, reflecting the economic substance of the transaction. The 2.0% Mandatory Convertible Securities are held in their entirety by Montalcino S.à.r.l., a company controlled by the Forum Group. At the current conversion price the securities can be converted into 2656250 shares. An analysis of this impact is shown in the table above. The increased amount of shares compared to the previous year stems from the stock dividend. Accordingly, the conversion price of the Mandatory Convertible Securities has been adjusted.

Despite the fact that the ownership stake in Züblin Immobilière France SA is below 50%, the company is fully consolidated in the consolidated financial statements. As of the balance sheet date, Züblin Immobilien Holding AG continued to exercise control as it holds an absolute majority of voting shares with voting rights and appoints the majority of the members of the Board of Directors.

15. Future contractual maturites

15. Future contractual 
maturites
in CHF thousand Carrying value Interest < 1 year amortisation Interest 1 to 5 years amortisation Interest > 5 years amortisation
               
Mortgages 773 930 17 367 217 295 28 706 603 177 0 0
Bond 59 102 2 400 0 7 200 60 000 0 0
Mandatory convertible security 3 719 855 0 3 421 0 855 0
Trade accounts payable 3 161 0 3 161 0 0 0 0
Derivative financial instruments 1 54 088 17 090 0 30 836 0 1 905 0
Other short-term liabilities 21 855 0 19 121 0 0 0 2 734
Total as of 31.3.2012 915 855 37 712 239 577 70 163 663 177 2 760 2 734
               
Mortgages 882 202 24 337 89 114 68 470 772 216 371 20 872
Mandatory convertible security 5 714 923 0 3 693 0 385 0
Trade accounts payable 1 991 0 1 991 0 0 0 0
Derivative financial instruments 1 32 349 14 914 0 16 484 0 –47 0
Other short-term liabilities 38 095 239 37 327 0 0 0 0
Total as of 31.3.2011 960 351 40 413 128 432 88 647 772 216 709 20 872

1Derivative financial instruments are disclosed on a net basis.

In the upcoming twelve months, contracts totalling CHF 239.6 million (previous year CHF 128.4 million) will mature. Of this amount, CHF 217.3 million (previous year CHF 89.1 million) relates to mortgages. CHF 86.8 million of these mortgages are held for sale, and the remainder is composed of normal amortization and maturing mortgages of CHF 146.3 million. The majority relates to Switzerland whereas discussions for a renewal are in process. During the reporting year Züblin has fully repaid a short-term credit facility in the amount of CHF 16.6. million. Trade accounts payable as well as the remainder of other short-term liabilities are part of the operational business and are covered by the short-term assets.

16. Financial instruments – fair-value-hierarchy

16. Financial instruments – 
fair-value-hierarchy
in CHF thousand Carrying value Level 1 Level 2 Level 3
         
As of 31.3.2012        
Assets: Derivative financial instruments 561 0 561 0
Liabilities: Derivative financial instruments 54 088 0 54 088 0
         
As of 31.3.2011        
Assets: Derivative financial instruments 1 520 0 1 520 0
Liabilities: Derivative financial instruments 32 349 0 32 349 0

The valuation of financial instruments is based upon the three-level fair value hierarchy, which is as follows:

Level 1 – Valuation based upon market prices for specific financial instruments.

Level 2 – Valuation based upon market prices for similar instruments or using valuation models which are based upon input parameters observable on the market.

Level 3 – Valuation based upon models with significant input parameters which have a material impact on fair value and are not observable on the market.

17. Financial instruments by category

17. Financial instruments 
by category
    31.3.2012   31.3.2011
  Book value Market value Book value Market value
         
Financial Assets        
Loans and receivables at amortized cost        
Trade accounts receivable 5 854 5 854 6 610 6 610
Other current assets 18 170 18 170 18 170 18 170
Cash and cash equivalents 39 555 39 555 51 399 51 399
Financial assets at fair value through profit and loss        
Derivative financial instruments 561 561 1 520 1 520
Total 64 140 64 140 77 699 77 699
         
Financial Liabilities        
Financial Liabilities at amortized cost        
Mortgages 773 930 806 604 882 202 909 053
Bond 59 102 62 400
Mandatory Convertible Securities 3 719 3 719 5 714 5 714
Other short-term borrowings 21 855 21 855 38 095 38 095
Accounts payable 3 161 3 161 1 991 1 991
Financial liabilities at fair value through profit and loss        
Derivative financial instuments 54 088 54 088 32 349 32 349
Total 915 855 951 827 960 351 987 202

The book value of the category “Loans and receivables at amortized cost” is equal to the market value as the relevant positions all have short maturities. The reported value of financial assets reflects the maximum default risk disregarding any collateral, in the event that the contractual partners fail to meet their payment obligations. No concentration of default risks arising from business relations with individual debtors or groups of debtors has been identified.

In the category “Liabilities at amortized cost”, the reported amounts of the short-term liabilities reflect their market value. The fair values of mortgages are calculated at the present values of the payment flows using the relevant yield curve. The fair values of convertible securities are based on the closing market price at the relevant balance sheet date. For Mandatory Convertible Securities, the market value as of the balance sheet date reflects the discounted amount of the outstanding liabilities.

18. Derivative financial instruments

Cash flow hedges

in CHF thousand Notional amounts 31.3.2012 Notional amounts 31.3.2011 Fair value 31.3.2012 Fair value 31.3.2011
         
1 to 12 months 103 225 67 400 –896 –1 211
1 to 3 years 304 388 130 310 –23 950 –3 217
3 to 5 years 216 612 367 726 –19 440 –20 912
More than 5 years 171 181 200 000 –9 802 –5 489
Total cash flow hedges 795 406 765 436 –54 088 –30 829
– of which liabilities     –54 088 –32 349
– of which assets     0 1 520

Cash flow hedges in equity

in CHF thousand 2011/2012 2010/2011
     
Reserve cash flow hedges shareholders of Züblin Immobilien Holding AG –22 964 –34 674
Reserve cash flow hedges non-controlling interests –8 394 –13 603
Total reserve for cash flow hedges as of 1.4. –31 358 –48 277
Fair value change –41 665 –746
Recognized in income statement as interest expense 15 919 19 094
Change in current and deferred taxes 3 717 –1 429
Total reserve for cash flow hedges as of 31.3. –53 387 –31 358
– of which shareholders of Züblin Immobilien Holding AG –40 579 –22 964
– of which non-controlling interests –12 808 –8 394

The Züblin Group uses interest rate swaps to hedge its exposure to future movements in interest rates. During financial year 2011/2012, Züblin entered into two new swap positions starting 30 March 2012 and 5 July 2012. These new swpas are replacing swaps which by then will mature.

All interest rate derivatives are designated as effective under the criteria of IAS 39, and as such, changes in market values of derivative financial instruments are recognized in the consolidated comprehensive income statement. The ineffective portion of cash flow hedges recognized in the income statement was CHF 0.5 million in the reporting financial year and CHF –0.7 million in the previous year.

Payments on interest rate swaps and interest payments on mortgages and other loans occurred simultaneously.

Currency options

in CHF thousand Notional amounts 31.3.2012 Notional amounts 31.3.2011 Fair value 31.3.2012 Fair value 31.3.2011
         
1 to 12 months 0 n.a. 0 n.a.
1 to 3 years 0 n.a. 0 n.a.
3 to 5 years 14 000 n.a. 561 n.a.
Total foreign currency put-options 14 000 n.a. 561 n.a.
– of which assets     0 n.a.

Purpose of these currency put-options is hedging future cash flow in other than the functional currency. The currency put-options are stated at their fair values in the category derivative financial instruments whereas gains and losses are recognized through profit and loss.

Total derivative financial instruments

in CHF thousand Notional amounts 31.3.2012 Notional amounts 31.3.2011 Fair value 31.3.2012 Fair value 31.3.2011
         
Cash flow hedges 795 406 765 436 –54 088 –30 829
Foreign currency put-options 14 000 0 561 0
Total derivative financial instruments 809 406 765 436 –53 527 –30 829
– of which liabilities     –54 088 –32 349
– of which assets     561 1 520

19. Mortgages

Overview mortgages as of 31.3.2012

In CHF thousand Switzerland France Germany Netherlands Total %
             
Term structure            
1 to 12 months 193 320 272 609 87 136 70 828 623 893 81%
1 to 3 years 0 0 150 037 0 150 037 19%
3 to 5 years 0 0 0 0 0 0%
More than 5 years 0 0 0 0 0 0%
Total 193 320 272 609 237 173 70 828 773 930 100%
of which:            
– Non-current mortgages 56 250 272 609 188 774 38 964 556 597  
– Current mortgages 96 823 0 1 857 31 864 130 544  
– Mortgages held for sale 40 247 0 46 542 0 86 789  
             
Term structure, including swaps            
1 to 12 months 0 89 525 0 22 648 112 173 14%
1 to 3 years 33 320 126 473 237 173 48 180 445 146 58%
3 to 5 years 160 000 56 611 0 0 216 611 28%
More than 5 years 0 0 0 0 0 0%
Total 193 320 272 609 237 173 70 828 773 930 100%
Average interest rates 3.05% 4.53% 5.27% 5.50% 4.48%  
             
Contractual maturity dates of mortgages            
1 to 12 months 136 070 0 0 30 392 166 462 23%
1 to 3 years 57 250 251 041 206 288 20 473 535 052 69%
3 to 5 years 0 21 568 30 885 19 963 72 416 8%
More than 5 years 0 0 0 0 0 0%
Total 193 320 272 609 237 173 70 828 773 930 100%
             
Fair value of mortgages            
Fixed rate mortgages 0 0 155 658 0 155 658 19%
Variable rate mortgages 194 711 290 274 91 401 74 561 650 947 81%
Total 194 711 290 274 247 059 74 561 806 605 100%

Overview mortgages as of 31.3.2011

In CHF thousand Switzerland France Germany Netherlands Total %
             
Term structure            
1 to 12 months 194 120 295 059 107 286 124 134 720 598 82%
1 to 3 years 0 0 0 0 0 0%
3 to 5 years 0 0 161 604 0 161 604 18%
More than 5 years 0 0 0 0 0 0%
Total 194 120 295 059 268 890 124 134 882 202 100%
of which:            
– Non-current mortgages         793 088  
– Current mortgages         70 192  
– Mortgages held for sale         18 922  
             
Term structure, including swaps            
1 to 12 months 97 350 0 0 72 114 169 464 19%
1 to 3 years 0 97 383 36 470 0 133 853 15%
3 to 5 years 96 770 174 267 232 420 52 020 555 476 63%
More than 5 years 0 23 409 0 0 23 409 3%
Total 194 120 295 059 268 890 124 134 882 202 100%
Average interest rates 2.87% 4.55% 5.32% 5.04% 4.45%  
             
Contractual maturity dates of mortgages            
1 to 12 months 0 0 0 74 168 74 168 8%
1 to 3 years 194 120 50 841 0 49 966 294 926 33%
3 to 5 years 0 220 809 268 890 0 489 699 56%
More than 5 years 0 23 409 0 0 23 409 3%
Total 194 120 295 059 268 890 124 134 882 202 100%
             
Fair value of mortgages            
Fixed rate mortgages 0 0 167 421 32 040 199 461 22%
Variable rate mortgages 196 602 305 899 112 744 94 347 709 592 78%
Total 196 602 305 899 280 165 126 387 909 053 100%

In the current financial year, the Company rolled over mortgage contracts to the value of CHF 41.1 million. The mortgage portfolio of the Züblin Group includes both variable rate and fixed rate loans. As of 31 March 2012, loans with fixed interest rates amounted to CHF 150.5 million (previous year 194.2 million). Capitalized closing fees of CHF 3.0 million (previous year CHF 2.5 million) are included in the figure for mortgages.

Some of the loan agreements and mortgages include financial covenants which specify, among other things, adherence to certain financial indicators (total debt/EBITDA, level of interest cover, loan-to-value ratio, and equity ratio). The financial covenants vary by country and loan contract, and are presented in summarized form in the table below:

  Switzerland France Germany Netherlands
         
31.3.2012        
Debt/EBITDA 13.5 13.75
Interest coverage ratio 1.5 1.15 – 1.5 1.4 > 1.5 – 2.0
Loan to value 70% 70% – 75% 70% 60% – 75%
Equity % 30% 25%

The Company closely monitors these covenants every quarter and performs sensitivity analyses to changes in earnings, interest rate movements and property valuations. The breach of a covenant may have a variety of consequences depending upon the individual contract. Generally, in the first instance this would include an increase in the margin or accelerated amortization. If so, there is typically a repair period. If after this period, the breach is not repaired, the bank will typically request an accelerated amortization of the loan or a partial repayment of the loan. As of the balance sheet date, the Company was in compliance with all of its covenants.

The following table summarizes the value of investment properties pledged as security for mortgages:

in CHF thousand 31.3.2012 31.3.2011
     
Book value of assets pledged (investment properties) 835 783 944 471
Credit drawn (debt secured) 580 610 688 083

As part of the refinancing of the loan portfolio in Switzerland, all mortgage notes charged against Swiss properties were lodged with UBS as the agent. If the conditions agreed in the consortium loan agreement (trigger covenants) are no longer met, the assigned securities to the value of CHF 136.8 million will be transferred to the lenders.

Furthermore, future rental fee receivables for properties, insurance policies for properties, and shares in subsidiary companies have been pledged as security over and above the mortgage liens.

20. 4% bond 11/15

20. 4% bond 11/15
in CHF thousand Nominal value Price in % Fair value Effective interest rate in %
         
As of 31.3.2012 60 000 104.00% 62 400 4.42%
         
As of 31.3.2011 n.a. n.a. n.a. n.a.

During the financial year 2011/2012 Züblin Immobilien Holding AG issued a 4% bond of CHF 60.0 million. The bond is quoted at the SIX Swiss Exchange. The bond has a duration of four years and its proceeds were used to repay short-term loans, to refinance different mortgages as well as a to finance a renovation project in France.

21. 2.0% Mandatory Convertible Securities France

21. 2.0% Mandatory Convertible Securities France
in CHF thousand 31.3.2012 31.3.2011
     
Balance Sheet items    
Amount of debt – interest 1 3 719 5 714
Amount of equity 2 47 140 47 140
     
Income statement    
Coupon 2.0% MCS –861 –949
Amortized interest 1 618 617
Total interest expense –243 –332

1Under IFRS, the amortized cost method requires that only the interest payment on the amount of debt, currently CHF 3.7 million (prior year CHF 5.7 million) be recorded as interest expense. The amount of debt simultaneously declines since the payment reduces the cash value of the interest payments to be made. The interest debt component is part of the balance sheet item “Mandatory Convertible Securities”.

2The equity component of CHF 47.1 million (prior year CHF 47.1 million) is shown in equity as part of non-controlling interests and is unchanged from the prior year. The currency tranlsation adjustment is part of the currency translation adjustment on non-controlling interests.

On 7 August 2007, Züblin Immobilière France SA issued 10-year Mandatory Convertible Securities for EUR 35.5 million. The 2.0% Mandatory Convertible Securities are held in their entirety by Montalcino S.à.r.l., a company controlled by the Forum Group. At the current conversion price the securities can be converted into 2 656 250 shares. Under the terms of the 2% Mandatory Convertible Securities 07/17, the holder has the right to convert the securities at any time after 7 August 2008. Once the term expires on 7 August 2017, the securities must be converted. The holder is entitled to a minimum interest level of 2%, but has the right to receive the same level of dividend distributions, or distributions from free or capital reserves, as existing shareholders.

22. Employee retirement benefit plan

The Züblin Group has different pension schemes throughout the countries in which it operates. These schemes vary according to local laws and employment regulations. In all countries outside of Switzerland, the plans are defined contribution plans. In the past twelve months, expenditures totalling CHF 0.5 million (previous year CHF 0.4 million) for all defined contribution plans were recorded. In Switzerland, the pension plan of Züblin Immobilien Management AG has been designated as a defined benefit plan under IAS 19. The pension scheme is financed by employees' and employer's contributions.

The following amounts are based upon the Project Unit Credit Method:

in CHF thousand 31.3.2012 31.3.2011
     
Pension liabilities (present value) 3 057 2 721
Pension assets at market value 2 286 2 121
Pension liabilities (technical deficit) –771 –600

The above amount has been recorded under “Other non-current liabilities”.

The pension liabilities and assets changed as follows in the Züblin Group's consolidated balance sheet:

in CHF thousand 2011/2012 2010/2011
     
Pension liabilities (present value) at 1.4. 2 721 2 526
Actuarial pension expenses 165 147
Employees' contributions 104 74
Interest expenses 75 124
Paid coverage –99 –229
Accrued service cost –158 105
Actuarial (gains) and losses 249 –26
Pension liabilities (present value) at 31.3. 3 057 2 721
     
Pension assets at market value at 1.4. 2 121 2 048
Expected income on plan assets 55 52
Employer contributions 156 186
Employees' contributions 104 124
Paid coverage –99 –229
Actuarial losses –51 –60
Pension assets at market value at 31.3. 2 286 2 121
     
Effective pension income 5 –8

The following table details the cover of the defined benefit pension plan and the impact of adjustments in the expected or actual values of the pension liabilities and assets:

in CHF thousand 31.3.2012 31.3.2011 31.3.2010 31.3.2009 31.3.2008
           
Pension liabilities (present value) 3 057 2 721 2 526 2 125 1 951
Pension liabilities at market value 2 286 2 121 2 048 1 798 1 504
Deficient cover 771 600 478 327 447
           
Adjustments of pension liabilities by experience 17 143 159 296 –26
Adjustments of pension assets by experience –51 –60 –105 –99 –53
Total actuarial gains and losses –34 83 54 198 –78
           
Expected contribution in the coming year 159 173      
           
Penison expense is comprised of the following items:          
– Current service cost 164 147      
– Interest expense 75 74      
– Expected return on plan assets –55 –52      
– Accrued service cost –158 105      
Pension expenses 26 274      
           
In the summary of recognized income and expense the following pension income and expenses were recorded directly:          
Actuarial (gains) and losses 300 34      
Cumulative actuarial (gains) and losses recorded as pension income and expense 351 51      

The calculation of the Group's pension liabilities is based on the following assumptions:

  31.3.2012 31.3.2011
     
Discount rate 2.25% 2.75%
Expected return on pension assets 2.50% 2.50%
Expected future salary increases 2.00% 2.00%
Expected future pension increases 0.00% 0.00%
Life expectancy in years at age of retirement (man/woman) BVG 2010 GT BVG 2005

Asset allocation: 100% of the assets are managed and invested by a reinsurance company. Furthermore, the Company has insured a minimum return on its pension assets. Therefore, a detailed asset allocation is not presented.

23. Liabilities from long-term rental contracts

In connection with the rental of its business premises, Züblin Immobilien Management AG has entered into fixed rental commitments up to 31 March 2016 at the latest, totalling CHF 1.2 million (previous year CHF 1.5 million). For the reporting financial year, the rental payments recorded in the income statement totalled CHF 0.3 million (previous year CHF 0.3 million).

in CHF thousand 31.3.2012 31.3.2011
     
Liabilities from long-term rental contracts    
1 to 12 months 293 553
1 to 3 years 585 625
3 to 5 years 293 585
more than 5 years 0 0

24. Related parties

In accordance with IAS 24, related parties for the reporting financial year included:

  • The Board of Directors
  • Members of Züblin Group Management
  • Bruin I, S.à.r.l., Luxembourg 1
  • Forum European Realty Income L.P., Cayman 1

1 These shareholders together form a group with a total holding of 19.84%. There are no shareholders agreements. These companies are represented on the Board of Directors by Andrew N. Walker.

Shareholdings by related parties as of 31 March 2012

  • Shareholdings by the Board of Directors and the Group Management are disclosed in detail in note 26 (see pages 147 to 148).
  • The 2.0% Mandatory Convertible Securities, which were issued in 2007 by Züblin Immobilière France SA (ZIF), were subscribed in their entirety by Montalcino S.à.r.l., a company controlled by the Forum Group, and can be converted into 2 656 250 shares of ZIF at the current conversion price.

Transactions with related parties and significant shareholders

As mentioned in this note last year under the heading of transactions after the year-end, the French subsidiary Züblin Immobilière France (ZIF) underwent a reorganization during the financial year and established a 100% asset management subsidiary, Züblin Immobilière France Asset Management (ZIFAM), on 3 May 2011. On 1 June 2011 the employment contract for Pierre Essig (member of the Group Management of Züblin Group and CEO in France) and all other employees were transferred from ZIF to the new company. ZIFAM was set up to perform the asset management for ZIF and will also provide property management services in future.

As part of this reorganization, the Company provided Pierre Essig with an option to buy the asset management company ZIFAM under certain circumstances. This option can only be exercised if Züblin Group or ZIF alter their strategy and give up their asset management activities. The option covers ZIFAM's entire capital and the exercise price is the market value of the company at the time of exercising the option.

Apart from the above there were no other transactions with related parties or significant shareholders in financial year 2011/12. Nor were any advisory fees paid to related parties or significant shareholders over and above the remuneration disclosed on pages 145 to 146. The Board of Directors and Group Management continually monitor potential conflicts of interest.

Loans to members of governing bodies

No loans have been granted to members of the Board of Directors or the Züblin Group Management.

25. Compensation

Compensation of the members of the Board of Directors

in CHF Basic compensation Subsidiaries1 Total
Financial year 2011/2012      
Pierre N. Rossier, Chairman 2 140 000 45 855 185 855
Christian Bubb, Vice-Chairman 65 000 0 65 000
Gerold Bührer, Member 60 000 0 60 000
Andrew N. Walker, Member 3 60 000 14 555 74 555
Dr. Markus Wesnitzer, Member 4 60 000 12 129 72 129
Total Board of Directors 385 000 72 539 457 539
       
Financial year 2010/2011      
Pierre N. Rossier, Chairman 2 120 000 45 930 165 930
Christian Bubb, Vice-Chairman 62 500 0 62 500
Gerold Bührer, Member 60 000 0 60 000
Andrew N. Walker, Member 3 90 000 13 372 103 372
Dr. Markus Wesnitzer, Member 4 60 000 13 372 73 372
Total Board of Directors 392 500 72 674 465 174

1Board compensation at the subsidiary level.

2Pierre N. Rossier is also a member of the Board of Directors of Züblin Immobilière France SA, Paris, ZIAG Immobilien AG, Dusseldorf und Züblin Immobilien AG, Zurich.

3Andrew N. Walker is also a member of the Board of Directors of Züblin Immobilière France SA, Paris.

4Dr. Markus Wesnitzer is also a member of the Board of Directors of ZIAG Immobilien AG, Dusseldorf.

Compensation of the Group Management

in CHF Basic compensation Bonus in cash Pension fund 1 Total
Financial year 2011/2012        
Bruno Schefer, CEO 620 000 120 000 82 679 822 679
Thomas Wapp, CFO 240 000 60 000 20 208 320 208
Pierre Essig, CEO France 321 096 54 581 45 221 420 898
Total Group Management 1 181 096 234 581 148 108 1 563 785
         
Financial year 2010/2011        
Bruno Schefer, CEO 620 000 125 000 114 864 859 864
Thomas Wapp, CFO 2 120 000 30 000 7 950 157 950
Pierre Essig, CEO France 320 928 60 174 49 883 430 985
Members who left in financial year 2010/2011        
George E. Aase 3 283 500 0 24 759 308 259
Dr. Oliver Bäumler 4 465 713 0 16 046 481 759
Total Group Management 1 810 141 215 174 213 502 2 238 817

1Employer's contribution.

2From 1.10.2010.

3Left the company as of 31.7.2010, on the payroll until 31.1.2011.

4Left the company as of 30.9.2010, on the payroll until 30.9.2011 (the costs were accrued in full in 2010/2011)

For further information on the compensation model and the compensation paid please refer to the Corporate Governance section, page 70.

26. Shareholdings

Shareholdings of the Board of Directors

  Shares ZIHAG 1 Restricted shares ZIHAG 2 Shares ZIF 3
Financial year 2011/2012      
Pierre N. Rossier, Chairman 116 932 0 10 625
Christian Bubb, Vice-Chairman 0 0 0
Gerold Bührer, Member 7 805 0 138
Andrew N. Walker, Member 2 724 0 48
Dr. Markus Wesnitzer, Member 1 139 0 0
Total Board of Directors 128 600 0 10 811
       
Financial year 2010/2011      
Pierre N. Rossier, Chairman 115 000 1 932 10 000
Christian Bubb, Vice-Chairman 0 0 0
Gerold Bührer, Member 6 666 1 139 130
Andrew N. Walker, Member 0 2 724 46
Dr. Markus Wesnitzer, Member 0 1 139 0
Total Board of Directors 121 666 6 934 10 176

1Shares ZIHAG = shares in Züblin Immobilien Holding AG.

2These ZIHAG shares were distributed on 24 April 2008 and were restricted until 23 April 2011.

3Shares ZIF = shares in Züblin Immobilière France SA.

Shareholdings of the Group Management

  Shares ZIHAG 1 Restricted shares ZIHAG 2 Shares ZIF 3
Financial year 2011/2012      
Bruno Schefer, CEO 40 296 0 5 956
Thomas Wapp, CFO 0 0 0
Pierre Essig, CEO France 0 0 29 308
Total Group Management 40 296 0 35 264
       
Financial year 2010/2011      
Bruno Schefer, CEO 24 967 15 329 5 608
Thomas Wapp, CFO 0 0 0
Pierre Essig, CEO France 0 0 27 584
Total Group Management 24 967 15 329 33 192

1Shares ZIHAG = shares in Züblin Immobilien Holding AG.

2These ZIHAG shares were distributed on 24 April 2008 and were restricted until 23 April 2011.

3Shares ZIF = shares in Züblin Immobilière France SA.

27. Events after the balance sheet date

Sales

Two investment properties were sold after the year-end. The first was in Frechen, Germany, which was sold in April 2012 at its market value as of 31 March 2012 and the second in Geneva in May 2012 at above the year-end market value.

Loan from Züblin Immobilien Holding AG (ZIHAG) to Züblin Immobilière Paris Ouest 1 (ZIPO)

On 24 April 2012 ZIHAG granted ZIPO a mezzanine loan to finance the renovation costs of the investment property Newtime “Jatte 1”. The loan is drawable on demand and has the following terms and conditions:

  • The first instalment of the loan amounts to EUR 35 million, of which EUR 6.5 million was paid out on 24 April 2012
  • Interest rate: 9.5% (of which 3% is payable in cash quarterly and 6% is capitalised)
  • Term of the loan: to 15 July 2015 (with the option to extend twice by one year)
  • ZIHAG will participate in any potential gain in the value of the property in proportion to the ratio of its loan to the project company's equity

As a result of this internal financing the OPCI fund established in the last financial year is no longer needed and will be liquidated.

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Annual Report 2011-2012

Annual Report 2011-2012 (8.16 MB)