Explanations to the annual financial statements

1 | Securities

The securities are listed shares. The Zug Estates Group did not hold any securities as at the balance sheet date (market value previous year: TCHF 4 366).

2 | Trade receivables

 
in CHF thousands31.12.201431.12.2013
Trade receivables from hotel & catering activities1 114852
Rent receivables386273
Other trade receivables533787
Provisions for doubtful receivables– 80– 76
Total trade receivables1 9531 836

3 | Other receivables

 
in CHF thousands31.12.201431.12.2013
Withholding tax credits57155
Accounts for heating and service charge settlement4 7593 073
Other receivables221 990
Total other receivables4 8385 218

The decline in "other receivables" is mainliy due to input VAT.

4 | Properties held for sale

 
in CHF thousands31.12.201431.12.2013
Acquisition value at the beginning of reporting period1 3880
Additions3 4171 388
Disposals00
Acquisition value at the end of reporting period4 8051 388

A preliminary agreement was concluded with the municipality of Risch for the sale of the Suurstoffi 29 development property in connection with the Suurstoffi East development plan. Since 2013, therefore, this property is classified under current assets. In the year under review, TCHF 3 417 was invested in this property.

5 | Investment properties, investment properties under construction and undeveloped plots

 
in CHF thousandsZug City Center site, Zug
investment properties
Suurstoffi site, Risch Rotkreuz, investment propertiesOther investment propertiesTotal investment propertiesTotal investment properties under construction1Undeveloped plots2Total
Balance as at 01.01.2013558 69792 58424 363675 644111 23411 311798 189
Investments3 59818 620028 08240 293068 375
Acquisitions00000118118
Disposals 300– 35– 3500– 35
Reclassification of properties under construction to investment properties 40109 6070109 607– 109 60700
Reclassification of undeveloped plots to properties under construction 500001 997– 1 9970
Reclassification to properties for sale 60000– 1 225– 163– 1 388
Revaluation (net)16 4286 279– 13822 5694 331026 900
Balance as at 31.12.2013584 587227 09024 190835 86747 0239 269892 159
Accumulated acquisition values as at 01.01.2013300 88173 71322 384396 97894 70911 311502 998
Accumulated acquisition values as at 31.12.2013310 343186 61422 344519 30142 1369 269570 706
Difference market values/acquisition values as at 01.01.2013257 81618 8711 979278 66616 5250295 191
Difference market values/acquisition values as at 31.12.2013274 24440 4761 846316 5664 8870321 453
Balance as at 01.01.2014584 587227 09024 190835 86747 0239 269892 159
Investments1 6451 67003 31561 746065 061
Acquisitions27 2000027 2000027 200
Disposals 700– 1 418– 1 41800– 1 418
Reclassification of properties under construction to investment properties 8024 470024 470– 24 47000
Revaluation (net)8 5162 508– 18210 84210 472021 314
Balance as at 31.12.2014621 948255 73822 590900 27694 7719 2691 004 316
Accumulated acquisition values as at 01.01.2014310 343186 61422 344519 30142 1369 269570 706
Accumulated acquisition values as at 31.12.2014339 188210 38121 460571 02981 7859 269662 083
Difference market values/acquisition values as at 01.01.2014274 24440 4761 846316 5664 8870321 453
Difference market values/acquisition values as at 31.12.2014282 76045 3571 130329 24712 9860342 233

The fair values are based on the market value assessments performed annually by a recognized independent real estate expert (Wüest & Partner AG) as at December 31 using the DCF (discounted cash flow) method. The discount rates applied for the valuation of the investment properties and the investment properties under construction as at the balance sheet date were within a range of 3.4% to 5.5% (previous year: 3.6% to 5.4%).

As at December 31, 2014, the fire insurance values amounted to TCHF  580 521 (previous year: TCHF 549 795).

Additional information per property can be found here.

6 | Operating properties

 
in CHF thousands 20142013
Acquisition value at the beginning of reporting period61 70060 723
Additions263977
Disposals00
Acquisition value at the end of reporting period61 96361 700
Accumulated depreciation at the beginning of reporting period– 20 655– 18 469
Disposals0– 1
Depreciation in the reporting period– 2 218– 2 185
Accumulated depreciation at the end of reporting period– 22 873– 20 655
Net book value at the beginning of reporting period41 04542 254
Net book value at the end of reporting period39 09041 045

The following properties located in Zug serve completely or partly as operating properties: Industriestrasse 14 (Parkhotel Zug), Industriestrasse 16 (Résidence), Metallstrasse 20 (Hotel City Garden), Haldenstrasse 9, 10, 11 (serviced city apartments), Baarerstrasse 30 (Restaurant Bären) and Industriestrasse 12 (Zug Estates offices).

The market value of the operating properties as at the balance sheet date is TCHF 106 724 (previous year: TCHF 106 507). It was determined by the independent real estate expert (Wüest & Partner AG) using the DCF method. For the valuation as at the balance sheet date, discount rates within a range from 3.9% to 4.8% were applied.

As at 31 December, 2014, the fire insurance values were unchanged at TCHF 84 827.

7 | Other tangible assets

 
in CHF thousands 20142013
Acquisition value at the beginning of reporting period19 07718 257
Additions811890
Disposals– 3 568– 70
Acquisition value at the end of reporting period16 32019 077
Accumulated depreciation at the beginning of reporting period– 13 633– 12 299
Disposals3 5680
Depreciation in the reporting period– 1 351– 1 334
Accumulated depreciation at the end of reporting period– 11 416– 13 633
Net book value at the beginning of reporting period5 4445 958
Net book value at the end of reporting period4 9045 444

8 | Prepayments for tangible assets

No prepayments were made for investment properties (previous year: TCHF 535).

9 | Intangible assets

 
in CHF thousands 20142013
Acquisition value at the beginning of reporting period197183
Additions1914
Disposals– 290
Acquisition value at the end of reporting period187197
Accumulated amortization at the beginning of reporting period– 144– 109
Disposals290
Amortization in the reporting period-29-35
Accumulated amortization at the end of reporting period– 144– 144
Net book value at the beginning of reporting period5374
Net book value at the end of reporting period4353

Intangible assets comprise software utilized in the business units.

10 | Financial liabilities

All financial liabilities are mortgage loans with financial institutions. They are structured as follows by maturity:

 
Residual term
in CHF thousands
31.12.201431.12.2013
Under 1 year45 0000
1 to 3 years00
3 to 5 years100 00050 000
5 to 10 years40 00090 000
Over 10 years135 000110 000
Total320 000250 000
Of which current45 0000
Of which long-term275 000250 000

The average residual term of the interest-bearing debt is 7.6 years (previous year: 9.5 years). The average capital-weighted interest rate on all interest- bearing financial liabilities is 2.2% (previous year: 2.6%). The short-term loans were taken out on a rolling basis, while the long-term loans were taken out at fixed interest rates. In the 2013 financial year, a 15-year TCHF 75 000 fixed-rate loan with an interest rate of 2.45% was also arranged under a forward contract maturing in May 2015 to supersede the short-term facilities. The fair value of the forward contract as at December 31, 2014 was TCHF –11 112 (previous year: TCHF 5 381). In light of the underlying transaction, it was not recognized in the balance sheet.

To secure the non-current financial liabilities, properties with a book value of TCHF 631 158 (previous year: TCHF 419 170) have been encumbered.

11 | Trade payables

 
in CHF thousands 31.12.201431.12.2013
Advance payments from tenants1 7021 585
Trade payables to suppliers3 0485 969
Total trade payables4 7507 554

12 | Provisions

 
in CHF thousands 20142013
Provisions at the beginning of the reporting period305137
Increase215192
Utilization– 200– 24
Release00
Provisions at the end of the reporting period320305
Of which current at the end of reporting period236225
Of which long-term at the end of reporting period8480

13 | Deferred tax liabilities

 
in CHF thousands 20142013
Deferred tax liabilities at the beginning of reporting period80 31574 096
Net creation recognized in the income statement in reporting period3 2816 219
Deferred tax liabilities at the end of reporting period83 59680 315

The average tax rate for deferred income taxes amounts to 14.6 % (previous year: 15.0 %).

14 | Shareholders' equity

 
Shares issued Security numberPar value CHFNumberVotesCapital CHF
Series A registered shares14 805 2112.501 948 6401 948 6404 871 600
Series B registered shares14 805 21225.00315 136315 1367 878 400
Total 2 263 77612 750 000

In the year under review, Zug Estates Holding AG acquired 16 315 series B registered treasury shares at an average price of CHF 1 178 and sold 13 321 series B registered treasury shares at an average price of CHF 1 203 (previous year: acquired 8 648 series B registered treasury shares at an average price of CHF 1 185, no sales).

As at December 31, 2014, Zug Estates Holding AG holds 18 400 series A registered treasury shares (unchanged) and 17 592 series B registered treasury shares (previous year: 14 598).

Non-distributable statutory reserves amount to TCHF 7 676 (previous year: TCHF 28 281) as at December 31, 2014.

Shareholders' equity (NAV) per share

in CHF 31.12.201431.12.2013
Shareholders' equity (NAV) per outstanding series B registered share, before deferred taxes1 521.551 437.27
Shareholders' equity (NAV) per outstanding series B registered share, after deferred taxes1 351.151 274.55

 Earnings per share

Information on series A registered shares20142013
Series A registered shares issuedNumber1 948 6401 948 640
Series A registered treasury shares (weighted average)Number18 40018 400
Average outstanding series A registered sharesNumber1 930 2401 930 240
Share in net income attributable to series A registered sharesTCHF17 71117 371
Applicable number of series A registered sharesNumber1 930 2401 930 240
Earnings per series A registered share, undilutedCHF9.189.00
Information on series B registered shares 20142013
Series B registered shares issuedNumber315 136315 136
Series B registered treasury shares (weighted average)Number16 09510 274
Average outstanding series B registered sharesNumber299 041304 862
Share in net income attributable to series B registered sharesTCHF27 43827 436
Applicable number of series B registered sharesNumber299 041304 862
Earnings per series B registered share, undilutedCHF91.7589.99

There are no potential dilutive effects to report. The diluted earnings per share correspond to the undiluted earnings per share.

15 | Significant shareholders

As of 31 December 2014, the following shareholders owned more than 3% of total voting rights:

 
Number or in % Series A
registered shares
Series B
registered shares
VotesVotes previous year
Heinz and Elisabeth Buhofer as well as Heinz M. Buhofer ¹1 480 6504 48165.6%66.3%
Ursula Stöckli-Rubli328 00017 00615.2%15.2%
Werner O. Weber, indirectly held through Wemaco Invest AG82 00046 6005.7%5.7%

The shares held by current members of the corporate bodies are shown in the Notes of Zug Estates Holding AG.

16 | Property income

The reported property income of TCHF 37  450 (previous year: TCHF 34 733) comprises actual rental income and income from Miteigentümergemeinschaft Metalli. This position contains rental revenue from all properties.

 
in CHF thousands 01.01.2014
– 31.12.2014
01.01.2013
– 31.12.2013
Actual rental income24 70122 879
Income from Miteigentümergemeinschaft Metalli 112 74911 854
Total property income37 45034 733

The individual contractual relationships with external tenants had the following terms as at the balance sheet date, based on the annualized projected rental revenue:

 
Term, share in % 31.12.201431.12.2013
Under 1 year, incl. unlimited rental contracts44.440.5
Over 1 year5.16.7
Over 2 years2.05.8
Over 3 years6.60.6
Over 4 years5.86.2
Over 5 years1.11.7
Over 6 years2.11.2
Over 7 years0.80.8
Over 8 years15.51.6
Over 9 years8.516.1
Over 10 years8.118.8
Total100.0100.0

As at December 31, 2014, the five largest tenant groups together generate 27.0% (previous year: 28.1%) of annualized projected rental revenue.

 
Tenants, share in % 31.12.2014   Tenants, share in % 31.12.2013
Novartis 8.3   Novartis 8.6
Migros 2 7.2   Migros 2 7.2
UBS 5.7   UBS 6.2
Dosenbach-Ochsner 3.0   Nord Stream 3.1
H&M 2.8   Dosenbach-Ochsner 3.0

17 | Hotel & catering income

 
in CHF thousands01.01.2014
– 31.12.2014
01.01.2013
– 31.12.2013
Accommodation11 17010 780
Catering8 5828 465
Ancillary services811971
Sales deductions-8-4
Total hotel & catering income20 55520 212

18 | Other operating revenue

 
in CHF thousands01.01.2014
– 31.12.2014
01.01.2013
– 31.12.2013
Revenue from services1 5631 605
Revenue from own work346274
Revenue from leasing of personnel2 0902 167
Other revenue61104
Total other operating revenue4 0604 150

19 | Personnel expenses

 
in CHF thousands01.01.2014
– 31.12.2014
01.01.2013
– 31.12.2013
Wages and salaries11 62211 682
Pension expenses626637
Other personnel expenses1 6171 583
Total personnel expenses13 86513 902

20 | Other operating expenses

 
in CHF thousands01.01.2014
– 31.12.2014
01.01.2013
– 31.12.2013
Marketing/sales promotion890864
Maintenance and repair449408
Administrative expenses643487
IT/software364225
Legal and consultancy costs417746
Hire, leasing453453
Other costs12 4372 241
Total other operating expenses5 6535 424

21 | Depreciation

 
in CHF thousands01.01.2014
– 31.12.2014
01.01.2013
– 31.12.2013
Depreciation of operating properties2 2182 185
Depreciation of other tangible assets1 3511 334
Amortization of intangible assets2935
Total depreciation3 5983 554

22 | Financial result

 
in CHF thousands01.01.2014
– 31.12.2014
01.01.2013
– 31.12.2013
Interest income from banks1223
Gain on securities4751 933
Fair value of financial assets1920
Total financial income6791 956
Interest expense mortgage loans5 9785 973
Other financial expenses5073
Losses on securities03
Total financial expenses6 0286 049
Financial result– 5 349– 4 093

In the reporting period, borrowing costs in the amount of TCHF 1 449 (previous year: TCHF 1 038) were capitalized.

23 | Taxes

 
in CHF thousands01.01.2014
– 31.12.2014
01.01.2013
– 31.12.2013
Income taxes2 0761 412
Deferred taxes3 2816 219
Total taxes5 3577 631
Average weighted tax rate20142013
Income before taxes (EBT)50 50652 438
Average tax rate14.86%14.51%
Income taxes at average tax rate7 5057 607
Unrecognized tax losses026
Utilisation of previously unrecognized tax losses-310
Reduction of tax rate– 2 1170
Other effects0– 2
Total income taxes5 3577 631

Potential tax reductions resulting from unrecognized loss carry forwards and temporary differences amount to 0 (previous year: TCHF 33).

24 | Contingent liabilities and other off-balance sheet obligations

Zug Estates AG is the majority owner of Miteigentümergemeinschaft Metalli, Zug. For this reason, joint liability may apply in relations with third parties.

In relation to the construction and operation of City Garden Hotel, Zug Estates AG accepted a demolition obligation amounting to TCHF 490. This comes into effect in 2025 at the earliest, and then only if the land on which the hotel was built has to be vacated for construction of the access road to the Zug city tunnel.

Zug Estates AG is owner and developer of the Suurstoffi development in Risch Rotkreuz. Under the terms of the rental contract, penalties amounting to a maximum of TCHF 290 were agreed with one tenant. In addition, the tenant is to be compensated for any damage incurred in excess of the penalty.

25 | Leasing liabilities

The liabilities from operating leasing that are not recognized in the balance sheet are structured as follows, according to maturity:

 
in CHF thousands31.12.201431.12.2013
up to 1 year1820
up to 3 years025
over 3 years420
Total6045

26 | Pension plan liabilities

The employee benefit plan of Zug Estates Holding AG and its subsidiary takes the form of independent foundations or, as the case may be, collective foundations in accordance with Swiss pensions legislation (BVG). In the financial year under review and the previous year, all payments were made to pension institutions that are themselves risk bearers.

Employer's contribution reserves (ECR)

As at December 31, 2014 there are no employer's contribution reserves.

Economic benefits/economic liabilities and pension expenses

in CHF thousandsDeficit/surplus of joint pension plans 31.12.2014Economic share of company 31.12.2014Economic share of company 31.12.2013Change or impact on net income in financial periodContri butions for the periodPension expenses in personnel expenses 2014Pension expenses in personnel expenses 2013
Patronage funds/pension schemes0000000
Pension plans without surplus/deficit0000626626456
Pension plans with surplus0000000
Pension plans with deficit000000181
Total pension expenses0000626626637

The pension plans are funded by employer and employee contributions. Contributions are calculated as a percentage of the insured salary.

Composition of pension expenses

in CHF thousands20142013
Pension contributions at the company's expense626637
Contributions to pension plans from employer's contribution reserves00
Total contributions626637
Change in ECR due to asset development, value adjustments, discounting, interest payments, etc.00
Total contributions and changes in employer's contribution reserves626637
Change in economic benefits for the company from surplus00
Change in economic liabilities for the company from deficit00
Total change in economic impact of surplus/deficit00
Total pension expenses in personnel expenses in the period626637

Total pension expenses in personnel expenses in the period under review amounted to TCHF 626 (previous year: TCHF 637). No extraordinary contributions were agreed or paid in the reporting period.

27 | Segment report

The Group's business activities comprise the business units "real estate" and "hotel & catering".

 
01.01.2013 – 31.12.2013
in CHF thousands    
Real estateHotel & cateringCorporate &
eliminations 1
Total
Operating revenue44 94320 276– 6 12459 095
Operating expenses12 38719 3195 79625 910
Revaluation of investment properties (net)26 9000026 900
Operating income before depreciation (EBITDA)59 456957– 32860 085
Operating income (EBIT)56 991– 105– 35556 531
01.01.2014 – 31.12.2014
in CHF thousands    
Operating revenue47 47020 619– 6 02462 065
Operating expenses10 58119 4525 62424 409
Revaluation of investment properties (net)21 3140021 314
Income from sale of investment properties48300483
Operating income before depreciation (EBITDA)58 6861 167– 40059 453
Operating income (EBIT)56 126157– 42855 855

All revenues were generated in the Canton of Zug and in the Canton of Aargau.

Ownership of the entire portfolio – i.e. investment and operating properties – stays with the real estate business unit. Based on an integrated view of the hotel & catering business unit, i.e. factoring in all properties used by the unit as well as all associated expenses and credits arising from rent paid to the real estate business unit, in the year under review the hotel & catering business unit generated operating income of CHF 3.4 million (previous year: CHF 3.3 million) and an annualized EBITDA return of 6.4% (previous year: 6.3%) on the market values of these properties.

28 | Transactions with related parties

In the year under review, revenue of TCHF 195 (previous year: TCHF 239) from hotel, catering and property management services were received from companies of the Metall Zug Group. This was offset by expenses and investments of TCHF 122 (previous year: TCHF 120) for services and deliveries of equipment. As at the balance sheet date, receivables due from Metall Zug Group companies amounted to TCHF 18 (previous year: TCHF 6) and liabilities to them TCHF 21 (previous year: TCHF 1). Furthermore, in the year under review, 15 895 series B registered treasury shares were acquired by Metall Zug AG at a market price of TCHF 18 734 and 18 400 series A registered shares of Metall Zug AG were sold to the same at a market price of TCHF 4 679. Consequently, Zug Estates Holding AG no longer holds any shares of Metall Zug AG.

Information on the procedure for determining the compensation of members of the board of directors and Group Management and on the compensation amounts paid to them is available in the compensation report. As at the balance sheet date, liabilities to members of the board of directors amounted to TCHF 134 (previous year: TCHF 93).

29 | Events after the balance sheet date

No events requiring disclosure took place after the balance sheet date.

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